TIDMNUC
RNS Number : 7345L
Nucleus Financial Group PLC
10 September 2019
10 September 2019
Nucleus Financial Group Plc
("Nucleus" or the "Group")
Unaudited interim results for the six months ended 30th June
2019
Nucleus, a leading independent wrap platform provider, is
pleased to announce its unaudited interim results for the six
months ended 30 June 2019.
Financial highlights
GBP million (unless otherwise Six months Six months Change
stated) ended 30 ended 30 %
June 2019 June 2018
Period end AUA 15,332 14,339 6.9%
=========== ----------- --------
Average AUA(2) 14,725 13,849 6.3%
=========== ----------- --------
Revenue(1) 25.2 24.2 4.0%
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Net revenue* (1) 22.1 21.1 4.6%
----------- ----------- --------
Blended revenue yield (bps)*
(1) 30.2 30.8 (1.9%)
----------- ----------- --------
Adjusted EBITDA* 4.6 4.9 (5.8%)
----------- ----------- --------
Adjusted EBITDA margin (%)*
(1) 20.7 23.0 (10.0%)
----------- ----------- --------
Adjusted profit before tax* 4.2 4.6 (7.3%)
----------- ----------- --------
Profit after tax for the period 3.4 2.2 56.5%
----------- ----------- --------
Earnings per share 4.4p 2.8p 57.1%
----------- ----------- --------
Interim dividend declared 1.5p 1.4p 7.1%
----------- ----------- --------
-- AUA increased 6.9% year-on-year to GBP15.3bn compared to a
FTSE All-Share Index reduction of 3.5% year-on-year
-- Net revenue grew by 4.6% in the period, with blended revenue
yield down slightly as expected, as a result of the impact of
tiered fees on larger portfolios
-- Adjusted EBITDA is in line with expectations at GBP4.6m
following substantial planned investment in the product proposition
during the period
-- Interim dividend of GBP1.1m declared equating to a payment of 1.5p per share
-- Strong balance sheet at 30 June 2019 with GBP17.0 million of cash and no borrowings
Operational highlights
-- Substantial investment in the core platform proposition
throughout the first half of the year saw several significant new
platform enhancements introduced including a material software
upgrade, a Junior Isa product, improved phased drawdown capability,
a new client portal and a new stockbroking service
-- 1.9% increase in the number of active advisers from 1,357 to 1,383 over the last year
-- 5.5% increase in customer numbers from 90,650 to 95,657 over the last year
David Ferguson, founder and CEO of Nucleus, commented:
"We anticipated that the change to our operating model in late
2018 would significantly accelerate our product development in
future years and the first half of 2019 has borne this out.
Substantial investment in the core platform has delivered improved
efficiency, new functionality and new capabilities. We intend to
continue developing our proposition to meet the needs of advisers
and customers and expect this to give the platform an even wider
market appeal over time."
"Alongside the progress in our product roadmap we continue to
grow assets, revenue, profits, customers and advisers, all against
a challenging market backdrop and I am excited by what we can
achieve."
"Financial performance is otherwise expected to develop as
planned as we look beyond short-term headwinds and toward the
future with confidence."
* 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 net revenue by Average AUA.
-- Adjusted EBITDA and adjusted profit before tax exclude
non-operating income, AIM admission costs and share-based payments,
and include right of use (ROU) asset depreciation and ROU liability
interest.
The definitions and calculation methods 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. The prior period has been restated.
(2) 2018 Average AUA has been recalculated using the daily
average method.
For further information please contact:
Nucleus Financial Tel: +44 (0)131 226 9800
David Ferguson, CEO
Stuart Geard, CFO
Shore Capital (nominated adviser Tel: +44 (0)20 7408 4090
and broker)
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
9:00am today, 10 September, 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 30 June 2019. It
is responsible for assets under administration (AUA) of GBP15.3bn
on behalf of more than 95,000 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 eight 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 officer's report
Overview
Value for money is replacing transparency as the key suitability
threshold for financial advice and regardless of the external
environment, end-to-end customer costs in retail financial services
are falling and will continue to fall. This will require platforms
and other market participants to generate internal efficiencies or
demonstrate an ability to generate efficiencies in other parts of
the chain. These dynamics validate our long-established purpose of
creating value through the strategic alignment of advisers and
customers and we continue to invest to that end. The first half of
2019 has been our best ever in terms of improving efficiency and
delivering new capabilities and we expect this to lead to an even
wider market appeal for the Nucleus platform over time.
