Shore Capital is delighted to be acting as Nominated Adviser, Sole Bookrunner and Broker on the AIM IPO of Nucleus Financial Group Limited
2 July 2018
Nucleus Financial Group Limited
Intention to Float on AIM
Nucleus, a leading independent wrap platform provider, today announces its intention to apply for admission of its Ordinary Shares to trading on the AIM market of the London Stock Exchange. Dealings are expected to commence on AIM in late July 2018.
Nucleus provides independent wrap platform services to over 2,200 adviser users across more than 800 financial adviser firms and is responsible for assets under administration (“AUA”) of £14.3 billion on behalf of more than 90,000 customers as at 31 May 2018.
The multi-award winning Nucleus wrap platform (the “Platform” or the “Nucleus Wrap”) offers a range of custody, trading, payment, reporting, fee-handling, research and integration services across a variety of tax wrappers and asset choices including cash, OEICs, Unit Trusts, offshore funds, structured products and listed securities, including ETFs and investment trusts.
Shore Capital is acting as Nominated Adviser, Sole Bookrunner and Broker to the Company and Craven Street Capital Limited is acting as Financial Adviser to the Company
Highlights:
Well positioned within a structurally growing market
- The UK financial planning and wealth management market is growing due to demographic, lifestyle and regulatory factors, most notably in respect of the increase in ISA allowances and greater pension flexibility and financial advisers have increasingly come to rely on the efficiencies and capabilities offered by platforms to deliver their proposition.
- Since the end of 2012, AUA in the advised platform market has grown from £123 billion to around £350 billion and is projected to grow to £745 billion by the end of 2021 (Source: Fundscape Platform Market Report Q3 2017’s ‘Realistic Channel Projections’)
Long-term engagement with leading, forward-looking advisers
- Nucleus requires financial advisers to meet stringent acceptance criteria and as a result, the Directors believe that the financial advisers that use the Nucleus wrap are generally younger and generate greater revenue per adviser than wider market averages
- Users are encouraged to participate in user sessions and platform development groups to help stimulate user engagement and moderate the Group’s product development costs
Competitive online and offline capabilities, consistently reflected in major awards
- The Nucleus wrap is designed to meet the requirements of adviser users and is developed to offer as much online capability as possible, supported as necessary with high quality offline support
- Nucleus has won CoreData’s ‘best medium sized platform’ for the last six years, the Schroders ‘platform of the year’ award for the last two years and recently won ‘best platform’ at the Money Marketing Awards. In addition, the Platform’s ‘Narrate’ portfolio reporting tool has attracted significant third-party recognition since launch in 2015, receiving awards at the Schroders UK Platform Awards, Money Marketing Awards and the ScotlandIS Digitech Awards
Blend of in/outsourced technology balances cost with agility, scalability and resilience
- The Nucleus wrap is designed to meet the changing requirements of advisers and customers through a blend of in-house and outsourced technology
- In-house technologies are increasingly preferred by the Group to provide front-end differentiation and outsourced technology is selected where specialist software can offer performance, cost or scalability advantages
Operational discipline supports modern and flexible cost base
- Consistent with its approach to marketing and technology, Nucleus has in the past operated with a top quartile AUA per full time employee metric (source: Finalytiq, 2016) and very competitive cost efficiencies when expressed as a percentage of AUA (source: Company analysis)
- Outsourcing core technology, back office operations and insured bond tax wrappers has allowed the Group to retain a highly competitive cost base through simplicity and a focus on added value activities
Simple revenue model has delivered consistently strong organic growth
- 100 per cent. of income is derived from Platform fees that are recurring subject to AUA levels, themselves driven by net flows of AUA to/from the Platform and by market movements
- Nucleus’ AUA and revenues have grown at compound annual rates of 25 per cent. and 24 per cent. respectively between 31 December 2012 and 31 December 2017 and the Directors believe the Group has the potential to continue growing organically as a result of secular growth and by signing up new users and achieving greater penetration of existing users
Opportunity to leverage data insights for product development
- The Group has established a business intelligence team which can provide detailed insight into user behaviour and trends in customer portfolios
- The Directors believe this capability will allow the Group to enhance the Platform in accordance with customer requirements and create new revenue-generating opportunities
Profitable, clean balance sheet, cash generative and opportunity for operational leverage
- The Group’s profit before tax has grown from £0.03 million in the year to 31 December 2012 to £5.1 million in the year to 31 December 2017, with year-end cash balances growing from £3.4 million to £17.0 million in the same period
- Approximately one third of the Group’s cost base has been linked to AUA between 2015 and 2017, and the Directors anticipate that the Group will benefit from operational leverage as AUA continues to grow
- As a result of the cash generative business model, the Board has adopted a policy of paying interim and final dividends such that the annual pay-out ratio represents between 60 and 70 per cent. of the Group’s profit after tax, adjusted for any exceptional items
Experienced management team and Board
- The Group’s executive management team has more than 60 years of collective experience in the platform market
- David Ferguson co-founded the Group in 2006, growing it from a team of two to more than 200 employees. He is Her Majesty’s Treasury Fintech Envoy for Scotland and the Chairman of FinTech Scotland
David Ferguson, CEO and founder of Nucleus, commented:
“We started this business in 2006 to create value through greater strategic alignment of advisers and their clients. Our commitment to this goal drives the development of our award-winning platform and has enabled us to grow from AUA of £100 million in 2007 to more than £14.3 billion today.”
“Nucleus has been an exciting journey so far and we expect this Admission to AIM to mark an important milestone in the business’s maturity and to open up new opportunities for us. We remain committed to keeping adviser/client alignment and transparency at the heart of what we do and to continue developing a market-leading platform and best in class customer service to deliver on our objectives.”
Angus Samuels, Chairman of Nucleus, added:
“Nucleus is a business that has been built in collaboration with advisers and we are proud to be embarking on the next stage of the Company’s development together. This is an exciting moment for the business and one we could not have achieved without the support of our dedicated team and community of supportive adviser users. We are looking forward to life as a listed company and the opportunities that lie ahead of us.”
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