Results for the six months ended 30 April 2017

5 June 2017

AFH Financial Group PLC ("AFH" or the "Company")

Results for the six months ended 30 April 2017

AFH reports further strong growth

AFH, a leading financial planning led wealth management firm, is pleased to announce its results for the six months ended 30 April 2017.

Strong growth

· Revenues up 19% to £13.9 million (H1 2016: £11.7 million)

· Gross margin increased to 56% (H1 2016: 55%)

· Recurring revenue as a percentage of total revenue increased to 70% (H1 2016: 66%, FY2016 68%)

· Underlying EBITDA* up 35% to £2.03 million (H1 2015: £1.50 million)

· Underlying EBITDA* margin increased to 14.6% from 12.8%

· Profit before tax up 34% to £1.15 million (H1 2016: £0.86 million)

· Underlying Earnings per share* up 27% to 6.17 pence (H1 2016: 4.84 pence)

· Funds under Management above £2.2bn, up 17% (H1 2016: £1.88bn)

Confident Outlook

· Strong balance sheet to support further acquisitions

· Cash reserves of £12.6 million, following on from successful £10 million placing (30 April 2016: £7.1 million)

· Regulatory dynamics continue to support further industry consolidation

· Proven acquisition methodology

· Strong pipeline of acquisition opportunities

*Underlying excludes amortisation of intangible assets arising on business combinations and the non-cash charge/credit for share based payment costs.

Alan Hudson, Group Chief Executive, commented:

"I am pleased to report another six month trading period of increased turnover and trading margins based on organic growth from new and existing clients leading to a 27% increase in underlying Earnings per Share. The strategy of the Company continues to be to generate long term value for shareholders by providing exceptional value and service to our clients and using our increasing size to drive down platform and third party administration costs aligned to an appropriate risk based investment model."

Enquiries:

AFH Financial Group PLC 01527 577775

Alan Hudson, Chief Executive Officer

Paul Wright, Chief Financial Officer

Liberum (Nominated Adviser and Broker) 020 3100 2000

John Fishley / Richard Bootle

Chief Executive's Review

Trading results

I am pleased to provide shareholders with an update on the Company's performance for the six months to 30 April 2017.

The business has seen further organic growth over the period with profitability increasing at both EBITDA and EPS levels. Revenue for the period increased to £13.9m (H1 2016: £11.7m), driven by ongoing recurring fees which increased by 23% and which represented 70% of total revenue during the period (H1 2016: 66%).

Revenue from acquisitions reported during the current year totaled £0.5m and represented 4% of total revenue for the period.

Adviser numbers grew to 154 during the period whilst annualised revenue per adviser increased to £180,000 (H1 2016 £156,000).

Gross margins increased to 56% (H1 2016: 55%). The Group reported underlying EBITDA of £2.03m, an increase of 35% over the same period last year (£1.50m).

The Group reported an increase of 34% in profit before tax to £1.15m whilst earnings per share increased to 3.71p per share (2016: 2.9p). Underlying earnings per share increased to 6.17p per share (2016: 4.84p)

During the period £128m (gross) of new funds were invested through AFH from existing and new clients.

April fundraising

During the period the Company raised £10m gross (£9.5m after expenses) in an institutional fundraising that I am pleased to report was oversubscribed. The creation of 5.7m new ordinary shares represented a 23% increase in the issued share capital of the Company and in addition to introducing a number of new institutions to the register was supported by existing major institutional shareholders. The fundraising has provided the financial strength to complete a number of potential acquisitions during the second half of the current financial year, the first of which was announced to the market on 1 June.

Cash position

The Group remains free of bank or secured debt, with the exception of a small property mortgage, and maintains healthy cash balances. Following the fundraising that completed in April 2017 cash and cash equivalents at period end totalled £12.6m. Unsecured non-convertible bonds of £0.75m and £2.14m mature in 2020 and 2018 respectively.