Alongside progress in our product roadmap we continued to grow
the business in a challenging market and were pleased to be awarded
CoreData's 'best medium platform' award for the eighth year in
succession and to be shortlisted for Schroder's platform of the
year and Money Marketing's company of the year awards.
Operational performance
Despite ongoing economic uncertainty and market volatility, we
enjoyed a 6.9 per cent increase in assets under administration
(AUA) to GBP15.3bn. Adviser and customer numbers also rose and we
would expect these new customers to contribute further inflows as
others have once the external environment settles.
Consistent with the wider sector, inflow performance was below
expectations and we ended H1 with gross inflows of just under
GBP1bn against GBP1.3bn in 2018, albeit reflecting a slight uptick
in market share. Outflows increased slightly due to consolidation
activity amongst adviser users, but we were successful in securing
a new partnership with an IFA consolidator and are in discussions
with others. These new relationships are expected to provide more
resiliency in net inflows while also presenting growth
opportunities in their own right.
Platform and other operations have been stable through the first
half of the year and we have been successful in launching a Junior
Isa, new phased drawdown capability, a new client portal and many
other platform enhancements, including meeting the new costs and
charges disclosure requirements of Mifid II. This rate of change
represents a planned and marked acceleration on previous years and
is evidence that the remodelling of our outsourced relationships
announced last November, is yielding positive results.
Financial performance and dividend
We are pleased to report a 4.6 per cent increase in net revenue
to GBP22.1m and adjusted EBITDA for the period of GBP4.6m, the
latter slipping slightly under 2018's GBP4.9m due to a substantial
increase (to steady-state) in investment in product development
through the period. On a reported basis, we increased profit after
tax and earnings per share by 56.5 per cent and 57.1 per cent
respectively.
Further details are contained in the chief financial officer's
report but this performance, alongside a continuation of our
regulatory capital surplus, means I am pleased to announce that the
board has declared an interim dividend of 1.5p per share (an
increase of 7.1 per cent on H1 2018), amounting to a total payment
of GBP1.1m to be paid in October.
Our people
We have continued to evolve the shape of the organisation
following the restructure of our outsourcing relationships in late
2018 and are moving toward a state in which all additional roles
sit within our technology function. This is consistent with our
ambition of building the most scalable advised platform in the UK,
a goal that can only be achieved with a substantial dependency on
technology for most operations. Alongside our technology, we aim to
offer market-leading offline service and accordingly continue to
invest in this area.
Overall people engagement remains strong and we continue to
perform well in terms of gender pay gap and the number of women in
senior positions.
Strategic development
Delivery in the first half of the year demonstrates the value we
can unlock in having a direct relationship with Bravura, following
the rearrangement of our outsourced relationships last November. In
addition to delivering a material upgrade we have generated
efficiencies and added new capabilities more effectively than ever
before. We retain conviction that our blend of in-house development
and data services sitting on top of Bravura's market-leading Sonata
software will allow us to deliver the best combination of cost
against agility, scalability and resilience over the medium and
long-term.
The period has also allowed us to advance our understanding of
the sources of return and other trends within customer portfolios
and we continue to believe we can use this insight to generate new
revenue streams, most likely starting in the first half of 2020.
The FCA's PROD rules and the new costs and charges disclosure
changes introduced as part of Mifid II will necessitate a new
approach to portfolio management and we believe modern,
customer-led and data-rich platforms such as ours will be best
placed to meet these demands.
Outlook
Recently reported M&A activity among peers and technology
providers which power this sector indicates a prolonged period of
disruption due to further replatforming and the concentration risk
associated with one of the major vendors. We believe this will
create substantial opportunity for stable, well-run platforms
operating on sound foundations such as Nucleus.
Accordingly, we will continue to invest in product development
and in growth consistent with our strategy which aims to deliver
operating leverage through scale over time. Overall, we believe the
investments we are making to accelerate growth will generate
improved inflow metrics in future periods.
Financial performance is otherwise expected to develop as
planned as we look beyond short-term headwinds and toward the
future with confidence.
David Ferguson
Founder and CEO
Chief financial officer's report
The first half of 2019, which started with market levels, and
consequently AUA, at depressed levels, was characterised by
continued uncertainty and market volatility and closed with no
greater clarity on many of the issues concerning markets, advisers
and customers.
Gross and net inflows, AUA and, by implication, revenue came
under continued pressure as a result, requiring us to balance the
need to respond to the challenging environmental conditions and the
desire to increase the investment in growing our business to take
advantage of the longer-term sectoral opportunity. This has
resulted in a further period of satisfactory financial performance
for Nucleus and we remain confident that our continued investment
in our people, proposition and service will translate into a
recovery of inflows and a return to our targeted level of top-line
growth.
