TIDMAFHP TIDMAFHB
RNS Number : 4481O
AFH Financial Group Plc
01 June 2020
1 June 2020
AFH Financial Group Plc
("AFH", the "Company" or the "Group")
RESULTS FOR THE SIX MONTHSED 30 APRIL 2020
Resilient revenue & margins
AFH, the leading financial planning led wealth management firm,
is pleased to announce its results for the six months ended 30
April 2020, a period which saw the continued trend of revenue
growth.
FINANCIAL OVERVIEW
-- Revenues up 5% to GBP38.2 million (H1 2019: GBP36.6 million)
-- EBITDA up 10% to GBP8.5 million (H1 2019: GBP7.7 million)
-- EBITDA margin up 1.2pp to 22.2% (H1 2019: 21.0%)
-- Profit after tax maintained at GBP4.6 million (H1 2019: GBP4.5 million)
-- Statutory Earnings per Share stable at 10.71 pence (H1 2019: 10.71 pence)
-- Underlying Earnings per Share* up 8% to 16.06 pence (H1 2019: 14.87 pence)
-- Funds under Management of GBP5.95bn, up 7% (H1 2019: GBP5.4bn)
-- Strong cash position of GBP16m in bank and in hand (as at 31 May 2020)
*Underlying Earnings per Share have been calculated on the
profit attributable to the equity holders for the period after
adding back Amortisation, Depreciation and non-cash share based
payments after adjusting the tax provision accordingly
Alan Hudson, CEO of AFH said: "During the first-half of the
year, we delivered a resilient set of results, notwithstanding the
negative impact of COVID-19 towards the end of the period.
"The Company continued to trade profitably, in line with our
expectations, while focusing on cash management and paying down
both Deferred Consideration and Loan Notes as they matured. Cash
retention remains a key focus for the Group and, in light of
current uncertainty, we have adopted a number of prudent cost
measures across the Board, senior management and staff to protect
profitability and ensure that the Company emerges from the current
crisis in a strong financial position.
"Throughout the ongoing crisis, our efforts have been focused on
protecting the health, safety and wellbeing of our employees and
their families, while continuing to deliver the same high level of
service to clients and maintaining long-term value creation for
shareholders. The Company adapted quickly to the challenges
presented in March and, by the end of the month, had over 400 staff
and all advisers working from home with full access to AFH's
web-based infrastructure, which has been the focus of significant
investment since 2015.
"Under the ongoing restrictions and uncertainty in the financial
markets, the Board expects that while gross revenue for the current
year will be lower than market expectations this will be largely
offset by the variable nature of the Group's cost of sales and cost
reductions implemented by the Company."
For further information please contact:
AFH Financial Group Plc 01527 577 775
Alan Hudson, Chief Executive Officer
Paul Wright, Chief Financial Officer
Liberum ( Nominated Adviser and Joint Broker) 020 3100 2000
Richard Bootle / Euan Brown / Kane Collings
Shore Capital ( Joint Broker) 020 7408 4090
Hugh Morgan / Edward Mansfield / Daniel Bush
Yellow Jersey PR Limited (Financial PR) 077 6932 5254
Joe Burgess / Georgia Colkin / Dominic Barretto
Notes to Editors
AFH Financial Group Plc (AIM: AFHP) is a leading UK financial
planning-led wealth management firm based in the Midlands. F ounded
in 1990 by CEO Alan Hudson , the Company provides wealth management
and financial advisory services to over 20,000 clients in the
UK.
The Company has a defined growth strategy focused on increasing
shareholder value through the expansion of the AFH community. This
strategy continues to be driven by a combination of organic growth
through greater productivity of the Company's advisers and by value
accretive acquisitions.
This announcement is released by AFH Financial Group Plc and
contains inside information for the purposes of Article 7 of the
Market Abuse Regulation (EU) 596/2014 (MAR), and is disclosed in
accordance with the Company's obligations under Article 17 of
MAR.
For the purposes of MAR and Article 2 of Commission Implementing
Regulation (EU) 2016/1055, this announcement is being made on
behalf of the Company by Paul Wright, Chief Financial Officer.
Chief Executive's Review
Business and Performance Review
During a period of exceptional events, the Company continued to
trade profitably in line with our expectations while focusing on
cash management and paying down both Deferred Consideration and
Loan Notes as they matured. The period started with the uncertainty
of a minority Government and a General Election before confidence
and the clarity of a stable majority Government boosted the markets
and our clients' willingness to progress their financial plans.
