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RNS
Nucleus Financial Gp   -  NUC   

Preliminary results

Released 07:00 02-Apr-2019

RNS Number : 7565U
Nucleus Financial Group PLC
02 April 2019
 

2 April 2019

Nucleus Financial Group Plc

("Nucleus" or the "Group")

Preliminary results for the year ended 31 December 2018

Nucleus delivers strong financial performance in its first period of trading on AIM

Nucleus, a leading independent wrap platform provider, is pleased to announce its audited annual results for the year ended 31 December 2018.

Financial highlights

£ million (unless otherwise stated)

Year ended

31 Dec 2018

Year ended

31 Dec 2017

Change

Period end AUA

13,884

13,577

2.3%

Average AUA

14,124

12,441

13.5%

Revenue

49.4

45.5

8.7%

Net revenue* 1

43.2

39.4

9.6%

Blended revenue yield (bps)* 1

30.6

31.6

(3.2)%

Adjusted EBITDA*

8.3

6.2

32.9%

Adjusted EBITDA margin (%)* 1

19.2

15.9

20.8%

Adjusted profit before tax*

7.7

5.8

32.8%

Profit after tax for the year

4.8

4.1

15.7%

Earnings per share

6.3p

5.4p

16.7%

Dividend paid

3.9

4.8

(18.3)%

 

·      Net revenue growth of 9.6% in the period, despite volatile markets, with blended revenue yield falling as expected, as a result of the full year effect of the platform fee reduction in July 2017

·      Strong growth in adjusted EBITDA margin as a result of the operational leverage effect of revenue growth, as well as reduced external platform development expenditure

·      Final dividend of 3.6p per share recommended, taking the full year dividends post-admission to AIM to 5p per share. 2017 dividend included a one-off distribution of accumulated profits

·      Strong balance sheet at the year-end with £17.7 million of cash and no debt

Operational highlights

·      Strategic unbundling of outsourced technology and BPO services to enhance control over platform technology and accelerate the rate of product development

·      6% increase in the number of active advisers from 1,317 to 1,396, over the last year

·      7% increase in customer numbers from 87,556 to 93,715, over the last year

·      Successful admission to trading on AIM in July 2018

·      Beta launch of 'Nucleus Go', a new online interface for advised clients

·      Launch of a new Junior Isa product (post year-end)

·      Implementation of functionality changes driven by new Mifid II regulation

 

 

David Ferguson, founder and CEO of Nucleus, commented:

"We were pleased to end last year having successfully completed two substantial strategic projects. Our July admission to AIM allowed us to mature our capital structure in accordance with our ambitions, and subsequent adjustments to our technology and BPO model have helped position us to become one of the most scalable and technology-led independent platforms in our market."

"We expect the changes to our operating model to substantially accelerate our product development through 2019 and beyond and this has already been evidenced through a further Sonata upgrade and delivery of a new Junior Isa product in the first quarter following the reporting period."

"It was also pleasing to see growth across most of our key performance indicators in the year, including growth in AUA, revenue, profit, customers, accounts and advisers using the platform. Despite the sector headwinds in the latter half of the year, we view the market outlook as positive for better quality advisers and those that provide services to those advisers and we are confident in our ability to deliver on our future plans."

 

* 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 and adjusted profit before tax 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.

1 The definition of net revenue has been revised to include product fees that were previously included within AUA related costs

 

For further information please contact:

Nucleus Financial           

Tel: +44 (0)131 226 9800

David Ferguson, CEO

 

Stuart Geard, CFO

 

Shore Capital (nominated adviser and broker)         

Tel: +44 (0)20 7408 4090

Hugh Morgan

 

Edward Mansfield

 

Daniel Bush

 

Camarco (media enquiries)    

Tel: +44 (0)20 3757 4994

Jennifer Renwick

 

Jake Thomas

 

 

 

 

Analyst presentation 

There will be an analyst presentation to discuss the results at 09:30 a.m. today, 2 April, at Vintry and Mercer, 19-20 Garlick Hill, London, EC4V 2AU. Analysts wishing to attend are asked to contact Jake Thomas on +44 (0)20 3781 8337 or jake.thomas@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 around 1,400 active adviser users and works with more than 870 financial adviser firms as at 31 December 2018. It is responsible for assets under administration (AUA) of £13.9bn on behalf of more than 93,000 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 three years and won 'Best platform' and 'Platform innovation' at the Money Marketing awards 2018.

 

 

 

 

 

 

 

Chief executive's report

Overview

We were pleased to end last year having successfully completed two substantial strategic projects. Our July admission to AIM allowed us to mature our capital structure in accordance with our ambitions, and subsequent adjustments to our technology and BPO model have helped position us to become one of the most scalable and technology-led independent platforms in our market.

Despite the challenging market environment, we were pleased to add over 8,600 new customers, helping grow AUA to £13.9bn, increase income to £43.2m and substantially grow adjusted EBITDA to £8.3m. We also welcomed 43 new firms and 172 new advisers as platform users and this group, together with existing advisers and customers, is expected to contribute positively to future inflows.

In such a full year, we were delighted to gain recognition as platform of the year in the Schroders and Money Marketing awards and also to retain CoreData's best medium-platform award for the seventh year in succession.

Market environment

Several environmental themes combined to make 2018 a more challenging year than the prior year, although the advised platform market nevertheless grew 3 per cent to £364bn at the end of the year.1

Markets experienced increased volatility in 2018, especially during the last quarter and valuations generally trended downward through the year (the FTSE All-Share Index declined by 13 per cent across 2018 and the FTSE 100 Index was similarly down 12.5 per cent), negatively impacting growth in AUA and inflows, which have some correlation to investor sentiment. Inflows were also affected by a reduction in the number and value of pension transfers. Despite a modest recovery in Q1 2019, the continued lack of clarity caused by Brexit and the ongoing impact on investor confidence is doing little to promote stability and these themes may continue throughout 2019.

