Chairman’s Statement

John Wheatley

Dear Shareholder

I am pleased to report on a sixth consecutive year of profitable growth, with increased margins complementing both organic and acquisitive progress.

The Company has maintained a consistent strategy since IPO, increasing margins and shareholder value while taking advantage of market consolidation opportunities and using the Company’s increased size to create a unique client proposition in order to drive organic growth.  At the year end, the Company announced that client Funds Under Management had exceeded £6 billion, an increase of over 40% during the year.

AFH’s business model remains advice-led, which the Board believes creates a best of breed investment strategy for clients and, in turn, has proved to deliver a high level of client retention. This has been particularly evident during the year under review when the Company continued to deliver strong organic inflows of funds from existing and new clients with low levels of redemptions. In the period, double-digit gross organic inflows continued to be achieved while outflows, including pension drawdowns, remained below 3%. This represented AFH’s third successive year of double-digit growth and, in net terms, compared favourably to the wealth management sector as a whole.

In September, the Company announced that, following two years of significant acquisition activity and given the uncertain political and economic climate, it would de-risk its model through a period of consolidation. While the Board remained open to any clear value-enhancing acquisition opportunities in the period under review and following a highly acquisitive twelve months, the Board’s focus was to ensure both successful integration of the Company’s new acquisitions as well a continuation of driving organic growth.

Throughout a year of market uncertainty, the Company increased its revenue base by 47% while maintaining gross margins at 53%. The increased scale of the Company allowed significant investment in both IT solutions and digital marketing during the period, while generating an increased Underlying EBITDA margin for a fifth successive year and an increase in Earnings Per Share of 59%. This allowed the Company to pay a dividend of 6p in 2019 and to recommend a further 33% increase to 8p in 2020.

During the period, the Company completed eight acquisitions and continued to integrate the businesses acquired in the previous year. While the majority of acquisitions have performed in line with expectations, with the average payment of deferred consideration in line with previous years, during 2018 the Company acquired several multi adviser businesses where the majority of advisers had not been previous owners of the business. These multi adviser acquisitions have been far more time intensive than the traditional smaller transactions, and the anticipated financial benefits of these acquisitions are not fully reflected in the 2019 results.

As previously reported, since IPO AFH has invested heavily to establish an infrastructure able to support a large national financial services business. This investment continued in 2019 to ensure ongoing operational efficiencies and to deliver greater benefits to clients. Following the year end the Company’s client portal was launched to provide an effective two-way information flow and ensure that client needs can continue to be met while meeting the increasing regulatory requirements in a cost-effective manner.

The Group’s drive to increase shareholder value remains based on the strategic aim of reducing the total investment cost for AFH’s clients, by leveraging the increased scale of AFH for their benefit. This was clearly demonstrated during the year by the elimination of platform fees for AFH Direct clients and the extension of segregated mandates to lower fund management charges. As a result, the Directors believe that the Company’s client proposition remains extremely competitive with clients choosing our own platform paying less than 2% in total annual investment and advice fees. The Board believes that this is not only in the spirit of sound commercial business, but leads the way for future advisory and wealth management models. 


As previously reported, in January 2019 the Group issued new three to five-year aspirational milestones: –

  • Funds under Management of £10 billion;
  • Revenues per annum of £140 million; and
  • Underlying EBITDA margin of 25% on revenue.

Since that time, and as evidenced by the financial performance for 2019, the Company has made steady progress towards these targets and the Board remains confident of their achievement in the time frame targeted.

Our people
As in previous years, the continued growth of AFH is due to the loyalty, professionalism and hard work of its employees and advisers nationwide. I would like to personally thank them all for the contribution they made in 2019. It has been another highly successful year in which we have continued to grow our business profitably and improve our operating margins in line with the Board’s expectations – against a challenging macro-economic backdrop.

It remains the Directors’ ambition to maintain the alignment of interest between our employees and advisers with those of our clients and shareholders. It is in response to the support we receive from our staff that we continue to develop and promote our people from within the Group at every opportunity, so that many key positions are occupied by home-grown talent. It is the enthusiasm, dedication and creativity of our staff and advisers that allows the Group to continue to deliver on its strategy each year since IPO.

Capital structure
During a year in which equity markets exhibited significant volatility, driven by political and economic uncertainty, the Group successfully raised £15 million of funds through the placing of 4% Convertible Unsecured Loan Stocks 2024 (“CULS”), introducing a number of new institutional investors to the Company. The Board and I welcome all those who participated, who join at another exciting period of the Group’s development, and thank our existing shareholders for their continued support.

As previously reported, in order for the Company to take advantage of selected earnings enhancing opportunities in AFH’s core wealth management division and provide the Company with added financial flexibility, in November 2019, the Company announced a £12 million facility agreement with HSBC. No drawings have been made on this facility to date.

At the year end, the Group had a strong balance sheet on which to drive growth and profitability and, we believe, a strong and supportive institutional and retail shareholder base.

The Directors intend to continue the Group’s progressive dividend policy, while recognising the requirement to maintain sufficient cash reserves within the Company to fund its growth strategy. Having considered this, in light of the strong performance during the year under review, the Directors propose a dividend of 8.0 pence per share, an increase of 33% over the 2019 dividend. This dividend will be paid 3p on 14 February 2020 to shareholders on the register of members at the close of business on 31 January 2020, the ex-dividend date is 30 January 2020, and 5p on 3 July 2020 to shareholders on the register of members at the close of business on 12 June 2020, the ex‑dividend date is 11 June 2020.

The Directors remain of the opinion that there is a continuing requirement for a professional, financial planning-led approach to wealth management delivered by trusted personal advisers and supported by the effective use of technology.

The Board has worked to ensure that it has put in place the necessary infrastructure and management to support its growth plans for 2020 and beyond. Continued investment in technology is expected to accelerate the benefits of scale and the infrastructure investment made in previous periods.

The Company continues to be cash generative and maintains a strong balance sheet. The Board expects the requirement for professional financial planning to accelerate in the future and for the consolidation within the sector to continue as commercial factors and regulatory requirements encourage a smaller number of larger businesses to dominate the sector. In the light of the December 2019 general election, the result of which we believe will deliver greater political certainty for the country, AFH will continue to focus on driving the organic growth of the business, providing professional and cost-effective services to clients while seeking appropriately priced opportunities to expand its captive distribution throughout the financial sector, to drive increased profitability and shareholder return.

Given the progress made in 2019, and the early months of the 2020 financial year, the Directors’ view the coming year as a period of opportunity and look forward to continued success.

John Wheatley

17 January 2020


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