This period was short lived as COVID-19 created further uncertainty
and the most dramatic fall in world markets experienced for many
decades.
The Company adapted quickly and, by the end of March, had over
400 staff and all advisers working remotely with full access to
AFH's web-based infrastructure, which has been the focus of
significant investment since 2015.
Following the sharp falls recorded in March, the markets
recovered a significant proportion of their losses in April and
volatility fell to pre COVID-19 levels. As previously signaled to
the market, our clients' managed portfolios provide a balanced
approach to investment and, as a result, the impact of market
movements was mitigated to less than 50% of that of the fall in
equity markets during this period.
Throughout the period, gross inflows of funds continued at a
similar level to that of the second half of 2019, whilst annualised
outflows continued at below 2% of opening funds. It was
particularly encouraging that, during March, when equity markets
were in turmoil, our clients continued with their long-term
investment strategy and no major outflows were recorded.
New business in our wealth management division was below
expectations for the period as uncertainty gripped the markets and
our advisers came to terms with new ways of virtual interaction
with clients. As noted above, the Company's continued investment in
technology allowed remote interaction with advisers and clients.
While new business in March and April fell from Q1 levels, the
indications are that a slow recovery will gather pace during the
second half of the financial year.
Our protection business continued to perform strongly, being
uncorrelated to the investment markets, and, again, the use of
technology allowed advisers to maintain business levels. The
protection providers all reported strong inflows during the period
and Eunisure continued to expand both its adviser productivity and,
with a new team in Scotland, its geographical footprint. In line
with the announcement made in September, the mix of Indemnity:
Non-Indemnity life business was adjusted from 1 November 2019 to
ensure that there was no further working capital drain on the
Company during the current year. This aim was achieved by the end
of the period with a positive cashflow from the division. As
reported the change reduced the gross margin from 52% to 46%.
However, the organic growth in the Group allowed the division to
report increased revenues and EBITDA.
In March, the Company took early action to address the likely
impact of a lockdown on the top line revenue and actioned a cost
reduction plan to temporarily remove GBP3 million of annualised
costs from the Group. The Board, senior management and staff
participated in a temporary salary cut, whilst non-critical
projects were put on hold. In addition, the variable nature of the
Company's cost of sales further cushioned the anticipated revenue
losses. The Group greatly benefitted from its ongoing investment in
IT and infrastructure and, in addition, since the commencement of
lockdown, introduced new processes that the Directors believe will
enable AFH to exit the lockdown period with a robust and more
efficient structure as and when that time comes.
During the period, the Company paid Deferred Consideration on
previous acquisitions as those debts became due and, in accordance
with IFRS guidance, reassessed the likely cost and associated
liability of acquisitions made during the preceding twelve months.
As a result, the maximum outstanding Deferred Consideration as at
30 April was reduced to GBP26.9 million.
Financial Advisory and Investment Management
Financial advisory and the management of client portfolios
continues to represent the core business of AFH and, in the first
half of 2020, represented 79% of Group revenues.
During the period, financial planning fees totalled GBP7.1
million, a decrease of GBP0.4 million over the same period last
year (H1 2019: GBP7.5 million).
Ongoing management fees increased to GBP23 million (H1 2019:
GBP21.8 million), reflecting the growing funds under management,
despite the fall in global markets due to the effect of the
COVID-19 pandemic in February and March 2020.
Annualised average revenue per adviser in our core business
increased to GBP258,000 (H1 2019: GBP236,000).
The division generated EBITDA of GBP6.3 million (H1 2019: GBP6.4
million) and following the financial upheaval experienced during
2020 we expect the growing requirement for professional financial
planning to accelerate in the future.
Protection Broking
The Protection Broking business saw further growth over the
period as a result of continuing strong demand for protection
products. The division continues to benefit from the ongoing
insurance gap in the market, estimated at GBP2.4 trillion and also
from the increased public awareness of the products as a result of
the effects of the COVID-19 pandemic.
During the period, the division generated revenues of GBP8.1
million (H1 2019: 7.3 million) from which EBITDA of GBP2.8 million
(H1 2019: 2.7 million) was derived. As previously anticipated and
reported the change in the model towards indemnity business reduced
the gross margin from 52% in H1 2019 to 46%.
