Assets Under Management AUM

Hargreaves Lansdown reduced for clarity

  • Investors reluctant to trade stocks
  • Fund activity held up well

Turbulence is still a problem for large platform brokers and Hargreaves Lansdown’s (HL.) The results showed how a market pullback can negatively affect retail investor sentiment, with negative consequences for the bottom line. The situation can be summed up as follows: “Investors buy stocks when the market goes up and sell, or do nothing, when they go down”. In addition to illustrating some uncomfortable truths about investor behavior in times of market exuberance, it is also the reason why management cannot offer more specific guidance on moving forward with its strategic transformation plan, which the company will spend £175m on by 2026.

The operational side of the business performed respectably under the circumstances. HL’s consistent marketing spend has allowed it to add 92,000 net customers to the platform. The resulting inflows somewhat offset the market turmoil and assets under management (AUM) stood at £123bn, up from £135bn at the same time last year.

Although funds are HL’s largest business segment, trading volumes in equities, on which he earns large commissions, have higher returns and weak investor sentiment was most evident in this side of the business. the company. AUM for equities was higher at £52.3bn, but investors sitting on their hands meant a much lower revenue margin of 37 basis points, meaning equities revenue fell 24 % to £195m for the year. Share commission trading income was down 30% to £169 million.

Interestingly, fund revenues have held up better – many providers are reporting strong demand for absolute return funds – with revenue margin hovering around 40 basis points, entries into the fund segment have generated significant operational gearing and revenue here was £255m, up from £233m last time out. .

Management also appears willing to cover significant operating costs while its business investment program is underway. Total underlying operating costs were £144 million, of which £11 million related to capital costs, plus operating expenses for the dual technology systems until its new computer is operational.

The market is clearly waiting to see if HL can generate the revenue growth it has seen over the past 40 years from its investment program. Broker Panmure Gordon currently forecasts a PE ratio for 2023 of 19, with a projected dividend yield of 4.8%. It’s historically cheap for the company, but the question is whether it’s now discounted for the maturity of its business, rather than the current market woes. Hold.

Last seen IC: Hold, 1,138p, Feb 22, 2022

HARGREAVES LANSDOWN (HL.)
ORDER PRICE: 873p MARKET VALUE: £4.1 billion
TO TOUCH: 872-874p TOP OF 12 MONTHS: 1626p LOW: 759p
DIVIDEND YIELD: 4.5% P/E RATIO: 19
NET ASSET VALUE: 121p NET CASH : £473m
Year to June 30 Turnover (£million) Profit before tax (millions of pounds sterling) Earnings per share (p) Dividend per share (p)
2018 448 292 49.7 32.2
2019 481 306 52.1 33.7
2020 551 378 66.1 37.5
2021 631 366 62.6 38.5
2022 583 269 45.6 39.7
% change -8 -27 -27 +3
Ex div: Sep 22
Payment: October 24