Results for the six months ended 30 April 2018

4 June 2018

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

Results for the six months ended 30 April 2018

AFH reports further strong revenue and margin growth

AFH, a leading financial planning led wealth management firm, is pleased to announce its results for the six months ended 30 April 2018.

Strong growth

· Revenues up 63% to £22.7 million (H1 2017: £13.9 million)

· Underlying EBITDA* up 118% to £4.43 million (H1 2017: £2.03 million)

· Underlying EBITDA* margin increased to 19.5% (H1 2017: 14.6%)

· Profit after tax up 177% to £2.5 million (H1 2017: £0.9 million)

· Statutory Earnings per share up 85% to 6.85 pence (H1 2017: 3.71 pence)

· Underlying Earnings per share* up 62% to 9.98 pence (H1 2017: 6.17 pence)

· Funds under Management above £3.2bn, up 45% (H1 2017: £2.2bn)

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

Confident Outlook

· Strong balance sheet to support further acquisitions

· Cash reserves of £23.7million, following on from successful £17.5 million placing (30 April 2017: £12.6 million)

· Regulatory dynamics continue to support further industry consolidation

· Proven acquisition methodology

· Strong pipeline of acquisition opportunities

Alan Hudson, Group Chief Executive, commented:

"I am pleased to report another six month period of increased turnover and trading margins based on organic growth from new and existing clients.

The business saw further growth over the period with profitability increasing at both EBITDA and EPS levels. At the start of FY17, the Board set an aspiration to achieve an underlying EBITDA margin of 20% within a three-to-five year period and the Company remains significantly ahead of that timeframe.

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 fund management charges aligned to an appropriate risk based investment model."

For further information please contact:

AFH Financial Group PLC 01527 577 775

Alan Hudson, Chief Executive Officer

Paul Wright, Chief Financial Officer

Liberum (Nominated Adviser and Broker) 020 3100 2000

John Fishley

Richard Bootle

This announcement is released by AFH Financial Group plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Paul Wright, Chief Financial Officer.

Chief Executive's Review

Business review

I am pleased to report another six month period of increased turnover and trading margins based on organic growth from new and existing clients. New Funds under Management have been invested at a rate of £35 million per month. During the period the Company completed and integrated six acquisitions which have brought a further £270 million of investment portfolios and are expected to be earnings enhancing in the second half of the year and thereafter.

Our two divisions both produced revenue growth with enhanced margins during the period which enabled the consolidated group to report an increase in the underlying EBITDA margin to 19.5%. At the start of FY17, the Board set an aspiration to achieve an underlying EBITDA margin of 20% within a three-to-five year period and the Company remains significantly ahead of that timeframe.

Funds under Management exceeded £3.2 billion at the period end, representing a 45% increase over the April 2017 level.

The institutional fundraising which closed in December 2017 has provided the Company with the ability to undertake a number of strategic and tactical acquisitions during the remainder of the year and into 2019. At the period end the Company retained over £23.7 million in cash against a regulatory requirement of £2.5 million. Despite the increased share count as a result of the fundraising I am pleased to report an increase in earnings per share of 85%with the opportunity to make further earnings enhancing acquisitions in the future.

Trading results

The business saw further organic growth over the period with profitability increasing at both EBITDA and EPS levels. Revenue for the period increased to £22.7 million (H1 2017: £13.9 million), underpinned by ongoing recurring fees. These increased by 38% and represented 59% of total revenue during the period; driven by new business in both our Wealth Management and Protection broking operations.

Revenue from acquisitions reported during the current period totaled £2.6 million and represented 11% of total revenue for the period.

The increased revenue together with the economies of scale generated by the business enabled the Company to report underlying EBITDA of £4.43 million, an increase of 117% over the same period last year (£2.03 million).

I am pleased to report an increase of 62% in underlying earnings per share to 9.98p per share (2017: 6.17p) whilst statutory earnings per share increased to 6.85p per share (2017: 3.71p).

Financial Advisory and investment management

Financial advisory and the subsequent management of client portfolios continued to represent the core business of AFH based on the simple philosophy that the most appropriate way to manage a client's portfolio is to fully understand their current and future financial aims, their attitude to risk and their lifestyle requirements before constructing appropriate personal models and finally managing their money to meet their objectives.

During the period our initial financial planning fees totalled £5.6 million, an increase of £1.5 million (37%), reflecting the expanding client base and increasing client requirements for financial planning driven by new legislation as well as changing lifestyle needs.

Ongoing management fees increased to £13.2 million (2017: £9.8 million), reflecting the growing funds under management which, as set out below, increased to £3.2 billion as a result of net organic inflows together with assets attached to acquisitions during the year.

Annualised revenue per adviser in our core business increased to £220,000 (H1 2017 £180,000).

Gross margins in our core business remained at 55%, reflecting the stable level of business generated centrally relative to that self-generated by our advisers.

The division generated EBITDA of £4.4m (2017: £3.1m), representing a 23.4% margin on revenue (2017: 22.3%) and demonstrating the benefits of scale that has been achieved by the strategy adopted by the Company since joining the AIM.

Protection broking

The Eunisure business traded above expectations during the period, reporting strong growth in both revenues and margins since the business was acquired in June 2017.

In March 2018 Eunisure started to transition part of its business from an indemnity to a non- indemnity basis using the financial strength of the AFH Financial Group to support the move. This is expected to have a positive impact on future revenue flows and to improve the EBITDA margin of the business above the traditional sector levels.