Acquisitions
Following a period of consolidation, the Group is continuing to
focus on cash generation and organic growth. Whilst the Group
remains open to future select acquisitions, should suitable
opportunities present themselves, with a focus on smaller IFAs and
larger businesses where the majority of advisers are employed or
equity participants in the target company, following the current
COVID-19 outbreak, evaluation of acquisition opportunities has been
temporarily suspended.
Funds under Management
In spite of gross inflows in excess of 8% annualised and
outflows continuing below 2% annualised, Funds under Management
decreased by GBP220 million driven by the market impact on
portfolios, which fell by an average 6.9% during the period
compared to the fall in UK equities of 18%.
Funds under Management GBP
billions
Reported as at 1 November
2019 6.17
---------------------------
Inflows from existing
business 0.245
---------------------------
Market impact (0.41)
---------------------------
Outflows and drawdowns (0.055)
---------------------------
Balance as at 30 April
2020 5.95
---------------------------
Inflows from existing business continued to be predominantly
invested on a discretionary mandate.
COVID-19
Our ongoing investment in our people and technology has allowed
the Group to adapt quickly in line with the current crisis and to
ensure the safety of its staff and their families. In response to
the challenges posed by COVID-19, the Group's priority continues to
be ensuring the safety of its employees and advisers, delivering
uninterrupted support and advice to its clients and maintaining
long-term value creation potential for its shareholders.
Whilst trading during the period to March remained in line with
expectations, levels of new business revenue are likely to be
impacted by the lockdown in the coming months. However, the Board
is confident that the remote working measures put in place will
allow the Group to maintain a high level of service to its clients
and provide the necessary advice to guide them through this
uncertain time, whilst the need for professional financial advice
is likely to increase as the country exits the current
situation.
Cash Position
Post period-end, the Company drew down an additional GBP8
million from HSBC Bank as a further prudent step to ensure business
continuity. As at 31 May 2020, the Group had GBP16 million in cash
on the balance sheet.
Cash retention remains a key focus for the Group and, as noted
above, in light of current uncertainty, the Board has adopted a
number of prudent cost measures across all staff and management to
protect profitability and ensure that the Group emerges from the
current crisis in a strong financial position.
Dividend
Whilst our Group may be resilient, we are not immune to how the
unprecedented level of uncertainty may impact the operating
environment for AFH and its clients for the foreseeable future. It
is therefore imperative that the Group has the ability and
flexibility to continue providing clients with the quality of
service they need while safeguarding the long-term success of the
Company.
For this reason, and acknowledging the heightened regulatory
sensitivity at this time, the Board has made the decision to reduce
the previously proposed second interim dividend of five pence per
share by two pence per share. The Group will consider paying an
additional two pence per share as a third interim dividend at such
time when the financial and economic effects of COVID-19 become
clearer. This prudent judgement will ensure we are able to deal
with circumstances as they arise and protect clients, the long-term
value of the Company, and our proven ability to benefit from the
growth opportunity that we believe will emerge on the other side of
this crisis.
In order to give effect to this decision, the Board is therefore
declaring a second 2019 interim dividend of three pence per share.
The second 2019 interim dividend will be paid on 3 July 2020 to
shareholders on the register at the close of business on 12 June
2020.
This second interim dividend, combined with the dividend paid in
February 2020, will equate to a 6 pence interim dividend, similar
to the level paid in 2019. A further update regarding any third
interim dividend will be made when the impact of the release from
lockdown becomes clearer.
Outlook
The Company plans to build on the progress achieved in the first
half of this financial year and continues to look after the
ever-growing financial advice needs of its clients.
As a result of the financial upheaval experienced during 2020,
we expect a growing requirement for professional financial planning
amongst the mass affluent, many of whom have not sought
professional advice to date, and the Board therefore believes that
the Company is well positioned to benefit from the medium and long
term requirements of this demographic.
Under the ongoing restrictions and uncertainty in the financial
markets, the Board expects that while gross revenue for the current
year will be lower than market expectations this will be largely
offset by the variable nature of the Group's cost of sales and cost
reductions implemented by the Company.
We look forward to continuing to update the market on our
progress.
