Company Registration No. 07638831 (England and Wales)
AFH Financial Group Limited
Annual report and
group financial statements
for the year ended 31 October 2024
AFH Financial Group Limited
Company information
Directors
Alan Hudson
Austin Broad
Alexis Larvin
Hayden Robinson
Secretary
Anne-Marie Brown
Company number
07638831
Registered office
AFH House
Buntsford Drive
Stoke Heath
Bromsgrove
Worcestershire
B60 4JE
Independent auditor
Saffery LLP
71 Queen Victoria Street
London
EC4V 4BE
AFH Financial Group Limited
Contents
Page
Strategic report
1 - 8
Directors' report
9 - 12
Directors' responsibilities statement
13
Independent auditor's report
14 - 17
Group statement of comprehensive income
18
Group statement of financial position
19 - 20
Company statement of financial position
21
Group statement of changes in equity
22
Company statement of changes in equity
23
Group statement of cash flows
24
Notes to the financial statements
25 - 54
AFH Financial Group Limited
Strategic report
For the year ended 31 October 2024
1
The directors present the strategic report for the year ended 31 October 2024.
Economic environment
The 2024 financial year has seen relative stability in global markets, despite being a year of elections across the world. Globally, inflation levels have gradually returned to more normal levels, with UK inflation rates returning to around 2%, although more slowly than expected. As a result, market expectations of aggressive rates cuts by the central bank have been disappointed. The Bank of England Monetary Policy Committee has been cautious in its rate setting policy. Rates have remained elevated through the financial year, with only one cut from 5.25% to 5.00% in July 2024. A further 0.25% cut in rates, taking the rate to 4.75%, came into effect at the start of November 2024.
The forecast for future rates cuts is pessimistic following the first Labour Budget in 14 years, announcing significant tax rises on businesses through increases to Employers NI. Further tax rises in future budgets have not been ruled out by the Chancellor or the Prime Minister. The expectation is that this budget and wider Labour government policy will have an inflationary impact. Markets are uncertain about future rates cuts, following the 0.25% drop to 4.50% announced on 6 February 2025. With inflation above the target of 2%, higher mortgages from elevated interest rates and gilt yields, and shrinking real-terms salaries from lower payrises, we anticipate that future New Business levels will be impacted by clients having less free capital. However, in the near term we expect New Business levels to remain relatively flat. There is uncertainty over future Inheritance Tax rules, which will drive demand for financial planning services, especially around tax and estate planning, as our target market seek to mitigate their increasing tax burden exposure through ethical tax planning.
Future developments
Following the acquisition of AFH Financial Group by Cortina Bidco Limited in 2021, the Cortina Bidco Group is looking to grow through acquisitions alongside continuing its growth organically though recruitment of strong advisers and improved lead generation processes.
Principal risks and uncertainties
Assessment of the principal risks and uncertainties and key performance indicators has been performed at Group level, which comprises Cortina Bidco Limited, AFH Financial Group Limited and its subsidiaries including the company. The following section summarises the principal risks and uncertainties that impact the Group and the market in which we operate. The Board is responsible for assessing the principal risks and these are monitored by the Risk Committee under the Chairmanship of the Group Head of Risk.
Against each of the principal risks, consideration is given to the Group's exposure and the extent to which the risk can be mitigated.
The Board considers other risks to the Group within four categories: - Conduct, Credit, Market and Operational. The Group's overall risk management programme seeks to minimise potential adverse effects on the Group's financial performance and its reputation arising from these risk areas.
The Key financial and non-financial risks identified by the Board and the measures taken to mitigate their impact are:
AFH Financial Group Limited
Strategic report (continued)
For the year ended 31 October 2024
2
GDPR and cyber risk
The failure or compromise of an IT system, whether internal or outsourced, could lead to disruption of services to clients, reputational damage and a negative impact on profitability.
The Group seeks to minimise this risk through close working relationships with our outsourced suppliers supported by appropriate Service Level Agreements against which performance is monitored. The Group carries out ongoing diligence over key suppliers to allow early identification of risk. Business continuity/disaster recovery arrangements are in place with most key services now cloud based and all staff able to operate remotely.
We continue to monitor and enhance our existing cyber security capability in line with the increasing threat and work with third party partners, including outsourced Managed Detection and Response services to ensure continuity of coverage. We regularly test and implement security protocols in conjunction with our service providers and externally validated standards. The Group has strong technical mitigations in place alongside regular mandatory security training for all staff and advisers.
The Group's IT team, in conjunction with our outsourced service partners continually monitor for any unauthorised usage and access of Group data. Access to Group systems is terminated immediately upon exit for all staff and advisers and return of all Group property is mandatory for leaving employees and advisers.
Reduced market yield risk
In an environment where market forecasters are projecting lower yields in the future the Group may fail to deliver past levels of return to our clients, especially in periods of high interest rates and / or inflation and market volatility.
Our business model is based on providing above average market returns whilst reducing the cost of investment for our clients thereby increasing the net yield from their portfolios. The Investment Committee includes external professionals who work with our research analysts to construct and manage diversified portfolios appropriate to the risk and financial planning needs of our clients. Our discretionary clients' portfolios are managed on an ongoing basis to react to short term market fluctuations within the investment strategy set out by the Investment Committee. A dedicated Investment Research team constantly monitors market movements, with processes in place to alert the Investment Committee at certain thresholds. Strong governance and oversight ensure that the Company can affect contingencies as issues arise.
Client outcomes risk
AFH is a client centric organisation, with this value embedded in our culture and values. Ensuring positive client outcomes is an area of ongoing focus for the Company.
We employ a team of specialist managers within our Adviser Management and Training & Compliance teams to recruit and manage high quality advisers who adhere to the Group's client centric culture. Clients are matched to advisers based on relevant expertise and location to cement both clients and advisers within the Group's community whilst our commercial structure encourages the retention of advisers. All advisers are subject to ongoing KPI monitoring and file and advice quality reviews, alongside annual competency and fitness and propriety assessments. Mission, vision and culture training is provided on induction to all staff and advisers by our dedicated training function, with regular refreshers to ensure our advisers live the AFH values and behaviours.
The Group prohibits advisers from charging over the published rates and conducts compliance checks on new business submissions to ensure the appropriate charge is levied. The CRO is involved in key commercial decision-making and there is a Risk team representative within all key projects to ensure alignment to good client outcomes.
AFH Financial Group Limited
Strategic report (continued)
For the year ended 31 October 2024
3
The Group has dedicated resource assessing compliance to regulation, and controls in place monitoring the trends of breaches and complaints identified. We foster an open culture to recognise and report breaches, with a formal internal breach process to clearly identify and resolve issues swiftly. The Group is focussing on MI automation and the digitalisation of key client processes to streamline processes and reduce manual process errors.
Regulatory, legislative and tax risk
The Group proactively seeks to understand future changes that will be arising from regulatory, legislative or tax changes. Impact assessments are carried out in advance of these changes to ensure the risk of non-compliance is minimised. Dedicated Change and Project Management teams focus on efficient implementation of changes to policies, processes and systems and provide regular updates to the board on implementation status.
The Group engages with its regulators in an open and constructive manner. Appropriately experienced and skilled Risk and Technical teams focus on regulatory change and legislative compliance, and where appropriate, the Group engages with independent experts for advice and assurance. In 2024 the Group participated in the FCA's Ongoing Advice Review, evidencing delivery of historic contractual obligations to its clients to the timetable set, which to date this has yielded no material response.
Acquisitive risk
The acquisitive nature of our business risks importing advice liabilities and people into the Group who do not share our culture or standards.
The Group employs a full-time acquisitions team who are responsible for the Due Diligence, contractual negotiations and integration of all acquisitions under the ultimate direction of the Chief Executive Officer. The Group adopts standard process questionnaires and contracts for acquisitions and always obtains full indemnities from each of the vendors in respect of any financial advice liability relating to the period before acquisition. A dedicated team monitors acquisition performance against diligenced projections.
The cultural fit of vendors and their client base is examined during due diligence and formal induction courses are mandatory for joining advisers prior to completion of the acquisition. Regular mission, vision and culture training is mandatory across entire workforce, with behaviour scaling forming a core part of our Performance Reviews further cementing the AFH culture. Client centricity forms a key part of the Company values. All advisers are subject to KPI monitoring to ensure compliance with AFH procedures and to ensure positive client outcomes.
Interest rate risk and cash flow risk
There is a risk of higher interest and / or delay in cash receipts.
The Group manages its treasury function on a centralised basis. The main sources of revenue and operating cash flows are substantially independent of changes in market interest rates, with further mitigation through holding diversified portfolios. The Group has access to interest-bearing facilities on which it seeks to obtain a commercial rate of return whilst not having a material adverse effect on cash flow. The Board monitors both its regulatory requirements and cash flow forecasts on a regular basis to ensure that appropriate funding is always in place.
The Group has access to a debt facility with a floating interest rate based on SONIA. The Group seeks to finance acquisition consideration through free cash flows wherever possible before drawing on this facility. It remains the Group strategy to ensure that sufficient financing is available to cover acquisition consideration outflows in advance of any acquisition being completed.
Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as commercial transactions.