From a regulatory perspective, the introduction of Mifid II created some operational disruption to adviser businesses, leading to some capacity issues as new processes bed in. Over time, the enhanced transparency afforded by these new rules will encourage greater accountability and in time can be expected to deliver a more effective market for customers. In essence, fund managers are now subject to the same disclosure requirements as have been applied to financial advisers and platforms since the introduction of the retail distribution review (RDR) in 2013.

In addition, the FCA published the final findings in respect of its Investment Platform Market Study on 14 March 2019. We welcome the findings and agree with its reiteration that the platform market is generally competitive. We are in full support of the proposed ban on exit fees and believe customers should be free to move between platforms without being exposed to financial or practical barriers. The study was borne from the asset management market study and we would expect the use of better analytics and improved transparency under Mifid II to apply further downward pressure on fund fees over time which will improve end-to-end value for money for clients.

It is increasingly apparent that the advised platform market is polarised between those who see platforms as a distribution channel for in-house fund management and those seeking to make financial advisers more effective in the pursuit of better customer outcomes. We are firmly in the latter category.

Platform pricing continued to drift downward in 2018, somewhat catalysed by special deals available from certain platforms aiming to drive in-house fund flows and those that have been through technology programmes that have caused disruption for advisers and their clients. It remains to be seen how durable such deals will prove in the light of new fee disclosures and (for the latter group) after operations have returned to a steady state.

Product development

In keeping with the rest of our sector, the early part of the year was focused on delivering new capabilities and operational changes in respect of Mifid II and GDPR regulations. We also made progress in delivering our new re-engineered client portal, an improved capital gains tool and further enhancements to our multiple award-winning reporting capabilities.

Beyond these areas, our efforts were primarily aimed at improving operational efficiency and executing changes to our technology and BPO model, the latter resulting in us having a direct licence with Bravura for the provision of its Sonata technology for the first time. Sonata sits at the core of our technology infrastructure and we are particularly excited about what we can achieve under the terms of this new relationship structure.

Following implementation of this new arrangement in Q4, we have already been successful in completing a Sonata upgrade and in adding a Junior Isa to our proposition. We have planned (and expect) to substantially accelerate our product development through 2019 and beyond with a view to becoming the most technology-enabled and ultimately scalable platform in our market.

Our people

We cannot be successful in the marketplace if we are not successful in the workplace and we continue to develop our structure to ensure our team has the breadth of capability and diversity of thought that will enable us to execute our business plan. In general, our hiring is directed toward raising standards and becoming increasingly technology-led so that we can operate within the cost constraints we expect the market to require.

To that end we were pleased to welcome several new additions to the team and to see 18 per cent of our people promoted into more senior roles. In accordance with our commercial ambitions, we were also very proud of our work in promoting diversity and inclusion, including signing up for the Women in Finance charter. The percentage of women in senior roles in the business improved from 18 per cent to 32 per cent over the year. We also continue to encourage our adviser users to think more about culture as they expand their own operations.

Dividend

Following the strong financial performance of the group, I am pleased to confirm the board is recommending, in line with our dividend policy, a final dividend payment of 3.6p per share, amounting to a final dividend of £2.7m. This takes the full year dividend since admission to AIM to 5.0p per share.

The final dividend will be paid on 21 June 2019 to ordinary shareholders on the register on 31 May 2019, with an ex-dividend date of 30 May 2019. The payment of the dividend is subject to shareholder approval at our AGM which will be held on 23 May 2019.

Outlook

The commercial and regulatory agenda will increasingly be set by the pursuit of improved customer outcomes and we believe our long-embedded commitment to transparency alongside our strategy of targeting more modern and customer-aligned advisers will prove correct. The advised platform market is now forecast to grow to £581bn by the end of 2023 (representing 9.3 per cent compound annual growth over the next five years)1 and this structural trend is a key driver of our medium/long-term growth.

Despite the well-publicised market headwinds, we view the  outlook for better quality advisers and those that provide services to those advisers as positive. We similarly believe that platform pricing will continue to correlate to the utility value on offer and that while all components in the sector are set to experience price compression, the greatest focus will arise in asset management where transparency is a more contemporary concept.

We expect the new disclosures resulting from Mifid II to generate substantial scrutiny on all-in fees and believe that advised platforms can play a positive role in creating meaningful cost efficiency for adviser users and their customers, whether delivered through improved practice management for advisers or more effective procurement of asset management for customers.

Rather than act as distribution channels for expensive retail asset management, platforms have scope to use data insights and portfolio construction techniques to substantially improve accountability across the value chain, adding value in such a way that pricing pressure may become diluted.

Successful execution of our product roadmap is vital to us accelerating growth and we believe our new technology and BPO model will allow us to achieve this while limiting unplanned costs which would negatively impact our financial outlook. The combination of Sonata and our in-house capabilities has been carefully designed to balance agility, scalability and resilience and we look forward to being able to demonstrate these characteristics over time.

 

 

David Ferguson

Founder and chief executive

 

 

1. Source: Fundscape Platform report March 2019

 

 

Chief financial officer's report

Despite the volatile and challenging market conditions, 2018 was a further year of solid financial performance with most of our key financial metrics continuing to display positive trends, including growth in AUA, revenue, adjusted EBITDA and profit after tax. In particular, the increase in net revenue of 9.6 per cent over the prior year was not matched by increases in expenditure, with the result that adjusted EBITDA increased to £8.3m and the adjusted EBITDA margin improved substantially to 19.2 per cent.

Financial key performance indicators

 

 

Year ended December 2018

Year ended December 2017

Year ended December 2016

Year ended December 2015

Year ended December 2014

Group

£'000

£'000

£'000

£'000

£'000

AUA1

13,883,713

13,576,703

11,143,757

9,068,789

7,807,690

Gross inflows1

2,290,236

2,607,759

1,854,830

1,977,783

1,944,335

Net inflows1

1,193,502

1,668,237

970,263

1,229,625

1,441,099

Revenue 2

49,405

45,462

37,483

33,091

27,572

Net revenue1, 3

43,154

39,361

32,407

28,166

22,925

Adjusted EBITDA1

8,304

6,248

5,141

4,637

3,089

Profit for the year*

4,756

4,111

3,387

4,300

2,472

Dividend paid1

3,933

4,813

nil

nil

nil

Adjusted EBITDA margin1 2

19.2%

15.9%

15.8%

16.5%

13.5%

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

1Industry-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.

