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RNS
Nucleus Financial Gp  -  NUC   

Interim report

Released 07:00 11-Sep-2018

RNS Number : 3367A
Nucleus Financial Group PLC
11 September 2018
 

11 September 2018

Nucleus Financial Group Plc

("Nucleus" or the "Group")

Interim report and financial statements for the six months ended 30th June 2018

Nucleus delivers strong H1 financial performance in first results presented as a quoted company

Nucleus, a leading independent wrap platform provider, is pleased to announce its unaudited interim results for the six months ended 30th June 2018.

Financial highlights / KPIs

£ million (unless otherwise stated)

Six months ended 30 June 2018

Six months ended 30 June 2017

Change

Assets under administration (AUA)

 

 

 

Period end AUA

14,339

12,401

15.6%

Average AUA

13,865

11,822

17.3%

Gross inflows

1,265

1,324

(4.5)%

Net inflows

726

850

(14.6)%

 

 

 

 

Financial KPIs

 

 

 

Revenue

21.6

19.5

11.0%

Blended revenue yield (bps)*

31.5

33.3

(5.4%)

Adjusted EBITDA*

4.9

1.9

152.0%

Adjusted EBITDA margin (%)*

22.4

9.9

127.0%

Profit after tax for the period

2.2

1.1

98.5%

Dividend paid

2.7

-

N/A

 

Operational highlights

·      Successful admission to trading on AIM in July 2018 (post period end)

·      Increase in number of active advisers from 1,266 to 1,357, up 7.2 per cent over the past 12 months

·      Customer numbers at 30 June 2018 stood at 90,650, an increase of 5.9 per cent on H1 2017

·      Continued development of the platform:

launch of a capital gains tool as part of our award winning Narrate client reporting tool;

creation of a new model portfolio analysis tool;

extension of API service functionality ('Integrate') which now accepts over 500,000 queries a month;

development of a new client portal for launch to market in H2.

·     Successful implementation of functionality changes driven by MiFID II regulation and compliance with GDPR in the reporting period

·    Continued progress with the proposed unbundling of selected outsourced technology and business process outsource (BPO) services

·      Appointment of Margaret Hassall and Tracy Dunley-Owen to the board

·      Interim dividend of 1.4p per share declared and payable in October

 

David Ferguson, founder and CEO of Nucleus, commented:

"In these, our inaugural set of interim results presented as a quoted company, I am very pleased to report strong results for the first half of the year. The backdrop of increased financial market volatility and pause in momentum across the sector as advisers and platforms alike dealt with the twin introduction of MiFID II regulation and the new GDPR rules, makes these results more pleasing, and financial performance has remained in line with our expectations since the end of the period."

"The growth in AUA and the number of active advisers, two of our key performance indicators, show that our adviser users continue to share our ambition of promoting transparency and improving customer outcomes."

"We are greatly appreciative of the support we have received since our successful IPO in July. It was an exciting moment and an important milestone for Nucleus and we welcome our new investors to the share register. We continue to be confident in our ability to deliver on our ambitions for the business for the remainder of the year and beyond."

 

* Industry-specific financial performance measures.

Included within this results announcement are alternative measures that the directors believe help to inform the results and financial position of the group.

Blended revenue yield is calculated by dividing annualised revenue by Average AUA.

Adjusted EBITDA excludes non-operating income, AIM admission costs and share-based payments.

The definitions and calculations are included at the end of the document, where other technical terms are also defined.

 

For further information please contact:

Nucleus Financial           

David Ferguson, CEO                                                      Tel: +44 (0)131 226 9800

Stuart Geard, CFO       

Shore Capital (nominated adviser and broker)         

Hugh Morgan                                                                   Tel: +44 (0)20 7408 4090

Edward Mansfield               

Daniel Bush 

Camarco (media enquiries)    

Jennifer Renwick                                                              Tel: +44 (0)20 3757 4994

Jake Thomas    

 

Analyst presentation 

There will be an analyst presentation to discuss the results at 10:30 a.m. today at Camarco, 107 Cheapside, London, EC2V 6DN. Those analysts wishing to attend are asked to contact Jessica Cooper on +44 (0)20 3757 4998 or jessica.cooper@camarco.co.uk

Forward looking statements

This announcement includes statements that are, or may be deemed to be, "forward-looking statements". By their nature, forward-looking statements involve known and unknown risks and uncertainties since they relate to future events and circumstances. Actual results may, and often do, differ materially from any forward-looking statements.

Any forward-looking statements in this announcement reflect Nucleus' view with respect to future events as at the date of this announcement. Save as required by law or by the AIM Rules for Companies, Nucleus undertakes no obligation to publicly revise any forward-looking statements in this announcement following any change in its expectations or to reflect events or circumstances after the date of this announcement.

 

Notes to editors

About Nucleus

Nucleus is a wrap platform founded in 2006 and built by advisers committed to altering the balance of power in the industry by putting the client centre stage. It provides independent wrap platform services to over 1,350 active adviser users and works with more than 800 financial adviser firms as at 30 June 2018. It is responsible for assets under administration ("AUA") of £14.3bn on behalf of more than 90,000 customers.

The multi award-winning platform offers a range of custody, trading, payment, reporting, fee-handling, research and integration services across a variety of tax wrappers and more than 5,000 asset choices including cash, OEICs, unit trusts, offshore funds, structured products and listed securities, including ETFs and investment trusts and currently facilitates over 1.1 million client account transactions on average per month.

Nucleus has won CoreData's 'Best medium-sized platform' for the last seven years, the Schroders 'Platform of the year' award for the last two years and recently won 'Best platform' and 'Platform innovation' at the Money Marketing awards.

 

 

 

Chief executive's report

Overview

Alongside growth in active users, customer numbers, AUA and profit, we invested heavily in the first half of 2018 to prepare the business for admission to AIM. This process concluded successfully on 26 July and we warmly welcome our new shareholders as we accelerate our efforts to create value through the strategic alignment of advisers and their customers.

I am immensely grateful to everyone at Nucleus and beyond who supported the admission process. I'd like to pay a particularly keen thank-you to our former board members, Mike Seddon and Stephen Tucker, for their considerable contribution to our success to date.

 

Replacing Mike and Stephen, we are very happy to welcome two new independent non-executive directors. Margaret Hassall and Tracy Dunley-Owen joined the board on our admission to AIM and their extensive financial services and technology experience will be of great value as we continue to develop the business.

