Thursday 8 August 2019 8:06 am

New business down at Hargreaves Lansdown as Woodford scandal bites

Hargreaves Lansdown has seen a drop in net new business as the impact of the Neil Woodford saga on the investment provider begins to become clear, but revenues and assets under administration still rose. 

The numbers

Hargreaves Lansdown reported a four per cent drop in net new business for the year ending 30 June, which fell from £7.6bn in 2018 to £7.3bn

Total assets under administration climbed eight per cent, growing to £99.3bn compared to last year’s £91.6bn

Revenue also rose, increasing 7 per cent to £480.5m

The company said its pre-tax profit was £305.8m, a five per cent increase, and that the total dividend per share for the year would be 42p, also a five per cent rise. 

Hargreaves said it now has a record 1.2m active clients, with 133,000 joining over the course of the year.

Why it’s interesting

Hargreaves Lansdown has been under a lot of scrutiny for its support of Neil Woodford’s now-suspended equity income fund, which the company continued to recommend to investors right up until it was gated on 3 June after becoming overwhelmed by withdrawals. 

Because these results only cover the year up to the 30 June, they only show the initial impact of the suspension on the investment platform. 

The gating of the fund affected over 290,000 Hargreaves Lansdown investors – about a quarter of the its total. The company is waiving fees for clients invested in the fund, at an estimated costing of £360,000 a month. 

Four Hargreaves executives, including chief executive Chris Hill, announced yesterday that they would not take bonuses this year because of the Woodford scandal.  

Hargreaves will still be encouraged by the increases seen in these results, however, which come during a challenging period for the investment industry.

Fincapp analyst Nik Lysiuk said the results were “good”, with “no surprises”, but suggested that Hargreaves should have recognised “the list of potential dangers emanating from such a close relationship with Woodford” earlier.

Shares in Hargreaves Lansdown were up just over six per cent in early trading, hitting 1,944.50p compared to 1,833p at yesterday’s close.

What Hargreaves Lansdown said

Responding to the results, Hill said: “We are pleased with the underlying strength and resilience of our business and our increase in market share.”

Acknowledging the fallout from the Woodford scandal, he said he had apologised to affected clients “because we all share their disappointment and frustration.”

“In these difficult times we recognise the financial and personal impact the gating of the fund has had on them,” Hill continued. “Our priority is to support them, keep them informed and ensure that the fund reopens as soon as is practicable.”

“We recognise that there are industry headwinds,” he added, “but we continue to execute our strategy and remain on track.”