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Hargreaves Lansdown Plc

Hargreaves Lansdown says business flows 'held up well' post Woodford

The FTSE 100 fund supermarket was hit by a higher than expected 94% increase in the Financial Services Compensation Scheme levy to £6.8mln

Hargreaves Lansdown -

Hargreaves Lansdown PLC (LON:HL.) said its own business flows have “held up well” since the Woodford Equity Income debacle blew up, as it announced higher year-end assets.

The FTSE 100 group reported assets under management of £99.3bn at the end of June, up 8% of the preceding year, including £1bn from the newly launched Active Savings service.

AuM was boosted by £7.3bn of net new business inflows, though this was down 4% on the previous year.  

On revenues up 7% to £480.5mln in the year 30 June, profit before tax rose and earnings per share were both up 5% to £305.8mln and 52.0p, both of which were short of the average analyst forecast of £307mln 52.8p.

This was due to a 94% increase in the Financial Services Compensation Scheme levy to £6.8mln, higher than the £4.5mln expected; excluding this, profits would have been ahead of the consensus.

Directors hiked the full year dividend 5% to 42.0p, which included a special dividend of 8.3p.

The Woodford effect

Hargreaves shares, which had fallen more than 16% due to the company’s close associations and unfailing backing of fund manager Neil Woodford as his flagship fund was controversially gated at the start of June, were up 10% by Thursday afternoon to 2,022p.

As well as some self-flagellation including confirming that he and his finance chief will forgo a bonus for 2019, chief executive Chris Hill said: “Since these announcements, Hargreaves Lansdown's own business flows and service levels have held up well.”

The Woodford Equity Income fund, which HL finally removed from its buy-list and waived its platform administration fee back in June, is expected to reopen in December and will be closely watched.

Hill added that he was “determined that we learn from events such as these” but said “the shortcomings of one fund should not detract from the benefits of favourite fund lists like the Wealth 50” and insisted management were “confident in the robustness of how we analyse, research and compile our favourite fund list with a focus on ensuring best value for clients”.

City views

Broker Shore Capital said that any potential disruption from Woodford “would have happened too late in the year to have any material impact on these results” but took encouragement from Hill’s comments.

“As such we do not expect material changes to consensus forecast, aside from the usual mark-to-market adjustment to AuA that are made periodically for all asset/wealth managers.”

Numis analysts noted that the higher inflated level of FSCS levy is expected to persist but noted that customer numbers increased by a healthy 12% to 1.224mln, with its market share in execution-only trading up to 34.1% and its platform share up to 40.5%.

"HL is now being valued at 28x one year forward earnings, a point where it has usually proved to be right to be adding to positions."

-- Adds share price and more analyst comment --

Quick facts: Hargreaves Lansdown Plc

Price: £18.89

Market: LSE
Market Cap: £8.96 billion
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