Alan Hudson
Chief Executive
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
Six months Six months Twelve months
ending 30 ending ending 31
April 2020 30 April October 2019
2019
Note GBP'000 GBP'000 GBP'000
Revenue 3 38,247 36,581 74,337
Cost of sales (18,553) (16,943) (34,657)
-------------- -------------- --------------
Gross profit 19,694 19,638 39,680
Administrative expenses before
amortisation and depreciation
and share based payments
expenses (11,193) (11,944) (22,452)
-------------- -------------- --------------
EBITDA 8,501 7,694 17,228
Amortisation and Depreciation (2,168) (1,568) (3,189)
Non cash share based payments (84) (72) (50)
-------------- -------------- --------------
Operating profit 6,249 6,054 13,989
Finance income 14 28 57
Finance costs (370) (113) (332)
-------------- -------------- --------------
Profit before tax 5,893 5,969 13,714
Income tax expense (1,299) (1,427) (2,901)
-------------- -------------- --------------
Profit for the year attributable
to owners of the parent 4,594 4,542 10,813
Other comprehensive income - - -
-------------- -------------- --------------
Total comprehensive income
for the year attributable
to owners of the parent 4,594 4,542 10,813
Earnings per share (in pence) 9
Basic 10.71 10.71 25.4
Diluted 9.84 9.88 23.5
Underlying EBITDA adjusted
for tax per share (in pence) 9
Basic 16.06 14.87 32.8
Diluted 14.74 13.73 30.4
All results derive from continuing operations
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
30 April 30 April 31 October
2020 2019 2019
Note GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Intangible assets 4 102,390 93,198 104,921
Property, plant and equipment 1,563 1,516 1,413
Right to use asset 3,555 - -
Investments 1 1 1
Deferred tax asset 23 27 23
-------------- -------------- --------------
107,532 94,742 106,358
Current assets
Trade and other receivables 5 29,155 22,134 26,232
Cash and cash equivalents 6,334 8,777 11,955
-------------- -------------- --------------
35,489 30,911 38,187
-------------- -------------- --------------
Total assets 143,021 125,653 144,545
Liabilities
Current liabilities
Trade and other payables 7 26,486 25,146 23,373
Current tax liabilities 375 1,599 1,224
Provisions 1,344 1,253 1,448
Financial liabilities -
Borrowings 6 1,771 80 832
-------------- -------------- --------------
29,976 28,078 26,877
Net current assets 5,513 2,833 11,310
-------------- -------------- --------------
Non-current liabilities
Trade and other payables 7 8,515 22,248 23,467
Financial liabilities -
Borrowings 6 20,439 1,030 15,241
Provision 150 102 161
-------------- -------------- --------------
29,104 23,380 38,869
Total liabilities 59,080 51,458 65,746
-------------- -------------- --------------
Net assets 83,941 74,195 78,799
Shareholders' equity
Share capital 8 4,294 4,259 4,279
Share premium account 8 56,231 55,740 55,986
Treasury Shares 8 - (149) (204)
Merger reserve (540) (540) (540)
Share-based payment reserve 852 790 768
Retained earnings 23,104 14,095 18,510
-------------- -------------- --------------
Total Shareholders' equity 83,941 74,195 78,799
Consolidated Statement of Changes in Equity
Share Share Treasury Merger Share-based Retained Total
capital premium Shares reserve payment earnings
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Audited balance
at 31 October
2018 4,198 54,641 - (540) 718 10,403 69,420
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit for the
period - - - - 72 4,542 4,614
Other
comprehensive
income - - - - - - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total
comprehensive
income - - - - 72 4,542 4,614
------------ ------------ ------------ ------------ ------------ ------------ ------------
Issue of share
capital 61 1,099 (149) - - - 1,011
Dividend - - - - - (850) (850)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Unaudited
balance
at 30 April
2019 4,259 55,740 (149) (540) 790 14,095 74,195
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit for the
period - - - - (22) 6,120 6,098
Other
comprehensive
income - - - - - - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total
comprehensive
income - - - - (22) 6,120 6,098
------------ ------------ ------------ ------------ ------------ ------------ ------------
Issue of share
capital 20 246 (55) - - - 211
Dividend - - - - - (1,705) (1,705)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Audited balance
at 31 October
2019 4,279 55,986 (204) (540) 768 18,510 78,799
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit for the
period - - - - 84 4,594 4,678
Other
comprehensive
income - - - - - - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total
comprehensive
income - - - - 84 4,594 4,678
------------ ------------ ------------ ------------ ------------ ------------ ------------
Issue of share
capital 15 245 204 - - - 464
Dividend - - - - - - -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Unaudited
balance
at 30 April
2020 4,294 56,231 - (540) 852 23,104 83,941
------------ ------------ ------------ ------------ ------------ ------------ ------------
Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
Six months Six months Twelve months
ending 30 ending 30 ending 31
April April October
2020 2019 2019
Note GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 10 7,692 765 5,787
Tax paid (2,201) (1,329) (2,608)
-------------- -------------- --------------
Net cash (outflow)/inflow from operating
activities 5,491 (564) 3,179
-------------- -------------- --------------
Cash flows from investing activities
Purchase of property, plant and
equipment (973) (434) (834)
Purchase of other intangible assets,
net of cash (1,633) (7,947) (3,830)
Acquisition of subsidiaries, net
of cash - - (9,378)
Payment of deferred consideration (7,433) (1,578) (8,007)
Interest received 14 28 57
-------------- -------------- --------------
Net cash outflow from investing
activities (10,025) (9,931) (21,992)
-------------- -------------- --------------
Cash flows from financing activities
Proceeds from issue of shares - 911 -
Share issue costs - - -
Proceeds from loan facility 4,000 - -
Proceeds from CULS - - 15,000
Issue costs - - (536)
Repayment of borrowings (3,433) (2,222) (2,314)
Interest paid (370) (110) (219)
Dividends (1,284) (850) (2,706)
-------------- -------------- --------------
Net cash (outflow)/inflow from financing
activities (1,087) (2,271) 9,225
-------------- -------------- --------------
Net (decrease)/increase in cash
and cash equivalents (5,621) (12,766) (9,588)
Cash and cash equivalents at the
beginning of the period 11,955 21,543 21,543
-------------- -------------- --------------
Cash and cash equivalents at the
end of the period 6,334 8,777 11,955
Notes to the Consolidated Financial Statements
1 General Information
AFH Financial Group Plc is a company incorporated in England and
Wales. The Group is principally engaged in the provision of
independent financial advice to the retail market.
2 Basis of preparation and accounting policies
2.1 Basis of preparation
The interim condensed consolidated financial statements have
been prepared in accordance with IAS 34 Interim Financial
Reporting. The interim condensed consolidated financial statements
do not include all the information and disclosures required in the
annual financial statements and should be read in conjunction with
the Group's financial statements for the year ended 31 October
2019, which were prepared in accordance with International
Financial Reporting Standards adopted by the International
Accounting Standards Board ("IASB") and interpretations issued by
the International Financial Reporting Interpretations Committee
("IFRIC") of the IASB (together "IFRS") as adopted by the European
Union, and in accordance with the requirements of the Companies Act
applicable to companies reporting under IFRS.
The information relating to the six months ended 30 April 2020
and the six months ended 30 April 2019 is unaudited and does not
constitute statutory financial statements within the meaning of
section 434 of the Companies Act 2006. The Group's statutory
financial statements for the year ended 31 October 2019 have been
reported on by its auditor and delivered to the Registrar of
Companies. The report of the auditor was unqualified and did not
draw attention to any matters by way of emphasis or contain a
statement under section 498(2) or (3) of the Companies Act
2006.
2.2 Significant accounting policies
This financial information has been prepared in accordance with
International Financial Reporting Standards (IFRS), including IFRIC
interpretations issued by the International Accounting Standards
Board (IASB) as adopted by the European Union and in accordance
with the accounting policies which will be adopted in presenting
the Group's Annual Report and Financial Statements for the year
ending 31 October 2020. These are consistent with the accounting
policies used in the Financial Statements for the year ended 31
October 2019, except that IFRS16 Leases is now effective for the
annual reporting period ending on 31 October 2020, replacing the
previous IAS17 standard.
The introduction of IFRS16 requires operating leases previously
not recognised on the Company's Statement of Financial Position, to
be accounted for as finance leases showing as right of use assets
and corresponding lease liabilities. The IFRS16 standard also, as a
consequence, affects the Statement of Comprehensive Income in that
operating lease expenses (such as property rents) are now recorded
as depreciation and finance expenses. The Statement of Consolidated
Cashflows is unaffected as these are non-cash entries.
2.3 Basis of consolidation
The interim condensed consolidated financial statements
consolidate the financial statements of the Company and its
subsidiary undertakings as at 30 April and 31 October each
year.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date that such control
ceases. The financial statements of subsidiaries are prepared for
the same reporting period as the parent company, using consistent
accounting policies.
