Business update

30 September 2019

AFH FINANCIAL GROUP PLC

("AFH" or the "Company")

Business update

AFH Financial Group plc (AIM: AFHP), a leading financial planning led wealth management firm, is pleased to provide the following business update.

As reported to the market on 13 September 2019, the Company continues to enjoy strong organic inflows of funds from existing and new clients with low redemptions. During the current year double digit gross inflows continue to be achieved whilst outflows, including pension drawdowns, remain below 2%.

Following AFH's three recent acquisitions of IFA businesses, bringing the total committed spend to £10.3 million since the £15 million Convertible Loan Stock placing in July 2019, the combined maximum committed spend for the seven acquisitions made in the current financial year is £29.9 million, of which £12.8 million was paid as initial consideration. The balance, which is entirely dependent on the performance of the acquisitions during the next two years, will be paid over the next three financial periods.

The Company's key strategic objective remains to become the number one financial planning-led wealth manager in the UK. As part of its business review and annual budget process the Board has evaluated its growth strategy in the light of the three to five year aspirations announced to the market in January 2019.

The Board reaffirms these aspirations of achieving Funds under Management of £10 billion; Revenues per annum of £140 million; and Underlying EBITDA margin of 25% on revenue whilst confirming its intention, as set out in recent statements to the market, to focus on driving the organic growth of the business, providing professional and cost-effective services to clients and, in-turn, enhancing profitability and shareholder return.

Since the Company was admitted to AIM in 2014, AFH has completed 50 acquisitions providing the size and profitability that the Board believed necessary to create a leading national advice led wealth management group. This in tandem with strong organic growth has enabled the Company to grow revenues by approximately 400% and earnings per share by approximately 600% during the period.

A consolidation strategy generally relies on an element of arbitrage to exist between the Company and the acquisition target where the multiple paid for acquisitions is below the multiple at which the acquirer's shares are traded, both to ensure accretion for existing shareholders and to compensate for any inherent risk in acquiring businesses.

In 2016, following a significant number of acquisitions, AFH decided that in the uncertain political and economic climate it would de-risk its model through a period of consolidation, cementing the integration of acquisitions completed during the previous twelve months and focusing on organic growth. This period of consolidation confirmed the Company's ability to grow organically, during which Funds under Management grew by 11% and cash generated from operations represented 95% of EBITDA reported for the year, whilst significantly reducing the level of outstanding deferred consideration on the balance sheet and increasing the cash generation and working capital of the business.

The Board considers that many of the economic and political factors that existed in 2016 are again present and will influence investor behaviour for the foreseeable future. Therefore, following completion of the remaining acquisition opportunities identified to the market at the time of the Convertible Loan Stock placing in July 2019 and currently undergoing due diligence, the Board intends to focus the Company's resources on organic revenue growth complemented by the use of technology to enhance productivity and drive operational efficiencies within its two operating divisions. This strategy is expected to unlock future working capital and, following the payment of deferred considerations as they become due, provide free cashflow to finance additional acquisitions in the future and deliver an appropriate level of ongoing dividends to shareholders.

As an outcome of this strategy the Company does not anticipate requiring any additional funding from the equity market in the foreseeable future as growth will be funded from working capital.

Commenting Alan Hudson, Chief Executive of AFH said:

"The growth and strategy of the Company has created a proposition for our clients that combines a market leading client centric service with a competitive cost model and has created a USP from which to achieve our three to five year aspirations.

"We seek to align our growth with operational efficiencies and during the current year the Company has invested heavily in digital marketing and IT infrastructure, all of which has been expensed, whilst absorbing the cost of clients using our Pershing-enabled AFH Direct platform.

"We were pleased to report robust growth in H1 2019, in May 2019, confirming strong growth in excess of 50% at Revenue, EBITDA and EPS levels and are pleased to confirm that during H2 the business has continued to perform well.

"We look forward to providing a full trading update to the market in early November following the end of our financial year on 31 October 2019."

Enquiries:

AFH Financial Group PLC                                                                       01527 577 775

Alan Hudson, Chief Executive Officer

Paul Wright, Chief Financial Officer

Liberum (Nominated Adviser and Joint Broker)                                020 3100 2000

Richard Bootle / Euan Brown / Kane Collings

Shore Capital (Joint Broker)                                                                   020 7408 4090

Hugh Morgan / Edward Mansfield / Daniel Bush

Yellow Jersey PR Limited (Financial PR)                                             077 4884 3871

Felicity Winkles / Joe Burgess / Annabel Atkins

Notes to Editors

AFH Financial Group (AIM: AFHP) is a leading UK financial planning-led wealth management firm based in the Midlands. Founded in 1990 by CEO Alan Hudson, the Company provides wealth management and financial advisory services to over 20,000 clients in the UK. These services are delivered by over 450 professional advisers and 400 support staff.