29th Jan 2019 11:54
LONDON (Alliance News) - Hargreaves Lansdown PLC on Tuesday reported a drop in assets, falling short of consensus, but managed to both increase its profit and interim payout.
Shares in the FTSE 100-listed financial services firm were down 5.2%, the worst performer in London's blue chip index. In the past 12 months, Hargreaves shares have slid 11%.
As of the end of December, Hargreaves' assets under administration fell 6.2% to GBP85.9 billion from GBP91.6 billion at June 30. On a year-on-year basis, assets under administration declined 0.2% from GBP86.1 billion.
Hargreaves' suffered a loss of GBP8.2 billion on negative market movements in the half.
However, Hargreaves Lansdown did achieve growth in client numbers, by 45,000 to 1.1 million, but net new business inflows were GBP2.53 billion, down 24% year-on-year.
Hargreaves Lansdown's net revenue climbed 9.4% to GBP236.4 million from GBP216.0 million, while pretax profit increased 4.4% year-on-year to GBP153.4 million from GBP146.9 million.
Consensus estimates expected Hargreaves to record first half profit of GBP156 million, based on expected net new business of GBP2.6 billion and closing assets under administration of GBP88 billion.
Over the second quarter ended December 31 Hargreaves assets under administration decreased 8.7%.
At September 30 the financial services firm's assets stood at GBP94.1 billion but negative stock market movements resulted in GBP9.4 billion being wiped off over the quarter.
In the three months to December Hargreaves still managed to achieve GBP1.2 billion in net new business.
Hargreaves' assets increased 2.7% over the first quarter ended September to GBP94.1 billion from an opening GBP91.6 million, driven by GBP1.3 billion in net new business and GBP1.2 billion in positive market movements.
"External market conditions have impacted investor confidence and driven industry-wide net outflows over this short reporting period," said Chief Executive Chris Hill.
"This includes our own UK measure of investor confidence, which is at its lowest point since the index was launched in 1995. The Investment Association has reported the worst period for industry net retail fund outflows ever over the three months to November 2018."
Shore Capital said: "Hargreaves remains a flow-monster, dominating the direct to client platform space. Having recently negotiated bigger discounts for clients from fund providers as part of its relaunched Wealth 50 list of favourite funds, we don't see any immediate pressure on Hargreaves' own platform fees."
The firm is paying a 10.3 pence interim dividend, increased 2.0% from 10.1p paid a year prior.
Hargreaves Lansdown said this reflects its confidence in its financial position and its business model, and it remains "committed" to paying special dividends when it has sufficient extra cash.
The firm's operating costs increased 20% to GBP85.1 million from GBP70.9 million a year ago. Hargreaves attributed this to "consciously and significantly" increasing its investment in the company, including in staff, digital marketing, and technology.
"The diversified nature of Hargreaves Lansdown has enabled us to continue growing despite a period of geopolitical uncertainty, market volatility and weak investor confidence," added Hill.
"We have a significant long-term market opportunity and our recent investment in service and developing our proposition are bringing real benefits to the business and our clients, both in difficult times such as the present and as and when conditions improve."
Peel Hunt agreed, believing Hargreaves remains a "unique asset".
The stockbroker said: "Today's results were modestly below consensus expectations, with assets under administration levels and profitability reflecting difficult market conditions and continued investment in the business.
"Like most in the sector, forecasts will move lower - we anticipate consensus moving about 5% down - although this does not change the long-term attractions of the business model."
Looking ahead, Brexit will continue to weigh on markets and consumer confidence until the uncertainty is resolved.
Its second half is traditionally stronger than the first, Hargreaves Lansdown continued, but it said Brexit uncertainty "is clearly not helpful".
"Irrespective of this short term volatility in markets and the impact on consumer confidence, the long-term growth and structural opportunity in the UK savings market continues to excite us," said Hill.
"We believe our platform and investments position us well to capture this growth and deliver long-term growth for our shareholders."
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