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Wealth consolidator targets £10bn as profit surges on buy spree

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Wealth consolidator targets £10bn as profit surges on buy spree

Wealth consolidator AFH Financial has set out a range of ambitious new targets after a buy spree propelled it to its fifth successive year of profit growth. 

The firm completed and integrated 16 acquisitions in year to 31 October, at a combined value of £34 million. The buys were funded by two placings, which raised £32.5 million. 

Underlying earnings before interest, tax, depreciation and amortisation (Ebitda) jumped 85% from £5.7 million to £10.4 million over the year. Revenues rose from 51% to £50.7 million, while the dividend was increased by 50% to 6p. 

AFH ended October with £4.4 billion in assets under management, an increase of 58% over the 12 months.

Chief executive Alan Hudson (pictured) was particularly pleased with the increase in the underlying profit margin from 17% to 21% over the year. 

'I am encouraged by the strong progress we made in 2018 as we continue to deliver on our strategy of harnessing solid organic growth with value adding acquisitions, with the aim of becoming the leading financial planning-led investment manager in the UK,' Hudson said. 

'These excellent full year results have been driven by the continued increase in our recurring revenue and our underlying Ebitda margin exceeding 20%, the achievement of the first of three medium term financial aspirational targets that we set in 2017.' 

With £21.5 million worth of cash in the bank at the end of October, AFH is gearing up to take advantage of more acquisition opportunities this year.

It has already put some of this money to use, spending £10 million on Yorkshire advisory CTL in December, its biggest deal to date. The firm also forked out £3.5 million for Midlands-based Hayburn Rock Financial Planning last week. 

'The company strategy to increase shareholder value through the expansion of the AFH community remains at the heart of our growth,' Hudson said. 'This strategy continues to be driven by a combination of organic growth through greater productivity of our advisers and by value accretive acquisitions.' 

£10 billion target 

At the end of December assets under management hit £5 billion, meeting the target the group set at the start of 2017. 

After achieving this, alongside exceeding its margin target, AFH has set a new set of goals for the next three to five years. 

This includes a £10 billion funds under management target and margin target of 25%. It has also set itself a revenue goal of £140 million. 

Hudson offered an insight into how AFH plans to build this sustainable business model, which includes the reduction in costs of ancillary services for clients. 

 

 

'During the year we continued to reduce fund-management fees while retaining our independent status, providing access for our clients to the whole of market and to drive down custody and administration costs,' Hudson pointed out. 

He also highlighted that in the summer the firm announced that platform fees would no longer be charged to clients on the AFH Direct platform. He described this to be a 'unique' proposition for clients of IFAs, which will drive further growth for the company as new clients and potential acquisition targets are drawn to the model. 

'Our strategy has enabled the group to enjoy annual double-digit organic growth in both funds under management and recurring revenue since we joined AIM in 2014 while maintaining gross margins and generating operating efficiencies to drive growth in earnings per share,' Hudson said. 

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