Edinburgh’s Nucleus Financial suspends dividend

David Ferguson

Shares of Edinburgh funds platform Nucleus Financial Group rose 7% on Tuesday after it said it is too early to estimate the impact of the coronavirus pandemic on its 2020 performance — but nonetheless suspended its final dividend.

The developments came as Nucleus published final audited results for the year ended December 31, 2019, and a first-quarter update on assets under administration (AUA).

Nucleus said assets under administration increased 16.3% year-on-year to £16.1 billion and adjusted EBITDA was in line with expectations at £7.9 million.

The platform enjoyed a 3.3% increase in the number of active advisers from 1,396 to 1,442 over the previous year and a 3.4% increase in customers from 93,715 to 96,857.

“However, in light of the exceptional and open-ended uncertainty caused by the Covid-19 pandemic and the rapidly changing environment, the board has decided, in the interests of prudence, not to recommend a dividend until there is more certainty around the term and impact on markets, investor confidence and revenue,” said Nucleus.

“The decision to suspend payment of the 2019 final dividend will allow the group to preserve capital until there is greater clarity on the above. 

“The board will continue to assess the situation and the appropriateness of paying a second interim dividend relating to the financial year ended 31 December 2019.”

Assets under administration fell to £14 billion at the end of first quarter 2020.

“The positive inflow momentum from Q4 continued into the first quarter of 2020 and there was limited impact on inflows until the latter part of March when the typical step up in tax year end contributions eased off,” said Nucleus.

“Q1 2020 gross inflows increased materially to £580m for the quarter, an increase of 24.5% on Q1 2019.

“Outflows stood at £312m, a 6.0% reduction on the same period in 2019, leaving net inflows of £268m for the first quarter, a 100.0% increase on Q1 2019.

“As previously noted on 23 March 2020, market volatility, particularly in March, has seen market movements of -£2.4bn over the quarter.”

Nucleus founder and CEO David Ferguson: “2019 was a challenging year for most UK financial services businesses as a result of the much trailed political and economic headwinds, particularly surrounding Brexit.

“Despite this, we made good progress over the year with growth across most of our key financial metrics, including AUA, revenue, profit after tax, customers and advisers.

“We’re committed to continually investing in the platform, and our product development and operations teams had a great year with notable progress in delivering improved efficiency, new functionality and enhanced capabilities.

“We entered 2020 with a stronger than ever combination of online product capability and offline service.

“We face a new challenge this year with the rapid change in the development of Covid-19, and it is entirely uncertain what impact this might have on businesses and the economy.

“The outlook is impossible to predict, but I can say that we remain open for business, and cash generative each day. 

“Our highest priorities are the health and wellbeing of our people, users and customers and we are taking every possible action to adapt to the situation and ensure we continue to deliver our online product as normal, backed up by top quality offline support. 

“Our platform is fully operational and all of our people are successfully working remotely with no impact on service.

“We are in continual dialogue with our users and our material service providers and I consider our operations to be resilient, recognising that our user experience remains reliant (as ever) on the performance of many of the interconnected parties that comprise the overall financial system.

“In light of the Covid-19 situation, the board has taken the prudent decision not to recommend a dividend until there is more certainty around the term and impact on markets, investor confidence and revenue.

“While this would typically be considered an unusual decision, we are in uncharted waters, and I believe it to be the correct course of action at this stage.

“Despite the current situation, the positive momentum following the general election in December carried into the start of the year and inflows have remained buoyant throughout with a 100.0% increase in net inflows in Q1 2020 against the first quarter of 2019.

“Inflow momentum has eased off in the last couple of weeks as the Covid-19 situation has developed.

“Reiterating the point above, it is too early to form a view on what the impact may be on the financial performance of the business over the full year.

“Notwithstanding the impact of external factors, whether related to market sentiment, the political environment or the current coronavirus pandemic, I believe the business is well-positioned to deliver on our plans and capitalise on the structural growth themes relating to our sector.”