2.4 Key sources of judgements and estimation uncertainty
The preparation of the condensed consolidated financial
statements requires management to make estimates and assumptions
that affect the reported amount of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities. If in the
future such estimates and assumptions, which are based on
management's best judgement at the date of preparation of the
financial statements, deviate from actual circumstances, the
original estimates and assumptions will be modified as appropriate
in the period in which the circumstances change. The areas where a
higher degree of judgement or complexity arises, or where
assumptions and estimates are significant to the consolidated
financial statements, are discussed below.
Impairment of client portfolios
The Group reviews whether acquired client portfolios are
impaired at least on an annual basis. This comprises an estimation
of the fair value less cost to sell and the value in use of the
acquired client portfolios. In assessing value in use, the
estimated future cash flows expected to arise from the individual
client portfolios are discounted to their present value over a
finite period to calculate the fair value.
The key assumptions used in arriving at a fair value less cost
of sale are those around valuations based on multiples of future
earnings streams and values based on assets under management. These
have been determined by looking at valuations of similar businesses
and the consideration paid in comparable transactions.
The carrying amount of client portfolios at 30 April 2020 was
GBP50.6m (2019 HY: GBP50.5m). No impairments have been made during
the period (2019 HY: nil).
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an
annual basis. This requires an estimation of the value in use of
the cash-generating units to which the goodwill has been allocated.
In assessing value in use, the estimated future cash flows expected
to arise from the cash-generating unit are discounted to their
present value using the Group's weighted average cost of capital
adjusted for tax.
The carrying amount of goodwill at 30 April 2020 was GBP50.8m
(2019 HY: GBP42.1m). No impairments have been made during the
period (2019 HY: GBP nil).
2.5 Change in accounting policies - IFRS 16 Adoption
The Group has adopted IFRS 16 from 1 November 2019 but it has
not restated comparatives for the prior reporting period, as
permitted under the specific transitional provisions in the
standard. The reclassifications and the adjustments arising from
the new leasing rules are therefore recognised in the opening
Statement of Financial Position on 1 November 2019.
In adopting IFRS 16, the group has used the following practical
expedients permitted by the standard:
-- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics;
-- reliance on previous assessments of whether leases are onerous;
-- the accounting for operating leases, with a remaining lease
term of less than 12 months as at 1 November 2019, as short-term
leases;
-- the exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application; and
-- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
The group has elected not to reassess whether a contract is or
contains a lease at the date of initial application. Instead, for
contracts entered into before the transition date, the group relied
on its assessment made in applying IAS 17 and IFRIC 4, 'Determining
whether an Arrangement contains a Lease'.
Lease liabilities
On adoption of IFRS 16, the group recognised lease liabilities
which had previously been classified as operating leases under the
principles of IAS 17 Leases. The lessee's incremental borrowing
rate applied to the lease liabilities on 1 November 2019 was based
on comparable loan interest rates in the relevant jurisdiction
where the lease is operable.
GBP000
Operating lease commitments disclosed
as at 31 October 2019 4,196
Adjustments (206)
-------------------------------------------- -------
Lease liability recognised as at 1 October
2019 3,990
Of which:
Current lease liabilities 1,027
Non-current lease liabilities 2,963
-------------------------------------------- -------
Lease liability recognised as at 1 October
2019 3,990
Lease Liability
The Liability value for the leases were measured at the amount
equal to the outstanding present value of the lease contracts
meeting the IFRS16 criteria, discounted at the lessee's incremental
borrowing rate as at the IFRS16 adoption date.
Right of use assets
Right-of-use assets for these leases were measured at the amount
equal to the lease liability as at the IFRS16 adoption date. There
were no onerous lease contracts that would have required an
adjustment to the right-of-use assets at the date of initial
application.
3 Revenue and segmental Analysis
The following is an analysis of the Group's revenue and results
from continuing operations by reportable segment.