Financial key performance indicators
Six months Year ended Year ended Year ended Year ended
ended June December December December December
2019 2018 2017 2016 2015
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
AUA(1) 15,332,087 13,883,713 13,576,703 11,143,757 9,068,789
Gross inflows(1) 954,781 2,290,236 2,607,759 1,854,830 1,977,783
Net inflows(1) 245,726 1,193,502 1,668,237 970,263 1,229,625
Revenue 25,210 49,405 45,462 37,483 33,091
Net revenue(1) 22,087 43,154 39,361 32,407 28,166
Adjusted EBITDA(1) 4,570 8,304 6,248 5,141 4,637
Profit for the period
after tax 3,372 4,756 4,111 3,387 4,300
Dividend paid 2,734 3,933 4,813 nil nil
Adjusted EBITDA
margin(1) 20.7% 19.2% 15.9% 15.8% 16.5%
(1) 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.
Financial review
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
Group GBPm GBPm GBPm
----------- ----------- -------------
Opening AUA 13,884 13,577 13,577
----------- ----------- -------------
Inflows 955 1,265 2,290
----------- ----------- -------------
Outflows (709) (539) (1,097)
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Net inflows 246 726 1,193
----------- ----------- -------------
Market movements 1,202 36 (886)
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Closing AUA 15,332 14,339 13,884
----------- ----------- -------------
Average AUA 14,725 13,849 14,124
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Restated Restated
Six months (1,2) (2)
ended 30 Six months Year ended
June 2019 ended 30 31 December
June 2018 2018
Group GBP'000 GBP'000 GBP'000
Revenue 25,210 24,234 49,405
AUA related fees paid (3,123) (3,112) (6,251)
Net revenue(1) 22,087 21,122 43,154
Staff costs (7,312) (7,016) (14,142)
AUA related costs(1) (4,959) (5,626) (11,131)
Other direct platform costs(2) (1,057) (624) (1,522)
Platform development costs (1,094) (128) (1,682)
Other costs(2) (3,095) (2,875) (6,373)
Adjusted EBITDA* 4,570 4,853 8,304
Depreciation* (350) (277) (585)
Adjusted EBIT 4,220 4,576 7,719
Interest income 27 3 11
Interest expense* (1) (1) (7)
Adjusted profit before tax 4,246 4,578 7,723
Other income 8 11 22
AIM admission costs - (1,473) (1,688)
Share-based payments (74) (69) (404)
Statutory profit before tax 4,180 3,047 5,653
Taxation (808) (893) (897)
Statutory profit after tax 3,372 2,154 4,756
Adjusted profit after tax 3,439 3,699 6,255
Basic and diluted EPS 4.4p 2.8p 6.3p
Blended revenue yield (bps)**(1) 30.2 30.8 30.6
Adjusted EBITDA margin 20.7% 23.0% 19.2%
(1) The definition of net revenue has been revised and restated
to include product fees that were previously included within AUA
related costs
(2) Platform-related mailing, bank charges, and errors and
losses have been reclassified and restated from "other costs" to
"other direct platform costs"
*Adjusted EBITDA excludes non-operating income, AIM admission
costs and share-based payments, and includes ROU asset depreciation
and ROU liability interest. It 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 by Average AUA
Revenue
AUA at 30 June 2019 was GBP15.3bn, an increase of 6.9 per cent
over the same point in the prior year and compares to a decrease in
the FTSE All-share index of 3.5 per cent over the same period. The
GBP1.4bn increase in AUA in the current year incorporates the
impact of significant market movements of GBP1.2bn as well as net
inflows of GBP246m, which were below expectations due, primarily,
to a combination of the difficult external environment and the
impact of increased outflows from a small number of firms that have
been acquired by consolidators.
Average AUA of GBP14.7bn (up 6.3 per cent over the 6 months to
30 June 2018) reflects the impact of the recovery in markets from
the position at the start of the year as well as the volatility
within the period. This compares to a growth in net revenue of 4.6
per cent to GBP22.1m (2018 H1: GBP21.1m) and reflects a lower
blended revenue yield of 30.2 basis points (2018 H1: 30.8 basis
points and 2018 FY: 30.6 basis points) that was in line with our
expectations. The blended revenue yield incorporates the impact of
renegotiated contractual terms with Paradigm with effect from the
beginning of the year, as well as the fee tiering structure
applicable to large client portfolios.
Costs
The terms of our revised contractual arrangements with Genpact
and Bravura took effect from November 2018 and include a number of
adjustments to our cost base, primarily with regards to AUA related
costs and other direct platform costs.
