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Hargreaves capital strength spurs special dividend

The asset gathering giant reported a 16 per cent rise in assets under administration last year
August 7, 2018

The momentum with which Hargreaves Lansdown (HL.) has been gathering assets continued apace through FY2018, with the direct-to-consumer platform provider gaining £7.6bn in net new business inflows – up 10 per cent on the prior year. The good news for shareholders was that capital generation has also remained robust, with tangible capital rising almost a third. That meant – after scrapping last year’s special dividend on higher regulatory capital needs – management could declare a one-off 7.8p a share return.

IC TIP: Hold at 2046p

Despite market growth being almost half what it was the prior year and one of the founders transferring £1.1bn in assets out of the platform, the rise in new business fed through to a 16 per cent surge in assets under administration to £91.6bn – around 137,000 new clients were added, taking the total past the 1m mark.

Net revenue from funds was up 17 per cent at £198m, reflecting a rise in new business and market performance. That net rate was replicated in the growth of stockbroking commission and equity holding charges, albeit on a slightly reduced 32 basis point margin, as higher equity dealing volumes were offset by lower growth in management fees – the latter capped once accounts reach a certain level of assets. However, management expects a boost to the margin on cash balances following this month’s base rate rise.

Analysts at Numis expect adjusted pre-tax profit of £334m for the year to June 2019, giving EPS of 57.2p (from £292mn and 49.8p in 2018).

HARGREAVES LANSDOWN (HL.)  
ORD PRICE:2,046pMARKET VALUE:£9.7bn
TOUCH:2,045-2,047p12-MONTH HIGH:2,137pLOW: 1,313p
DIVIDEND YIELD:1.6%PE RATIO:41
NET ASSET VALUE:85pNET CASH:£344m
Year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201435821034.522.39
201539519933.221.6*
201638821937.424.1*
201738626644.729.0
201844829249.732.2*
% change+15+10+11+11
Ex-div:27 Sep   
Payment:19 Oct   
*Excludes special dividends of 11.4p a share in 2015, 9.9p in 2016 and 7.8p in 2018