 

Following these board changes, we are reviewing the constitution of the Nucleus advisory board, composed of financial adviser users, so as to preserve the strong feedback mechanism between the board and our users.

 

The team is now fully engaged in delivering the next phase of our growth and to mark the start of that era, I am happy to present our financial results for the first time as a public company.

 

Operational performance

 

More volatile markets and regulatory change in relation to MiFID II and GDPR implementations impacted financial advisers and customer sentiment, leading to a slight dip in gross inflows, down 4.5 per cent at £1.27bn (H1 2017: £1.32bn). Outflows were in line with expectations for the period, meaning net inflows were down 14.6% at £726m in H1 2018 (H1 2017: £850m). Despite low financial market growth over the period, AUA grew by 5.6 per cent in H1 2018, while the FTSE All Share Index decreased by 0.5 per cent and the FTSE 100 Index decreased by 0.7 per cent.

Against this, we remain committed to building durable relationships with more progressive adviser firms and we were pleased to see the number of active adviser users rising by 7.2 per cent year-on-year to 1,357, contributing to a 5.9 per cent increase in overall customer numbers from 85,581 to 90,650.

We are also extremely proud to have won the Money Marketing 'Best platform' and 'Platform innovation' awards and retained the CoreData 'Best medium-sized platform' for the seventh year in succession.

Financial performance and dividend

Despite more challenging financial market conditions, revenue to 30 June 2018 increased 11 per cent year-on-year helping drive H1 adjusted EBITDA to £4.9m, a substantial 152 per cent increase on 2017.

Our strong performance in 2017 allowed for the payment of a pre-admission dividend to ordinary shareholders totalling £2.7m, providing the group with an appropriate level of capital going forward.

In the context of the continuation of that performance into 2018 I am pleased to announce that the board has declared, in line with the group's dividend policy, an interim dividend of 1.4 pence per share, amounting to a total dividend of £1.1m. This will be paid on 19 October 2018 to ordinary shareholders on the register on 21 September 2018, with an ex-dividend date of 20 September 2018.

Strategic development

We remain on track to deliver the unbundling of our outsourced technology and BPO services. Once agreed, the creation of a direct relationship with the provider of our core platform software will facilitate improved technology services and accelerate change management to address the evolving needs of our users. Management expect the unbundling of these services to be broadly cost neutral and successful execution will strengthen our technology foundations. It will also create optionality in our future organisational design and support our plans to deliver further margin expansion.

We continue to invest in our data science capability and also remain on track for the 2019 launch of a product extension with the objective of boosting our revenue yield and improving the overall attractiveness of the Nucleus platform.

Outlook

Financial performance since the period end has remained in line with our expectations and we remain focused on investing in the business to support the longer-term growth opportunity which will enable the company to benefit from improved operating margins with greater scale, even if pricing pressure becomes more pronounced. This includes a planned increase in spend on platform development in the second half of the year as outlined in the CFO report below.

We expect inflows per firm (across the sector) to remain slightly soft in the short-term as post-MiFID II and post-GDPR processes mature and adviser firms rediscover capacity to take on new clients. However, we also anticipate an acceleration in the number of firms using our platform, partially due to service constraints arising as a result of re-platforming experiences elsewhere, and for those firms to continue to make a growing contribution to overall AUA inflows. In such situations, this trend can also trigger modest incremental improvements in relative outflows due to the balance toward new clients.

We welcome the FCA's interim Platform Market Study (MS17/1) report into the way competition works in the investment platform market and agree with the direction of the findings. We believe there remains scope for more progressive vertical integration in asset management where the business model is more aligned with good customer outcomes.

We look forward to building on the assured progress of recent years. We remain confident in the prospects for Nucleus, and for the advised platform sector in general.

 

David Ferguson
Founder and chief executive

 

Chief financial officer's report

The first half of 2018 has been a further period of solid financial performance by Nucleus, with almost all financial metrics continuing to display positive trends including growth in AUA, revenue, adjusted EBITDA and profit after tax. In particular, the increase in AUA of 15.6 per cent and revenue of 11.0 per cent over the prior year period were not matched by increases in expenditure, with the result that adjusted EBITDA (i.e. excluding the costs of approximately £1.5m incurred in relation to the company's admission to AIM in July 2018) increased by 152 per cent from £1.9m in H1 2017 to £4.9m in H1 2018, representing a yield of 22.4 per cent (compared to the prior year period of 9.9 per cent). Similarly, profit after tax of £2.2m (up 99 per cent from H1 2017 of £1.1m, despite the inclusion of the AIM admission costs) was ahead of expectations and provides scope for Nucleus to invest more heavily in the remainder of 2018.

 

Financial key performance indicators

 

 

Six months ended June 2018

Year ended December 2017

Year ended December 2016

Year ended December 2015

Year ended December 2014

Group

£'000

£'000

£'000

£'000

£'000

AUA

14,338,870

13,576,703

11,143,757

9,068,789

7,807,690

Gross inflows

1,264,903

2,607,759

1,854,830

1,977,783

1,944,335

Net inflows

726,235

1,668,237

970,263

1,229,625

1,441,099

Revenue*

21,645

40,365

33,281

28,957

23,604

Adjusted EBITDA

4,853

6,248

5,141

4,637

3,089

Profit for the period/year*

2,154

4,111

3,387

4,300

2,472

Dividend

2,658

4,813

nil

nil

nil

Adjusted EBITDA margin

22.4%

15.5%

15.4%

16.0%

13.1%

*2015 - 2018 reported on an IFRS basis; 2014 reported under FRS102

 

Financial review

 

Six months ended 30 June 2018

Six months ended 30 June 2017

Year ended     31 December 2017

Group

£m

£m

£m

Opening AUA

13,577

11,144

11,144

Inflows

1,265

1,324

2,608

Outflows

(539)

(474)

(940)

Net inflows

726

850

1,668

Market movements

36

407

765

Closing AUA

14,339

12,401

13,577

Average AUA

13,865

11,822

12,411

 

 

 

 

Six months ended 30 June 2018

Six months ended 30 June 2017

Year ended     31 December 2017

Group

£'000

£'000

£'000

 

 

 

 

Revenue

21,645

19,500

40,365

 

 

 

 

