■ Record assets under administration
■ Strong inflow into Sipps and Isas
■ Vantage clients up to 413,500
The last three months leading up to the end of the tax year are traditionally the busiest for
The value of assets held within the group's direct-to-private investor platform, Vantage, rose by 11 per cent to £24.4bn, thanks to a £1.6bn positive move in equity markets and net new business inflows of £974m. Active Vantage client numbers rose by 17,500 to 413,500, while active account numbers rose 4 per cent to 631,000. New individual savings accounts (Isas) contributions held up well at £1.08bn, and investments into self-invested pension plans (Sipps) rose in the full tax year to April from £1.65bn a year earlier to £1.71bn.
Consequently, operating revenue in the third quarter rose 17 per cent to £175m, of which 80 per cent was recurring. Finances remain in good shape, too, with the group debt free and retaining a high capital surplus over regulatory requirements.
Add. Stronger net inflows have offset recent market weakness and, with strong cost control, Hargreaves Lansdown has managed to push profits ahead. The corporate Vantage platform continues to develop alongside greater demand from retail investors, too. Worries over changes in the business model imposed by the Retail Distribution Review (RDR) are, in our opinion, grossly overplayed. Some margin pressure is to be expected as RDR comes closer, but the group is expected to mitigate this by asking for higher fees from the fund management groups that it passes the business on to. For the 12 months to June 2012, we expect EPS to increase from 20.3p to 24.4p, rising to 28.7p in 2012-13.
Peel Hunt says…
Hold. Hargreaves Lansdown has shown its ability to generate net inflows regardless of unfavourable market conditions, but until there is more clarity on the effects of RDR we are placing a hold recommendation on the shares. And while trading volumes are up, management has retained a cautious stance because the uncertain economic backdrop is likely to have a continued adverse impact on investor sentiment. Even so, revenue quality remains impressive, with 80 per cent of group income generated through recurring business. Expect full-year adjusted EPS of 23.8p, rising to 29.2p in the year to June 2013.
Hargreaves Lansdown enjoys very high customer loyalty, and offers a wide range of investment products. Both are important factors, especially with more and more people looking to take charge of their own pension arrangements. However, at 507p, the shares trade on a punchy 17 times forecast earnings for next year, which suggests that the strong growth profile is already in the price. Hold.