2 Details of the 2017 revenue presentation restatement are set out in note 2.

3 The definition of net revenue has been revised to include product fees that were previously included within AUA related costs.

Financial review

 

 

Year ended 31 December 2018

Year ended 31 December 2017

Group

 

£m

Opening AUA

 

13,577

Inflows

 

2,290

Outflows

 

(1,097)

Net inflows

 

1,193

Market movements

 

(886)

Closing AUA

 

13,884

Average AUA

 

14,124

 

 

 

 

 

Year ended 31 December 2018

Restated 1

Year ended 31 December 2017

Group

 

£'000

£'000

Revenue

 

49,405

45,462

AUA related fees paid

 

(6,251)

(6,101)

Net revenue1

 

43,154

39,361

 

 

 

 

Staff costs

 

(14,142)

(13,138)

AUA related costs1

 

(11,131)

(10,224)

Other direct platform costs

 

(745)

(495)

Platform development costs

 

(1,682)

(2,773)

Other costs

 

(7,150)

(6,483)

 

 

 

 

Adjusted EBITDA*

 

8,304

6,248

Depreciation

 

(585)

(410)

Adjusted EBIT

 

7,719

5,838

Interest income

 

11

9

Interest expense

 

(7)

(3)

 

 

 

 

Adjusted profit before tax

 

7,723

5,844

 

 

 

 

Other income

 

22

36

AIM admission costs

 

(1,688)

-

Share-based payments

 

(404)

(756)

 

 

 

 

Statutory profit before tax

 

5,653

5,124

Taxation

 

(897)

(1,013)

Statutory profit after tax

 

4,756

4,111

 

 

 

 

Adjusted profit after tax

 

6,255

4,719

Basic and diluted EPS

 

6.3p

5.4p

Blended revenue yield (bps)**1

 

30.6

31.6

Adjusted EBITDA margin

 

19.2%

15.9%

1 The definition of net revenue has been revised to include product fees that were previously included within AUA related costs

*Adjusted EBITDA excludes non-operating income, AIM admission costs and share-based payments and is included within the strategic 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 over Average AUA

 

 

 

Revenue

AUA was naturally impacted by market volatility throughout the year, and in particular the sharp, market-wide decline in Q4, and this is evident in the muted 2.3 per cent increase in AUA for the year (2017: 21.8 per cent). Across 2018, the FTSE All Share Index decreased by 13 per cent and the FTSE 100 Index decreased by 12.5 per cent. Despite market conditions and weak investor sentiment, particularly as the year progressed, gross inflows were £2.3bn (2017: £2.6bn) and net inflows were £1.2bn (2017: £1.7bn). Average AUA increased by £1.7bn, or 13.5 per cent (2017: 25.3 per cent) to £14.1bn.

Net revenue increased by 9.6 per cent to £43.2m (2017: 21.5 per cent to £39.4m), at a slower growth rate than average AUA growth, reflecting the full effect of our July 2017 price cut and resulting in a blended revenue yield of 30.6 basis points (2017: 31.6 basis points) that was in line with our expectations.

We expect pricing pressure to be a continuing trend in the platform industry in future years, but believe we are well positioned in terms of scale, our current and planned proposition, the quality of our customer base, and our selected technology and outsourced service providers to meet this challenge.

Costs

Staff costs were £14.1m for the period (up 7.6 per cent). The number of full-time equivalent employees increased from 192 to 218 (an increase of 13.5 per cent), predominantly as a result of ongoing investment in our technology, change management, client servicing and operations teams. We expect to continue growing our staffing levels in 2019, but at a lower rate, with most of the recruitment occurring in the first half of the year. 

AUA related costs increased to £11.1m, up 8.9 per cent (against revenue growth of 9.6 per cent) over the prior year, at an average cost of 7.9 basis points (2017: 8.2 basis points), reflecting the tiering benefits within a significant component of these costs.

Other direct platform costs relate to platform hosting and licencing costs and increased to £0.7m (2017: £0.5m).

We continue to believe that the impact of the restructuring of the technology and BPO model will be broadly cost neutral in each year of our planning period, subject to market and net inflow levels returning to the levels forecast at the time of the restructuring. Within the overall cost base, we have planned for a material increase in other direct platform costs and, to a much lesser extent, platform development costs and other costs, offset by a reduction in AUA related costs, through a combination of fixed discounts and basis points-related rate card adjustments.

Platform development costs of £1.7m were lower than the 2017 comparative cost of £2.8m. This difference is as a result of 2017 including the preparatory costs of a significant platform upgrade that was completed in October 2017 as well as the costs of a substantial amount of third-party developed software, while 2018 was characterised by increased internally-developed software expenditure (included in staff costs), as well as, particularly in the first half of the year, an increase in regulatory change (which was largely non-chargeable to Nucleus) and reduced external development expenditure while we renegotiated our agreements with Genpact and Bravura.

We continue to plan for a significant increase in platform development expenditure over the level achieved in 2018, including through a programme of regular core platform software upgrades, optimising our use of Sonata and consistent levels of third-party development expenditure. Complemented by further increased investment in our internal software development capabilities, we believe that this expenditure will drive proposition, efficiency and resilience benefits and is a source of competitive advantage.

Finally, other costs increased by £0.7m (10.3 per cent) to £7.2m (2017: £6.5m). The increase in these costs was largely as a result of the inclusion of the costs of our single location head office premises, the incremental costs incurred as a result of being quoted on AIM and increases in overhead costs attributable to the increasing size of the business.