Business review

I am pleased to report another six month trading period of increased turnover and trading margins based on organic growth from new and existing clients. New Funds under Management have continued to be invested at a rate of £20m per month. During the period 97% of these funds were invested on a discretionary basis. Funds under Management exceeded £2.2bn at period end.

Our digital transformation and IT development projects, to which I referred in my last report have continued to gather pace and initial phases have been launched internally. The external roll out will commence during the second half of the year bringing both operational efficiencies and greater visibility and investment opportunity to our clients and advisers.

In May, the Company signed a long term contract with Pershing, the custody and settlement arm of Bank of New York, extending our six year relationship to provide a secure and cost effective service to our clients. Financial benefits of this relationship have already been experienced by our clients whilst our ability to leverage on the IT spend and vision of Bank of New York is expected to bring further commercial opportunities in the future.

During the period AFH completed six acquisitions with a combined capped value of £4.5m. Initial consideration of £2m was paid with the balance to be earned during the next two years. The Company also paid £1.5m in deferred consideration on acquisitions undertaken in 2014 - 2016.

The fundraising described above has provided the Company with the ability to complete a number of strategic and tactical acquisitions during the remainder of the year and into 2018. Following the period under review, the Company recently announced the acquisition of Parker Sage Independent Financial Advisers Limited, an IFA providing independent financial advice in Canary Wharf London and the northern home counties, at a capped consideration of up to £5.6m, of which £2.25m was paid on completion with the balance to be earned under the standard AFH model. In addition, the Company has also completed the acquisition of Eunisure Limited, at a capped consideration of £4.5m, of which £1.5m was paid in June 2017. The balance will be earned during a four year period based on a targeted increase in Group profitability attributable to the core Eunisure business and introduced financial planning led investment management. AFH is currently assessing several further acquisitions which are in various stages of due diligence and negotiation.

Whilst AFH has a strategy of continuing to increase the average size of our acquisitions, the Company also remains committed to providing an exit for retiring IFAs where our existing advisers can offer the full AFH service to the acquired client base. As a result the Board expects to announce both strategic and tactical acquisitions in the future.

Outlook

The strategy of the Company continues to be to generate long term value for shareholders by providing exceptional value and service to our clients and using our increasing size to drive down platform and third party administration costs aligned to an appropriate risk based investment model.

The Group remains profitable and cash generative with a strong balance sheet. Our strategy remains to expand our distribution capacity nationally in our traditional areas of strength, through both organic and acquisitive growth to drive increased profitability. The recent acquisition of Eunisure significantly increases our national footprint whilst addressing the segment of financial protection that has been widely reported as underserved by the market in recent years. The Directors' believe that the expansion of our financial planning products and scope is in the best interests of both our shareholders and clients and the Company continues to actively seek appropriately priced acquisition opportunities with a comparable culture to AFH.

The progress made during the first half of the current financial year, combined with the growth dynamics of our market, allow the Directors to view the prospects for the full year and beyond with confidence.

Alan Hudson

Chief Executive

5 June 2017

Consolidated Statement of Comprehensive Income

Notes to the Consolidated Financial Statements

1 General Information

AFH Financial Group Plc is a company incorporated in England and Wales. The Group is principally engaged in the provision of independent financial advice to the retail market.

2 Basis of preparation and accounting policies

2.1 Basis of preparation

The interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's financial statements for the year ended 31 October 2016, which were prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB (together "IFRS") as adopted by the European Union, and in accordance with the requirements of the Companies Act applicable to companies reporting under IFRS.

The information relating to the six months ended 30 April 2017 and the six months ended 30 April 2016 is unaudited and does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 October 2016 have been reported on by its auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified and did not draw attention to any matters by way of emphasis, or contain a statement under section 498(2) or (3) of the Companies Act 2006.

