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No dividend for shareholders

Nucleus: ‘too early to assess impact of Covid-19’

David Ferguson

David Ferguson: ‘we were feeling good about life’

Nucleus Financial, the wrap platform, is hoping that a return to normality will build on the momentum of the past year.

However, chief executive David Ferguson cautioned that the impact of the Covid-19 virus was yet to be assessed and the board has decided not pay a dividend as a “prudent” measure.

“Inflow momentum has eased off in the last couple of weeks as the Covid-19 situation has developed.” said Mr Ferguson in a statement with the year end figures.

“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.”

Speaking to Daily Business, he expressed his confidence in the business, while admitting the outlook remained uncertain.

“It is frustrating. We were feeling good about life,” he said. “Hopefully, we will pick up on the momentum we have seen.”

The Edinburgh-based company enjoyed a lift in assets under administration (AUA) and pre-tax profits over the year to the end of December while customer numbers also increased.

First quarter gross inflows have increased 24.5% to £580m. Outflows stood at £312m, a 6% reduction on the same period in 2019, leaving a doubling of net inflows of £268m for the first quarter on Q1 2019.

AUA increased 16.3% year-on-year to £16.1bn compared to a FTSE All-Share Index increase of 14.2%.

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.

Statutory profit after tax increased by 25.2% to £6m on 2018 while adjusted EBITDA was in line with expectations at £7.9m following increased investment in the product proposition during the year

There was 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 customer numbers from 93,715 to 96,857.

Notwithstanding the uncertainty, the group has a robust capital structure and solvency position including £18.5m of cash and cash equivalents at the end of the financial year..

Suspending 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.

Mr Ferguson added: “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 remain open for business and cash generative each day

– David Ferguson, Nucleus

“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 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% increase in net inflows in Q1 2020 against the first quarter of 2019.”

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