Unaudited Six months ending 30
April 2020
Financial Advice and
Head Office Investment Management Protection Total
2020 2020 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------------------------------- --------------- ---------------
Revenue - 30,115 8,132 38,247
Cost of sales (7) (14,135) (4,411) (18,553)
Gross profit (7) 15,980 3,721 19,694
Administrative expenses before
amortisation and depreciation
and share based payments
expenses (623) (9,670) (900) (11,193)
__________ ____________ __________ __________
EBITDA (630) 6,310 2,821 8,501
Amortisation and Depreciation (402) (1,749) (17) (2,168)
Non cash share based payments (84) - - (84)
Operating profit (1,116) 4,561 2,804 6,249
Finance income 4 8 2 14
Finance costs (356) (14) - (370)
Profit before tax (1,468) 4,555 2,806 5,893
----__________ ----____________ ----__________ ----__________
Unaudited Six months ending 30
April 2019
Financial Advice and
Head Office Investment Management Protection Total
2019 2019 2019 2019
GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------------------------------- --------------- ---------------
Revenue - 29,323 7,258 36,581
Cost of sales - (13,435) (3,508) (16,943)
Gross profit - 15,888 3,750 19,638
Administrative expenses before
amortisation and depreciation
and share based payments
expenses (1,429) (9,525) (990) (11,944)
__________ ____________ __________ __________
EBITDA (1,429) 6,363 2,760 7,694
--------------- -------------------------------- --------------- ---------------
Amortisation and Depreciation (1,545) (23) (1,568)
Non cash share based payments (72) - - (72)
Operating profit (1,501) 4,818 2,737 6,054
Finance income 20 8 - 28
Finance costs (100) (13) - (113)
Profit before tax (1,581) 4,813 2,737 5,969
Segment revenue reported above represents revenue generated from
external customers. There were no Inter-segment sales in the
current year.
The Accounting policies of the reportable segments are the same
as the Group's accounting policies.
The total revenue of the Group for the year has been derived
from its activities wholly undertaken in the United Kingdom.
No customer is defined as a major customer by revenue,
contributing more than 10% of the Group revenues (2019 -
GBPnil)
4. Intangible Assets
Acquired
client
Other intangibles Goodwill portfolios Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 31 October 2018 546 28,405 52,331 81,282
Additions 164 14,041 5,486 19,691
Disposals - - - -
Revaluations - - - -
At 30 April 2019 710 42,446 57,817 100,973
Additions 203 7,367 5,552 13,122
Disposals - - - -
Revaluations - - - -
At 31 October 2019 913 49,813 63,369 114,095
Additions 235 - 1,398 1,633
Disposals - - - -
Revaluations - (2,500) (2,500)
At 30 April 2020 1,148 47,313 64,767 113,228
Amortisation
At 31 October 2018 57 375 5,922 6,354
Charge for the period 29 - 1,392 1,421
At 30 April 2019 86 375 7,314 7,775
Charge for the period 31 - 1,368 1,399
At 31 October 2019 117 375 8,682 9,174
Charge for the period 146 - 1,518 1,664
At 30 April 2020 263 375 10,200 10,838
Net book value
At 30 April 2020 885 46,938 54,567 102,390
------------------ --------- ------------ --------
At 31 October 2019 796 49,438 54,687 104,921
------------------ --------- ------------ --------
At 30 April 2019 624 42,071 50,503 93,198
------------------ --------- ------------ --------
At 31 October 2018 489 28,030 46,409 74,928
------------------ --------- ------------ --------
Goodwill and Acquired client portfolios
Goodwill believed to have an indefinite useful life is carried
at cost. The determination of whether goodwill is impaired requires
an assessment of the value in use. The recoverable amount of
goodwill on a value in use calculation is based on the discounted
cash flows expected from the intangible assets of each acquisition,
assuming no future growth in revenue generated cash flows,
discounted at an asset specific rate of 10%, for a period of 10
years with no annuity. On this basis the directors believe the
value of goodwill is not impaired at 30 April 2020.
The Directors have assessed the sensitivity of the assumptions
detailed above and consider that, due to the level of prudence
already factored into these assumptions, it would require a
significant adverse variance in any of these to reduce the fair
value to a level where it matched the carrying value.
During the period ended 30 April 2020, no asset or share
purchases were undertaken relating to acquired client
portfolios.
5. Trade and other receivables
Group
Unaudited Unaudited Audited
Six months Six months Twelve
ending 30 ending 30 months
April 2020 April 2019 ending
31 October
2019
GBP'000 GBP'000 GBP'000
Trade receivables 24,952 18,219 21,592
Other receivables 2,393 2,659 3,087
Prepayments 1,810 1,256 1,553
---------------- ---------------- ------------
29,155 22,134 26,232
The trade receivables are stated net of GBP1.2m doubtful debt
provision relating to commission on policies that may lapse before
term.
Included in trade receivables is GBP8.1m of commissions
receivable from insurance companies on life and other protection
policies brokered by the protection division due in greater than 1
year.