Staff costs

7,016

6,121

13,138

AUA related costs

6,149

5,822

11,228

Other direct platform costs

420

259

495

Platform development costs

128

2,250

2,773

Other costs

3,080

3,122

6,483

 

 

 

 

Adjusted EBITDA*

4,853

1,926

6,248

Depreciation

277

192

410

Adjusted EBIT

4,576

1,734

5,838

Interest income

3

7

9

Interest expense

(1)

(1)

(3)

 

 

 

 

Adjusted profit before tax

4,578

1,740

5,844

 

 

 

 

Other income

11

16

36

AIM admission costs

(1,473)

-

-

Share based payments

(69)

(345)

(756)

 

 

 

 

Statutory profit before tax

3,047

1,411

5,124

Taxation

(893)

(326)

(1,013)

Statutory profit after tax

2,154

1,085

4,111

 

 

 

 

Basic and diluted EPS

2.8p

1.4p

5.4p

Blended revenue yield (bps)**

31.5

33.3

32.5

Adjusted EBITDA margin

22.4%

9.9%

15.5%

 

* Adjusted EBITDA excludes non-operating income, AIM admission costs and share based payments and is included within the interim report as the directors believe this is a better representation of the underlying performance of the business.

** Blended revenue yield is calculated by dividing annualised revenue by Average AUA.

 

 

 

 

Revenue

AUA continued to grow at encouraging levels, up 5.6 per cent on 31 December 2017 and 15.6 per cent over the last 12 months. The increase in AUA to £14.3bn came almost entirely from net inflows of £726m (14.6 per cent lower than the £850m recorded in the first half of 2017), with volatile markets, which only recovered towards the end of the period, contributing marginally to the increase.

Despite the volatile markets and lower than expected net inflows in the second quarter of 2018, revenue for the six-month period was 11.0 per cent higher than the prior year period. This resulted in a blended revenue margin yield of 31.5 basis points, which was in line with expectation and reflects the impact of the price cut that took effect from July 2017 as well as slightly higher average client portfolio sizes (H1 2017, 33.3 basis points and FY 2017, 32.5 basis points).

Costs

Staff costs of £7.0m for the period (up 14.6 per cent over the prior year period) were slightly below expectations, but in general have and are expected to continue to increase in line with our plans, with the number of full-time employees increasing from 177 to 204, predominantly as a result of our ongoing investment in our technology, customer, operations and change management teams.

AUA related costs for the half-year were in line with expectations at £6.1m, an increase of 5.6 per cent over the prior year and, at an average cost of 8.9 basis points, reflecting the tiering benefits within a significant component of these costs.

Other direct platform costs relating to hosting and licencing costs increased to £0.4m. The company continues to plan to invest more heavily in this area in 2019 and beyond, including through the planned restructuring of its primary outsourcing contracts.

Platform development costs of £0.1m were below expectation and significantly lower than the H1 2017 comparative cost of £2.3m. This difference is caused by 2017 including the preparatory costs of a platform upgrade that was completed in October 2017 as well as the costs of a substantial amount of third-party developed software, while 2018 has been characterised by increased internally-developed software expenditure (included in staff costs), an increased amount of regulatory change (which has largely been non-chargeable to Nucleus) and an underspend on external software development.

We continue to expect a significant increase in platform development expenditure in the remainder of 2018, to include the costs of a further planned platform upgrade, one-off investment in test automation software and a modest level of third-party software development expenditure, but that the total cost for the year will remain significantly below the 2017 full-year cost of £2.8m.

Finally, 'Other costs' of £3.1m were broadly consistent with expectations and the prior year.

 

Group financial position

30 June 2018

31 December 2017

 

£'000

£'000

Cash and cash equivalents

17,028

16,992

Consolidated net assets

15,747

16,182

Capital adequacy ratio

16.0%

15.3%

Capital adequacy ratio - underlying*

18.8%

21.7%

Excess capital - above 8% regulatory requirement

6,697

5,369

 

*Reflects the theoretical ratio of including current period/year profits in the capital measure

 

 

Financial position

Nucleus continues to maintain a balance sheet that is free from goodwill and intangible assets and has no debt. Surplus capital is comfortably in excess of minimum regulatory capital requirements, and together with the liquidity position is assessed as sufficient to meet the ongoing operations of the business, under both normal and stressed conditions, the platform investment requirements, and to deliver returns to shareholders in line with our dividend policy guidance.

The directors consider that the group has adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the interim financial statements.

Principal risks and uncertainties

The group continues to operate a risk framework through which it can systematically identify actual and potential risk events and seeks to put in place appropriate policies and controls as safeguards. Our principal risks and uncertainties are detailed in pages 18 to 21 of the Group's annual report and financial statements for the year ended 31 December 2017. With the exception of solvency risk (including access to capital), the principal risks and uncertainties remain unchanged from year-end and are not expected to change materially for the remainder of the financial year. Since admission to AIM, the provisions of the previous shareholders' agreement that ordinarily restricted the ability of the company to raise additional capital from its existing shareholders no longer apply.

 

Stuart Geard
Chief financial officer

 

Consolidated income statement

 

Notes

Six months to 30 June 2018 £'000

 

Six months to 30 June 2017 £'000

Continuing operations

 

 

 

 

Revenue

 

21,645

 

19,500

Cost of sales

 

(6,697)

 

(8,332)

 

 

 

 

 

Gross profit

 

14,948

 

11,168

 

 

 

 

 

Other operating income

 

11

 

16

Administrative expenses

 

(11,914)

 

(9,779)

 

 

 

 

 

Operating profit

 

3,045

 

1,405

 

 

 

 

 

Finance income

 

3

 

7

Finance costs

 

(1)

 

(1)

 

 

 

 

 

Profit before income tax

 

3,047

 

1,411

 

 

 

 

 

Income tax

7

(893)

 

(326)

 

 

 

 

 

Profit for the period

 

2,154

 

1,085

 

 

 

 

 

Earnings per share (pence)

 

 

 

 

Basic and diluted

 

2.8

 

1.4

 

 

Consolidated statement of comprehensive income

 

Notes

Six months to 30 June 2018 £'000

 

Six months to 30 June 2017 £'000

 

 

 

 

 

Profit for the period

 

2,154

 

1,085

 

 

 

 

 

Items that may be subsequently reclassified to profit or loss

Unrealised loss on investments

 

-

 

(1)

 

 

 

 

 

Total comprehensive income for the period

 

2,154

 

1,084

 

 

 

