Edinburgh fintech Nucleus suspends dividend amid 'significant uncertainty' of Covid-19

Nucleus Financial Group, the Edinburgh-based fintech business, is to suspend its dividend payout amid the “significant uncertainty” caused by the global coronavirus emergency.

Nucleus was set up by its CEO David Ferguson with the backing of a number of financial advice firms in 2006. Picture: Lisa Ferguson

Releasing 2019 results which confirmed that its assets under administration had passed through the £16 billion mark, the firm said that it was too early to estimate the impact of the pandemic on its performance this year. Volatile stock markets in the first quarter of 2020 saw those assets fall back to £14bn.

David Ferguson, the group’s founder and chief executive, said it was “entirely uncertain” what impact Covid-19 might have on businesses and the economy.

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

“Our highest priorities are the health and wellbeing of our people, users and customers and we are taking every possible action to adapt to the situation and ensure we continue to deliver our online product as normal. Our platform is fully operational and all of our people are successfully working remotely with no impact on service.

“In light of the Covid-19 situation, the board has taken the prudent decision not to recommend a dividend until there is more certainty around the term and impact on markets, investor confidence and revenue. While this would typically be considered an unusual decision, we are in uncharted waters, and I believe it to be the correct course of action at this stage.”

Despite the uncertain backdrop, Ferguson said some of the positive momentum following the general election in December had carried into the start of the year, with a 100 per cent year-on-year increase in net inflows in the first quarter. That inflow momentum “eased off” in the last couple of weeks as the virus situation developed. Adjusted profit before tax last year dipped 5 per cent to £7.3 million.

Nucleus, which Ferguson set up with the backing of a number of financial advice firms in 2006, has developed software platforms that enable financial advisers to provide online access to clients for investments across ISAs, pensions and bond accounts.

The “wrap platform” provider, which floated in 2018, is seen as one of the biggest successes of Scotland’s fast-developing fintech – financial technology – sector.

Paul McGinnis, an analyst at house brokerage Shore Capital, noted: “The 2019 final results from Nucleus, deferred from 24 March, demonstrated a positive finish to 2019 and indeed a strong start to 2020 until the sharp falls in markets caused by the Covid-19 pandemic.

“Given the real momentum on net flows and platform development, management are keen to harness this tangible progress by not taking drastic action on costs too soon, while remaining mindful of responsibility to shareholders.”