AFH Financial Group Limited
Strategic report (continued)
For the year ended 31 October 2024
4
Credit risk is managed on a Company basis. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board. The utilisation of credit limits is regularly monitored, and the credit worthiness and financial strength of our Providers is assessed by the centralised Research team as part of Defacto ratings. The Group receives most of its income directly from blue chip financial institutions in accordance with instructions placed by its clients thereby minimising the risk of incurring bad debts. The Group only uses Providers regulated with the FCA to PRA prudential requirements and the Group prohibits advice in unregulated investments.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding and the ability to close out market positions.
The Group maintains flexibility by maintaining headroom in its cash position. Management monitors forecasts of the Group's liquidity based on expected cash flows. This is carried out in accordance with recommended accounting practice and limits set by the Group. The Board reviews the Group's liquidity at its monthly meetings. The Risk Committee carry out quarterly assessments in line with CRR Regulation and quarterly liquidity assessments.
S172 Companies Act 2006
The Board should understand the views of the group's key stakeholders and sets out below how their interests and the matters set out in section 172 of the Companies Act 2006 have been considered in board discussions and decision-making.
| | What is important to them | |
Clients We apply our skills and expertise to educate, inform and enrich our clients’ lives. We put our clients at the heart of everything we do. Our clients rely on us to deliver best-in-class advice and services to meet their agreed objectives | Face to face scheduled meetings with advisers Client portal Regular on-line fact sheets and technical updates together with quarterly personalised reporting Educational Webinars on relevant topics such as Wills and Estates planning, or the impact of the UK Budget | Personal service tailored to their specific requirements Reliable financial planning advice Investment performance in line with expectations Adherence to FCA regulations and Consumer Duty rules Our services represent value for money | Delivered continual improvements to our client portal, including: - Digital standard fact find form, and - Periodic performance reports Average portfolio performance ahead of industry benchmarks Number/value of complaints and operational breaches |
AFH Financial Group Limited
Strategic report (continued)
For the year ended 31 October 2024
5
Employees We recognise that along with our advisers our employees are our greatest asset, and it is through their combined efforts that the Company can consistently meet its strategic objectives | We engage formally with all our employees through: - Our Group intranet “The Hive” - Regular all hands briefing meetings and update emails - Staff engagement surveys - Ongoing Professional Development Reviews for appraisal and target setting - Staff workshops (e.g., to roll out updates to AFH culture and brand values) Informal engagement is maintained through social events. | Fulfilling and rewarding work Career and leaning development opportunities Flexible working opportunities Competitive remuneration and benefits package Social interaction across and within teams Business supports employee’s social conscience through access to volunteering and fundraising opportunities | Annual staff pay reviews in November that met cost of living challenges Maintained employee attrition levels during 2024 Carried out two engagement pulse surveys during the year Launched career maps and organisation levels, talent identification and career conversations Launched Recognition and suggestions tool to celebrate staff contributions Implemented a new HR system including an enhanced annual development processes Delivered professional and regulatory training modules to upskill our employees Several all-hands social events to celebrate successes |
Advisers Together with our staff, advisers are our major asset, as the primary interface with clients | Regular technical, economic and investment strategy updates Quarterly in-person briefings Dedicated support from administrative pods and technical resource Adviser community to encourage business and social interaction Dedicated Adviser Management teams for support and development CPD and ongoing training support Associate Adviser scheme to train new advisers, with exam support | Clear and timely economic, technical and investment guidance Access to full and current data on their clients Benefits of the AFH community including marketing and lead generation Ongoing training on skills, products and regulatory developments Access to high-quality, value-for-money services for clients Other Company initiatives | Delivered improvements to our Adviser portal Weekly and monthly community updates delivered via Teams and other digital media Access to adviser management and development teams to support adviser development and CPD |
AFH Financial Group Limited
Strategic report (continued)
For the year ended 31 October 2024
6
Shareholders Maintaining a transparent and open dialogue with our shareholders to ensure an understanding of our strategy and performance is a key element of our corporate governance. | Our principal means of engagement are: Regular board meetings Production of monthly reporting and analysis Direct engagement over key strategic objectives | Financial performance Business model ESG | Increase in Revenue and EBITDA Shareholder value Regulatory adherence |
Suppliers The Group has a range of suppliers supporting the business operations, many of whom have long term relationships with the Company. The Group also works with two significant suppliers whose products are used in the direct management of our clients and their portfolios. | We work in a collaborative manner with our suppliers All major suppliers have a designated point of contact within AFH. We are committed to work with suppliers within the agreed terms of engagement. | Long term relationships Collaborative working Fair and balanced contractual terms | Participation in regular client forums provided by our platform and investment partner Regular dialogue and formal meetings with significant suppliers Payment in line with contractual terms |
Regulator As a UK provider of financial services, we are subject to financial services regulations and approvals in the UK market, under the FCA | We maintain a constructive and open relationship with our regulator. We ensure regulatory reporting is submitted within relevant timelines and FCA requests are responded to promptly and appropriately Consideration of forthcoming regulatory development and implement regulatory requirements within given timeline Ongoing Consumer Duty review responses | Being able to demonstrate adherence to regulations Ensuring good customer outcomes Implementation and embedding of Consumer Duty and Consumer Duty principles in line with timelines Maintaining appropriate capital adequacy | Finalised implementation of Consumer Duty requirements Meeting all ongoing reporting deadlines Responding to Consumer Duty and Service Review requests in a timely and cooperative manner |
AFH Financial Group Limited
Strategic report (continued)
For the year ended 31 October 2024
7
Local and National Communities We endeavour to assist local and national communities to benefit from our employees’ and advisers’ desire to make a difference in their communities. | We provide support to our local communities through group and local fundraising and participating in local events. In addition to AFH initiatives, we encourage our staff to support local communities. | Participation as an active member of the local business community Financial & practical support Collaborative approach to local issues | Active membership of business and professional bodies during the year Supported charities selected by AFH staff with £28k raised in year against a target of £12k Supported local charities and local communities: - Charity volunteering scheme, giving staff one volunteer day a year, supported eight charities in the year, - Staff donations of £650 supported local foodbanks in December |
AFH Financial Group Limited
Strategic report (continued)
For the year ended 31 October 2024
8
Key performance indicators
The directors consider the key financial performance indicators (“KPIs”) for the Group are as follows:
| | | |
Revenue –total income from all revenue streams | 2020 £60.0m 2021 £66.3m 2022 £71.4m 2023 £76.5m 2024 £80.8m | - Grow revenue through acquisition to expand national footprint and buying power, - Generate new and retain existing clients, - Increase productivity of advisers | - Total revenue increased by 6% - Average adviser revenue grew to £408k |
Gross margin –revenue generated by the Group after fees paid to its advisors and other direct costs of sale | 2020 53% 2021 49% 2022 55% 2023 64% 2024 70% | - Profitability of advisory and investment services before central cost | Improved in 2024 following: - Benefits from acquisitions, - Practice Buy Outs from Self-Employed Advisers, - Increasing proportion of employed advisers - Benefits from scaling on AFH own models, adding value to both clients and AFH |
Business review
During the year the Group saw revenue growth of £4.3m despite economic and political uncertainty while maintaining our funds under management. Gross revenue per adviser was above £408k (2023: £385k). Total revenue for the year increased by 6% to £80.8m (2023: £76.5m), gross margins increased to 70% (2023: 64%). The revenue growth has been predominantly from the consolidation of acquisitions the Group has made and growth in AFH's own funds and models.
Hayden Robinson
Director
16 February 2025
AFH Financial Group Limited
Directors' report
For the year ended 31 October 2024
9
The directors present their annual report and financial statements for the year ended 31 October 2024.
Information not presented in the Directors' Report is instead shown in the Strategic Report in accordance with S414C(11) of the Companies Act 2006, including principal activities, future developments and financial risk management.
Principal activities
The principal activity of the group is to provide financial planning led investment management services of the highest quality to clients who value a long-term relationship, based on mutual trust and respect.
The principal activity of the company is that of an intermediate holding company.
Results and dividends
The profit for the year, after taxation, amounted to £21.9m (2023: £17.8m). The results for the year are set out on page 18.
No dividends were paid during the period (2023: £nil).
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Alan Hudson
Austin Broad
Alexis Larvin
Hayden Robinson
Going concern
As at the time of the signing of the financial statements, UK interest rates remain high, with inflation remaining above 2% and UK payroll taxes due to increase significantly. Global markets remain volatile, with continuing conflict in Ukraine and the Middle East, and uncertainty about the impact of a new Presidency in the USA, following protectionist rhetoric on the campaign trail. As a Group we continue to adapt during a difficult period and have maintained revenue growth in our Core Wealth Management division. Most client assets are held in diversified portfolios and the impact of the markets on recurring revenue has been diluted.
The directors have considered the Group's anticipated business activities, its cash flows and capital position for a period of 12 months from the date of these accounts. They believe that even in the event of falling markets and without further growth the group can continue to trade profitably from an EBITDA perspective and will continue to generate cash surpluses after interest payments. The Group maintains sufficient facilities to cover its short and long-term liabilities. This assessment has been stress tested for lower than anticipated revenues. Therefore, the directors are satisfied that the Group has adequate resources for the near future and for this reason continue to adopt the Going Concern basis in preparing the financial information. The Group may receive financial support from its ultimate owners if required.