Our operating margin (as reflected by adjusted EBITDA margin) increased as a result of lower platform development spend and the operating leverage effect of our increased scale.

Taxation

The group's effective tax rate of 15.9 per cent (2017: 19.8 per cent) reflects the impact of a number of one-off items, in particular a large proportion of AIM admission costs, that are non-tax deductible, offset by the impact of research and development related tax relief of £0.5m (2017: nil) that related to prior years but that was claimed in 2018.

Dividend

During the year we paid pre-admission dividends in June and July 2018 totalling £2.9m, as well as an interim dividend in October 2018 of £1.1m, which amounted to 1.4 pence per share.

Our dividend policy is to pay both interim and final dividends at a combined pay-out ratio of between 60 and 70 per cent of the group's profits after tax adjusted for exceptional items. In determining the 2018 pay-out ratio, the board has taken into consideration the benefit to earnings of the lower than anticipated platform development expenditure in the year, as well as the weak performance of markets in 2018, and have set the proposed pay-out ratio at the lower end of the range at 60.7 per cent.

The final dividend therefore amounts to £2.7m (or 3.6 pence per share) and brings the full-year post-admission dividend in respect of the 2018 financial year to £3.8m (or 5.0 pence per share).

A maiden dividend was made to shareholders in 2017 to take account of accumulated profits in the preceding years.

 

 

Group financial position

31 December 2018

31 December 2017

 

£'000

£'000

Cash and cash equivalents

17,672

16,992

Net assets

17,473

16,182

Capital adequacy ratio

14.5%

15.3%

Capital adequacy ratio - underlying

20.6%

21.7%

Excess capital - above 8% regulatory requirement

5,393

5,369

 

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 regard for the forecasted liquidity requirements of the group, is assessed as sufficient to support the ongoing operations of the business (under both normal and stressed conditions), allow the planned investment in the platform, and 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 [annual] financial statements.

 

 

Stuart Geard
Chief financial officer

 

Consolidated income statement

 

 

 

Note

2018

£'000

 

Restated*

2017

 £'000

Continuing operations

 

 

 

 

Revenue*

 

49,405

 

45,462

Cost of sales*

 

(19,809)

 

(19,592)

 

 

 

 

 

Gross profit

 

29,596

 

25,870

 

 

 

 

 

Other operating income

 

22

 

36

Administrative expenses

 

(23,969)

 

(20,788)

 

 

 

 

 

Operating profit

 

5,649

 

5,118

 

 

 

 

 

Finance income

 

11

 

9

Finance costs

 

(7)

 

(3)

 

 

 

 

 

Profit before income tax

 

5,653

 

5,124

 

 

 

 

 

Income tax

7

(897)

 

(1,013)

 

 

 

 

 

Profit for the financial year

 

4,756

 

4,111

 

 

 

 

 

Profit attributable to:

 

 

 

 

Owners of the parent

 

4,756

 

4,111

 

 

 

 

 

Earnings per share (pence)

 

 

 

 

Basic

6

6.3

 

5.4

Diluted

6

6.3

 

5.4

 

 

*Details of the 2017 revenue presentation restatement are set out in note 2.

 

 

 

 

 

 

 

 

 

 

Consolidated statement of comprehensive income

 

 

 

Note

2018

£'000

 

2017

£'000

 

 

 

 

 

Profit for the financial year

 

4,756

 

4,111

 

 

 

 

 

Items that may be subsequently reclassified to profit or loss

Unrealised loss on investments

 

 

-

 

(1)

 

 

 

 

 

Total comprehensive income for the financial year

 

4,756

 

4,110

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

Owners of the parent

 

4,756

 

4,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated statement of financial position

 

 

 

Note

31 December 2018

 

31 December 2017

 

 

£'000

 

£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

 

2,029

 

1,780

Deferred tax

 

163

 

158

 

 

2,192

 

1,938

 

 

 

 

 

Current assets

 

 

 

 

Trade and other receivables

 

10,611

 

9,739

Investments in securities

 

84

 

99

Tax receivable

 

541

 

17

Cash and cash equivalents

 

17,672

 

16,992

 

 

28,908

 

26,847

 

 

 

 

 

Total assets

 

31,100

 

28,785

 

 

 

 

 

Equity

 

 

 

 

Shareholders' equity

 

 

 

 

Called up share capital

9

76

 

21

Capital redemption reserve

 

53

 

1

Share-based payment reserve

 

150

 

2,646

Fair value reserve

 

-

 

39

Treasury shares

 

(30)

 

-

Retained earnings

 

17,224

 

13,475

 

 

 

 

 

Total equity

 

17,473

 

16,182

 

 

 

 

 

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Financial liabilities

 

6

 

93

Provisions

3

32

 

-

Deferred tax

 

41

 

46

 

 

79

 

139

Current liabilities

 

 

 

 

Financial liabilities

 

87

 

107

Trade and other payables

 

12,134

 

10,707

Tax payable

 

740

 

1,124

Provisions

3

587

 

526

 

 

13,548

 

12,464

 

 

 

 

 

Total liabilities

 

13,627

 

12,603

 

 

 

 

 

Total equity and liabilities

 

31,100

 

28,785

 

 

 

 

 

 

 

Consolidated statement of changes in equity

 

 

 

 

Called up share capital

Retained earnings / (accumulated losses)

 

 

Share premium

 

 

Treasury shares

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Balance at 1 January 2018

21

13,475

-

-

Reclassify investments from FVOCI to FVPL

-

39

-

-

 

 

 

 

 

Changes in equity

Issue of preference shares

 

50

(50)

-

 

-

Redemption of preference shares

(50)

-

-

-

Issue of bonus shares and G share conversion

57

(57)

-

-

Buy back and redemption of G and deferred shares

 

(2)

-

-

 

-

Profit for the financial year

-

4,756

-

-

Dividends paid

-

(3,933)

-

-

Purchase of own shares

-

-

-

(30)