 

 

 

 

Consolidated statement of financial position

 

Notes

Six months to 30 June 2018

 

Six months to 30 June 2017

 

 

£'000

 

£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

 

1,742

 

1,780

Deferred tax

 

102

 

158

 

 

1,844

 

1,938

 

 

 

 

 

Current assets

 

 

 

 

Trade and other receivables

 

9,004

 

9,739

Investments

 

99

 

99

Tax receivable

 

17

 

17

Cash and cash equivalents

 

17,028

 

16,992

 

 

 

 

 

 

 

26,148

 

26,847

 

 

 

 

 

Total assets

 

27,992

 

28,785

 

 

 

 

 

Equity

 

 

 

 

Shareholders' equity

 

 

 

 

Called up share capital

 

71

 

21

Share premium

 

2,426

 

-

Capital redemption reserve

 

1

 

1

Share-based payment reserve

 

289

 

2,646

Fair value reserve

 

39

 

39

Retained earnings

 

12,921

 

13,475

 

 

 

 

 

Total equity

 

15,747

 

16,182

 

 

 

 

 

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Financial liabilities

 

38

 

93

Provisions

3

16

 

-

Deferred tax

 

46

 

46

 

 

100

 

139

Current liabilities

 

 

 

 

Financial liabilities

 

107

 

107

Trade and other payables

 

10,657

 

10,707

Tax payable

 

504

 

1,124

Provisions

3

877

 

526

 

 

12,145

 

12,464

 

 

 

 

 

Total liabilities

 

12,245

 

12,603

 

 

 

 

 

Total equity and liabilities

 

27,992

 

28,785

 

The unaudited condensed consolidated interim financial statements were approved and authorised for issue by the Board and were signed on its behalf on 10 September 2018.

 

S J Geard

Director

 

 

 

                             Consolidated statement of changes in equity

 

Called up share capital

 

Retained earnings / (accumulated losses)

 

 

Share premium

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Balance at 1 January 2018

21

 

13,475

 

-

 

 

 

 

 

 

Changes in equity

Issue of share capital

 

50

 

(50)

 

-

Profit for the period

-

 

2,154

 

2,426

Dividend paid

-

 

(2,658)

 

-

Transfer on share conversion

-

 

-

 

-

Share based payments charge

-

 

-

 

-

 

 

 

 

 

 

Balance at 30 June 2018

71

 

12,921

 

2,426

 

 

 

 

 

 

 

 

 

Called up share capital

 

Retained earnings / (accumulated losses)

 

 

Share premium

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Balance at 1 January 2017

22

 

(1,548)

 

15,747

 

 

 

 

 

 

Changes in equity

Profit for the period

 

-

 

1,085

 

-

Transfer on capital reduction

-

 

15,747

 

(15,747)

Share based payments charge

-

 

-

 

-

Unrealised loss on investments

-

 

-

 

-

 

 

 

 

 

 

Balance at 30 June 2017

22

 

12,921

 

-

 

 

 

 

 

 

 

Consolidated statement of changes in equity (continued)

 

 

 

Capital redemption reserve

Share-based payment reserve

Fair value reserve

Total equity

 

 

 

 

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Balance at 1 January 2018

1

2,646

39

16,182

 

 

 

 

 

Changes in equity

 

 

 

 

Issue of share capital

-

-

-

-

Profit for the period

-

-

-

2,154

Dividend paid

-

-

-

2,658

Transfer on share conversion

-

(2,426)

-

-

Share based payments charge

-

69

-

69

 

 

 

 

 

Balance at 30 June 2018

1

289

39

15,747

 

 

 

 

 

 

 

 

Capital redemption reserve

Share-based payment reserve

Fair value reserve

Total equity

 

 

 

 

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Balance at 1 January 2017

-

1,931

40

16,192

 

 

 

 

 

Changes in equity

 

 

 

 

Profit for the period

-

-

-

1,085

Transfer on capital reduction

-

-

-

-

Share based payments charge

-

345

-

345

Unrealised loss on investments

-

-

(1)

(1)

 

 

 

 

 

Balance at 30 June 2017

-

2,276

39

17,621

 

 

 

 

 

 

 

Consolidated statement of cash flows

 

 

 

Notes

Six months to 30 June 2018 £'000

 

Six months to 30 June 2017 £'000

Cash flows from operating activities

 

 

 

 

Cash inflow from operations

4

4,445

 

5,730

Interest received

 

3

 

1

Income tax paid

 

(1,457)

 

(705)

 

 

 

 

 

Net cash inflow from operating activities

 

2,991

 

5,026

 

 

 

 

 

Cash flows from investing activities

Purchase of tangible fixed assets

 

(239)

 

(97)

 

 

 

 

 

Net cash outflow from investing activities

 

(239)

 

(97)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Interest paid

 

(1)

 

(1)

Interest received

 

-

 

6

Repayment of finance leases

5

(54)

 

(87)

Dividend paid

 

(2,658)

 

-

 

 

 

 

 

Net cash outflow from financing activities

 

(2,713)

 

(82)

 

 

 

 

 

Increase in cash and cash equivalents

 

39

 

4,847

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

16,992

 

13,839

 

 

 

 

 

Effects of exchange rate changes

 

(3)

 

(1)

 

 

 

 

 

Cash and cash equivalents at end of period

 

17,028

 

18,685

 

 

 

 

 

 

 

Notes to the consolidated financial statements

 

1. Accounting policies

 

Basis of preparation

               

The annual financial statements comply with International Financial Reporting Standards (IFRS) as adopted by the European Union. The condensed consolidated interim financial statements comply with International Accounting Standard (IAS) 34 Interim Financial Reporting. They have been prepared under the going concern basis, under the historical cost convention as modified by the recognition of certain financial assets measured at fair value.

 

The condensed consolidated interim financial statements are not the company's statutory accounts and are unaudited, but have been reviewed by the group's auditors, PricewaterhouseCoopers LLP and their report is set out after the notes to the consolidated financial statements. The directors consider that the group has adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the interim financial statements.

 

The same accounting policies, methods of calculation and presentation have been followed in the preparation of the condensed consolidated interim financial statements for the six months to 30 June 2018 as were applied in the audited financial statements for the year ended 31 December 2017.        

               

Basis of consolidation

 

The condensed consolidated interim financial statements comprise the financial statements of the company and all its subsidiary undertakings.

