A boost from post-Brexit trading saw investment platform Hargreaves Lansdown PLC (LON:HL.) report strong gains in half-year profits, but is shares fell as net new business inflows were down on the previous year, missing forecasts.
The FTSE 100-listed firm saw its pre-tax profits increase by 21% to £131.0mln for the six months to December 31, up from £108.1mln a year earlier, as net revenues rose 16% to £184.8mln, up from £158.8mln.
Hargreaves said the key contributors to profit growth were "significantly elevated" trading volumes since the Brexit vote last June, higher stock market prices generating additional revenue from charges, new revenue from new assets, and cost control.
The group’s total assets under administration at the end of its first-half were £70.0bn, up from £61.7bn at the start of the year.
However, its net business inflows fell by 16% to £2.34bn, down from £2.77bn a year earlier.
Numis downgrades ...
Broker Numis downgraded its rating for Hargreaves to 'hold' from 'buy' as the asset numbers were below its forecasts.
Numis said Hargreaves’ assets under administration were a little behind its £70.8bn forecasts, while net inflows were short of its £2.9bn estimate.
The broker raised its full-year earnings forecasts, and upped its target price to 1,497p from 1,458p, but reduced its rating on valuation grounds.
By lunchtime, Hargreaves shares were down 2.5%, or 35p at 1,351p.
Diversification helps …
Hargreaves’ chief executive, Ian Gorham, said: “The diversified nature of the Hargreaves Lansdown business has enabled us to deliver significant growth in both revenue and profit.
“Despite macroeconomic uncertainties impacting investor confidence and net new business, clients continue to trust us with their money and benefit from our market-leading investment services.”
As previously announced, Gorham will step down as chief executive officer following the results, to be replaced by Chris Hill, the current chief financial officer. Philip Johnson will be appointed the group’s new CFO.
Hargreaves Lansdown is paying an interim dividend of 8.60p, up 10% on the previous year.
Take profits ...
Analysts at Liberum noted that the half-year results beat their forecasts, largely on better stockbroking income than expected, which they said “should drive consensus upgrades of the range 5%-10% in our view.”
But, the analysts added: “While we expect the shares to trade better in the near term, over the medium to longer term we continue to see structural headwinds facing the company - namely pricing pressure and meaningful competition - which underpin our negative stance on valuation."
They concluded: “We believe investors should take profits on any strength in the share price.”
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