Uncertainty around the prospects of emerging market economies and tumbling commodity prices have sent global stock market haywire in recent months. It is no wonder that investors have become nervy about making equity trades. For self-investing giant Hargreaves Lansdown (HL.) this has big implications. Revenue margins on shares and stocks held by the group - consisting of management fees applied to shares held in Isas and self-invested personal pensions as well as stockbroking commissions - fell 4 basis points to 0.27 per cent during the first half of the year. Equity deals grew at a slower rate despite active clients on its platform increasing by 99,000.
The good news: net revenue grew 10 per cent thanks to strong new business inflows. Overall, assets under administration grew a fifth to £58.8bn, helping drive pre-tax profit growth. However, chief executive Ian Gorham says this growth would have been doubled if the FTSE 350 had remained flat during the period.
Together with the £264m of assets transferred from JP Morgan and Jupiter, the group's Vantage platform gained a record £2.73bn of net new business. On the subject of pricing, Mr Gorham says Hargreaves does not have any plans to reduce it charges, which he continues to insist are already "pretty darn cheap". He adds: "At the moment we're more focused on new things and investing in service." This includes building a new savings service, as well as android and iPhone apps.
Healthy growth in assets held in Hargreaves' multi-manager funds has boosted management fees for the group's discretionary and managed division. The value of assets held in this fund range and its portfolio management service grew by a quarter to £6.2bn. Meanwhile, continued reduction in annuity volumes following the government's pension reforms pulled down revenue for the group's third and smallest division. However, Mr Gorham was positive about the potential for other retirement products such as drawdown to offset this decline.
Broker Numis Securities expects adjusted EPS of 36.7p for the full year, up from 33.2p in 2015.
HARGREAVES LANSDOWN (HL.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,261p | MARKET VALUE: | £5.98bn | |
| TOUCH: | 1,260-1,262p | 12-MONTH HIGH: | 1,533p | LOW: 928p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 36 | |
| NET ASSET VALUE: | 45p | NET CASH: | £182m | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 197 | 102 | 16.9 | 7.3 |
| 2015 | 201 | 108 | 18.3 | 7.8 |
| % change | +2 | +6 | +8 | +7 |
Ex-div: 3 Mar Payment: 31 Mar | ||||