 

Subsidiaries are entities controlled by the company. Control is achieved where the group has existing rights that give it the current ability to direct the relevant activities that affect the returns and exposure or rights to variable returns from the entity. Subsidiaries are included in the consolidated financial statements of the group from the date control of the subsidiary commences until the date that control ceases. Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Uniform accounting policies have been applied across the group.

               

Segmental reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the executive committee (the decision-making body). The board tasks responsibility to the executive committee to assess the financial performance and the position of the group and make strategic decisions and allocate resources.

               

Nucleus' principal activities are the provision of wrap administration services and there is only one reporting and operating segment as defined under IFRS 8 Operating Segments. This is reviewed on a regular basis.

 

Revenue

 

Revenue comprises fees earned by the company from the provision of a wrap platform service to UK financial advisers and their clients. Fees are recognised exclusive of Value Added Tax and net of large case discounts. They are recorded in the year to which they relate and can be reliably measured. Fees are calculated on a basis point rate applied on a daily basis to assets under administration on the platform.

 

New standards adopted for the first time in the 2018 consolidated interim financial statements

 

IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers came into effect from 1 January 2018. Neither of these standards have had a material impact on the group's financial statements.

 

 

Notes to the consolidated financial statements (continued)

 

1. Accounting policies (continued)

 

Future standards, amendments to standards and interpretations not early-adopted in the 2018 consolidated interim financial statements

 

IFRS 16 Leases is effective for accounting periods beginning on or after 1 January 2019. The directors have performed an initial review of this standard and concluded this will not have a significant effect on the group's profit but will result in reclassifications on the statement of financial position and income statement. Subject to short term and low value exemptions, all leases will be capitalised and brought on balance sheet with the main impacts being around the capitalisation of various IT equipment leases and the operating lease for the company's office premises at Blenheim Place. The directors continue to assess the financial impact of this standard on the group.

 

Notes to the consolidated financial statements (continued)

 

Critical accounting judgements and key sources of estimation uncertainty

 

The preparation of condensed consolidated interim financial statements in compliance with IAS 34 requires the use of certain critical accounting estimates. There have been no material revisions to the group's critical accounting estimates and judgements from the year ended 31 December 2017.

 

 

Notes to the consolidated financial statements (continued)

 

2. Financial instruments

 

The principal financial instruments, from which financial instrument risk arises, are as follows:

               

·      Trade and other receivables

·      Cash and cash equivalents

·      Investments in securities

·      Trade and other payables

·      Financial liabilities

 

Financial assets and liabilities have been classified into categories that determine their basis of measurement and, for items measured at fair value, whether changes in fair value are recognised in the income statement or statement of other comprehensive income. The following tables show the carrying values of assets and liabilities for each of these categories.

 

 

 

Fair value through other comprehensive income

Financial liabilities at amortised cost

Fair value through  profit   or loss

Total

 

 

 

 

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

At 30 June 2018

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

Investments in securities

99

-

-

99

Cash and cash equivalents

-

-

17,028

17,028

Trade and other receivables

-

-

9,004

9,004

 

 

 

 

 

Total financial assets

99

-

26,032

26,131

 

 

 

 

 

Non-financial assets

 

 

 

1,861

 

 

 

 

 

Total assets

 

 

 

27,992

 

 

 

 

 

Financial liabilities

 

 

 

 

Finance lease obligations

-

145

-

145

Trade and other payables

-

10,657

-

10,657

 

 

 

 

 

Total financial liabilities

-

10,802

-

10,802

 

 

 

 

 

Non-financial liabilities

 

 

 

1,443

 

 

 

 

 

Total liabilities

 

 

 

12,245

 

 

 

 

 

 

 

 

Notes to the consolidated financial statements (continued)

 

2. Financial instruments (continued)

 

 

Fair value through other comprehensive income

Financial liabilities at amortised cost

Fair value through  profit 

or loss

Total

 

 

 

 

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

At 31 December 2017

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

Investments in securities

99

-

-

99

Cash and cash equivalents

-

-

16,992

16,992

Trade and other receivables

-

-

9,739

9,739

 

 

 

 

 

Total financial assets

99

-

26,731

26,830

 

 

 

 

 

Non-financial assets

 

 

 

1,955

 

 

 

 

 

Total assets

 

 

 

28,785

 

 

 

 

 

Financial liabilities

 

 

 

 

Finance lease obligations

-

200

-

200

Trade and other payables

-

10,707

-

10,707

 

 

 

 

 

Total financial liabilities

-

10,907

-

10,907

 

 

 

 

 

Non-financial liabilities

 

 

 

1,696

 

 

 

 

 

Total liabilities

 

 

 

12,603

 

 

 

 

 

 

 

Notes to the consolidated financial statements (continued)

 

2. Financial instruments (continued)

 

The table below classifies financial assets that are categorised on the statement of financial position at fair value in a hierarchy that is based on significance of the inputs used in making the measurements. The levels of hierarchy are as follows:

 

Level 1 - Quoted prices in active markets

                               

Level 2 - Observable direct or indirect inputs other than Level 1 inputs

 

Level 3 - Inputs that are not based on observable market data

 

The fair value of financial instruments classified as financial assets and liabilities at amortised cost approximate their carrying value largely due to the short-term maturities of these instruments.

 

Investments in securities are held for the benefit of platform functionality and are reported on a separate line in the statement of financial position. The assets are held at fair value with any gains or losses being taken to the statement of other comprehensive income.

 

The following tables show the group's financial assets measured at fair value through the statement of comprehensive income, classed according to the relevant level of the fair value hierarchy.

 

 

Level 1

Level 2

Level 3

Total

 

 

 

 

 

 

£'000

£'000

£'000

£'000

At 30 June 2018

 

 

 

 

 

 

 

 

 

Investments in securities

99

-

-

99

 

 

 

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

 

 

 

 

 

 

£'000

£'000

£'000

£'000

At 31 December 2018

 

 

 

 

 

 

 

 

 

Investments in securities

99

-

-

99

 

 

 

 

 

 

 

Notes to the consolidated financial statements (continued)

 

2. Financial instruments (continued)

 

Credit risk             

 

The group holds the surplus of corporate cash balances over and above its working capital requirements on deposit with its corporate banking services providers, Royal Bank of Scotland plc and Bank of Scotland plc.