AUA related costs of GBP5.0m decreased by GBP0.7m (or 11.9 per
cent) from the prior year, at an average cost of 6.8 basis points
(2018 H1: 8.2 basis points). This reflects the contractual
provisions within the restructured agreements as well as, to a
lesser extent, the impact of service credits and the tiering
benefits within a significant component of these costs. A similar
result is anticipated in respect of this cost category in the
second half of the year.
Other direct platform costs increased by GBP0.4m (from GBP0.6m
to GBP1.0m), representing the costs of surround platform licence
fees (GBP0.4m and marginally lower than in the prior year) and
other platform-related costs such as correspondence, bank charges
and remediation of GBP0.6m, which have been reallocated from 'other
costs' to achieve better presentation of our total cost base. These
costs increased by GBP0.4m, from GBP0.2m to GBP0.6m, largely due to
our revised technology and administration relationships resulting
in the responsibility for additional printing and postage costs and
increased provisions for errors and compensation. Consistent with
guidance given previously, we anticipate a significant increase in
other direct platform costs in the second half of the year, as a
consequence of Nucleus taking over the responsibility for platform
hosting and production support from Genpact. The expected cost of
these services, and other direct platform costs as a whole, remains
consistent with our expectations.
Platform development costs of GBP1.1m were more in line with
expectations and our stated plans, as the direct contractual
relationship with Bravura and access to a dedicated Bravura
development team allowed for the completion of a further platform
upgrade in February, the delivery of substantial propositional,
regulatory and other change, and investment in testing software and
other tools. Given the positive momentum established in the first
half of 2019, we will still seek to achieve our targeted
expenditure on platform development of GBP3m per year.
Staff costs were GBP7.3m for the period, an increase of 4.2 per
cent on the prior year. The number of full-time equivalent
employees increased from 204 to 229 (an increase of 12.3 per cent)
and from 218 at the start of the year, predominantly as a result of
ongoing investment in our technology, change management, client
servicing and operations teams. Total staff costs were below
expectations, partly as a result of delayed recruitment (which in
turn was largely in response to the challenging trading
environment) and partly due to lower performance-related
remuneration provisions.
Other costs increased by 7.6 per cent to GBP3.1m (2018 H1:
GBP2.9m). These costs, which include the costs of our larger office
premises, the incremental costs associated with being a quoted
business, higher FSCS levies and the increased overhead costs
attributable to the increasing size of the business, were in line
with expectations.
IFRS 16 impact
With effect from 1 January 2019 the group implemented IFRS 16
Leases, the details and impact of which are set out in the changes
in accounting policies note below. To provide a consistent and
comparable indication of financial performance, adjusted EBITDA has
been determined on a basis consistent with that applied in the 2018
annual report and financial statements. The required adjustment
relates to IFRS 16-derived right of use (ROU) asset depreciation
and ROU liability interest, which are included within other costs
in the financial review.
Reconciliation of statutory to alternative performance
measure
Six months Six months Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
Group GBP'000 GBP'000 GBP'000
Depreciation 568 277 585
Finance costs 91 1 7
Depreciation and finance costs
on a statutory basis 659 278 592
less:
ROU asset depreciation included (218) - -
in other costs
ROU liability interest included (90) - -
in other costs
Depreciation and finance costs
per financial review 351 278 592
comprising:
Depreciation 350 277 585
Interest expense 1 1 7
Operating margin
Our operating margin (as reflected by the adjusted EBITDA
margin) decreased against H1 2018, which benefitted from the
unusually low level of platform development expenditure incurred in
that period.
Dividend
During the first half of the year, we recommended and paid a
final dividend in respect of the 2018 financial year of GBP2.7m (or
3.6 pence per share). This compares to a pre-admission dividend of
GBP2.7m that was declared and paid in June 2018.
The directors have, in line with our dividend policy, declared
an interim dividend of 1.5 pence per share. This dividend amounts
to a total payment of GBP1.1m and will be paid on 18 October 2019
to shareholders on the register on 20 September 2019, with an
ex-dividend date of 19 September 2019.
Cash flow
Although we continue to achieve a high conversion rate of
operating profit to cash, this is not fully reflected in the
movement in cash and cash equivalents during the period. This is
primarily due to the build up and subsequent settlement of trade
and other payables balances at the end of 2018 that related to the
termination of the previous outsourced services ageement and the
commencement of the revised contractual arrangements.
