The Bank of England's recent interest rate cut is a dark cloud looming for many financial services companies, which among other implications will find it harder to make money on the funds they hold on their balance sheets. Hargreaves Lansdown (HL.) is no different. Soon to step down chief executive Ian Gorham says lower for longer interest rates will have a "substantial impact" on the income the group makes on non-Sipp clients' cash balances. Management expects cash interest margins to be in the range of 0.35 per cent to 0.45 per cent for the year ending June 2017, down from 0.56 per cent for 2016.
That said, there were a lot of positives to be found in the self-investing giant's full-year results, mostly thanks to its core Vantage platform. Vantage client numbers increased by 100,000 to around 827,000, while assets under administration were up 12 per cent to almost £59bn. Last year's pension freedom changes continued to drive new business into its Sipp product, with net new business during the six months to June up almost three-quarters on December to £2.7bn. What's more, average new contributions increased slightly to almost £9,200.
However, volatile equity markets dampened retail investor confidence in particular. Vantage Isa suffered a 15 per cent decline in net new business. The good news was that the net revenue margin on shares and other stock recovered, up from 0.29 per cent to 0.3 per cent, with revenue being generated from equity deals and management fees.
Assets under management for the group's discretionary portfolio management division were flat at £2.9bn. Net new business of £66m was offset by the impact of £52m in stock market losses, compared with a £169m gain the previous year.
Analysts at Numis expect adjusted pre-tax profits of £235m for the year ending June 2017, giving EPS of 39.6p (from £219m and 37.3p in 2016).
HARGREAVES LANSDOWN (HL.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,335p | MARKET VALUE: | £6.33bn | |
| TOUCH: | 1,334-1,336p | 12-MONTH HIGH: | 1,533p | LOW: 1,056p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 36 | |
| NET ASSET VALUE: | 53p | NET CASH: | £211m | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)* |
|---|---|---|---|---|
| 2012 | 239 | 153 | 24.2 | 15.8 |
| 2013 | 292 | 195 | 31.7 | 20.68 |
| 2014 | 358 | 210 | 34.5 | 22.39 |
| 2015 | 395 | 199 | 33.2 | 21.6 |
| 2016 | 388 | 219 | 37.4 | 24.1 |
| % change | -2 | +10 | +13 | +12 |
Ex-div: 15 Sep Payment: 28 Sep *Excludes special dividends of 11.4p a share in 2015 and 9.9p a share in 2016 | ||||