 

The group is therefore exposed to counterparty credit risk and a failure of either bank would impact the group's resources and its ability to meet its solvency and liquidity requirements. Credit risk is managed within the risk appetites set by the board on an annual basis.

                               

Supply of wrap platform services to clients results in trade receivables which management consider to be of low risk, other receivables are likewise considered to be low risk. Management do not consider that there is any concentration of risk within either trade or other receivables.

 

Included in other receivables is a balance of cash prefunded on the wrap platform as required by our terms and conditions. This balance fluctuates due to timing. Where this prefunding has been outstanding for more than six months, it is fully provided for. The provision as at 30 June 2018 was £183,929 (31 December 2017: £168,788).

 

During the period, the group had an uncommitted overdraft facility of £5,000,000 with The Royal Bank of Scotland plc for working capital purposes in support of the group's discretionary commitment to prefund tax relief on eligible pension contributions. Interest is charged on this facility at 3% plus base rate up to an overdrawn amount of £5,000,00 and 5% plus base rate on any amount over £5,000,000. The overdraft is secured by a fixed and floating charge over all the company's assets.

 

Liquidity risk

 

The group's liquidity position is subject to a range of factors that may generate liquidity strain in the short or medium term. The group manages its liquidity risk through an ongoing evaluation of its working capital requirements against available cash balances and credit facilities.              

 

Exposure to securities markets

               

The group's income is derived from a tiered basis point fee that is applied to client assets under administration. This income is exposed to the value of the underlying investment assets which can be affected by market movements. Although some of this risk is mitigated within components of the cost base, the group is ultimately exposed to volatility in its financial results because of market movements beyond its control.

               

Operational risk

 

The nature of the activities performed by the group is such that a degree of operational risk is unavoidable in relation to losses that could be incurred by the group or by others because of errors or omissions for which the group is ultimately liable. 

 

Particular operational risks for the group are considered to be:

 

·      Operational control failures in core processes - there is always a risk of failure in core processes, either directly by the company and/or by third parties which would result in operational losses, poor client outcomes and reputational damage;

·      Systems-related risks including cyber-attacks, data leakage and business continuity events, and

·      People risks - we consider that the two most significant people related risks are the risk of failure to attract and retain core skills and knowledge in the company, and people-related errors in core processes.

 

 

Notes to the consolidated financial statements (continued)

 

2. Financial instruments (continued)

 

The following tables show an analysis of the financial assets and financial liabilities by remaining expected maturities.

 

 

< 3 months

3-12 months

1-5 years

> 5 years

Total

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

At 30 June 2018

 

 

 

 

 

Financial assets

 

 

 

 

 

Cash and cash equivalents

17,028

-

-

-

17,028

Investments

-

99

-

-

99

Trade and other receivables

8,546

458

-

-

9,004

 

 

 

 

 

 

 

25,574

557

-

-

26,131

 

 

 

 

 

 

 

 

 

 

 

 

 

< 3 months

3-12 months

1-5 years

> 5 years

Total

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

At 31 December 2017

 

 

 

 

 

Financial assets

 

 

 

 

 

Cash and cash equivalents

16,992

-

-

-

16,992

Investments

-

99

-

-

99

Trade and other receivables

9,069

670

-

-

9,739

 

 

 

 

 

 

 

26,061

769

-

-

26,830

 

 

 

 

 

 

 

 

 

 

 

 

 

< 3 months

3-12 months

1-5 years

> 5 years

Total

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

At 30 June 2018

 

 

 

 

 

Financial liabilities

 

 

 

 

 

Trade and other payables

10,381

276

-

-

10,657

Finance lease obligations

27

80

38

-

145

 

 

 

 

 

 

 

10,408

356

38

-

10,802

 

 

 

 

 

 

 

 

 

 

 

 

 

< 3 months

3-12 months

1-5 years

> 5 years

Total

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

At 31 December 2017

 

 

 

 

 

Financial liabilities

 

 

 

 

 

Trade and other payables

10,413

279

15

-

10,707

Finance lease obligations

27

80

93

-

200

 

 

 

 

 

 

 

10,440

359

108

-

10,907

 

 

 

 

 

 

Notes to the consolidated financial statements (continued)

 

3. Provisions

 

 

30 June

2018

31 December 2017

 

 

 

 

£'000

£'000

 

 

 

Client compensation

108

98

Outsourced service

769

204

Dilapidations

16

224

 

 

 

 

893

526

 

 

 

Analysed as:

 

 

Current

877

526

Non-current

16

-

 

 

 

 

893

526

 

 

 

 

Client compensation

Outsourced service

Dilapidations

Total

 

 

 

 

 

 

£'000

£'000

£'000

£'000

At 31 December 2017

98

204

224

526

 

 

 

 

 

Utilised during period

(53)

(16)

(222)

(291)

Unused amounts reversed during period

(19)

(31)

-

(50)

Provided during period

82

612

14

708

 

 

 

 

 

At 30 June 2018

108

769

16

893

 

 

Client compensation

 

The group remediates clients affected by errors on the platform and calculates any amounts due in line with guidance given by the Financial Ombudsman Service in respect of the type of client loss, distress and inconvenience for which clients should be compensated. Where actual trading losses are suffered by clients, these are calculated in accordance with MiFID II best execution rules to ensure clients are restored to the position they would have been in had the error or omission not been made. Amounts are provided and reversed against the administrative expenses line in the income statement and the majority of the outstanding issues are expected to be agreed in the second half of 2018.

 

Outsourced service

 

As part of the commercial agreement with our outsourced BPO service provider, should any key performance criteria not be met, the group is entitled to receive a discount on the wrap administration fees charged. Where these are agreed, they are deducted from the invoiced fee and the net expense is charged through the income statement. Where these are uncertain or in dispute with the service provider, a provision is booked in recognition of the uncertainty regarding the outcome. Where failures are agreed between both parties, the provision is released, resulting in a credit to the income statement. Where it is agreed that no failure exists, a payment is made, and that element of the provision is utilised. 

 

 

Notes to the consolidated financial statements (continued)

 

3. Provisions (continued)

 

Post the interim reporting period date of 30 June 2018, an amount of £610,671 has been resolved, resulting in a credit to the income statement of £294,181 and a payment of £316,490, with the remaining balance expected to be agreed in the second half of 2018. The timing and amount of any cash flow will be dependent on the outcome of these negotiations.

