Listed IFA AFH Financial Group has reported total revenue growth of £4.2m to £15m for the period ending 31 October, whilst gross margins were held at 51 per cent.
Recurring revenue was also up, accounting for £8.2m of total revenue during the year, compared to £5.5m in 2013. The increase in recurring revenue as a percentage of total revenue can be attributed in part to the acquisitions.
The group reported that its total advisers increased to 136, with seven acquisitions expanding operations into Scotland, Cornwall and East Anglia.
The statement noted that there is still a “strong acquisition pipeline from single person businesses to small-to medium corporates”.
John Wheatley, the group’s chairman, said the board believes this growth will enable it to accelerate the rate of acquisitions in the future as appropriate opportunities arise.
At the end of June last year the group’s shares were admitted to trading on the Alternative Investment Market, and although Mr Wheatley admitted trading volumes have been low, they have allowed it to meet several institutional investors.
Profit before tax – adjusted to exclude the exceptional one-off initial public offering costs – increased marginally to £1.06m from £1.05m in 2013. The tax charge for the year was also increased to 30 per cent as a result of the non-tax deductibility of these exceptional IPO costs.
According to the results, the directors recognise that there is a continuing consolidation of the IFA market at many levels within the sector.
“This has been particularly apparent since the summer months of 2014 with a number of medium sized IFA practices now considering their future as part of larger organisations,” it added.
Alan Hudson, chief executive, explained that acquisitions incurred an initial cash outlay of £864,000 with the balance of the consideration of up to £1.15m being on a deferred basis depending on trading of the acquired businesses during the next two year period.
“It is anticipated that these acquisitions will act as a seed for organic growth in the future and enable the group to recruit additional IFAs in these new areas,” he noted.
Post year end, Mr Hudson stated that the pipeline for both suitable acquisitions and IFA recruitment remains strong, although there was upward pressure on price multiples within the sector during 2014.
“The group continues to expand nationally without any loss of focus on our traditional West Midlands client base and remains focused on both small and larger IFAs looking to benefit from being part of a wider group.
“It is expected to be a feature of our acquisition strategy in 2015 to expand the business nationally with an emphasis on the south and north west of England.”
peter.walker@ft.com