Qualifying third party indemnity provisions
The directors confirm that no qualifying third-party indemnity provision in favour of any of the Directors of the company, as defined by s236 of the Companies Act 2006, either by the company or by any other party, was in force at the time of signing of this report, and that no such provision had been in force at any time in the financial year.
Environmental and safety considerations
Commitment to safety is the Group's first consideration. The number of accidents is a key performance indicator reported on to group every month. Any accidents at the workplace are recorded, fully investigated and corrective action instigated at the earliest opportunity. Active communication and training campaigns are implemented, and information is shared with the group. The Group is fully involved in the group's Industrial Management System which aims to reduce both the incidence and the impact of accidents.
AFH Financial Group Limited
Directors' report (continued)
For the year ended 31 October 2024
10
Disabled persons
The Group gives full and fair consideration to applications for employment from disabled persons where the candidate’s particular aptitudes and abilities are consistent with adequately meeting the requirements of the job. Opportunities are available to disabled employees for training, career development and promotion.
Where existing employees become disabled, it is the Group’s policy to provide continuing employment wherever practicable in the same or an alternative position and to provide appropriate training to achieve this aim.
Employee involvement
The Group involves employees in the running of the business through a strategic board and senior management team that works closely with management and staff members.
Employees are invited to engage in regular Pulse surveys where they can contribute ideas towards ways to improve the business, staff benefits and the working environment.
In line with government legislations the Group offers a company-wide pension scheme, where staff have the option to opt out if they wish.
Post reporting date events
There have been no significant events affecting the Group since the year end.
Auditor
In accordance with the company's articles, a resolution proposing that Saffery LLP be reappointed as auditor of the Group and its Subsidiaries will be put to the members at the Annual General Meeting.
AFH Financial Group Limited
Directors' report (continued)
For the year ended 31 October 2024
11
Energy and carbon report
AFH Financial Group Limited
Directors' report (continued)
For the year ended 31 October 2024
12
Methodology
The Green House Gas (GHG) Reporting Protocol – Corporate Standard has been followed to allow easy comparison with equivalent organisational reporting. Carbon emissions are therefore reported as Scope 1, 2 and 3 emissions. The report has also used the 2024 UK Government's Conversion Factors for Company Reporting.
Benchmarking and Intensity Metrics
The Group has chosen to utilise an intensity metric that will support comparison to the baseline emissions in future years and will hopefully also seek to measure its emissions against peers for transparency. The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2e per number of full-time employees, the recommended ratio for the sector.
Energy Efficiency Actions
In the previous financial year the Group had implemented an Efficiency at Work policy which set out how many aspects of their energy usage can be reduced. A part of this programme was to install a selection of LED lights to various buildings, the intention is to update the remaining lights in due course.
No formal targets have been set at this point, therefore the Group recommends to proactively develop a more robust plan with the aim of reducing both energy consumption and carbon emissions.
Comparisons of this current year against the baseline year has shown a decrease of Scope 2 when compared to the comparison year of 38%. Scope 1 shows a decrease of 5% over the same comparison period, although it has increased over the previous 2 years. This is mainly due to the introduction of Banks Wealth Management (Chorley) which has significant gas usage.
Scope 3 shows an increase in business mileage, following return to business travel post Covid-19 and an increased proportion of employees using cars for business purposes. The mileage has increased from 364,325 in the period 2022-23 to 780,521 in 2023-24.
This year, and the previous 2 years are a reasonable guide to a more normalised energy usage for the business, although it is recognised some further closures of offices has taken place during this reporting year which has impacted the amount of Gas & Electricity purchased during this year.
Adopting a hybrid working environment of office and home-based working has positively impacted the overall energy consumption.
Statement of disclosure to auditor
Each of the persons who are directors at the time when this Directors’ report is approved had confirmed that:
So far as that Director is aware, there is no relevant audit information of which the Company’s auditor is unaware, and
That Director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
On behalf of the board
Hayden Robinson
Director
16 February 2025
AFH Financial Group Limited
Directors' responsibilities statement
For the year ended 31 October 2024
13
The Directors are responsible for preparing the Strategic Report, Directors’ Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the group financial statements in accordance with UK-adopted international accounting standards, as well as applicable law. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101, Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether applicable UK have been followed, subject to any material departures disclosed and explained in the financial statements;
make judgements and accounting estimates that are reasonable and prudent; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
AFH Financial Group Limited
Independent auditor's report
To the members of AFH Financial Group Limited
14
Opinion
We have audited the financial statements of AFH Financial Group Limited (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 October 2024 which comprise the Group statement of comprehensive income, the Group and Company statements of financial position, the Group and Company statements of changes in equity, the Group statement of cash flows and notes to the financial statements, including significant accounting policies.
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
the financial statements give a true and fair view of the state of affairs of the group and of the parent company as at 31 October 2024 and of the group's profit for the year then ended;
the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
AFH Financial Group Limited
Independent auditor's report (continued)
To the members of AFH Financial Group Limited
15
The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the group and parent company financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
AFH Financial Group Limited
Independent auditor's report (continued)
To the members of AFH Financial Group Limited
16
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud are detailed below.
Identifying and assessing risks related to irregularities:
We assessed the susceptibility of the group and parent company’s financial statements to material misstatement and how fraud might occur, including through discussions with the directors, discussions within our audit team planning meeting, updating our record of internal controls and ensuring these controls operated as intended. We evaluated possible incentives and opportunities for fraudulent manipulation of the financial statements. We identified laws and regulations that are of significance in the context of the group and parent company by discussions with directors and by updating our understanding of the sector in which the group and parent company operates.
Laws and regulations of direct significance in the context of the group and parent company include The Companies Act 2006 and UK Tax legislation and the Financial Services and Markets Act 2000, on which The Financial Conduct Authority (FCA) Handbook is based.
Audit response to risks identified
We considered the extent of compliance with these laws and regulations as part of our audit procedures on the related financial statement items including a review of group and parent company financial statement disclosures. We reviewed the parent company's records of breaches of laws and regulations, minutes of meetings and correspondence with relevant authorities to identify potential material misstatements arising. We discussed the parent company's policies and procedures for compliance with laws and regulations with members of management responsible for compliance.
During the planning meeting with the audit team, the engagement partner drew attention to the key areas which might involve non-compliance with laws and regulations or fraud. We enquired of management whether they were aware of any instances of non-compliance with laws and regulations or knowledge of any actual, suspected or alleged fraud. We addressed the risk of fraud through management override of controls by testing the appropriateness of journal entries and identifying any significant transactions that were unusual or outside the normal course of business. We assessed whether judgements made in making accounting estimates gave rise to a possible indication of management bias. At the completion stage of the audit, the engagement partner’s review included ensuring that the team had approached their work with appropriate professional scepticism and thus the capacity to identify non-compliance with laws and regulations and fraud.
As group auditors, our assessment of matters relating to non-compliance with laws or regulations and fraud differed at group and component level according to their particular circumstances. Our communications included a request to identify instances of non-compliance with laws and regulations and fraud that could give rise to a material misstatement of the group financial statements in addition to our risk assessment.
Subsidiaries within the group are regulated by the FCA. We discussed the subsidiaries' authorisations and permitted activities with the SMF 16 and obtained evidence of this from the FCA register. We obtained additional evidence about compliance by discussing any breaches with the SMF16 and SMF17 and reviewing correspondence with the FCA.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities is available on the Financial Reporting Council's website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
AFH Financial Group Limited
Independent auditor's report (continued)
To the members of AFH Financial Group Limited
17
This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Jamie Cassell (Senior Statutory Auditor)
For and on behalf of Saffery LLP
17 February 2025
Statutory Auditors
71 Queen Victoria Street
London
EC4V 4BE
AFH Financial Group Limited
Group statement of comprehensive income
For the year ended 31 October 2024
18
2024
2023
as restated
Notes
£'000
£'000
Revenue
4
80,775
76,528
Cost of sales
(24,215)
(27,333)
Gross profit
56,560
49,195
Administrative expenses
(33,821)
(33,971)
Exceptional items
5
(79)
Operating profit
6
22,739
15,145
Finance income
10
187
50
Finance costs
11
(94)
(187)
Profit before taxation
22,832
15,008
Income tax (expense)/income
12
(968)
2,853
Profit and total comprehensive income for the year
21,864
17,861
Profit for the financial year is all attributable to the owners of the parent company.
Total comprehensive income for the year is all attributable to the owners of the parent company.
