Edinburgh fintech Nucleus Financial continues to invest in future as first-half profits cool

Nucleus Financial Group, the Edinburgh-based fintech business, has seen customer numbers top the 100,000 mark after booking resilient first-half results despite investor sentiment being hit by the pandemic.

Edinburgh-based Nucleus, which CEO David Ferguson set up with the backing of a number of financial advice firms in 2006, has developed software platforms that enable financial advisers to provide online access to clients for investments across ISAs, pensions and bond accounts. Picture: Lisa Ferguson

The firm said it had also pushed the button on its new discretionary portfolio management service, Nucleus IMX, which it is expecting “good things from over time”.

Results for the six months to the end of June revealed that assets under administration (AUA) had recovered to just over £15.8 billion, close to pre-Covid highs and a 3.2 per cent increase on a year earlier. That compares to a FTSE All-Share Index fall of 15.9 per cent over the period.

Net revenue grew by 0.7 per cent to £22.2 million while operating expenses were in line with expectations.

Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) were down 54 per cent at £2.1m, after being adversely impacted by the combined effect of lower-than-expected average AUA levels and continued investment during the period.

There was a 4.3 per cent increase in customer numbers to 99,797 over the last year, with that figure pushing through 100,000 since the period end.

David Ferguson, the group’s chief executive, said there were “lots of positives” to latch onto during a tough period for the financial services industry, pointing to a recent “uptick” in adviser activity.

He said: “Covid-19 has clearly impacted investor sentiment over the first half of the year but, despite this, we recovered most of the Q1 market fall in AUA by the end of the period and grew assets by 3.2 per cent year-on-year.

“During this time we have focused on those elements within our control and as such we continue to invest in our proposition to ensure we meet the future needs of our users. We expect good things from IMX over time and intend to continue investing in the development of our platform and service proposition for the long-term benefit of our users, their clients and our shareholders.

“While the impact of Covid-19 remains uncertain and continues to affect investor sentiment, customer numbers exceeded 100,000 after the period end, and trading has been in line with our post-Covid-19 expectations.”

An interim dividend of 1p per share was declared, down from 1.5p a year earlier, and equating to a payout of £800,000. It had suspended its dividend with its 2019 results.

Nucleus, which Ferguson set up with the backing of a number of financial advice firms in 2006, has developed software platforms that enable financial advisers to provide online access to clients for investments across ISAs, pensions and bond accounts.

The “wrap platform” provider, which floated in 2018, is seen as one of the biggest successes of Scotland’s burgeoning fintech – financial technology – sector.

Shore Capital analyst Paul McGinnis said: “Two key positives from the release are that the company’s competitively-priced model portfolio service, IMX, was launched in August (with firms signed up) and that Nucleus is in dialogue with ‘several’ large firms through the Nucleus Enterprise brand, which would have the potential to accelerate net inflows (and therefore AUA growth) if deals can be secured.”

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