The financial services group published a very strong set of half year results

AFH Financial (AFHP:AIM) 385p

Gain to date: 11.6%

Original entry point: Buy at 345p, 24 January 2019

Shares in wealth manager AFH Financial (AFHP:AIM) have rallied sharply after the firm released strong first-half results, confirming our faith in its buy-and-build strategy.

Revenue for the six months to 30 April was up 61% to £36.6m thanks to strong organic growth as well as four deals in the first half, although the full benefits from the latter won’t flow through until the second half. Post-tax profit increased by 80% to £4.5m.

Funds under management (FuM) grew by 68% to £5.4bn due to inflows, acquisitions and positive market moves, and chief executive and founder Alan Hudson is sticking to his goal of £10bn of FuM within three to five years, together with annual revenue of £140m and a 25% operating margin. Meanwhile the protection broking business, which offers life insurance and critical cover, almost doubled revenues to £7.3m in the first half and with a dedicated new office for its telephone operations the business could double in size again in the future.

SHARES SAYS: For as long as AFH can bolt on good businesses at four to five times earnings before interest, tax, depreciation and amortisation (EBITDA) to consolidate its position, we believe it should deliver further strong returns for shareholders. Keep buying.

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