2.2 Significant accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 October 2016.

2.3 Basis of consolidation

The interim condensed consolidated financial statements consolidate the financial statements of the Company and its subsidiary undertakings as at 30 April and 31 October each year.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

2.4 Key sources of judgements and estimation uncertainty

The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities. If in the future such estimates and assumptions, which are based on management's best judgement at the date of preparation of the financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The areas where a higher degree of judgement or complexity arises, or where assumptions and estimates are significant to the consolidated financial statements, are discussed below.

Impairment of client portfolios

The Group reviews whether acquired client portfolios are impaired at least on an annual basis. This comprises an estimation of the fair value less cost to sell and the value in use of the acquired client portfolios. In assessing value in use, the estimated future cash flows expected to arise from the individual client portfolios are discounted to their present value over a finite period to calculate the fair value.

The key assumptions used in arriving at a fair value less cost of sale are those around valuations based on multiples of future earnings streams and values based on assets under management. These have been determined by looking at valuations of similar businesses and the consideration paid in comparable transactions.

The carrying amount of client portfolios at 30 April 2017 was £23.1m (2016: £18.4m). No impairments have been made during the period (2016: nil).

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill has been allocated. In assessing value in use, the estimated future cash flows expected to arise from the cash-generating unit are discounted to their present value using the Group's weighted average cost of capital adjusted for tax.

The carrying amount of goodwill at 30 April 2017 was £2.1m (2016: £2.1m). No impairments have been made during the period (2016: £ nil).

3 Segmental Analysis

The Board of Directors is considered to be the chief operating decision maker of the Group.

The Board has determined that there is one operating segment based on reports reviewed by the Board that are used to make strategic decisions.

The total revenue of the group for the year has been derived from its principal activity wholly undertaken in the United Kingdom.

4 Intangible Assets

The financial liabilities are recognised at amortised cost. There is no material difference between the fair value and the carrying value.

The 8% unsecured bond is due in 2020. The 7.5% Unsecured bond, issued in December 2014 is due in December 2018.

The mortgage is repayable by instalments over an 8 year period, ending October 2023, with an interest rate of 2.9% over LIBOR.

6. Trade and other payables

7 Share Capital

On 3 February 2017, 57,057 Ordinary Shares were issued at £1.00 each with £0.90 per share transferred to the share premium account to provide additional working capital.

On 3 February 2017, 5,500 Ordinary Shares were issued at £0.37 each with £0.27 per share transferred to the share premium account to provide additional working capital.

On 9 March 2017, 180,639 Ordinary Shares were issued at £1.64 each with £1.54 per share transferred to the share premium account to provide additional working capital.

On 20 March 2017, 5,714,285 Ordinary Shares were issued at £1.75 each with £1.65 per share transferred to the share premium account to provide additional working capital.

On 26 April 2017, 2,500 Ordinary Shares were issued at £1.00 each with £0.90 per share transferred to the share premium account to provide additional working capital.

On 26 April 2017, 6,521 Ordinary Shares were issued at £0.37 each with £0.27 per share transferred to the share premium account to provide additional working capital.

8 Earnings per share

The calculation of earnings per share is based on the profit attributable to the equity holders for the period of £921,000 (2016 - £659,000) and weighted average number of shares in issue during the period of 24,806,775 (2016 - 22,726,615).

The diluted earnings per share has been adjusted for the potential share issue relating to the share-based payments. The number of shares has been increased by the difference between the amount of shares that will be issued if all options are exercised and the number of shares that could be purchased for the same consideration at average market price.

There are no adjustments between the Earnings for the purpose of basic earnings per share being net profit attributable to shareholders and the Earnings for the purpose of diluted earnings per share.

There are no adjustments between the Net profit attributable to equity holders of the parent and the Earnings from continued operations for the purpose of diluted earnings per share excluding discontinued operation.

Underlying earnings per share of £1,529,000 (2016 - £1,101,000) have been calculated on the profit attributable to the equity holders for the period after adding back Amortisation, Depreciation and non-cash share based payments after adjusting the tax provision accordingly.

9 Reconciliation of Operating profit to Net Cash inflow from Operating Activities