AFH Financial Group Limited
Group statement of financial position
As at 31 October 2024
19
2024
2023
as restated
Notes
£'000
£'000
Non-current assets
Goodwill
13
39,906
39,906
Intangible assets
13
49,832
54,098
Property, plant and equipment
14
1,140
942
Right-of-use assets
14
3,471
3,356
Investments
15
1
1
Deferred tax asset
24
572
94,350
98,875
Current assets
Trade and other receivables
17
80,040
50,134
Current tax recoverable
2,420
Cash and cash equivalents
10,484
4,726
90,524
57,280
Current liabilities
Trade and other payables
19
36,449
29,093
Current tax liabilities
9
Borrowings
21
50
Lease liabilities
23
396
400
Provisions
25
37
132
36,891
29,675
Net current assets
53,633
27,605
Non-current liabilities
Trade and other payables
19
133
420
Lease liabilities
23
2,960
2,955
Deferred tax liabilities
24
1,266
1,345
4,359
4,720
Net assets
143,624
121,760
Equity
Called up share capital
27
5,000
5,000
Share premium account
28
81,637
81,637
Merger reserve
29
(540)
(540)
Retained earnings
57,527
35,663
Total equity
143,624
121,760
AFH Financial Group Limited
Group statement of financial position (continued)
As at 31 October 2024
20
The financial statements were approved by the board of directors and authorised for issue on 16 February 2025 and are signed on its behalf by:
Hayden Robinson
Director
Company registration number 07638831 (England and Wales)
AFH Financial Group Limited
Company statement of financial position
As at 31 October 2024
31 October 2024
21
2024
2023
Notes
£'000
£'000
£'000
£'000
Non-current assets
Investments
16
1,740
2,217
Deferred tax asset
572
1,740
2,789
Current assets
Trade and other receivables
18
116,284
103,956
Cash and cash equivalents
4,227
202
120,511
104,158
Current liabilities
(60,857)
(41,809)
Net current assets
59,654
62,349
Total assets less current liabilities
61,394
65,138
Equity
Called up share capital
5,000
5,000
Share premium account
81,637
81,637
Retained earnings
(25,243)
(21,499)
Total equity
61,394
65,138
As permitted by trues408 Companies Act 2006, the company has not presented its own income statement and related notes. The company’s loss for the year was £3,743,666 (2023 - £1,758,860 loss).
The financial statements were approved by the board of directors and authorised for issue on 16 February 2025 and are signed on its behalf by:
16 February 2025
Hayden Robinson
Director
Company registration number 07638831 (England and Wales)
AFH Financial Group Limited
Group statement of changes in equity
For the year ended 31 October 2024
22
Share capital
Share premium account
Merger reserve
Retained earnings
Total
£'000
£'000
£'000
£'000
£'000
As restated for the period ended 31 October 2023:
Balance at 1 November 2022
5,000
81,637
(540)
17,802
103,899
Year ended 31 October 2023:
Profit and total comprehensive income
-
-
-
17,861
17,861
Balance at 31 October 2023
5,000
81,637
(540)
35,663
121,760
Year ended 31 October 2024:
Profit and total comprehensive income
-
-
-
21,864
21,864
Balance at 31 October 2024
5,000
81,637
(540)
57,527
143,624
AFH Financial Group Limited
Company statement of changes in equity
For the year ended 31 October 2024
23
Share capital
Share premium account
Retained earnings
Total
£
£
£
£
Balance at 1 November 2022
5,000
81,637
(19,740)
66,897
Year ended 31 October 2023:
Loss and total comprehensive income
-
-
(1,759)
(1,759)
Balance at 31 October 2023
5,000
81,637
(21,499)
65,138
Year ended 31 October 2024:
Loss and total comprehensive income
-
-
(3,744)
(3,744)
Balance at 31 October 2024
5,000
81,637
(25,243)
61,394
AFH Financial Group Limited
Group statement of cash flows
For the year ended 31 October 2024
24
2024
2023
Notes
£'000
£'000
£'000
£'000
Cash flows from operating activities
Cash generated from operations
34
28,285
20,100
Interest paid
(94)
(187)
Income taxes refunded/(paid)
1,461
(1,037)
Net cash inflow from operating activities
29,652
18,876
Investing activities
Purchase of intangible assets
(126)
(45)
Purchase of property, plant and equipment
(438)
(285)
Payment of contingent consideration
(1,963)
(3,561)
Interest received
187
50
Net cash used in investing activities
(2,340)
(3,841)
Financing activities
Movement in intercompany with non-group entities
(21,004)
(14,842)
Repayment of borrowings
(50)
-
Payment of lease liabilities
(500)
-
Net cash used in financing activities
(21,554)
(14,842)
Net increase in cash and cash equivalents
5,758
193
Cash and cash equivalents at beginning of year
4,726
4,533
Cash and cash equivalents at end of year
10,484
4,726
AFH Financial Group Limited
Notes to the group financial statements
For the year ended 31 October 2024
25
1
Accounting policies
Company information
AFH Financial Group Limited (“the company”) is a private limited company incorporated in England and Wales. The registered office is AFH House, Buntsford Drive, Stoke Heath, Bromsgrove, Worcestershire, B60 4JE.
The Group is principally engaged in the provision of independent financial advice and investment management to the retail market.
The group consists of AFH Financial Group Limited and all of its subsidiaries.
1.1
Accounting convention
The Consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the United Kingdom and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS, except as otherwise stated.
The financial statements are prepared in sterling, which is the functional currency of the group. Monetary amounts in these financial statements are rounded to the nearest £'000.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
As permitted by FRS 101, the company financial statements have been prepared in accordance with Financial Reporting Standard 101 “Reduced Disclosure Framework” (“FRS 101”) and in accordance with the applicable provisions of the Companies Act 2006. Except for certain disclosure exemptions detailed below, the recognition, measurement and disclosure requirements of international accounting standards have been applied to these financial statements and, where necessary, amendments have been made in order to comply with the Companies Act 2006 and The Large and Medium-sized Companies and Groups Regulations 2008/410 (‘Regulations’):
The requirement of IFRS 7 'Financial Instruments Disclosures' relating to the disclosure of financial instruments and the nature and extent of risks arising from such instruments;
The requirement of IFRS 13 'Fair Value Measurement' paragraph 91 to 99 relating to the fair value measurement disclosure of financial assets and financial liabilities that are measured at fair value;
The requirements of IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' paragraph 30 and 31 relating to the disclosure of standards, amendments and interpretations in issue but not yet effective;
The requirement of IAS 1 'Presentation of Financial Statements' paragraphs 134 to 136 relating to the disclosure of capital management policies and objectives;
The requirements of IAS 7 'Statement of Cash Flows' and IAS 1 'Presentation of Financial Statements' paragraph 10(d); 111 relating to the presentation of a Cash Flow Statement; and
The requirements of IAS 24 'Related Party Disclosures' relating to the disclosure of key management personnel compensation and relating to the disclosure of related party transactions entered into between the company and other wholly-owned subsidiaries of the group.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
1
Accounting policies (continued)
26
1.2
Going concern
As at the time of the signing of the financial statements, UK interest rates remain truehigh, with inflation remaining above 2% and UK payroll taxes due to increase significantly. Global markets remain volatile, with continuing conflict in Ukraine and the Middle East, and uncertainty about the impact of a new Presidency in the USA, following protectionist rhetoric on the campaign trail. As a Group we continue to adapt during a difficult period and have maintained revenue growth in our Core Wealth Management division. Most client assets are held in diversified portfolios and the impact of the markets on recurring revenue has been diluted.
The directors have considered the Group’s anticipated business activities, its cash flows and capital position for a period of 12 months from the date of these accounts. They believe that even in the event of falling markets and without further growth the group can continue to trade profitably from an EBITDA perspective and will continue to generate cash surpluses after interest payments. The Group maintains sufficient facilities to cover its short and long-term liabilities. This assessment has been stress tested for lower than anticipated revenues. Therefore, the directors are satisfied that the Group has adequate resources for the near future and for this reason continue to adopt the Going Concern basis in preparing the financial information. The Group may receive financial support from its ultimate owners if required.
1.3
Basis of consolidation
The consolidated group financial statements consist of the financial statements of the parent company AFH Financial Group Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 October 2024. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases. Control is achieved when the company has the power over the investee; is exposed or has rights to variable return from its involvement with the investee; and has the ability to use its power to affects its returns.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
1
Accounting policies (continued)
27
1.4
Business combinations
Business combinations are accounted for using the acquisition method except for group reorganisations where the combination is on a share for share basis and the resulting business remains unchanged. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. A review is undertaken to adjust the provisional amounts recognised on acquisition to reflect new information obtained during the period about circumstances existing at the date of acquisition which if known would affect the measurement of the amounts recognised.
Any contingent consideration to be transferred is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 3. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
1.5
Revenue
Revenue across the group is recognised in line with the requirements of IFRS 15 as contractual performance obligations are satisfied, as noted below by revenue stream. Revenue is measured at the fair value of the consideration received adjusted for clawbacks, allowance for impairment, discounts, rebates, and other sales taxes or duty.
The group recognises revenue from the following major sources:
The nature, timing of satisfaction of performance obligations and significant payment terms of the group's major sources of revenue are as follows:
Initial Fee income
Fees are recognised as earned at the point when financial advice is provided.
Ongoing Fee and Investment management income
Fees are recognised as gross earned as and when fees from the management of investments are earned.
Protection income (indemnified)
Revenue is recognised as earned as the policy goes live and the fees from the policy are due. This income is recorded net of clawback provision.
Interest income
Revenue is recognised as interest accrues (using the effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset).
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
1
Accounting policies (continued)
28
1.6
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the net fair value of the separable assets, liabilities and contingent liabilities of the subsidiary or an interest in an associate undertaking recognised at the date of acquisition. Subsequent remeasurement to the goodwill is recorded against the future contingent consideration in the first year of acquisition where additional information on pre-existing facts and circumstances at the point of acquisition is obtained.
Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses on an annual basis. Any impairment is recognised immediately in the Statement of Comprehensive Income and is not subsequently reversed.
The single cash generating unit to which Goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the cash generating unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit.
1.7
Intangible assets other than goodwill
The cost of intangible assets, excluding goodwill acquired in a business combination, is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets assessed as having finite lives are amortised over their useful economic life.