 

Dilapidations

 

In the six months to 30 June 2018, the group utilised the remainder of the dilapidations provision relating to the previous leasehold premises following completion of contractual restoration obligations. The current balance provides for dilapidations relating to the group's new leasehold office premises at Greenside, Edinburgh. This is calculated using the Building Cost Information Service survey (part of the Royal Institution of Chartered Surveyors) of average settlement figures for offices, adjusted for inflation, and the square footage of the company's leasehold premises. The provision has been classified as non-current due to the likelihood of its utilisation at the end of the lease in 2027.

 

4. Reconciliation of profit before income tax to cash generated before operations

 

 

Six months to 30 June

2018

Six months to 30 June   2017

 

 

 

 

£'000

£'000

 

 

 

Profit before income tax

3,047

1,411

Depreciation

277

192

Share-based payments charge

69

345

Bad debt provision

15

64

Increase in trade and other receivables

(158)

(607)

Decrease in operational platform prefunding

877

1,177

(Decrease)/increase in trade and other payables

(50)

3,072

Increase in other provisions

367

81

Interest paid

1

1

Interest received

(3)

(7)

Net exchange differences

3

1

 

 

 

 

4,445

5,730

 

 

 

Notes to the consolidated financial statements (continued)

 

5. Reconciliation of liabilities arising from financing activities

 

 

At 1 January 2018

Non-cash changes

Cash flows

At 30 June 2018

 

 

 

 

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Finance lease liabilities

200

(1)

(54)

145

 

 

 

 

 

 

200

(1)

(54)

145

 

 

 

 

 

 

At 1 January 2017

Non-cash changes

Cash flows

At 30 June 2017

 

 

 

 

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Finance lease liabilities

104

235

(87)

252

 

 

 

 

 

 

104

235

(87)

252

 

 

Notes to the consolidated financial statements (continued)

 

6. Earnings per share

 

Basic and diluted earnings per share            

               

Basic earnings per share has been calculated by dividing the total profit for the period by the weighted average number of shares in issue during the period.

 

 

 

Six months to 30 June

2018

Six months to 30 June   2017

 

 

 

 

£'000

£'000

 

 

 

Profit for the period

2,154

1,085

 

 

 

 

Six months to 30 June

2018

Six months to 30 June   2017

 

 

 

Weighted average number of ordinary shares

75,933,359

75,984,439

 

 

 

 

Six months to 30 June

2018

Six months to 30 June   2017

 

 

 

Basic and diluted earnings per share (pence)

2.8

1.4

 

 

The weighted average number of ordinary shares reflect the number of shares in issue following the listing of the Company on 26 July 2018. The share capital transactions that happened after the reporting period are detailed in note 11.

               

On 26 July 2018, the company granted long term incentive awards in the form of nil-cost options over its ordinary shares to the executive directors and other persons discharging managerial responsibility under its newly established long-term incentive plan. The total number of shares over which the awards were granted was 782,766. The vesting of each of the awards is subject to the satisfaction of performance conditions that have been set by the remuneration committee. These conditions, which will be assessed over prescribed three-year periods, relate to the achievement of specific targets in relation to earnings per share, net-inflow of assets under administration and total shareholder return. Vesting will also normally be dependent on the continued employment of the participant within the group.

 

7. Income tax

               

Tax is charged at 29% for the six-month period ended 30 June 2018 (30 June 2017: 23%), representing the best estimate of the average annual effective tax rate expected to apply for the full year, applied to the pre-tax income of the six-month period. The effective tax rate reflects the effect of IPO costs not deductible for tax purposes.

 

8. Dividends

               

During the six-month period to 30 June 2018, the group paid an interim dividend of £2,657,702 to ordinary and B ordinary shareholders (six months to 30 June 2017: £nil).

 

Notes to the consolidated financial statements (continued)

 

9. Share capital

 

 

30 June 2018

31 December 2017

30 June 2018

31 December 2017

 

 

 

 

 

 

Number

Number

£'000

£'000

Allotted, called up and fully paid

 

 

 

 

Ordinary shares of £0.01 each 

1,123,171

998,723

11

10

B Ordinary shares of £0.01 each

761,028

761,028

8

8

G1 Ordinary shares of £0.01 each

30,712

173,074

-

2

G2 Ordinary shares of £0.01 each

9,026

104,430

-

1

G3 Ordinary shares of £0.01 each

40,728

40,728

1

-

G4 Ordinary shares of £0.01 each

25,676

25,676

-

-

Deferred shares of £0.01 each

113,318

-

1

-

Redeemable preference shares of £1 each

50,000

-

50

-

 

 

 

 

 

 

2,153,659

2,103,659

71

21

 

 

During January 2018, in line with the growth share scheme, 142,362 G1 and 95,404 G2 shares converted into 124,448 ordinary and 113,318 deferred shares. The deferred shares hold no voting, capital or dividend rights and are only entitled to a small share of assets in a winding up.

 

On 8 May 2018, the company issued 50,000 redeemable non-convertible preference shares at a nominal value of £1 per share. Each preference share carries a right to a fixed non-cumulative dividend of 0.01% of its nominal value, payable annually in arrears and does not carry any voting rights.

 

The share capital of the company has subsequently changed as part of the company's admission to AIM on 26 July 2018. The share capital transactions that happened after the reporting period are detailed in note 11.

 

Notes to the consolidated financial statements (continued)

 

10. Related parties

 

Entities with control, joint control or significant influence over the Company

 

Sanlam has a significant interest in the shareholding of Nucleus Financial Group plc ("NFG"), as did Nucleus IFA Company (NIFAC) until 26 July 2018. Transactions with NIFAC and Sanlam were as follows:

 

 

Six months to 30 June 2018

Six months to 30 June 2017

 

 

 

 

£'000

£'000

NIFAC

 

 

Interest charged to NIFAC at 2.5% (2016: 2.5%)

-

1

Interest charged to NIFAC at 3.0% (2016: 3.0%)

-

5

Dividend paid to NIFAC by NFG

632

-

Amounts charged to NIFAC by NFG in respect of company secretarial and financial services

12

12

 

 

 

 

At 30 June 2018

At 31 December 2017

 

 

 

 

£'000

£'000

 

 

 

Amounts owed to NFG

16

10

 

 

 

 

Six months to 30 June 2018

Six months to 30 June 2017

 

 

 

 

£'000

£'000

Sanlam

 

 

