Hargreaves Lansdown profits jump by a fifth

Emma Haslett
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Hargreaves Lansdown was told by the FCA it must find another £50m in capital reserves (Source: Hargreaves Lansdown)

Strength in markets is clearly working out for Hargreaves Lansdown, as profits rose by more than a fifth.

The figures

Pre-tax profits rose 21 per cent to £265.8m in the year to the end of June, with net revenue rising 18 per cent to £385.6m.

Total assets under administration jumped 28 per cent to £79.2bn, while net new business inflows rose 15 per cent to £6.9bn.

However, operating costs rose to £126.7m, up from £108.2m last year.

Shares were down one per cent at 1,343p in the first minutes of trading.

Read more: Hargreaves Lansdown's chairman is stepping down

Why it's interesting

There weren't many surprises in today's figures: earlier this month it published its unaudited results alongside an announcement it will not pay a special dividend for the first time since its IPO in 2007.

That was thanks to a demand from the Financial Conduct Authority (FCA), which said that, "given the group's strong recent growth in scale and complexity", it must raise its capital surplus to the tune of £50m.

Thus, the company cut its total dividend by 15 per cent to 29p, although its ordinary dividend rose 20 per cent to 29p.

"Another strong year operationally for this asset gathering monster, albeit the share price is largely unchanged over the last 12 months," said Paul McGinnis, an analyst at Shore Capital Markets.

"While there are, and always have been, risks to HL’s superbly-executed business model, with the launch of Vanguard’s UK D2C platform (offering Vanguard passive fund only) and the FCA’s Platform review being the latest two, we think the market applies more weight to these risks than the more positive aspects around client growth and the opening up of the £700bn plus cash savings market via HL’s digital deposit service later this year."

Read more: Hargreaves Lansdown cuts dividend as FCA demands it ups capital surplus

What Hargreaves Lansdown said

Chief executive Chris Hill said:

We have had a good year for gathering new clients and assets as a result of our relentless focus on the exceptional service we provide... There are considerable challenges for people in the current saving and investment environment but there are also opportunities, and Hargreaves Lansdown is ideally placed to help people make their investment decisions with confidence.

Read more: Hargreaves Lansdown profits jump as retail investors love the Brexit trade

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