30 June 2019 31 December
Group financial position 2018
GBP'000 GBP'000
------------- ------------
Cash and cash equivalents 17,056 17,672
------------- ------------
Net assets 18,063 17,473
------------- ------------
Capital adequacy ratio 14.8% 14.5%
------------- ------------
Capital adequacy ratio -
underlying 18.3% 20.6%
------------- ------------
Excess capital - above 8%
regulatory requirement 6,645 5,393
------------- ------------
Financial position
Nucleus continues to be funded entirely by equity capital and
has a high level of free cash. 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 interim
financial statements.
Stuart Geard
Chief financial officer
Consolidated statement of comprehensive income
Restated*
Note Unaudited Unaudited
six months six months
to 30 June to 30 June
2019 2018
GBP'000 GBP'000
Continuing operations
Revenue* 25,210 24,234
Cost of sales* (10,233) (9,490)
------------ ------------
Gross profit 14,977 14,744
Other operating income 13 11
Administrative expenses (10,746) (11,710)
------------ ------------
Operating profit 4,244 3,045
Finance income 27 3
Finance costs (91) (1)
------------ ------------
Profit before income tax 4,180 3,047
Income tax 7 (808) (893)
------------ ------------
Profit for the period 3,372 2,154
============ ============
Items that may be subsequently
reclassified to profit or loss - -
------------ ------------
Comprehensive income attributable
to equity holders 3,372 2,154
============ ============
Earnings per share (pence)
Basic 6 4.4 2.8
Diluted 6 4.4 2.8
*Details of the 2018 revenue presentation restatement are set
out in note 1.
Consolidated statement of financial position
Unaudited Audited
Note 30 June 31 December
2019 2018
GBP'000 GBP'000
Assets
Non-current assets
Right of use lease assets 3,734 -
Property, plant and equipment 1,820 2,029
Deferred tax 116 163
---------- -------------
5,670 2,192
Current assets
Trade and other receivables 9,874 10,611
Investments in securities 123 84
Tax receivable - 541
Cash and cash equivalents 17,056 17,672
---------- -------------
27,053 28,908
Total assets 32,723 31,100
========== =============
Equity
Shareholders' equity
Called up share capital 9 76 76
Capital redemption reserve 53 53
Share-based payment reserve 224 150
Treasury shares (81) (30)
Retained earnings 17,791 17,224
Total equity 18,063 17,473
========== =============
Liabilities
Non-current liabilities
Lease liabilities 3,974 -
Financial liabilities - 6
Provisions 3 48 32
Deferred tax 41 41
---------- -------------
4,063 79
Current liabilities
Lease liabilities 516 -
Financial liabilities - 87
Trade and other payables 8,540 12,134
Tax payable 763 740
Provisions 3 778 587
---------- -------------
10,597 13,548
---------- -------------
Total liabilities 14,660 13,627
========== =============
Total equity and liabilities 32,723 31,100
========== =============
The unaudited consolidated interim financial statements were
approved and authorised for issue by the Board and were signed on
its behalf on 9 September 2019.
S J Geard
Director
Consolidated statement of changes in equity
Called Retained Share premium Treasury
up share earnings shares
capital
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2019 76 17,224 - (30)
----------- ----------- ---------------- -----------
IFRS 16 conversion - (71) - -
Changes in equity
Other movements - - - -
Profit for the period - 3,372 - -
Dividend paid - (2,734) - -
Purchase of own shares - - - (51)
Share-based payments charge - - - -
Balance at 30 June 2019 76 17,791 - (81)
----------- ----------- ---------------- -----------
Called Retained Share premium Treasury
up share earnings shares
capital
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2018 21 13,475 - -
Changes in equity
Issue of share capital 50 (50) - -
Profit for the period - 2,154 - -
Dividends paid - (2,658) - -
Transfer on share conversion - 2,426 - -
Share-based payments charge - - - -
Balance at 30 June 2018 71 15,347 - -
----------- ----------- ---------------- -----------
Consolidated statement of changes in equity (continued)
Share-based
Capital redemption payment
reserve reserve Fair value
reserve Total
equity
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2019 53 150 - 17,473
--------------------- ------------ ------------- ---------
IFRS 16 conversion - - - (71)
Changes in equity
Other movements - - - -
Profit for the period - - - 3,372
Dividend paid - - - (2,734)
Purchase of own shares - - - (51)
Share-based payments charge - 74 - 74
Balance at 30 June 2019 53 224 - 18,063
--------------------- ------------ ------------- ---------
Share-based
Capital redemption payment
reserve reserve Fair value
reserve Total
equity
GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2018 1 2,646 39 16,182
Changes in equity
Issue of share capital - - - -
Profit for the financial
period - - - 2,154
Dividends 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
--------------------- ------------ ------------- ---------
Consolidated statement of cash flows
Unaudited
Note six months Unaudited
to 30 June six months
2019 to 30 June
GBP'000 2018 GBP'000
Cash flows from operating activities
Cash inflow from operations 4 2,782 4,445
Interest received 27 3
Interest paid (91) -
Income tax paid (199) (1,457)
------------ --------------
Net cash inflow from operating
activities 2,519 2,991
------------ --------------
Cash flows from investing activities
Purchase of tangible fixed assets (194) (239)
Purchase of investments (39) -
Net cash outflow from investing
activities (233) (239)
------------ --------------
Cash flows from financing activities
Dividends paid (2,734) (2,658)
Interest paid - (1)
Purchase of Treasury shares (51) -
Repayment of finance leases - (54)
Lease payments - principal (115) -
Net cash outflow from financing
activities (2,900) (2,713)
------------ --------------
(Decrease)/Increase in cash and
cash equivalents (614) 39
Cash and cash equivalents at
beginning of period 17,672 16,992
Effects of exchange rate changes (2) (3)
Cash and cash equivalents at
end of period 17,056 17,028
============ ==============
Notes to the consolidated interim 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 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 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.
