Profits blip at Hargreaves Lansdown

Turnover took a collective hit of £35m as a result of lower interest income on client funds in the low-rate environment, coupled with reduced fees from its fund and shares platform following the retail distribution review. Moreover, the Financial Services Compensation Scheme levy was £4.4m in 2015, up from just £0.8m in 2014 on the back of some payouts for misdeeds elsewhere in the market. Top that off with a one-off drop in foreign exchange trading revenue and you can start to understand why pre-tax profits were down from 59 per cent of turnover to just 50 per cent.

Yet chief executive Ian Gorham is upbeat, pointing to longer-term indicators. Total assets under administration were up 18 per cent year-on-year to £55.2bn - and that is before the £370m of assets acquired from JP Morgan Asset Management. "On interest rates, we are at the bottom," says Mr Gorham: he does not see that interest income can fall much further.

Above all, the company is not planning to reduce its pricing any further. Despite new entrants in the market offering share dealing for "peanuts", Mr Gorham insists the post-RDR experience has demonstrated that customers are willing to pay up for quality investment services.

Net revenues after client loyalty bonus payments ticked up for the year. Increased drawdown sales made up for a drop in commissions as customers moved away from the individual annuity market. This also suits the business, as Hargreaves retains the customer money through an ongoing drawdown product rather than making a one-off annuity sale. Meanwhile, the growing fund management business pushed the company’s net discretionary revenue up 17 per cent to £52.4m as decent performance lured £0.9bn worth of net new business into its portfolio management services, including its own multi-manager funds.

Numis expects EPS of 36.9p in the year to June 2016, up from 33.2p in FY 2015.