Edinburgh fintech in takeover sights to beat expectations after strong quarter

Scottish fintech Nucleus, currently being courted by a number of takeover suitors, said a strong performance in recent weeks should see it beat expectations for the financial year.

Nucleus founder David Ferguson said that focus and investment had paid dividends in 2020. Picture: Lisa Ferguson

In a stock market update the Edinburgh-based platform company said it had seen “significantly improved” net inflows and increased assets under administration (AUA), alongside continued momentum in attracting new customers.

The progress made in the fourth quarter means it expects to report adjusted earnings and year-end AUA ahead of the board's expectations for 2020.

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However, it provided no update on the recent takeover approaches it has received from industry rivals. There has been speculation a sale of the business could be announced by the end of the year.

AUA now stands at £17.3 billion, up 7.2 per cent since 30 September. Although the bulk of the increase was down to market movements, it also benefited from £166m of net inflows.

Outflows have reduced significantly over the year, by 19.6 per cent for the period from 1 October to 9 December compared to the same period in 2019.

David Ferguson, Nucleus' founder and chief executive, said: "We came into 2020 in great shape and as flows dipped through the height of the pandemic, we chose to maintain our focus and continue to invest in the things that make the greatest difference to our users, in the expectation that momentum would return, as it has.”

Meanwhile, Nucleus also said it had completed a deal to acquire part of Glasgow-based OpenWealth which it announced at the beginning of November.

OpenWealth has provided business process outsourcing (BPO) services to Nucleus since 2011, including account servicing and administration.

The 130 or so OpenWealth staff that currently provide services to the business will transfer to Nucleus, taking the combined headcount to about 380 people.

Ferguson described the deal as a “milestone towards us achieving a market-leading position for our customers”.

“The acquisition is expected to be earnings enhancing in 2021 and increasingly accretive in future years."

Nucleus’ platform is now used by 880 financial adviser firms and is responsible for assets on behalf of more than 100,000 customers.

Nucleus recently confirmed it had received approaches from James Hay and Transact to acquire the business which is majority owned by financial advice network Sanlam.

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