Gain on disposal of own shares

-

94

-

-

Transfer on share conversion

-

2,900

-

-

Share-based payments charge

-

-

-

-

 

 

 

 

 

Balance at 31 December 2018

76

17,224

-

(30)

 

 

 

 

 

 

 

 

 

 

Called up share capital

Retained earnings / (accumulated losses)

 

 

Share premium

 

 

Treasury shares

 

£'000

£'000

£'000

£'000

 

 

 

 

 

Balance at 1 January 2017

22

(1,548)

15,747

-

 

 

 

 

 

Changes in equity

Redemption of shares

 

(1)

 

(63)

-

 

-

Transfer on capital reduction

-

15,747

(15,747)

-

Transfer on exercise of options

-

41

-

-

Dividends paid

-

(4,813)

-

-

Unrealised loss on investments

-

-

-

-

Profit for the financial year

-

4,111

-

-

Share-based payments charge

-

-

-

-

 

 

 

 

 

Balance at 31 December 2017

21

13,475

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Reclassify investments from FVOCI to FVPL

-

-

(39)

-

 

 

 

 

 

Changes in equity

 

 

 

 

Issue of preference shares

-

-

-

-

Redemption of preference shares

50

-

-

-

Issue of bonus shares and G share conversion

-

-

-

-

Buy back and redemption of G and deferred shares

2

-

-

-

Profit for the financial year

-

-

-

4,756

Dividends paid

-

-

-

(3,933)

Purchase of own shares

-

-

-

(30)

Gain on disposal of own shares

-

-

-

94

Transfer on share conversion

-

(2,900)

-

-

Share-based payments charge

-

404

-

404

 

 

 

 

 

Balance at 31 December 2018

53

150

-

17,473

 

 

 

 

 

 

 

 

 

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

 

 

 

 

Redemption of shares

1

-

-

(63)

Transfer on capital reduction

-

-

-

-

Transfer on exercise of options

-

(41)

-

-

Dividends paid

-

-

-

(4,813)

Unrealised loss on investments

-

-

(1)

(1)

Profit for the financial year

-

-

-

4,111

Share-based payments charge

-

756

-

756

 

 

 

 

 

Balance at 31 December 2017

1

2,646

39

16,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated statement of cash flows

 

 

 

Note

2018

 £'000

 

2017

 £'000

Cash flows from operating activities

 

 

 

 

Cash inflow from operations

4

7,298

 

10,509

Interest received

 

8

 

1

Income tax paid

 

(1,822)

 

(940)

 

 

 

 

 

Net cash inflow from operating activities

 

5,484

 

9,570

 

 

 

 

 

Cash flows from investing activities

Purchase of tangible fixed assets

 

(833)

 

(1,373)

Sale/(purchase) of investments

 

10

 

(31)

 

 

 

 

 

Net cash outflow from investing activities

 

(823)

 

(1,404)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Interest paid

 

(2)

 

(3)

Interest received

 

-

 

8

Dividends paid

 

(3,933)

 

(4,813)

Redemption of shares

 

-

 

(63)

Purchase of Treasury shares

 

(30)

 

-

Repayment of finance leases

 

(107)

 

(139)

Exercise of options

 

98

 

-

 

 

 

 

 

Net cash outflow from financing activities

 

(3,974)

 

(5,010)

 

 

 

 

 

Increase in cash and cash equivalents

 

687

 

3,156

 

 

 

 

 

Cash and cash equivalents at beginning of year

 

16,992

 

13,839

 

 

 

 

 

Effects of exchange rate changes

 

(7)

 

(3)

 

 

 

 

 

Cash and cash equivalents at end of year                  

 

17,672

 

16,992

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes to the consolidated financial statements

1. Accounting policies

 

Basis of preparation

 

The financial information contained within this document is based upon the consolidated financial statements of Nucleus Financial Group plc. Those financial statements comply with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and have been prepared on a going concern basis, under the historical cost convention as modified by the recognition of certain financial assets measured at fair value.

 

The preparation of the financial statements in compliance with EU adopted IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the group and company's accounting policies. The areas where significant judgements and estimates have been made in the preparation of the financial statements are detailed in note 2.

 

Section 435 of the Companies Act 2006 statement

 

The financial information contained within this document does not constitute statutory accounts. It is based on statutory accounts which have been audited by PricewaterhouseCoopers LLP (PwC). The 2017 statutory accounts have been filed with the registrar of companies, and the 2018 statutory accounts will be filed in due course. The auditor PwC has reported on those accounts. Their reports were (i) unqualified, (ii) did not reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report, and (iii) did not contain a statement under section 498 (2) or (3) of the companies act 2006.

 

Basis of consolidation

 

The consolidated 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.

 

Going concern

 

After reviewing the group and the company's forecasts and projections, the directors have a reasonable expectation that the group and the company has adequate resources to continue in operational existence for at least 12 months from the date of signing of the financial statements. The group and the company therefore continues to adopt the going concern basis in preparing its financial statements.

 

Segmental reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the executive committee (the chief operating decision maker). 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. It is considered appropriate that management review the performance of the group by reference to total results against budget.

 

The main financial performance measures are assets under administration on the platform, gross and net inflows onto the platform, revenue, adjusted EBITDA, profit for the year, dividend paid, adjusted EBITDA margin, consolidated operating profit, consolidated profit after tax and consolidated net assets. These are disclosed in the chief financial officer's report, where non GAAP financial performance measures are also identified and reconciled to GAAP measures.

 

Revenue

 

Revenue comprises fees earned by the group 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. Performance obligations are satisfied as the wrap platform service is provided to customers. Accrued income represents fees that are collected in the following month.

 

 

New standards effective for the first time in the 2018 financial statements

 

IFRS 2 Share-based payments

 

IFRS 2 has been amended by Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2). These changes affect accounting for cash-settled share-based payment transactions, classification of share-based payment transactions with net settlement features and modifications of share-based payment transactions from cash-settled to equity-settled. As Nucleus does not operate any cash settled share-based payment schemes, the amendment to this standard has not impacted the group.

