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Hargreaves Lansdown powers ahead

RESULT: Record profits and assets under management bode well for what is usually a stronger second half, but the shares are trading on a hefty premium
February 6, 2013

Hargreaves Lansdown (HL.) delivered record profits at the half-year stage, and the pension and investment planning specialist's reputation for providing an exceptional service was underlined by the 21,000 increase to 446,000 in the number of clients using its Vantage trading platform. Accordingly, analysts at Numis have upgraded forecasts for the full year by 4 per cent to pre-tax profits of £195.3m and EPS of 31.8p (from £152.8m and 24.3p in 2012). Yet, despite the upgrade, the shares are still trading on 25 times forecast EPS, a deserved premium but one that leaves the shares fully priced.

IC TIP: Hold at 786p

Total net inflows jumped by 42 per cent to £1.65bn, pushing assets under administration up to a record £30.4bn. Once again, the Vantage platform was the main revenue driver, with assets under administration rising 30 per cent to £28.5bn. The platform provides clients with the advantage of holding and managing their assets - mainly individual savings accounts (Isas) and self-invested personal pensions (Sipps) - in one place, with a single dealing service and instant online access. And while relatively small, the group's discretionary investment management business, PMS, saw managed assets rise by 20 per cent to £1.8bn.

Staff numbers grew from 637 to 717, reflecting the rise in demand for investment services, and while overall costs rose by 15 per cent, total assets grew by 30 per cent, which pushed operating margins up from 63 per cent to 65.6 per cent.

HARGREAVES LANSDOWN (HL.)
ORD PRICE:786pMARKET VALUE:£3.73bn
TOUCH:786-788p12-MONTH HIGH:788pLOW: 422p
DIVIDEND YIELD:2.2%PE RATIO:28
NET ASSET VALUE:31pNET CASH:£133m*

Half-year to 31 DecPre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201172.011.45.10
201293.715.16.30
% change+30+32+24

Ex-div: 13 Mar

Payment: 11 Apr

*Excludes £15.6m of restricted cash