Amounts charged to NFS by Sanlam in respect of the Onshore Bond

204

176

Dividend paid to Sanlam by NFG

1,418

-

 

 

 

 

At 30 June 2018

At 31 December 2017

 

 

 

 

£'000

£'000

 

 

 

Amounts owed by NFG to Sanlam in respect of Board fees

191

89

Amounts owed by NFS to Sanlam in respect of fees for the Onshore Bond

71

65

Amounts owed by NFS to Sanlam in respect of tax collected from the Onshore Bond

42

83

 

 

 

Notes to the consolidated financial statements (continued)

 

10. Related parties (continued)

 

Subsidiaries

 

NFG owns 100% of the share capital of NFS, NIFAS and IMX. There were no transactions with IMX and NIFAS. Transactions with NFS are as follows:

 

 

At 30 June 2018

At 31 December 2017

 

 

 

 

£'000

£'000

NFS

 

 

Amounts owed to NFG by NFS

1,632

2,025

 

 

 

Other related parties

                               

During the year the Company was charged £390,000 (6 months to 30 June 2017: £nil) for services provided by Craven Street Capital Limited, of which J A A Samuels, a director of NFG, is a director. An amount of £294,000 is accrued as at 30 June 2018 (31 December 2017: £102,000).

 

 

11. Events after the reporting date

 

On 6 July 2018, Nucleus Financial Group Limited was re-registered under the Companies Act 2006 as a public company under the name of Nucleus Financial Group Plc. The company listed on AIM on 26 July 2018 and this coincided with the following share capital transactions:

 

On listing, 18,823 G3 shares and 8,812 G4 shares converted to ordinary shares and 21,905 G3 shares and 16,864 G4 shares converted to deferred shares. Following this there were no G3 and G4 shares remaining in issue.  

 

The company bought back 30,712 G1 shares, 9,026 G2 shares and 152,087 deferred shares for a consideration of £1. Following this there were no G1, G2 or deferred shares remaining in issue.

 

The company then converted the remaining 761,028 B ordinary shares into ordinary shares and awarded a bonus issue of three new ordinary shares for each existing ordinary share. This resulted in the creation of 5,735,502 new ordinary shares, bringing the total ordinary shares in issue to 7,647,336. Subsequently, each ordinary share was then sub-divided into 10 new ordinary shares.

 

This has given rise to a post-listing number of shares in issue of 76,523,360, comprising 76,473,360 ordinary shares and 50,000 redeemable non-convertible preference shares. The nominal value of the 76,523,360 shares is £126,473, comprising £76,473 for the ordinary shares and £50,000 for the redeemable non-convertible preference shares.

 

An interim dividend amounting to £211,000 was paid to G3 and G4 shareholders in July 2018.

 

The Directors have declared an interim dividend of 1.4 pence per share. The dividend will be paid on 19 October 2018 to shareholders on the register on 21 September 2018.

 

Independent review report to Nucleus Financial Group plc

 

Report on the condensed consolidated interim financial statements

 

Our conclusion

 

We have reviewed Nucleus Financial Group plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim report and financial statements of Nucleus Financial Group plc for the six-month period ended 30 June 2018. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the AIM Rules for Companies.

 

What we have reviewed

 

The interim financial statements comprise:

·      the consolidated statement of financial position as at 30 June 2018;

·      the consolidated income statement and consolidated statement of comprehensive income for the period then ended;

·      the consolidated statement of cash flows for the period then ended;

·      the consolidated statement of changes in equity for the period then ended; and

·      the explanatory notes to the interim financial statements.

The interim financial statements included in the interim report and financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the AIM Rules for Companies.

 

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

Responsibilities for the interim financial statements and the review

 

Our responsibilities and those of the directors

 

The interim report and financial statements, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report and financial statements in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

 

Our responsibility is to express a conclusion on the interim financial statements in the interim report and financial statements based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the AIM Rules for Companies and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

What a review of interim financial statements involves

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

We have read the other information contained in the interim report and financial statements and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

 

 

 

PricewaterhouseCoopers LLP

Chartered Accountants

Edinburgh

10 September 2018

 

1The maintenance and integrity of the Nucleus Financial Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.

2Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

 

Definitions and glossary of technical terms

 

The following definitions apply throughout this document:

 

"Adjusted"                              denotes that a standard or defined financial performance measure is adjusted for non-recurring items, transactions that do not reflect the normal operating activities of the group, and share based payments

 

"Adjusted EBITDA"              Adjusted EBITDA excludes non-operating income, AIM admission costs and share-based payments

 

"Adjusted EBITDA margin"  adjusted EBITDA expressed as a percentage of revenue

 

"AIM Rules"                           the rules published by London Stock Exchange entitled "AIM Rules for Companies"

 

"AUA"                                    assets under administration

 

"Average AUA"                      the average AUA balance for the period is calculated as the average of the month end AUA balances during the period

 

"Blended revenue yield (bps) revenue is divided by the average assets under administration. For interim periods the revenue is annualised using the number of days in the period.

 

"BPO"                                     Business process outsourcing. The contracting of the operations and responsibilities of a specific business process to a third-party service provider.

 

"Capital adequacy ratio"         a capital adequacy measure calculated by dividing regulatory capital over risk weighted exposures

 

"Companies Act"                    the Companies Act 2006, as amended

 

"Craven Street Capital"          Craven Street Capital Limited

 

"Customers"                            the customers of Nucleus, whose assets are managed through the platform

 

"Clients"                                  the customers of financial advisers, whose assets are managed through the platform

 

"Executive Directors"              the executive directors of the Company, being David Ferguson and Stuart Geard

 

"EBITDA"                               Earnings Before Interest Tax Depreciation and Amortisation

 

"FCA"                                      the Financial Conduct Authority

 

"GDPR"                                   the General Data Protection Regulation (Regulation (EU) 2016/679)

 

"IFRS"                                     International Financial Reporting Standards as adopted by the European Union

 

"IMX"                                      Nucleus IMX Limited

 

"MiFID II"                               the EU Markets in Financial Instruments Directive (2014/65/EU)

 

"NFS"                                      Nucleus Financial Services Limited

 

"NIFAC"                                  Nucleus IFA Company Limited

 

"NIFAS"                                  Nucleus IFA Services Limited

 

"Nucleus" or the "Group"       the Company and its Subsidiaries

 

"Sanlam"                                 Sanlam UK Limited

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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Interim report - RNS