 

IFRS 9 Financial instruments

 

IFRS 9 replaced the classification and measurement models for financial instruments contained in IAS 39 Financial Instruments: Recognition and Measurement and is effective for accounting periods beginning on or after 1 January 2018. The main changes from IAS 39 include the following:

 

·      financial assets are to be classified and measured based on the business model for managing the financial and the cash flow characteristics of the financial asset, either at fair value or amortised cost

·      a financial asset or liability that would otherwise be at amortised cost may only be designated as at fair value through profit or loss if such a designation reduces an accounting mismatch

 

The impairment model in IFRS 9 is based on the premise of providing for expected losses. IFRS 9 requires that the same impairment model apply to all of the following:

 

·      financial assets measured at amortised cost

·      financial assets mandatorily measured at fair value through other comprehensive income

·      financial guarantee contracts to which IFRS 9 is applied

·      lease receivables within the scope of IFRS 17 Leases

·      contract assets within the scope of IFRS 15 Revenue from contracts with customers

 

The adoption of this standard has not had a significant impact on the group.

 

IFRS 15 Revenue from contracts with customers

 

The standard provides a comprehensive new model for revenue recognition, addressing various issues such as identifying distinct performance obligations, accounting for contract modifications and accounting for the time value of money.

 

The directors have reviewed this standard and are of the opinion that, given the simple revenue model and the

absence of long-term contracts, the implementation of IFRS 15 does not have a significant impact on the financial performance of the group and no accounting policies have changed as a result of its implementation.

 

 

 

 

 

 

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

 

IFRS 16 Leases

 

The group will not be early adopting this standard which becomes effective from 1 January 2019.

 

The group will be taking advantage of the practical expedient which allows the continuation of the existing assessment as to whether a contract contains a lease for all ongoing contracts entered into before 1 January 2019. The IFRS 16 definition of a lease will apply to all contracts entered into after 1 January 2019.

 

The modified retrospective approach will be used, resulting in the cumulative effect of application on 1 January 2019 being recognised through an adjustment to opening retained earnings.

 

A full assessment of the impact of the above has been performed, and whilst there is no change to the recognition of finance leases, there is a material change to the group's assets and liabilities due to the requirement to bring the group's operating leases on balance sheet. On 1 January 2019, this is expected to result in a £71,123 charge to retained earnings, an increase in the group's intangible right of use assets of £3,900,842 and an increase in the group's liabilities of £3,971,965.

 

Critical accounting judgements and key sources of estimation uncertainty, and restatements

 

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The critical accounting judgements and the key sources of estimation uncertainty are as follows:

 

Income taxes

 

The group is subject to income taxes. Judgement is required in determining the extent to which it is probable that taxable profits will be available in future against which deferred tax assets can be utilised. Based on forecasts, the group expects to materially recover its deferred tax assets within the next two years.

 

Share-based payments

 

The group assesses the fair value of shares under the LTIP scheme at the grant date using appropriate valuation models, depending upon the nature of the performance criteria. At the end of each reporting period, the company revises its estimate of the number of options and shares under the LTIP scheme that are expected to vest to reflect latest expectations on the group's ability to achieve the specified performance criteria and actual or anticipated leavers from the schemes. For non-market related performance criteria, the company recognises the impact of any revision to the prior year's estimates in the income statement, with a corresponding adjustment to equity.

 

Provisions

 

The group has recognised provisions in respect of client compensation, outsourced service and dilapidations. Further detail on these provisions, the rationale behind their recognition and the timing of future cash flow is included in note 3.

 

 

Restatement of revenue presentation

 

As part of our consideration of the impact of IFRS 15 we have reviewed our principal and agency relationships relating to platform income. We consider that separate revenue and cost presentation will more accurately reflect the revenue and cash flows arising from the contracts with customers. There is no impact on the reported profit or net assets of the group as a result of this restatement.

 

 

 

 

 

2017

£'000

Adjustment

Restated

2017

£'000

Continuing operations

 

 

 

Revenue

40,365

5,097

45,462

Cost of sales

(14,495)

(5,097)

(19,592)

 

 

 

 

Gross profit

25,870

-

25,870

 

 

 

 

 

 

 

 

Profit for the financial year

4,111

-

4,111

 

 

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 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. In adopting IFRS 9 all previously classified loans and receivables were re-classified as financial assets at amortised cost, with no change to measurement, and all financial assets previously classified at fair value through other comprehensive income were reclassified as financial assets at fair value through profit and loss, as this is the residual category under IFRS 9. The following tables show the carrying values of assets and liabilities for each of these categories.

 

 

 

Financial assets at fair value through profit and loss

 

Financial liabilities at amortised cost

 

 

Financial assets at amortised cost

 

 

 

Total

 

 

£'000

£'000

£'000

£'000

2018

 

 

 

 

 

Financial assets

 

 

 

 

 

Investments in securities

 

84

-

-

84

Cash and cash equivalents

 

-

-

17,672

17,672

Trade and other receivables

 

-

-

10,611

10,611

 

Total financial assets

 

 

84

 

-

 

28,283

 

28,367

 

 

 

 

 

 

Non-financial assets

 

 

 

 

2,733

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

31,100

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

Finance lease obligations

 

-

93

-

93

Trade and other payables

 

-

12,134

-

12,134

 

 

 

 

 

 

 

Total financial liabilities

 

 

-

 

12,227

 

-

 

12,227

 

 

 

 

 

 

Non-financial liabilities

 

 

 

 

1,400

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

13,627

 

 

 

 

 

 

 

Fair value  through other comprehensive income

Financial liabilities at amortised cost

 

 

Loans and receivables

 

 

 

Total

 

 

£'000

£'000

£'000

£'000

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

 

Financial instruments measured at fair value - fair value hierarchy

 

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 disclosed in note 1.

 

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 income statement.