6. Analysis of borrowings
Unaudited Unaudited Audited
Six months Six months Twelve months
ending 30 ending 30 ending 31
April April October
2020 2018 2019
GBP'000 GBP'000 GBP'000
Current borrowings
Mortgage on freehold property 81 80 80
Lease liability 938 - -
8% Unsecured bonds 752 - 752
1,771 80 832
----------------- ----------------- -----------------
Non-current borrowings
4% Convertible Unsecured Loan
Stock 13,600 - 15,000
8% Unsecured bonds - 752 -
Lease Liability 2,617
HSBC Facility 4,000 - -
Mortgage on freehold property 222 278 241
20,439 1,030 15,241
----------------- ----------------- -----------------
The financial liabilities are recognised at amortised cost.
There is no material difference between the fair value and the
carrying value.
4% Convertible Unsecured Loan Stock are due for redemption or
conversion in 5 years.
The 8% unsecured bond is due 2020.
The mortgage is repayable by instalments over an 8-year period,
ending October 2023, with an interest rate of 2.9% over LIBOR.
Lease liabilities relate to the IFRS 16 adjustments disclosed in
note 1.
7. Trade and other payables
Unaudited Unaudited Audited
Six months Six months Twelve months
ending 30 ending 30 ending 31
April April October
2020 2019 2019
GBP'000 GBP'000 GBP'000
Current
Trade payables 2,207 1,673 1,853
Contingent consideration 18,403 17,257 14,433
Commissions payable 4,430 4,664 5,357
Other payables 670 780 745
Accruals 776 772 985
26,486 25,146 23,373
Non-current
Contingent consideration 8,515 22,248 23,467
8. Share Capital
Unaudited Unaudited Audited
Six months Six months Twelve months
ending 30 ending 30 ending 31
April April October
2020 2019 2019
GBP'000 GBP'000 GBP'000
42,944,040 authorised, issued
and fully paid 10p ordinary
shares 4,294 4,259 4,198
4,294 4,259 4,198
---------------- ---------------- ---------------
Nil authorised, issued and
fully paid 10p treasury shares - 4 -
---------------- ---------------- ---------------
- 4 -
---------------- ---------------- ---------------
9. Earnings per share
The calculation of earnings per share is based on the profit
attributable to the equity holders for the period of GBP4,594,000
(HY: 2019 - GBP4,542,000) and weighted average number of shares in
issue during the period of 42,866,960 (HY: 2019 - 42,449,632).
The diluted earnings per share has been adjusted for the
potential share issue relating to the share-based payments. The
number of shares has been increased by the difference between the
number of shares that will be issued if all options are exercised
and the number of shares that could be purchased for the same
consideration at average market price.
Unaudited Unaudited Audited
Six months Six months Twelve months
ending 30 ending 30 ending 31
April April October
2020 2019 2019
GBP'000 GBP'000 GBP'000
Weighted average number of ordinary
shares for the purpose of basic
earnings per share 42,886,690 42,449,632 42,495,124
Effect of dilutive potential ordinary
shares 3,838,132 3,524,766 3,453,911
Weighted average number of ordinary
shares for the purpose of diluted
earnings per share 46,724,822 45,974,398 45,949,035
There are no adjustments between the Earnings for the purpose of
basic earnings per share being net profit attributable to
shareholders and the Earnings for the purpose of diluted earnings
per share.
There are no adjustments between the Net profit attributable to
equity holders of the parent and the Earnings from continued
operations for the purpose of diluted earnings per share excluding
discontinued operation.
Underlying earnings per share of 16.06p (HY2019 - 14.87p) have
been calculated on the profit attributable to the equity holders
for the period after adding back Amortisation, Depreciation and
non-cash share based payments after adjusting the tax provision
accordingly.
10. Reconciliation of Operating profit to Net Cash inflow from
Operating Activities
Unaudited Unaudited Audited
Six months Six months Twelve months
ending 30 ending 30 ending 31
April April October
2019 2019 2019
GBP'000 GBP'000 GBP'000
Profit before tax for the period 5,893 5,969 13,714
Adjustments for
Interest and other investment income (14) (28) (57)
Interest expense 370 113 332
Depreciation and amortisation 2,168 1,568 3,189
Equity settled share-based expense 84 72 50
Movements in working capital
Increase in trade and other receivables (2,923) (7,238) (12,627)
Increase in trade and other payables 2,114 309 1,186
Cash generated from operations 7,692 765 5,787
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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