Where the contractual consideration for the intangible asset varies to the amount paid in the future periods, the difference is written off through Administrative Expenses in the Statement of Comprehensive Income
Intangible assets assessed as having finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year end.
Intangible assets are amortised over the following periods:
The amortisation expense on intangible assets with finite lives is recognised within Administrative Expenses in the Statement of Comprehensive Income.
1.8
Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment in value.
Depreciation is provided on all property, plant and equipment at rates calculated to write each asset down to its estimated residual value over its expected useful life as follows:
Freehold land and buildings
12.5% per annum on cost
Fixtures and fittings
20% per annum on cost
Computer and office equipment
20-25% per annum on cost
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
1
Accounting policies (continued)
29
Right of use assets at the lower of lease term and useful economic life.
Any gain or loss arising on disposal of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Comprehensive Income in the year the asset is disposed of. The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end.
1.9
Non-current investments
Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.
A subsidiary is an entity controlled by the parent company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the group holds a long-term interest and has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
1.10
Impairment of tangible and intangible assets
At each reporting end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
1
Accounting policies (continued)
30
1.11
Cash and cash equivalents
Cash and cash equivalents in the Statement of Financial Position comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less. For the purpose of the Statement of Cash Flow, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts.
1.12
Financial assets
Financial assets are recognised in the group's statement of financial position when the group becomes party to the contractual provisions of the instrument. Financial assets are classified into specified categories, depending on the nature and purpose of the financial assets.
At initial recognition, financial assets classified as fair value through profit and loss are measured at fair value and any transaction costs are recognised in profit or loss. Financial assets not classified as fair value through profit and loss are initially measured at fair value plus transaction costs.
Impairment of financial assets
Financial assets, other than those at Fair value through profit and loss (FVTPL), are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.
Interest is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.
1.13
Financial liabilities
The group recognises financial debt when the group becomes a party to the contractual provisions of the instruments. Financial liabilities are classified as either 'financial liabilities at fair value through profit or loss' or 'other financial liabilities'.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
1
Accounting policies (continued)
31
Other financial liabilities
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.
Derecognition of financial liabilities
Financial liabilities are derecognised when, and only when, the group’s obligations are discharged, cancelled, or they expire.
Fair value estimation
The net book amount less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a Going Concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group monitors capital by maintaining or adjusting the capital structure by adjusting the amount of
dividends paid to shareholders, issuing new shares and unsecured securities or selling assets to maintain
financial resources.
The capital employed by the Group is composed of equity attributable to the shareholders and long term
unsecured corporate bonds, as detailed in the Statement of Changes in Equity.
The capital structure of the Company consists of debt, cash and cash equivalents and equity comprising
share capital, reserves and retained earnings. The Company reviews the capital structure annually and as
part of this review considers that cost of capital and the risks associated with each class of capital.
1.14
Equity instruments
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
1.15
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date. Tax relating to items recognised directly in equity is recognised in equity and not in the Statement of Comprehensive Income.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
1
Accounting policies (continued)
32
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax, except:
Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense as applicable; and
Receivables and payables that are stated with the amount of sales tax included.
1.16
Dividend recognition
Dividend distributions to the Company's shareholders are recognised in the accounting period in which the dividends are declared and paid, or if earlier, in the accounting period when the dividend is approved by the Company's shareholders at the Annual General Meeting.
1.17
Provisions
Provisions are recognised when the group has a legal or constructive present obligation as a result of a past event and it is probable that the group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
1
Accounting policies (continued)
33
1.18
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of inventories or non-current assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the group is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.19
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.20
Share-based payments
Employees (including senior executives) of the Group have previously received remuneration in the form of share based payment transactions for services provided as consideration for equity instruments ("equity settled transactions").
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted and is recognised as an expense over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ("the vesting date"). Fair value is determined using the Black Scholes pricing model.
The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The Statement of Comprehensive Income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest.
1.21
Leases
At inception, the group assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the group recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
1
Accounting policies (continued)
34
The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the group's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the group is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the group's estimate of the amount expected to be payable under a residual value guarantee; or the group's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.
2
Adoption of new and revised standards and changes in accounting policies
During the financial year, the Group has adopted the following new IFRSs (including amendments thereto) and IFRIC interpretations, that became effective for the first time.
Standard
Effective date, annual period beginning on or after
IFRS 17 - Insurance Contracts
1 January 2023
Amendments to IFRS 17 - Insurance Contracts;
and Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4 Insurance Contracts)
1 January 2023
Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements)
1 January 2023
Definition of Accounting Estimates (Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors)
1 January 2023
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12 Income Taxes)
1 January 2023
International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12)
1 January 2023
Their adoption has not had any material impact on the disclosures or amounts reported in the financial statements.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
2
Adoption of new and revised standards and changes in accounting policies (continued)
35
Standards which are in issue but not yet effective
At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group and which have not been applied in these financial statements, were in issue but were not yet effective.
Standard
Effective date, annual period beginning on or after
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
1 January 2024
Classification of Liabilities as Current or Non-Current, Non-current Liabilities with Covenants: amendments to IAS 1
1 January 2024
Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
1 January 2024
Lack of Exchangeability (Amendments to IAS 21)
1 January 2025
The directors are evaluating the impact that these standards will have on the financial statements of the Group.
At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group and which have not been applied in these financial statements, have not been endorsed for use in the UK and will not be adopted until such time as endorsement is confirmed.
Standard
Effective date, annual period beginning on or after
Classification and Measurement of Financial Instruments (Amendments to IFRS 7 and IFRS 9)
1 January 2026
Annual Improvements to IFRS Accounting Standards – Volume 11
1 January 2026
IFRS 18 – Presentation and Disclosure in Financial Statements
1 January 2027
IFRS 19 – Subsidiaries without Public Accountability: Disclosures
1 January 2027
The directors are evaluating the impact that these standards will have on the financial statements.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
36
3
Critical accounting estimates and judgements
The application of the Group's accounting policies requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about net book values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. If in the future such estimates and assumptions 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.
Recognition of accrued fee income
Management estimation is required to determine the amount of accrued revenue that can be recognised, fees are recognised as earned at the point when financial advice is provided and when fees from the management of investments are earned.
Impairment of client portfolios
An assessment is made at each reporting date as to whether there is any indication that the carrying value may be impaired. Where such an indication is identified the client portfolios are tested for impairment. This comprises an estimation of the fair value less cost to sell and the value in use of the acquired client portfolios. The key assumption used in arriving at a value in use is based on future expected earnings based on funds under management. Future earnings streams for each cash generating unit is then discounted over a finite period to calculate the fair value. The assumptions used by the Group have been determined by looking at valuations of similar businesses and the consideration paid in comparable transactions.
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 unit 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. Impairments of £nil have been made during the year (2023: £nil) based upon the Directors' review.
Contingent consideration
The Group has entered into certain acquisition agreements that provide for a contingent consideration to be paid. The Group recognised all amounts management anticipates will be paid in full under the relevant acquisition agreement taking into account the contractual performance targets. This requires management to make an estimate of the expected future cash flows from the acquired client portfolio for the calculation of the present value of those cash flows.
The contingent consideration is subject to an earn-out based on future turnover of acquisitions over a period up to four years. The carrying amount of contingent consideration provided for at 31 October 2024 is £0.34m (2023: £2.8m).
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
3
Critical accounting estimates and judgements (continued)
37
Acquisitions
The Group's business model is to make acquisitions through the direct purchase of the customer contracts or via the acquisition of the share capital of legal entities.
Judgement is required by management in the interpretation of IFRS 3 for each share-based customer contract transaction.
The directors of the Group assess for each acquisition, in line with IFRS 3 Appendix B, whether the share transactions constitute business combinations or are in substance asset purchases. In making their judgement, the directors consider all factors within IFRS 3 Appendix B Paragraphs B7 through to B12. After assessment, the directors conclude whether each transaction is an asset purchase or a business combination for financial reporting purposes.
Identification and valuation of separable intangible assets acquired through a business combination requires the directors to make various judgements. The fair value of client portfolios on acquisition of AFH Financial Group Limited was determined using the income approach, based on the discounted cash flows expected from the acquired client portfolios, assuming a future growth rate of 3% in revenue generated cash flows and a client attrition rate of 5.91%, discounted at an asset specific rate of 14.36%, for a period of 17 years with no annuity.
The Directors continue to assess the impact of information gathered during the measurement period and where such information affects the facts and circumstances in existence at the acquisition date an adjustment is reflected under IFRS 3.
Amortisation of intangibles fixed assets and client portfolios
The annual amortisation charge for intangibles assets is sensitive to changes in the estimated useful economic lives and residual value of the assets. The useful economic lives and residual values are re-assessed annually. See note 13 for the carrying amount of acquired client portfolios and other intangible assets and the accounting policies for the useful economic lives for each class of assets.
Discounting long term assets and liabilities
The directors have reviewed the effect of discounting the long-term assets and liabilities in line with IFRS 9. The assets and liabilities effected by discounting are long term trade receivables (net of allowance for impairment), long term deferred contingent consideration and the long-term lease liabilities. The weighted average cost of capital (WACC) has been used to determine a discounting rate of 14.36% to long term trade receivables and long term deferred contingent consideration. The cost of equity has been determined using the capital asset pricing model (CAPM). Long term lease liabilities are discounted at 3%, the group's incremental borrowing rate upon adoption of IFRS 16.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
38
4
Revenue
The Directors of the Group consider there to be only one operating division within the Group.
