Financial planning group Fairstone has reported growing revenues and funds under management, but posted a loss in accounts for 2020.
The Boldon-based firm has grown quickly in recent years through its downstream buy-out model, in which it takes an initial stake in smaller financial advisory firms before acquiring them in full at a later date.
The company’s accounts for 2020 which show that its revenues rose 8% to £69.7m. But over the same period the company reported an operating loss of £2.2m, having seen an £851,000 profit the year before.
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The accounts include exceptional costs of £1.4m, made up of £500,000 from a historic VAT dispute and £900,000 in costs from the deal in which equity group TA Capital became Fairstone’s majority owners.
That deal, announced in February, along with new financing and renewed backing from existing shareholders and senior management “puts Fairstone on track to expand and accelerate our plans for growth”, the accounts say.
Fairstone said it had seen a 32% increase in funds under management to £10.7bn in 2020, while recurring income increased to £49.3m, representing 73% of advisory revenue.
It completed 10 acquisitions and started another 10 firms on the downstream buy-out model with a view to full acquisition within the next two years. It said it had high levels of interest in its buy-out proposition, with more than 45 firms in active discussions over it.
Fairstone CEO Lee Hartley said: “In 2020, against the backdrop of the pandemic, we again delivered strong progress across all areas of the business and the group continues to make excellent progress against its core strategy and growth plan.
“From an acquisition perspective, the year was very heavily back-end loaded as the effect of a national lockdown delayed a large amount of our due diligence programme. I’m delighted to say that every single deal we aimed to complete in 2020 was concluded, although naturally later than planned. This means our profits for the full-year are quite heavily understated when compared to the steady-state performance.”
In February’s deal, as well as the stake taken in the firm by TA Associates, private equity backers Synova reinvested into the group and funders Alcentra increasing the scale of the acquisition facilities available to the company.
Mr Hartley said: “Fairstone’s considered approach, together with our proven business model and the significant financial backing that we have at our disposal, allows the management team and shareholders to look forward to 2021 and beyond in a positive manner.”
