Edinburgh fintech Nucleus Financial hails first-half progress

Nucleus Financial Group, the Edinburgh-based fintech business, has seen its assets under administration jump above £15 billion but its first-half profits were dented by a “substantial” investment programme.

David Ferguson is the capital firm's founder and chief executive. Picture: Lisa Ferguson

David Ferguson, the firm’s founder and chief executive, said he was looking towards the future “with confidence” despite “short-term headwinds” as he unveiled results for the six months to the end of June.

Assets under administration (AUA) rose 6.9 per cent year-on-year to £15.3bn compared to a benchmark FTSE All-Share Index fall of 3.5 per cent.

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Adjusted underlying earnings of £4.6 million, down from £4.9m, were in line with expectations, the firm noted, following substantial planned investment in its product development during the period. On an adjusted pre-tax basis, profits came in at £4.2m, compared with £4.6m a year earlier.

An interim dividend of 1.5p per share was declared, up from 1.4p last year.

Ferguson said: “We anticipated that the change to our operating model in late 2018 would significantly accelerate our product development in future years and the first half of 2019 has borne this out.

“Substantial investment in the core platform has delivered improved efficiency, new functionality and new capabilities.

“We intend to continue developing our proposition to meet the needs of advisers and customers and expect this to give the platform an even wider market appeal over time.”

He added: “Alongside the progress in our product roadmap we continue to grow assets, revenue, profits, customers and advisers, all against a challenging market backdrop and I am excited by what we can achieve.

“Financial performance is otherwise expected to develop as planned as we look beyond short-term headwinds and toward the future with confidence.”

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 firm, which floated in 2018, is seen as one of the biggest successes of Scotland’s fast-developing fintech – financial technology – sector.

Its latest results also show that there has been a 1.9 per cent increase in the number of active advisers from 1,357 to 1,383 over the last year. Customer numbers, meanwhile, have grown 5.5 per cent from 90,650 to 95,657.

Paul McGinnis, an analyst with house-broker Shore Capital, noted: “We regard this as a resilient performance in a tough market with early signs that the key technology unbundling agreement, signed in November 2018, is delivering the expected benefits.

“We continue to see scope for very material margin upside as AUA scales beyond £20bn.”

John Moore, senior investment manager at Brewin Dolphin, said: "Nucleus has produced another set of promising results against what has been a difficult environment for activity and competition.

"A modest increase in active users should help ease investors who may have been worried about the uncertain backdrop and the increase in dividend from 1.4p to 1.5p shows confidence backed up with cash of £17m

"From here, shareholders will be hopeful that the high levels of investment in the platform itself will continue to attract users in what is a competitive platform and advisor market generally.”