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DJ AFH Financial Group Plc Interim Results

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 MONTHS ENDED 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.

(MORE TO FOLLOW) Dow Jones Newswires

June 01, 2020 02:00 ET (06:00 GMT)

DJ AFH Financial Group Plc Interim Results

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 MONTHS ENDED 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.

(MORE TO FOLLOW) Dow Jones Newswires

June 01, 2020 02:00 ET (06:00 GMT)

DJ AFH Financial Group Plc Interim Results -2-

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 
 
 
 

(MORE TO FOLLOW) Dow Jones Newswires

June 01, 2020 02:00 ET (06:00 GMT)

DJ AFH Financial Group Plc Interim Results -2-

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 
 
 
 

(MORE TO FOLLOW) Dow Jones Newswires

June 01, 2020 02:00 ET (06:00 GMT)

DJ AFH Financial Group Plc Interim Results -3-

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 

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DJ AFH Financial Group Plc Interim Results -3-

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 

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DJ AFH Financial Group Plc Interim Results -4-

                                                         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:

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DJ AFH Financial Group Plc Interim Results -4-

                                                         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:

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DJ AFH Financial Group Plc Interim Results -5-

-- 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 
                         ------------------  ---------  ------------  -------- 
 

(MORE TO FOLLOW) Dow Jones Newswires

June 01, 2020 02:00 ET (06:00 GMT)

DJ AFH Financial Group Plc Interim Results -5-

-- 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 
                         ------------------  ---------  ------------  -------- 
 

(MORE TO FOLLOW) Dow Jones Newswires

June 01, 2020 02:00 ET (06:00 GMT)

DJ AFH Financial Group Plc Interim Results -6-

 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.

(MORE TO FOLLOW) Dow Jones Newswires

June 01, 2020 02:00 ET (06:00 GMT)

DJ AFH Financial Group Plc Interim Results -6-

 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.

(MORE TO FOLLOW) Dow Jones Newswires

June 01, 2020 02:00 ET (06:00 GMT)

DJ AFH Financial Group Plc Interim Results -7-

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

IR KKKBKKBKDOPN

(END) Dow Jones Newswires

June 01, 2020 02:00 ET (06:00 GMT)

DJ AFH Financial Group Plc Interim Results -7-

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

IR KKKBKKBKDOPN

(END) Dow Jones Newswires

June 01, 2020 02:00 ET (06:00 GMT)