The revenue in 2024 is net of the discounting effect of the trade and other receivables of greater than 1 year, reducing the reported revenue by £nil (2023: £nil).
2024
2023
£'000
£'000
Revenue analysed by class of business
Initial fee income
9,619
10,484
Ongoing fee and investment management income
71,156
66,044
80,775
76,528
5
Exceptional items
2024
2023
£'000
£'000
Expenditure
Disposal of the protection division
-
79
Exceptional costs in 2024 were £nil. Exceptional costs in 2023 fees related to the disposal of the protection division and costs incurred in exiting premises.
6
Operating profit
2024
2023
Operating profit for the year is stated after charging/(crediting):
£'000
£'000
Employee benefit expenses
31,621
26,668
Depreciation of property, plant and equipment
241
262
Depreciation of right of use assets
385
556
Amortisation of intangible assets (included within administrative expenses)
3,914
3,903
Fair value adjustment in respect of Contingent Consideration
-
(556)
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
39
7
Auditor's remuneration
2024
2023
Fees payable to the company's auditor and associates:
£'000
£'000
For audit services
Audit of the financial statements of the group and company
65
60
Audit of the financial statements of the company's subsidiaries and associates
145
140
210
200
For other services
Tax services
53
49
Other services
25
65
Total non-audit fees
78
114
8
Employees
The average monthly number of persons (including directors) employed by the group during the year was:
2024
2023
Number
Number
Office
569
537
Directors
4
4
Total
573
541
Their aggregate remuneration comprised:
2024
2023
£'000
£'000
Wages and salaries
25,884
22,033
Social security costs
2,715
2,362
Pension costs
3,022
2,273
31,621
26,668
Key management personnel are those people having authority and responsibility for planning, direction and controlling the activities of the Group. The board consider that the Directors comprise key management personnel of the Company. Their remuneration during the year was as follows: salaries including bonuses were £1,377,467 (2023: £1,271,890), pension contributions were £46,636 for four directors (2023: £35,177), benefits in kind were £8,841 (2023: £10,271) and share based payments were £nil (2023: £nil).
No directors exercised share options in the year.
The highest paid Director received remuneration of £798,421 (2023: £619,098). Share based payments were £nil (2023: £nil) and pension contributions were £nil (2023: £nil).
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
40
9
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2024
2023
Number
Number
Office
-
1
Directors
4
4
Total
4
5
Their aggregate remuneration comprised:
2024
2023
£'000
£'000
Wages and salaries
1,655
1,489
Pension costs
9
1,664
1,489
10
Investment income
2024
2023
£'000
£'000
Interest income
Financial instruments measured at amortised cost:
Bank deposits
62
50
Other interest income on financial assets
125
Total interest revenue
187
50
11
Finance costs
2024
2023
£'000
£'000
Interest on lease liabilities
50
167
Other interest payable
44
20
Total interest expense
94
187
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
41
12
Income tax expense
2024
2023
as restated
£'000
£'000
Current tax
Adjustments in respect of prior periods
1,047
(2,203)
Deferred tax
Origination and reversal of temporary differences
(79)
(650)
Total tax charge/(credit)
968
(2,853)
The charge for the year can be reconciled to the profit/(loss) per the income statement as follows:
2024
2023
as restated
£'000
£'000
Profit before taxation
22,832
15,008
Expected tax charge based on a corporation tax rate of 25.00% (2023: 22.50%)
5,708
3,377
Effect of expenses not deductible in determining taxable profit
973
3,818
Under/(over) provided in prior years
1,044
(2,281)
Adjustment in respect of non-consolidated Group entities
(6,757)
(7,767)
Taxation charge/(credit) for the year
968
(2,853)
13
Intangible assets
Group
Goodwill
Other intangibles
Acquired client portfolios
Total
£'000
£'000
£'000
£'000
Cost
At 1 November 2022 as restated
40,829
1,389
76,044
118,262
Additions, separately acquired
-
45
-
45
Disposals
(34)
-
(34)
At 31 October 2023 as restated
40,829
1,400
76,044
118,273
Additions, separately acquired
126
126
Disposals
(33)
(478)
(511)
At 31 October 2024
40,829
1,493
75,566
117,888
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
13
Intangible assets
Group
Goodwill
Other intangibles
Acquired client portfolios
Total
£'000
£'000
£'000
£'000 (continued)
42
Amortisation and impairment
At 1 November 2022
923
509
18,946
20,378
Charge for the year
131
3,772
3,903
Eliminated on disposals
(12)
-
(12)
At 31 October 2023
923
628
22,718
24,269
Charge for the year
145
3,769
3,914
Eliminated on disposals
(33)
-
(33)
At 31 October 2024
923
740
26,487
28,150
Carrying amount
At 31 October 2024
39,906
753
49,079
89,738
At 31 October 2023
39,906
772
53,326
94,004
At 31 October 2022
39,906
880
57,098
97,883
Impairments
An impairment of £nil (2023 £nil) has been recorded against a client bank intangible.
An impairment of £nil (2023 £nil) has been recorded against Goodwill.
Goodwill and acquired client portfolios
The determination of whether goodwill is impaired requires an assessment of the recoverable amount of the cash generation unit to which it relates. 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. These assume a future annual growth rate of 3% on 2025 forecast revenue generated cash flows and a client attrition rate of 5.91%, discounted at an asset specific rate of 14.36%, for a period of 17 years with no annuity. A period greater than 5 years for future cash flows is deemed to be appropriate due to the predictability of cash flows arising from client relationships.
The Directors have assessed for indicators of impairment applied appropriate sensitivity of the assumptions detailed above to determine whether an impairment is required. No impairment was deemed necessary.
Due to the level of prudence already factored into the 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 year ended 31 October 2024 no (2023: nil) acquisitions were undertaken relating to acquired client portfolios and 2 (2023: nil) further acquisitions relating to ongoing trading entities.
Included within contingent consideration are amounts relating to other client portfolio and goodwill acquisitions of £0.34m (2023 £2.8m). The contingent consideration is subject to earn outs based on future turnover over a period up to a two-year period.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
43
14
Property, plant and equipment
Group
Freehold land and buildings
Fixtures and fittings
Computer and office equipment
Total
£'000
£'000
£'000
£'000
Cost
At 1 November 2022
5,527
1,059
1,460
8,046
Additions
1,386
10
275
1,671
Disposals
(856)
(61)
(56)
(973)
At 31 October 2023
6,057
1,008
1,679
8,744
Additions
500
307
132
939
At 31 October 2024
6,557
1,315
1,811
9,683
Accumulated depreciation and impairment
At 1 November 2022
1,917
868
1,184
3,969
Charge for the year
576
99
143
818
Eliminated on disposal
(243)
(45)
(53)
(341)
At 31 October 2023
2,250
922
1,274
4,446
Charge for the year
376
76
174
626
At 31 October 2024
2,626
998
1,448
5,072
Carrying amount analysed between owned assets and right-of-use assets
At 31 October 2024
Owned assets
460
317
363
1,140
Right-of-use assets
3,471
-
-
3,471
3,931
317
363
4,611
At 31 October 2023
Owned assets
461
84
397
942
Right-of-use assets
3,346
2
8
3,356
3,807
86
405
4,298
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
14
Property, plant and equipment (continued)
44
Property, plant and equipment includes right-of-use assets, as follows:
Right-of-use assets
2024
2023
£'000
£'000
Net values at the year end
Property
3,471
3,346
Fixtures and fittings
-
2
Computer and office equipment
-
8
3,471
3,356
Total additions in the year
500
1,386
Depreciation charge for the year
Property
375
545
Fixtures and fittings
2
2
Computer and office equipment
8
9
385
556
Included in freehold land and improvements is £460,000 of land that has an indefinite useful life.
The £460,000 of Freehold Land is owned outright by the Group.
There are no fixed assets in the company.
Right of use assets
During the prior year, the Group extended the lease term on the Head Office building by 5 years. This modification resulted in the recognition of an additional RoU Asset of £1.4m and an additional lease liability of £1.4m. These are presented separately in the statement of financial position.
There are no right of use assets in the Company.
15
Investments
Group
Current
Non-current
2024
2023
2024
2023
£'000
£'000
£'000
£'000
Investments in subsidiaries
1
1
The Shares in group undertakings represent certain subsidiary companies and joint ventures that have not been consolidated into the Group on the grounds of being immaterial.
Fair value of financial assets carried at amortised cost
The directors consider that the carrying amounts of financial assets carried at amortised cost in the financial statements approximate to their fair values.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
45
16
Investments
Company
Current
Non-current
2024
2023
2024
2023
£'000
£'000
£'000
£'000
Investments in subsidiaries
1,740
2,217
Classified as part of a disposal group held for sale
-
-
-
-
Fair value of financial assets carried at amortised cost
Except as detailed below the directors believe that the carrying amounts of financial assets carried at amortised cost in the financial statements approximate to their fair values.
In the opinion of the directors, the aggregate value of the company's investments in subsidiary undertakings is not less than the amount included in the balance sheet.
