Nucleus assets top £17bn ahead of £144m takeover

Nucleus Financial's Edinburgh HQ

Edinburgh funds platform Nucleus Financial Group — which last month agreed to be taken over — said on Tuesday its assets under administration increased 7.9% year-on-year to £17.4 billion for the year ended December 31, 2020, and its revenue edged 0.6% higher to £51.8 million.

Pensions and investment firm James Hay said on February 9 it agreed to buy Nucleus Financial in an all cash deal that values Nucleus at £144.62 million.

Nucleus Financial’s major shareholder, Sanlam UK Limited, with 52.19% of shares, has given an irrevocable undertaking to vote in favour of the acquisition.

Sanlam UK Limited is an indirectly held subsidiary of Sanlam of South Africa. Should the acquisition be completed, Sanlam UK Limited will receive £75 million in cash.

James Hay Holdings has received legally binding irrevocable undertakings in favour of the deal in respect of 55.88% of Nucleus stock. Shareholders will vote on on the deal later this month.

Adjusted profit before tax fell 29.8% to £5.1 million in 2020, with Nucleus Financial recording a 4.3% increase in customer numbers from 96,857 to 101,029 over the previous year.

“As a result of the offer by James Hay Holdings to acquire the entire issued share capital of Nucleus, the directors have resolved not to recommend a final dividend in respect of the 2020 financial year,” said Nucleus.

In his overview of the results, Nucleus founder and current CEO David Ferguson said: “Since the close of the financial year (and following a process initiated by our majority shareholder), the board has recommended a cash offer to shareholders from James Hay Holdings valuing the company at £144.62m.

“Becoming part of this enlarged group gives Nucleus a key role in a much bigger story where we can create a leading independent platform of scale with a high tech, high touch proposition and philosophy.

“I think the combination of our people’s talents and the size of the opportunity can see us carefully navigate the roadmap to deliver on this collective medium-term goal.

“Regardless of our ownership, I hope we are able to build on the successes of last year and the positive momentum we have enjoyed in early 2021 which has resulted in us now being responsible for £17.8bn AUA.”

Ferguson added: “We entered 2020 in great shape and enjoyed a strong Q1 before the rapid development of Covid-19 and volatile markets saw inflows dip and AUA growth stall through the height of the pandemic.

“I’ve commented before on how our people adjusted brilliantly to maintain our online and offline services, and I would reiterate how magnificent they’ve been throughout this extraordinary period.

“Despite the environment, we kept investing in the things that matter to our users in the expectation that momentum would return, as it did through late summer and particularly through Q4.

“Net inflows increased by 42% year-on-year, meaning AUA increased by 7.9% to close the year at £17.4bn.”

“Our continued investment in the business delivered several major product enhancements, we completed the acquisition of the relevant OpenWealth assets (welcoming 130 new staff into the business in the process), landed our first Enterprise firm and started the rollout of our new model portfolio service, Nucleus IMX, which since launch has the third highest net inflows of all DFMs on the platform, all while maintaining operations and service levels throughout the crisis.

“The positive AUA and inflow momentum flowed directly from our highest ever people engagement and our highest ever net promoter score (+41), each of which underscored our confidence in the growth prospects for the business.

“The Q4 2020 recovery in inflows has continued strongly through Q1 2021 with gross and net inflows already up on the whole of the prior quarter and taking us to increased AUA of £17.8bn (Q4 2020: £17.4bn) as at 21 March.

“With the last part of March (normally our busiest time of the year) still to come, I expect the coming days to round off our best ever quarter for new business activity.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.