EDINBURGH investment business Nucleus Financial has paid its first dividend in its 11-year history, with its investors sharing a windfall of £4.3 million - the equivalent of £2.43 per share.
Founded in 2006, the so-called wrap platform is currently used by 400 advisory businesses, with around 1,500 individual financial advisers managing their clients’ investment portfolios via Nucleus’s technology.
Around 75 of the IFA businesses that use Nucleus bought into the firm at launch and own 50 per cent of its shares.
They have received the dividend along with South African insurance business Sanlam, which owns 43 per cent of the firm, and staff and management, who own the remaining seven per cent between them.
Founder and chief executive David Ferguson said that being able to pay a dividend for the first time is “a sign of maturity” at Nucleus, whose long-term aim is to seek a market listing.
“We’ve been appreciating in capital value over the years but we’ve never been in a position where we’ve had sufficient cash reserves to pay a dividend,” Mr Ferguson said.
“We’re still investing in growth and product development but we felt we had sufficient resources in the business that we had the capital to do this.
“It’s a pleasing moment.”
Mr Ferguson said that the expectation is that the business will now be able to pay a dividend on an annual basis, although he noted that future payments are likely to be smaller than this year’s.
“This is the first dividend and I would imagine it will be higher than normal, but from next year onwards we would look to have a progressive dividend,” he said.
“This is a bit of a one-off and reflects more than a year’s profit because we would ideally have done this last year.”
In the 2015 financial year Nucleus’s pre-tax profit rose by 92 per cent to £4.8m, although Mr Ferguson said this had been artificially inflated due to “a change in a contractual relationship with a supplier”.
As a result the firm’s pre-tax profit of £4.3m for the 2016 year represented a fall of 10 per cent, although Mr Ferguson said that on a like-for-like basis the figure represented a rise of 21 per cent.
That came on the back of a 15 per cent rise in revenues to £33.3m, which in turn was the result of the assets managed on the platform increasing by 22 per cent to £11.1 billion, with Nucleus making its money by charging clients an annual fee for administering their assets.
This level of growth has been sustained in the first half of this year, with Nucleus seeing gross inflows rise by 45 per cent to £1.3bn, bringing assets under administration to £12.8bn and first-half revenues to £19.5m.
Mr Ferguson expects turnover to continue rising despite Nucleus cutting the fees its charges to customers with large portfolios, with the reduction helping boost the overall assets on the platform.
In June it announced that annual charges for anyone who has invested up to £499,999 via the platform will remain unchanged at 0.35 per cent per but will drop from 0.25 per cent to 0.175 per cent for accounts worth £500,000 to £999,999 and from 0.15 per cent to 0.05 per cent for anything bigger.
“We are seeing a massive uptick in inflows this year,” Mr Ferguson said.
“Net inflows are up around 100 per cent, which is a spectacular growth rate - we’ve not had that since we were two years old.
“The price adjustment for larger clients has been a driver - we’re getting more larger clients.”
In terms of investments, Mr Ferguson said Nucleus would continue to plough cash into “the never-ending journey” of updating the platform’s technology.
“We’ve got a bunch of things we are looking at to make advisers more effective or to make it easier for customers to understand what their money is doing,” he said.
“Digital technology affects all our lives and is evolving very rapidly. Financial services is probably a bit behind - technology has not landed as well here as in other sectors.”
The firm, which employs 165 people in Scotland and 15 sales people based around the UK, recently signed up to take on new office space in the Greenside development next to Calton Hill in Edinburgh city centre.
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