Investment in subsidiary undertakings
Details supporting the shares in group undertakings are included in note 33.
Movements in non-current investments
Shares in subsidiaries
£'000
Cost or valuation
At 1 November 2023
2,217
Disposals
(477)
At 31 October 2024
1,740
Carrying amount
At 31 October 2024
1,740
At 31 October 2023
2,217
17
Trade and other receivables
Group
2024
2023
£'000
£'000
Trade receivables
9,469
10,890
Amounts owed by related parties
68,353
36,897
Other receivables
655
1,352
Prepayments
1,563
995
80,040
50,134
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
17
Trade and other receivables (continued)
46
Fair value of trade receivables
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
No significant receivable balances are impaired at the reporting date.
18
Trade and other receivables
Company
2024
2023
£'000
£'000
VAT recoverable
250
78
Amounts owed by fellow group undertakings
75,016
67,444
Amounts owed by parent company and related parties
40,717
36,328
Prepayments and accrued income
301
106
116,284
103,956
19
Trade and other payables
Group
Current
Non-current
2024
2023
2024
2023
£'000
£'000
£'000
£'000
Trade payables
6,346
5,181
Amounts owed to related parties
26,588
16,136
Accruals
1,552
2,529
Deferred consideration
210
2,373
133
420
Social security and other taxation
1,046
1,066
Other payables
707
1,808
-
36,449
29,093
133
420
The deferred consideration is contingent consideration. The non-current contingent consideration has been discounted in 2024, the net effect of this is a reduction in the carrying value and an increase to net assets of £nil (2023: £264,295).
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
47
20
Trade and other payables
Company
2024
2023
£'000
£'000
Trade payables
523
207
Amounts owed to fellow group undertakings
34,909
25,297
Amounts owed to parent company and related parties
25,087
15,926
Accruals
263
298
Other payables
75
31
60,857
41,759
21
Borrowings
Group
2024
2023
£'000
£'000
Borrowings held at amortised cost:
Loans from subsidiary undertakings
-
50
The loans in 2023 were 4% Convertible Unsecured Loan Stocks (CULS), issued in July 2019 and due for redemption or conversion in 5 years. These were redeemed in 2024.
The borrowings are recognised at amortised cost. There is no material difference between the fair value and the carrying value.
22
Borrowings
Company
2024
2023
£'000
£'000
Borrowings held at amortised cost:
Loans from subsidiary undertakings
-
50
23
Lease liabilities
Group
Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:
2024
2023
£'000
£'000
Current liabilities
396
400
Non-current liabilities
2,960
2,955
3,356
3,355
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
23
Lease liabilities (continued)
48
2024
2023
Amounts recognised in profit or loss include the following:
£'000
£'000
Interest on lease liabilities
50
167
Payments in the year in respect of right of use asset leases amounted to £59,440 (2023: £483,238).
Lease contracts on property are generally reviewed every 5 years. The Non-current lease liability is shown net of discounting which is a reduction in the carrying value of £269,827 (2023: £521,340).
24
Deferred taxation
2024
2023
as restated
£'000
£'000
Deferred tax liabilities
1,266
1,345
Deferred tax assets
(572)
1,266
773
Deferred tax assets are expected to be recovered within one year
The following are the major deferred tax liabilities and assets recognised by the group and movements thereon during the current and prior reporting period.
Tax losses
£'000
Liability at 1 November 2023 as restated
773
Deferred tax movements in current year
Charge/(credit) to profit or loss in respect of business combinations
(75)
Prior year losses offset against current year profits
568
Liability at 31 October 2024
1,266
25
Provisions for liabilities
Group
2024
2023
£'000
£'000
37
132
All provisions are expected to be settled within 12 months from the reporting date.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
25
Provisions for liabilities (continued)
49
Movements on provisions:
£'000
At 1 November 2023
132
Reversal of provision
(95)
At 31 October 2024
37
Clawback provision
A provision is held for cancelled protection policies ahead of the agreed terms. The provision is calculated on the actual run-rate of lost clients with 90% of clawbacks occurring in the first 12 months.
26
Retirement benefit schemes
2024
2023
Defined contribution schemes
£'000
£'000
Charge to profit or loss in respect of defined contribution schemes
3,022
2,273
The group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
27
Share capital
2024
2023
2024
2023
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary shares of 10p each
49,998,674
49,998,674
5,000
5,000
There were no share issues in the financial year.
28
Share premium account
2024
2023
£'000
£'000
At the beginning and end of the year
81,637
81,637
Share premium is the amount paid for shares issued in excess of the nominal value.
29
Merger reserve
2024
2023
£'000
£'000
At the beginning and end of the year
(540)
(540)
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
29
Merger reserve (continued)
50
The merger reserve was created when the Group was formed on 23 June 2010, bringing AFH Financial Group and AFH Group Limited under a common ownership structure. The shareholders of AFH Group Limited exchanged for shares in AFH Financial Group.
30
Events after the reporting date
There were no subsequent events as at the time of issuing the financial statements.
31
Related party transactions
There were no related party transactions during the 2024 financial year end beyond intercompany transactions to/from parent undertakings.
32
Financial instruments
Interest rate risk management
The Group have an exposure to interest rate risk arising on interest-bearing deposits.
The Board monitors its treasury at least monthly and seeks to obtain a commercial rate of return from AA or above rated UK institutions whilst not impacting on cash flow.
The possible movement in UK interest rates would have an impact on the profit or loss.
Liquidity risk management
The Board monitors forecasts of the Group's liquidity comprising undrawn borrowing facilities and cash and cash equivalents on the basis of expected cash flows. This is carried out in accordance with recommended accounting practice and limits set by the Group.
The Board reviews the Group's liquidity at its monthly meetings. Board policy involves projecting cash flows and considering the level of liquid assets necessary to meet these requirements.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
32
Financial instruments (continued)
51
An analysis of the Group's contracted maturities of financial liabilities is as follows:
Effective
Carrying
Cash
Within
Interest rate
amount
flows
a year
1-2 years
2-5 years
>5 years
2024
£'000
£'000
£'000
£'000
£'000
£'000
Loans
4% Convertible Unsecured Loan Stocks
4%
-
-
-
-
-
-
Trade payables
6,346
6,346
6,346
-
-
-
Other payables
28,408
28,408
28,408
-
-
-
Contingent consideration
343
343
210
133
-
-
Commissions payable
1,373
1,373
1,373
-
-
-
Lease liabilities
3,356
3,356
396
364
1,031
1,565
39,826
39,826
36,733
497
1,031
1,565
Effective
Carrying
Cash
Within
Interest rate
amount
flows
a year
1-2 years
2-5 years
>5 years
2023
£'000
£'000
£'000
£'000
£'000
£'000
Loans
4% Convertible Unsecured Loan Stocks
4%
50
50
50
-
-
-
Trade payables
5,181
5,181
5,181
-
-
-
Other payables
20,186
20,186
20,186
-
-
-
Contingent consideration
2,793
2,793
2,373
420
-
-
Commissions payable
1,191
1,191
1,191
-
-
-
Lease liabilities
3,355
3,355
400
342
1,355
1,258
32,756
32,756
29,381
762
1,355
1,258
There is no material difference between the fair value and carrying value for those financial liabilities held at amortised cost.
Credit risk
The Group's maximum exposure to credit risk is represented by its trade receivables and cash balances, which are usually paid within 35 working days.
Aged trade receivables
Total
Current
›30 days
›60 days
›90 days
receivables
£'000
£'000
£'000
£'000
£'000
2024
9,469
-
-
-
9,469
2023
10,890
-
-
-
10,890
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
32
Financial instruments (continued)
52
The Group operates different credit terms in different parts of the business. The balances represent number of days from the date of invoice. No impairments for bad or doubtful debts have been made. Given the credit terms across the different parts of the business, the balances outside of the current category are not deemed to be past due.
33
Subsidiaries
Details of the company's subsidiaries at 31 October 2024 are as follows:
Name of undertaking
Principal activities
Percentage owned
AFH Group Limited
Holding Company
100.00
AFH Independent Financial Services Limited
(1) Other financial services
100.00
AFH JV (Holdings) Limited
(1) Non trading
100.00
Core Financial Services Limited
(1) Other financial services
100.00
Corville Financial Services Limited
(1) Non trading
100.00
LFS & Partners Limited
(1) Other financial services
100.00
St Johns Asset Management Limited
Other financial services
100.00
AFH Legal Limited
Legal services
100.00
AFH Acquisitions Limited
Holding Company
100.00
Hayburn Rock Financial Planning Limited
(1) Other financial services
100.00
Mulberry Independent Financial Advisers Limited
(1) Other financial services
100.00
Broadleaf Financial Services Limited
(1) Other financial services
100.00
The Insurance Partnership Financial Services Limited
(1) Other financial services
100.00
Inshore Independent Financial Advisers Limited
(1) Other financial services
100.00
Artex Insurance (Guernsey) PCC Limited - AFH Cell 1
(2) Insurance
100.00
(1) 100% subsidiaries owned by AFH Group Ltd, a wholly owned subsidiary of AFH Financial Group Limited.
(2) 100% subsidiaries registered in Guernsey.
