AFH Financial (AFHP) reported “steady progress” towards its long-term goals this week, as the financial planning-led wealth manager unveiled stable margins, a 40 per cent rise in funds under management, and another leap in revenues in its October year-end financial statement.
Earnings also strengthened, thanks to a switch in the revenue model within the group’s protection broking division. Here, underlying cash profits doubled to £5.4m, while the gross margin ticked up from 44 to 54 per cent.
That has also boosted cash generation, which should provide further evidence to investors that AFH’s historically acquisition-dominated strategy can be self-funded. On this front, discernment has been the watchword, as management concentrates on technology investments and organic revenue growth.
Should an attractive takeover target appear, then the post-period signing of a £12m loan facility with HSBC has given the group flexibility to move quickly and avoid the need to tap the equity market. Chief executive Alan Hudson reports a strong pipeline of potential deals, but has relaxed his valuation criteria from four to five times’ cash profits for larger high-quality candidates.
Broker Liberum expects adjusted earnings of 32.7p per share for the year to October 2020, and 36.8p in FY2021.
| AFH Financial (AFHP) | |||||
| ORD PRICE: | 385p | MARKET VALUE: | £165m | ||
| TOUCH: | 383-387p | 12-MONTH HIGH: | 390p | LOW: | 260p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 15 | ||
| NET ASSET VALUE: | 184p* | NET DEBT: | 5% | ||
| Year to 31 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 21.0 | 1.59 | 6.0 | 2.25 |
| 2016 | 24.1 | 2.03 | 7.2 | 3.00 |
| 2017 | 33.6 | 3.51 | 11.2 | 4.00 |
| 2018 | 50.7 | 7.79 | 16.0 | 6.00 |
| 2019 | 74.3 | 13.7 | 25.4 | 8.00 |
| % change | +47 | +76 | +59 | +33 |
| Ex Div: | 30 Jan & 11 Jun | |||
| Payment: | 14 Feb & 3 Jul | |||
| *Includes intangible assets of £105m, or 245p a share. Dividend paid in separate 3p & 5p tranches. | ||||