 

The following tables show the group's financial assets measured at fair value through profit and loss, classed according to the level of the fair value hierarchy.

 

 

 

 

 

Level 1

Level 2

Level 3

Total

 

£'000

£'000

£'000

£'000

2018

 

 

 

 

Investments in securities

84

-

-

84

 

 

 

 

 

2017

 

 

 

 

Investments in securities

99

-

-

99

 

 

 

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, Bank of Scotland plc and Investec Bank plc. The group is therefore exposed to counterparty credit risk and a failure of any of these banks 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.

 

The supply of wrap platform services to clients results in trade receivables which the 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. Where these amounts are not received within normal operational timeframes, our experience is that the risk of non-recovery increases, and we provide to our expectation of most likely outcome. The provision as at 31 December 2018 was £176,674 (2017: £168,788).

 

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:

 

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

·      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; and

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

 

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

2018

 

 

 

 

 

Financial assets

 

 

 

 

 

Cash and cash equivalents

17,672

-

-

-

17,672

Investments

-

84

-

-

84

Trade and other receivables

10,182

429

-

-

10,611

 

 

 

 

 

 

 

27,854

513

-

-

28,367

 

 

 

 

 

 

 

 

 

 

 

 

 

< 3 months

3-12 months

1-5 years

> 5 years

Total

 

£'000

£'000

£'000

£'000

£'000

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

2018

 

 

 

 

 

Financial liabilities

 

 

 

 

 

Trade and other payables

11,966

168

-

-

12,134

Finance lease obligations

87

-

6

-

93

 

 

 

 

 

 

 

12,053

168

6

-

12,227

 

 

 

 

 

 

 

 

 

 

 

 

 

< 3 months

3-12 months

1-5 years

> 5 years

Total

 

£'000

£'000

£'000

£'000

£'000

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

 

3. Provisions

 

 

2018

 2017

 

£'000

£'000

 

 

 

Client compensation

429

98

Outsourced service

158

204

Dilapidations

32

224

 

 

 

 

619

526

 

Analysed as follows:

 

 

Current

587

526

Non-current

32

-

 

 

 

 

619

526

 

 

 

 

 

 

Client compensation

Outsourced service

Dilapidations

 

Total

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

 

At 1 January 2017

 

85

-

103

188

 

 

 

 

 

 

Unused amounts reversed during year

 

(5)

-

-

(5)

Utilised during year

 

(28)

-

-

(28)

Provided during year

 

46

204

121

371

 

 

 

 

 

 

At 31 December 2017

 

98

204

224

526

 

 

 

 

 

 

Provided during year

 

435

612

30

1,077

Utilised during year

 

(73)

(333)

(222)

(628)

Unused amounts reversed during year

 

(31)

-

-

(31)

Charge/(credit) to income statement

 

-

(325)

-

(325)

 

 

 

 

 

 

At 31 December 2018

 

429

158

32

619

 

 

 

 

 

 

 

 

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 utilised against the administrative expenses line in the income statement and the majority of the outstanding issues are expected to be resolved in the first half of 2019.

 

Outsourced service

 

As part of the commercial agreement with its 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.

 

 

 

 

 

 

 

 

Dilapidations

 

During the year, 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 from operations

 

 

2018

2017

 

£'000

£'000

Profit before income tax

5,653

5,124

Depreciation

585

410

Loss on disposal of fixed assets

-

55

Share-based payments charge

404

756

Bad debt provision

8

(287)

Increase in trade and other receivables

(618)

(351)

(Increase)/decrease) in operational platform prefunding

(257)

1,234

Increase in trade and other payables

1,427

3,233

Increase in other provisions

93

338

Interest paid

7

3

Interest received

(11)

(9)

Net exchange differences

7

3

 

 

 

 

7,298

10,509

 

Operational platform prefunding includes prefunding of client pension tax relief and temporary funding required under the client money and client assets rules.

 

5. Reconciliation of liabilities arising from financing activities

 

 

 

 

At 1 January 2017

 

Non-cash changes

 

 

Cash flows

At 31 December 2017

 

 

 

 

 

 

Finance lease liabilities

 

105

234

(139)

200

 

 

 

 

 

 

 

 

 

At 1 January 2018

 

Non-cash changes

 

 

Cash flows

At 31 December 2018

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

 

Finance lease liabilities

 

200

2

(109)

93

 

 

 

 

 

 

 

 

6. Earnings per share

 

Earnings per share has been calculated by dividing the total profit for the year by the weighted average number of ordinary shares in issue during the year.

 

 

2018

 2017

 

£'000

£'000

Profit for the year

4,756

4,111

 

 

 

 

 

2018

 2017

Weighted average number of ordinary shares (basic)

75,932,243

75,984,439

SIP scheme

1,821

-

LTIP scheme

16,209

-

Weighted average number of ordinary shares (diluted)

75,949,568

75,984,439

 

 

2018

 2017

Basic/diluted earnings per ordinary share (pence)

6.3

5.4

 

 

 

 

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 during the year are detailed in note 9.

               

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 1,013,612 of which 68,865 have lapsed. The vesting of each of the awards is subject to the satisfaction of performance conditions that have been set by the remuneration and HR 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

 

Analysis of tax expense

 

 

2018

 2017

 

£'000

£'000

Current tax:

 

 

Tax on profits for the year

1,435

1,124

Adjustments in respect of prior periods

(527)

(17)

 

 

 

Deferred tax:

 

 

Origination and reversal of timing differences

(11)

(94)

 

 

 

 

 

 

Tax expense in income statement

897

1,013

 

Factors affecting the tax expense

 

The tax assessed for the year is lower (2017: higher than) the standard rate of corporation tax in the UK of 19.00 per cent (2017: 19.25 per cent). The differences are reconciled below:

 

 

2018

 2017

 

£'000

£'000

Profit before taxation

5,653

5,124

 

Profit before taxation multiplied by the standard rate of corporation tax in the UK of 19.00 per cent (2017: 19.25 per cent)

 