With the exception of the introduction of IFRS 16, effective
from 1 January 2019, as detailed further in note 11, the same
accounting policies, methods of calculation and presentation have
been followed in the preparation of the consolidated interim
financial statements for the six months to 30 June 2019 as were
applied in the audited financial statements for the year ended 31
December 2018. Those statutory accounts which have been filed with
the registrar of companies contained an unqualified audit report,
did not reference to any matters to which the auditor drew
attention by way of emphasis without qualifying the report, and did
not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
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.
Basis of consolidation
The 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 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 reportable 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 AUA on the platform,
gross and net inflows, 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 and amended standards adopted in the 2019 consolidated
interim financial statements
The group adopted IFRS 16 Leases effective 1 January 2019.
Details of the impact are set out in note 11 Changes in accounting
policies below. Other new and amended standards did not have any
impact on the group's accounting policies.
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 and reclassifications to
cost of sales
As part of the consideration of the impact of IFRS 15,
management reviewed the principal and agency relationships relating
to platform income. Management considered that separate revenue and
cost presentation would more accurately reflect the revenue and
cash flows arising from the contracts with customers. Platform
related mailings, bank charges and errors and losses, which were
previously disclosed in Administrative expenses, have been
reclassified to Cost of sales. There is no impact on the reported
profit or net assets of the group as a result of these
restatements.
Six months Adjustment Restated
to 30 June
30 June 2018
2018 GBP'000
GBP'000
Continuing operations
Revenue 21,645 2,589 24,234
Cost of sales (6,697) (2,793) (9,490)
----------- ----------- ---------
Gross profit 14,948 (204) 14,744
Other operating income 11 - 11
Administrative expenses (11,914) 204 (11,710)
----------- ----------- ---------
Operating profit 3,045 - 3,045
Profit for the financial period 2,154 - 2,154
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 Financial
assets Financial assets Total
at fair liabilities at amortised
value through at amortised cost
profit cost
and loss
GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2019
Financial assets
Investments in securities 123 - - 123
Cash and cash equivalents - - 17,056 17,056
Trade and other receivables - - 9,873 9,873
---------------- --------------- --------------- ---------
Total financial assets 123 - 26,929 27,052
---------------- --------------- ---------------
Non-financial assets 5,671
Total assets 32,723
=========
Financial liabilities
Lease liabilities - 4,491 - 4,491
Trade and other payables - 8,539 - 8,539
Total financial liabilities - 13,030 - 13,030
---------------- --------------- --------------- ---------
Non-financial liabilities 1,630
Total liabilities 14,660
=========
Financial
assets Financial Financial
at fair liabilities assets
value through at amortised at amortised Total
profit cost cost
and loss
GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 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
=========
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.
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 Level 2 Level Total
1 3
GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2019
Investments in securities 123 - - 123
At 31 December 2018
Investments in securities 84 - - 84
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 30 June 2019 was GBP168,828
(2018: GBP183,929).