All companies bar Artex Insurance (Guernsey) PCC Limited have registered address of AFH House, Buntsford Drive, Bromsgove, B60 4JE
Artex Insurance (Guernsey) PCC Limited - PO Box 230 Heritage Hall Le Marchant Street St Peter Port, GUERNSEY GY1 4JH
AFH Acquisitions Limited for the Financial Year ended 31 October 2024 was entitled to exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies. The members have not required the company to obtain an audit of its financial statements for the year in accordance with section 476.
The Company's immediate parent is AFH Wealth Management Holdings Limited, which is incorporated in the Cayman Islands. The ultimate parent undertaking is Cortina Topco Limited, which is incorporated in the Cayman Islands, indirectly controlled by funds managed by Flexpoint Ford, LLC, a private equity investment firm incorporated in the United States of America.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
53
34
Cash generated from operations
2024
2023
as restated
£'000
£'000
Profit for the year before income tax
22,832
15,008
Adjustments for:
Finance costs
94
187
Investment income
(187)
(50)
Amortisation and impairment of intangible assets
3,914
3,903
Depreciation and impairment of property, plant and equipment
626
818
Decrease in provisions
(95)
(131)
Movements in working capital:
Decrease/(increase) in trade and other receivables
2,594
(731)
(Decrease)/increase in trade and other payables
(1,493)
1,096
Cash generated from operations
28,285
20,100
35
Prior period adjustment
Based on professional advice and their own assessment, the directors consider that the carrying value of goodwill and the related deferred tax liability on business combinations in the prior year accounts at 1 November 2022 and 31 October 2023 was understated.
For the year ended 31 October 2022, an adjustment of £1,495,000 has been made to the carrying value of goodwill, in addition to the recognition of a £1,419,000 deferred tax liability on previous business combinations. This had a resulting impact to equity of £76,000.
For the year ended 31 October 2023, a further adjustment of £78,000 for a reduction of recognised deferred tax liability on previous business combinations. The resulting impact to equity in the financial year 2023 totalled £78,000.
Therefore, an adjustment of £1,495,000 had been made to the carrying value of goodwill, in addition to the recognition of a £1,341,000 deferred tax liability on previous business combinations. The resulting impact to equity in the financial years 2022 and 2023 in relation to a deferred tax credit totals £154,000.
AFH Financial Group Limited
Notes to the group financial statements (continued)
For the year ended 31 October 2024
35
Prior period adjustment (continued)
54
Reconciliation of changes in equity
1 November
31 October
2022
2023
Notes
£'000
£'000
Equity as previously reported
103,823
121,606
Adjustments to prior year
Deferred tax charge on 2021 and 2022 business combinations
76
76
Deferred tax charge on 2023 business combinations
-
78
Equity as adjusted
103,899
121,760
Analysis of the effect upon equity
Retained earnings
76
154
Reconciliation of changes in profit for the previous financial period
2023
Notes
£'000
Profit as previously reported
17,783
Adjustments to prior year
Deferred tax charge on 2023 business combinations
78
Profit as adjusted
17,861
2024-10-312023-11-01falseCCH SoftwareCCH Accounts Production 2024.210Alan HudsonPaul WrightAustin BroadAlexis LarvinHayden RobinsonAnne-Marie Brownfalse07638831bus:Consolidated2023-11-012024-10-3107638831bus:Director12023-11-012024-10-3107638831bus:Director32023-11-012024-10-3107638831bus:Director42023-11-012024-10-3107638831bus:Director52023-11-012024-10-3107638831bus:Director22023-11-012024-10-3107638831bus:CompanySecretary12023-11-012024-10-31076388312023-11-012024-10-3107638831bus:Consolidated2024-10-31076388312024-10-3107638831core:ContinuingOperationsbus:Consolidated2023-11-012024-10-3107638831bus:Consolidated2022-11-012023-10-3107638831core:Exceptionalbus:Consolidated12023-11-012024-10-3107638831core:Exceptionalbus:Consolidated12022-11-012023-10-3107638831core:ContinuingOperationsbus:Consolidated2022-11-012023-10-31076388312022-11-012023-10-3107638831core:RetainedEarningsAccumulatedLossesbus:Consolidated2023-11-012024-10-3107638831core:RetainedEarningsAccumulatedLossesbus:Consolidated2022-11-012023-10-3107638831core:RetainedEarningsAccumulatedLosses2022-11-012023-10-3107638831core:RetainedEarningsAccumulatedLosses2023-11-012024-10-3107638831core:Goodwillbus:Consolidated2024-10-3107638831core:Goodwillbus:Consolidated2023-10-3107638831core:IntangibleAssetsOtherThanGoodwillbus:Consolidated2024-10-3107638831core:IntangibleAssetsOtherThanGoodwillbus:Consolidated2023-10-31076388312023-10-3107638831bus:Consolidated2023-10-3107638831core:Non-currentFinancialInstrumentsbus:Consolidated2024-10-3107638831core:Non-currentFinancialInstrumentsbus:Consolidated2023-10-3107638831bus:Consolidated2023-10-3107638831core:CurrentFinancialInstrumentsbus:Consolidated2024-10-3107638831core:CurrentFinancialInstruments2024-10-3107638831core:ShareCapitalbus:Consolidated2024-10-3107638831core:ShareCapitalbus:Consolidated2023-10-3107638831core:SharePremiumbus:Consolidated2024-10-3107638831core:SharePremiumbus:Consolidated2023-10-3107638831core:RetainedEarningsAccumulatedLossesbus:Consolidated2023-10-3107638831core:ShareCapital2024-10-3107638831core:ShareCapital2023-10-3107638831core:SharePremium2024-10-3107638831core:SharePremium2023-10-3107638831core:RetainedEarningsAccumulatedLosses2023-10-3107638831core:ShareCapital2022-10-31076388312022-10-3107638831core:RetainedEarningsAccumulatedLosses2024-10-3107638831core:Goodwillbus:Consolidated2023-11-012024-10-3107638831core:IntangibleAssetsOtherThanGoodwillbus:Consolidated2023-11-012024-10-3107638831core:Goodwillbus:Consolidated2022-10-3107638831core:Non-standardIntangibleAssetClass1ComponentIntangibleAssetsOtherThanGoodwillbus:Consolidated2022-10-3107638831core:Non-standardIntangibleAssetClass2ComponentIntangibleAssetsOtherThanGoodwillbus:Consolidated2022-10-3107638831bus:Consolidated2022-10-3107638831core:Non-standardIntangibleAssetClass1ComponentIntangibleAssetsOtherThanGoodwillbus:Consolidated2023-10-3107638831core:Non-standardIntangibleAssetClass2ComponentIntangibleAssetsOtherThanGoodwillbus:Consolidated2023-10-3107638831core:Non-standardIntangibleAssetClass1ComponentIntangibleAssetsOtherThanGoodwillbus:Consolidated2024-10-3107638831core:Non-standardIntangibleAssetClass2ComponentIntangibleAssetsOtherThanGoodwillbus:Consolidated2024-10-3107638831core:Goodwillbus:Consolidated2022-11-012023-10-3107638831core:Non-standardIntangibleAssetClass1ComponentIntangibleAssetsOtherThanGoodwillbus:Consolidated2023-11-012024-10-3107638831core:Non-standardIntangibleAssetClass2ComponentIntangibleAssetsOtherThanGoodwillbus:Consolidated2023-11-012024-10-3107638831core:Goodwillbus:Consolidated2023-10-31076388312023-10-3107638831core:LandBuildingscore:LeasedAssetsHeldAsLesseebus:Consolidated2022-10-3107638831core:FurnitureFittingsbus:Consolidated2022-10-3107638831core:ComputerEquipmentbus:Consolidated2022-10-3107638831core:LandBuildingscore:LeasedAssetsHeldAsLesseebus:Consolidated2023-10-3107638831core:FurnitureFittingsbus:Consolidated2023-10-3107638831core:ComputerEquipmentbus:Consolidated2023-10-3107638831core:LandBuildingscore:LeasedAssetsHeldAsLesseebus:Consolidated2024-10-3107638831core:FurnitureFittingsbus:Consolidated2024-10-3107638831core:ComputerEquipmentbus:Consolidated2024-10-3107638831core:LandBuildingscore:LeasedAssetsHeldAsLesseebus:Consolidated2022-11-012023-10-3107638831core:FurnitureFittingsbus:Consolidated2022-11-012023-10-3107638831core:ComputerEquipmentbus:Consolidated2022-11-012023-10-3107638831core:LandBuildingscore:LeasedAssetsHeldAsLesseebus:Consolidated2023-11-012024-10-3107638831core:FurnitureFittingsbus:Consolidated2023-11-012024-10-3107638831core:ComputerEquipmentbus:Consolidated2023-11-012024-10-3107638831core:CurrentFinancialInstrumentsbus:Consolidated2023-10-3107638831core:CurrentFinancialInstruments2023-10-3107638831core:Non-currentFinancialInstruments2024-10-3107638831core:Non-currentFinancialInstruments2023-10-3107638831bus:PrivateLimitedCompanyLtd2023-11-012024-10-3107638831bus:Auditedbus:Consolidated2023-11-012024-10-3107638831bus:FullIFRSbus:Consolidated2023-11-012024-10-3107638831bus:FullAccounts2023-11-012024-10-3107638831bus:ConsolidatedGroupCompanyAccounts2023-11-012024-10-31xbrli:purexbrli:sharesiso4217:GBP