1,074

 

986

 

 

 

Effects of:

 

 

Expenses not deductible for tax purposes

412

252

Fixed asset differences

5

2

Share schemes differences

-

(42)

Adjustments to tax charge in respect of prior period

-

(17)

Adjustments to tax charge in respect of prior period R&D claims

(527)

-

Adjustments to deferred tax in respect of prior period

-

21

Adjust closing deferred tax to average rate of 19.00% (2017: 19.25%)

-

3

Adjust opening deferred tax to average rate of 19.00% (2017: 19.25%)

-

(3)

Deferred tax not recognised

(70)

(69)

Recognition of deferred tax asset

-

(122)

Other differences

3

-

Tax credits

-

2

 

 

 

 

897

1,013

 

 

 

 

8. Dividends

 

 

2018

 2017

 

£'000

£'000

£0.01 ordinary share dividends* (142p 2017: 243p per share)

1,577

2,399

£0.001 ordinary share dividends* (1.4p per share)

1,063

-

B ordinary share dividend (142p 2017: 243p per share)

1,081

1,851

G1 share dividend (243p per realised share)

-

338

G2 share dividend (243p per realised share)

-

225

G3 share dividends (243p per realised share)

84

-

G3 share dividends (142p per realised share)

49

-

G4 share dividends (243p per realised share)

50

-

G4 share dividends (142p per realised share)

29

-

 

 

3,933

 

4,813

 

* The Esot waived its right to receive dividends during the year.

 

 

 

 

 

9. Share capital

 

 

2018

 2017

 

£'000

£'000

Allotted, called up and fully paid

 

 

Ordinary shares of £0.01 each: nil (2017: 998,723)

-

10

B ordinary shares of £0.01 each: nil (2017: 761,028)

-

8

G1 ordinary shares of £0.01 each: nil (2017: 173,074)

-

2

G2 ordinary shares of £0.01 each: nil (2017: 104,430)

-

1

G3 ordinary shares of £0.01 each: nil (2017: 40,727)

-

-

G4 ordinary shares of £0.01 each: nil (2017: 25,676)

-

-

Ordinary shares of £0.001 each: 76,473,360 (2017: nil)

76

-

 

 

 

 

76

21

 

Employee benefits trusts hold a total of 561,442 shares (2017: 53,238)

 

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.

 

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 carried a right to a fixed non-cumulative dividend of 0.01 per cent of its nominal value, payable annually in arrears and did not carry any voting rights. These were redeemed on 26 July 2018.

 

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 76,473,360.

 

 

 

 

 

 

 

 

 

10. Related party transactions

Entities with significant influence over the company

 

Transactions with NIFAC and Sanlam were as follows:

 

 

2018

2017

 

£'000

£'000

NIFAC

 

 

Additional loans provided by NFG to NIFAC

-

28

Subordinated loan facility cap

-

450

Interest charged to NIFAC at 2.5% (2017: 2.5%)

-

1

Interest charged to NIFAC at 3.0% (2017: 3.0%)

-

7

Amounts owed to NFG

42

10

Dividend paid to NIFAC by NFG

632

1,082

 

 

 

Sanlam

 

 

Amounts owed to Sanlam in respect of board fees

176

89

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

72

65

Amounts charged by Sanlam in respect of the Onshore Bond

429

369

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

97

83

Dividends paid to Sanlam by NFG

1,976

2,427

 

 

 

 

On Nucleus' admission to AIM, NIFAC realised part of its shareholding in Nucleus and distributed the net proceeds together with its residual shareholding interest to its underlying shareholders. NIFAC no longer holds shares in Nucleus.

 

Subsidiaries

 

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

 

 

2018

2017

 

£'000

£'000

NFS

 

 

Amounts owed to NFG by NFS

706

2,025

 

 

 

 

Other related parties

 

During the year the company was charged £390,000 (2017: £150,000) for services provided by Craven Street Capital Limited of which Angus Samuels is a director. An amount of £nil (2017: £102,000) is accrued.

 

11. Events after the reporting period

 

There were no subsequent events that required adjustment to or disclosure in the financial statements for the period from 31 December 2018, to the date upon which the financial statements were available to be issued.

 

 

 

 

 

 

Definitions and glossary of technical terms

 

The following definitions apply throughout this document:

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.

 

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.

 

Adjusted earnings per share (EPS)

Value of adjusted profit after tax divided by weighted average number of shares.

 

Adjusted profit after tax

The adjusted profit before tax less the adjusted profit before tax multiplied by the standard rate of corporation tax in the UK.

AUA

Assets under administration.

 

Average AUA

The average AUA balance for the period is calculated as the average of the end of day 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.

 

Capital adequacy ratio

A capital adequacy measure calculated by dividing regulatory capital over risk weighted exposures.

Capital adequacy ratio-underlying

Capital adequacy ratio that includes current year profits in the capital measure.

 

Compound asset growth rate

Average growth rate over a period of time expressed as an annualised percentage.

 

EBITDA

Earnings Before Interest Tax Depreciation and Amortisation.

 

Gross inflows

Value of cash and assets received onto the platform.

 

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.

 

Net inflows

 

Value of Gross inflows less Outflows.

Outflows

Value of cash and assets leaving the platform.

 


 

Glossary

 

 

AIM Rules

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

 

BPO

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

 

Customers

The customers of Nucleus, whose assets are managed on the platform through a financial adviser.

 

Clients

The customers of financial advisers who are referred to as clients, whose assets are managed on the platform.

 

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.

 

Mifid II

The EU Markets in Financial Instruments Directive (2014/65/EU).

 

NFS

Nucleus Financial Services Limited.

 

Nucleus" or the "Group

The Company and its Subsidiaries.

 

Priips

The Packaged Retail and Insurance-based Investment Products Regulation.

Sanlam

Sanlam UK Limited.

 

SMCR

Senior Managers and Certification Regime.

 

 

 

 

 

 

 

 

 

 


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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Preliminary results - RNS