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 1-5 years > 5 years Total
months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2019
Financial assets
Cash and cash equivalents 17,056 - - - 17,056
Investments - 123 - - 123
Trade and other receivables 9,395 478 - - 9,873
----------- -------- ---------- ---------- --------
26,451 601 - - 27,052
=========== ======== ========== ========== ========
< 3 months 3-12 1-5 years > 5 years Total
months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 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 1-5 years > 5 years Total
months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2019
Financial liabilities
Trade and other payables 7,590 949 - - 8,539
Lease liabilities 164 353 2,055 1,919 4,491
----------- -------- ---------- ---------- --------
7,754 1,302 2,055 1,919 13,030
=========== ======== ========== ========== ========
< 3 months 3-12 1-5 years > 5 years Total
months
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 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. Provisions
30 June 31 December
2019 2018
GBP'000 GBP'000
Client compensation 620 429
Outsourced service 158 158
Dilapidations 48 32
826 619
======== ============
Analysed as follows:
Current 778 587
Non-current 48 32
826 619
==== ====
Client Outsourced Dilapidations
compensation service Total
GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2018 429 158 32 619
============== =========== ============== ========
Provided during period 270 - 16 286
Utilised during period (19) - - (19)
Unused amounts reversed
during period (60) - - (60)
At 30 June 2019 620 158 48 826
============== =========== ============== ========
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 next twelve months.
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
The dilapidations provision relates 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
Six months Six months
to 30 June to 30 June
2019 2018
GBP'000 GBP'000
Profit before income tax 4,180 3,047
Depreciation 568 277
Share-based payments charge 74 69
Bad debt provision 116 15
Increase in trade and other receivables (152) (158)
Decrease in operational platform prefunding 774 877
Decrease in trade and other payables (3,052) (50)
Increase in other provisions 208 367
Interest paid 91 1
Interest received (27) (3)
Net exchange differences 2 3
------------ ------------
2,782 4,445
============ ============
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 30
At 1 January Non-cash June
2018 changes Cash flows 2018
GBP'000 GBP'000 GBP'000 GBP'000
Finance lease liabilities 200 (1) (54) 145
=============== =========== ============= ========
At 30
At 1 January Non-cash June
2019 changes Cash flows 2019
GBP'000 GBP'000 GBP'000 GBP'000
Lease liabilities 4,606 - (115) 4,491
=============== =========== ============= ========
Lease liabilities, which includes items previously classified as
finance lease liabilities, increased by GBP4,513k as a result of
adopting IFRS 16 Leases effective 1 January 2019.
6. Earnings per share
Earnings per share has been calculated by dividing the total
profit for the period by the weighted average number of ordinary
shares in issue during the period.
Six months Six months
to 30 June to 30 June
2019 2018
GBP'000 GBP'000
Profit for the period 3,372 2,154
Weighted average number of ordinary shares
(basic) 75,895,905 75,933,359
SIP scheme 37,455 -
LTIP scheme 90,794 -
Weighted average number of ordinary shares
(diluted) 76,024,154 75,933,359
Six months Six months
to 30 June to 30 June
2019 2018
Basic/diluted earnings per ordinary share
(pence) 4.4 2.8
The weighted average number of ordinary shares reflects the
number of shares in issue following the listing of the Company on
26 July 2018.
The company grants 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 1,840,702
of which 77,600 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
Tax is charged at 19% for the six-month period ended 30 June
2019 (30 June 2018: 29%), representing the best estimate of the
average annual effective tax rate expected to apply for the full
year, applied to the pre-tax income for the six-month period. The
prior period tax rate reflects the effect of AIM admission costs
not deductible for tax purposes.
8. Dividends
Six months Six months
to 30 June to 30 June
2019 2018
GBP'000 GBP'000
GBP0.01 ordinary share dividends* (2018:
142p per share) - 1,577
GBP0.001 ordinary share dividends* (3.6p 2,734 -
per share)
B ordinary share dividend (2018: 142p per
share) - 1,081
2,734 2,658
============ ============
* The Employee share ownership trust waived its right to receive
dividends during the year.
9. Share capital
30 June 31 December
2019 2018
GBP'000 GBP'000
Allotted, called up and fully paid
Ordinary shares of GBP0.001 each: 76,473,360 76 76
76 76
======== ============
Employee benefits trusts hold a total of 587,913 shares (2018:
561,442)
10. Related party transactions
Entities with significant influence over the company
Transactions with Nucleus IFA Company Limited (NIFAC) and Sanlam
UK Limited (Sanlam) were as follows:
Six months Six months
to 30 June to 30 June
2019 2018
GBP'000 GBP'000
NIFAC
Dividend paid to NIFAC by NFG - 632
30 June 31 December
2019 2018
GBP'000 GBP'000
Amounts owed to NFG 15 42
Six months Six months
to 30 June to 30 June
2019 2018
GBP'000 GBP'000
Sanlam
Amounts charged by Sanlam in respect of
the Onshore Bond 222 204
Dividends paid to Sanlam by NFG 1,437 1,418
30 June 31 December
2019 2018
GBP'000 GBP'000
Amounts owed to Sanlam in respect of board
fees 42 176
Amounts owed to Sanlam in respect of fees
for the Onshore Bond 38 72
Amounts owed to Sanlam in respect of tax
collected from the Onshore Bond 650 97
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 Nucleus Financial Services
Limited, Nucleus IFA Services Limited and Nucleus IMX Limited.