During the period the division generated revenues of £3.9 million from which EBITDA of £1.3 million was derived.

We continue to view this sub sector of the market as underserved and providing a significant opportunity for the future.

Acquisitions

The market for acquisitions within the IFA sector continued to be buoyant and whilst some upward pressure on prices was seen in larger businesses, where competition from private equity and product providers has increased, we were able to close a number of transactions at our traditional multiples and in line with our earn out model. Our pipeline remains strong with a number of opportunities in due diligence and contract negotiations at the period end.

During the period we completed six acquisitions for an initial consideration of £3.2 million, encompassing both retiring IFAs, whose client portfolios have been transitioned to existing AFH advisers, as well as larger organisations whose clients and advisers have been absorbed into the AFH model. This model continues to allow clients' portfolios to be retained on existing platforms and products where appropriate but enables them to move to our cost-effective discretionary service where a clear benefit to the client can be demonstrated. Future deferred consideration of up to £3.5 million is payable on these acquisitions over the next two financial years depending on their achievement of financial targets.

Integration of acquisitions made during the period has been completed successfully and I am pleased to report that businesses acquired in previous periods continue to trade in line with our expectations. During the period we again paid deferred consideration, based on the profitability of the acquired businesses, in excess of 90% of the expectation, including a growth opportunity, set at the time of acquisition across the portfolio.

Whilst AFH has a strategy of continuing to increase the average size of its 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.

Funds under management

Funds under management increased by £0.41 billion during the period, driven by new monies invested and acquired portfolios. The fall in the markets that occurred in February and March 2018 was cushioned for our clients by the investment strategy for our funds and represented less than a 0.4% impact during the period.

Inflows from existing business continued to be predominantly invested on a discretionary mandate and again showed annualised double digit growth.

December fundraising

During the period the Company raised £17.5 million gross (£16.8 million after expenses) in an institutional fundraising that I am pleased to report was oversubscribed. The creation of 7 million 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 already provided the financial strength to complete a number of acquisitions during the current financial year

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 December fundraising, cash and cash equivalents at period end totalled £23.7 million. Unsecured non-convertible bonds of £0.75 million and £2.14 million mature in 2020 and December 2018 respectively. As noted above, the Company's regulatory requirement is £2.5 million.

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 fund management charges aligned to an appropriate risk based investment model. We believe that this is the most sustainable model for the future of the sector, aligning clients' interests with those of shareholders to secure long term growth and profitability, and in line with the current objectives of the regulator.

The Company remains profitable and cash generative, and during the period further strengthened its balance sheet. Our model remains to expand our distribution capacity through both organic and acquisitive growth whilst maintaining centralised investment, advice and compliance functions to drive increased profitability and shareholder value.

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 whilst maintaining a focus on the IFA market the Company continues to actively seek appropriately priced acquisition opportunities in the wider advisory and wealth management sector 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

4 June 2018

Consolidated Statement of Comprehensive Income

All results derive from continuing operations

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 2017, 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 2018 and the six months ended 30 April 2017 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 2017 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 six months ended 30 April 2018.

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 2018 was £37.8m (2017 HY: £23.1m). No impairments have been made during the period (2017 HY: 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 2018 was £6.6m (2017 HY: £2.1m). No impairments have been made during the period (2017 HY: £ nil).

3 Revenue and segmental Analysis

The following is an analysis of the Group's revenue and results from continuing operations by reportable segment.

Segment revenue reported above represents revenue generated from external customers. There were no Inter-segment sales in the current year.

The Accounting policies of the reportable segments are the same as the Group's accounting policies.

The total revenue of the Group for the year has been derived from its activities wholly undertaken in the United Kingdom.

No customer is defined as a major customer by revenue, contributing more than 10% of the Group revenues (2017 - £nil)

4. Intangible Assets

Goodwill and Acquired client portfolios

Goodwill believed to have an indefinite useful life is carried at cost. The determination of whether goodwill is impaired requires an assessment of the value in use. The recoverable amount of goodwill on a value in use calculation is based on the discounted cash flows expected from the intangible assets of each acquisition, assuming no future growth in revenue generated cash flows, discounted at an implied factor of 10%, for a period of 10 years with no annuity. On this basis the directors believe the value of goodwill is not impaired at 30 April 2018. The directors have concluded that Goodwill relates to a single Cash Generating Unit.

The Directors have assessed the sensitivity of the assumptions detailed above and consider that, due to the level of prudence already factored into these assumptions, it would require a significant adverse variance in any of these to reduce the fair value to a level where it matched the carrying value.

During the period ended 30 April 2018, 3 asset purchases and 3 share purchases were undertaken relating to acquired client portfolios. Consideration for these acquisitions amounted to £6.7m, of which £6.7m related to client portfolios. Included within the total consideration are amounts relating to contingent consideration of £3.5m. The contingent consideration is subject to earn outs based on future turnover over a period up to three year period.

5. Trade and other receivables

Group

There are no bad or doubtful receivables.

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 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.

7. Trade and other payables

8. Share Capital

9. Earnings per share

The calculation of earnings per share is based on the profit attributable to the equity holders for the period of £2,491,000 (2017 - £921,000) and weighted average number of shares in issue during the period of 36,352,925 (2016 - 24,806,775).

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 9.98p (2016 - 6.17p) 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.

10. Reconciliation of Operating profit to Net Cash inflow from Operating Activities