■ Assets under management up 6 per cent in first quarter of 2011
■ £1.1bn net new inflows this year
■ Operating revenue up 36 per cent in quarter to end-March
Assets within the group's Vantage trading platform rose in the first quarter from £20.9bn to £22.1bn, boosted by a net £1.1bn inflow of net new funds. This is the most active time of the year as investors move to take full advantage of their investment allowances ahead of the new tax year, and new contributions to individual savings accounts (Isas) jumped from £812m last year to £1.09bn. Investment in personal pensions was also strong, rising from £1.35bn to £1.65bn in the full tax year to 5 April 2011. Overall client numbers were up by 20,000 in the third quarter to 366,000.
Operating revenue for the first nine months of the current financial year rose 32 per cent to £150.3m and of this over three quarters was made up of recurring income.
Hold. Hargreaves Lansdown has ticked the right buttons with record inflows and more customers, and the group is on target to meet our estimates for a 47 per cent jump in pre-tax profits to £133m for the 12 months to 30 June 2011, giving an EPS of 20.9p. In the latest three-month period, the core Vantage platform has delivered 51 per cent growth in revenues year-on-year, and income from the annuities business is up by 50 per cent in the financial year so far. The potential for further growth is considerable, with the group currently controlling just 0.5 per cent of UK pension assets. More business is expected to be generated by customers seeking to improve their pension savings. Expect full-year EPS of 20.9p, rising to 26.3p in 2011-12.
Canaccord Genuity says...
Hold. Hargreaves Lansdown has considerable potential to grow further, and clients are clearly attracted by the Vantage platform and the advantage of using tax wrappers as a means of limiting tax liabilities. The performance of Vantage has been impressive and its contribution to group revenue has risen from 70 per cent to 77 per cent. We will be looking to upgrade our full-year EPS estimate from 18.6p towards the consensus figure of 19.8p, but given the shares are trading on 31 times 2011 earnings, we are retaining our hold position.
Hargreaves Lansdown enjoys strong customer loyalty that allows it to pull in extra funds. And, while pressure is likely to mount on disposable income, the group is planning a number of new initiatives to attract clients, including a junior Isa that should be on offer later this year. However, rated on 23 times 2012 forecast earnings, at 615p, the shares look up with events. Fairly priced.