AFH halts acquisition drive 01 October 2019

AFH Financial Group has paused its recent acquisition spree as the company seeks to focus on "organic revenue growth" in light of the current economic and political climate. 

In a business update this morning (September 30) the wealth manager announced it did not anticipate seeking any additional funding from the equity market for deals in the "foreseeable future" as it moved to complete acquisitions currently undergoing due diligence in its pipeline. 

AFH had followed a similar strategy in 2016 when the company moved to de-risk its business model by focusing on a period of integration for acquisitions it had made in the previous 12 months and prioritising organic growth.

At the time the wealth manager pointed to an "uncertain political and economic" climate as cause for the pause in new deals and in today's statement the company said its board believed many of the economic and political factors that existed in 2016 were again present to "influence investor behaviour for the foreseeable future".

AFH said: "Therefore, following completion of the remaining acquisition opportunities identified to the market at the time of the Convertible Loan Stock placing in July 2019 and currently undergoing due diligence, the board intends to focus the company's resources on organic revenue growth complemented by the use of technology to enhance productivity and drive operational efficiencies within its two operating divisions.

"This strategy is expected to unlock future working capital and, following the payment of deferred considerations as they become due, provide free cashflow to finance additional acquisitions in the future and deliver an appropriate level of ongoing dividends to shareholders." 

Since AFH joined the AIM in 2014 it has completed 50 acquisitions, increasing its revenues by 400 per cent in the same period. 

The wealth manager has completed a number of acquisitions this year, including three this month, brining its total committed spend to £10.3m since its stock placing in July of this year.

AFH has committed to an acquisition spend of £29.9m in the current financial year, spread over seven deals and of which £12.8m was paid upfront as an initial consideration - the remaining balance will be paid dependent on performance targets over the next two years. 

Earlier this month the company bought Wirral-based IFA firm Broadleaf Financial Services Limited for £3.2m in a deal which added £140m in funds under management to its business. 

Just days earlier AFH announced the acquisitions Mulberry Independent Financial Advisers Limited and AE Garment Independent Financial Services Limited for £7.2m, in deals which saw the wealth manager gain £215m of funds under management. 

Alan Hudson, chief executive of AFH, said: "The growth and strategy of the company has created a proposition for our clients that combines a market leading client centric service with a competitive cost model and has created a USP from which to achieve our three to five year aspirations.

"We seek to align our growth with operational efficiencies and during the current year the company has invested heavily in digital marketing and IT infrastructure, all of which has been expensed, whilst absorbing the cost of clients using our Pershing-enabled AFH Direct platform."