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AFH assets swell

The wealth management group is converting IFA consolidation into earnings growth
May 28, 2019

While the broader wealth management sector has spent the last year battling regulatory pressures and slowing organic growth, Aim-traded AFH Financial (AFHP) has been busy dancing to its own tune. In a bid to become the UK’s number one financial planning-led wealth manager, the group has been absorbing small teams of independent financial advisers (IFAs), headed by ageing principals. Half-year numbers suggest the plan is bearing fruit.

IC TIP: Buy at 334p

In the period, AFH made four such acquisitions, adding £640m-worth of investment portfolios. This, together with deals made in the second half of FY2018, and double-digit growth in organic client inflows, meant funds under management stood at £5.4bn by 30 April, a whopping 68 per cent up on last year.

Broker Shore Capital reckons around a third of these assets currently sit on the AFH Direct platform, which waives fees in exchange for managing client money using model portfolios constructed from funds where AFH has negotiated institutional rates. Encouragingly, a focus on lower client costs hasn’t eaten into profitability; moreover, the underlying Ebitda margin rose from 19.5 to 21 per cent year on year.

Shore Capital forecasts adjusted pre-tax profits of £17m and EPS of 29.9p for the year to October 2019, rising to £20.6m and 35.6p in FY2020.

AFH FINANCIAL (AFHP)   
ORD PRICE:334pMARKET VALUE:£142m
TOUCH:328-340p12-MONTH HIGH:424pLOW: 300p
DIVIDEND YIELD:1.8%PE RATIO:17
NET ASSET VALUE:174p*NET CASH: £7.7m
Half-year to 30 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201822.73.26.9nil
201936.66.010.7nil
% change+61+85+56-
Ex-div:na   
Payment:na   
*Includes intangible assets of £93m, or 219p a share.