Other related parties
During the period the company was charged GBPNil (2018:
GBP390,000) for services provided by Craven Street Capital Limited
of which Angus Samuels is a director. As at the period end, there
were no outstanding balances.
11. Changes in accounting policies
IFRS 16 Leases
In adopting this standard, which became effective from 1 January
2019, the modified retrospective approach was used, resulting in
the cumulative effect of application on 1 January 2019 being
recognised through an adjustment to opening retained earnings. On
adoption the group recognised lease liabilities in relation to
previously classified operating property leases. The liability was
measured at the present value of future lease payments, discounted
using an estimated incremental borrowing rate of 4%. The associated
right-of-use asset was measured on a retrospective basis as if the
new standard had always applied. There were no changes relating to
the recognition of finance leases. Use was made 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.
Effect
31 December of IFRS 1 January
2018 16 2019
GBP'000 GBP'000
Assets
Non-current assets
Right of use lease assets - 4,013 4,013
Property, plant and equipment 2,029 (112) 1,917
Deferred tax 163 - 163
------------ ----------
2,192 3,901 6,093
Current assets 28,908 - 28,908
Total assets 31,100 3,901 35,001
============ ========= ==========
Total equity 17,473 (71) 17,402
============ ========= ==========
Liabilities
Non-current liabilities
Lease liabilities - 4,217 4,217
Financial liabilities 6 (6) -
Provisions 32 32
Deferred tax 41 - 41
------------ --------- ----------
79 4,211 4,290
Current liabilities
Lease liabilities - 389 389
Financial liabilities 87 (87) -
Trade and other payables 12,134 (541) 11,593
Tax payable 740 740
Provisions 587 - 587
------------ --------- ----------
13,548 (239) 13,309
------------ --------- ----------
Total liabilities 13,627 3,972 17,599
============ ========= ==========
Total equity and liabilities 31,100 3,901 35,001
============ ========= ==========
12. Events after the reporting period
There were no subsequent events that required adjustment to or
disclosure in the financial statements for the period from 30 June
2019 to the date upon which the unaudited consolidated interim
financial statements were available to be issued.
Independent review report to Nucleus Financial Group plc
Report on the consolidated interim financial statements
Our conclusion
We have reviewed Nucleus Financial Group plc's consolidated
interim financial statements (the "interim financial statements")
in the interim report of Nucleus Financial Group plc for the 6
month period ended 30 June 2019. 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 2019;
-- the 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 notes to the interim financial statements.
The interim financial statements included in the interim report
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, 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 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 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 considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Edinburgh
9 September 2019
Definitions and glossary of technical terms
The following definitions apply throughout this document:
Industry-specific Included within this results announcement
financial are alternative measures that the directors
performance measures 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, and include ROU asset depreciation
and ROU liability interest.
---------------------------------------------------
Adjusted EBITDA margin Adjusted EBITDA expressed as a percentage
of net revenue.
---------------------------------------------------
Adjusted earnings Value of adjusted profit after tax divided
per share (EPS) by weighted average number of shares.
---------------------------------------------------
Adjusted profit after The adjusted profit before tax less the
tax 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 Revenue is divided by the average assets
(bps) 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.
---------------------------------------------------
EBITDA Earnings before interest, tax, depreciation
and amortisation.
---------------------------------------------------
Gross inflows Value of cash and assets received onto
the platform.
---------------------------------------------------
Industry-specific Included within this results announcement
financial- are alternative measures that the directors
performance measures 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.
---------------------------------------------------
ROU asset/liability Right of use asset/liability
---------------------------------------------------
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.
-------------------------------------------------
FSCS Financial Services Compensation Scheme
-------------------------------------------------
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).
-------------------------------------------------
NIFAC Nucleus IFA Company Limited
-------------------------------------------------
NFS Nucleus Financial Services Limited.
-------------------------------------------------
"Nucleus" or the "Group" The Company and its Subsidiaries.
-------------------------------------------------
LTIP Long term incentive plan
-------------------------------------------------
PROD rules Product Intervention and Product Governance
Sourcebook rules
-------------------------------------------------
Sanlam Sanlam UK Limited.
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IR KKLFBKKFXBBQ
(END) Dow Jones Newswires
September 10, 2019 02:01 ET (06:01 GMT)
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