EDINBURGH-based technology firm Nucleus Financial has said it expects to hire more staff in coming months after maintaining investment in growth in the first half but warned the impact of the Covid 19 coronavirus could weigh on markets for some time.
Nucleus supplies internet-based platforms that people can use to manage their investment portfolios.
The company was impacted by volatility in equity markets triggered by the coronavirus crisis in the first half.
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Markets plunged in the first quarter before recovering ground from April to June after central banks pumped huge amounts of money into the global financial system.
Nucleus suffered a small drop in the total value of assets under administration (AUA) on its systems in the six months to June overall, to £15.8 billion, from £16.1bn at December 31.
However, chief executive David Ferguson said the coronavirus had not dented the firm’s confidence in its long-term growth prospects.
Demand for platforms is being boosted by changes in the pensions world that are encouraging people to take more responsibility for saving for retirement.
“This is a five, ten, 20-year story,” said Mr Ferguson, who noted that Nucleus had been prepared to accept a reduction in profits in the first half in order to maintain investment at the levels directors felt were required.
“We made a conscious decision back in March that we were far more interested in the long-term potential for the company than in short-term profitability,” he said.
The company enhanced its core platform during the first half and continued work on a new service that it launched in August. The core platform was adapted to be able to handle scanned documents and e-signatures in response to the logistical challenges posed by the coronavirus.
While many firms have shed jobs in recent months, Nucleus has increased employee numbers.
The company has recruited 12 people since the lockdown started in March. Eight are in post and four are due to start work at the firm soon.
It employs around 250 people.
“We still plan to keep on hiring across different roles in the next six months,” said Mr Ferguson.
He added: “We have not furloughed any staff and will continue to take our wider stakeholder responsibilities seriously as the fallout from the pandemic becomes clearer. Among these responsibilities are our obligations in respect of diversity and inclusion, and we have refocused our efforts in this area.”
Mr Ferguson believes Nucleus is well positioned to win market share, grow its revenues and to increase its profit margins.
The company had £18.7m cash at the end of June and no borrowings.
However, directors felt the company should take a prudent approach in terms of paying dividends to shareholders, in order to retain cash for investment.
In April the company decided not to pay a second interim dividend in respect of the 2019 financial year, citing the exceptional and open-ended uncertainty caused by the Covid-19 pandemic and the rapidly changing environment.
It told investors yesterday: “Considering the ongoing uncertainty as a result of the Covid 19 pandemic … the directors do not believe that the outlook for societies, economies and markets has improved sufficiently (or that the downside risk of Covid 19 has reduced sufficiently) to declare a second interim dividend in respect of the 2019 financial year at this stage.”
Nucleus declared a 1p per share interim dividend for the current year, down from 1.5p per share last time.
The company has increased customer numbers to more than 100,000, from 95,657 at the end of June last year.
Revenues were broadly flat in the first half, at £25.1m, against £25.2m in the same period last year. Underlying earnings fell to £2.1m, from £4.6m.
Shares in the company closed down 5%, 7.5p, at 136.5p.
Edinburgh-based Aegon UK has expanded quickly in the platform market through acquisitions. The Dutch-owned firm decided the platform market offered better prospects than the traditional pensions business on which it had focused.
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