Hargreaves Lansdown profits surge despite ‘challenging’ conditions spooking investors
Hargreaves Lansdown topped the City’s profit predictions for the year despite “challenging” market conditions triggering a sharp fall in the amount of cash flowing into its platform over the past 12 months.
In its full year results, released today, the UK’s biggest DIY investment and savings firm said pre-tax profits had rocketed over 50 per cent to £402.1m in the 12 months to the end of June even as net new business flows tumbled.
The amount of cash flowing onto the platform fell 13 per cent to £4.8bn – down from £5.5bn last year. Assets under management ticked up eight per cent to £134bn despite the slowdown, however, as market conditions improved.
Analysts had been pricing in profits of £379.4m for the full year.
The full-year numbers mark the first results following the takeover of new chief Dan Olley in August.
In a statement this morning, Olley said it was a “robust financial performance for our full year in what continues to be a challenging broader economic environment,” with customers pouring into the firm’s saving products rather than investing.
“As the data from our Savings and Resilience Barometer shows, the rising cost-of-living is putting pressure on the UK’s financial wellbeing. People have less disposable income, investor confidence is low and the outlook remains uncertain,” Olley said.
“Markets have been volatile and with interest rates rising, savers have looked to make their cash work harder for them without always wanting to invest.”
The firm’s Active Savings cash platform attracted record new business of £3.2bn in the year while”challenging external conditions and low investor confidence” hampered net flows onto the platform and stockbroking volumes.
Hargreaves Lansdown was among a host of retail firms to make hay as investors poured onto the platforms through lockdowns. However, growth across the sector has since slowed as investors reined in spending and investment as prices surged over the past year,
Olley’s predecessor Chris Hill stepped down after seven years in charge amid a series of high-profile run-ins with founder Peter Hargreaves, who attacked the firm’s digitisation strategy and swelling cost base.
In its update this morning, the FTSE 100 firm said its spend had continued to climb in the period, with costs rising in line with guidance to £314.6m, up from £284.7m last year.
City analysts said the profits beat would go some way to winning back shareholders after a bruising year.
“Hargraves’ improved performance should help rebuild investor confidence, following previous scrutiny regarding executive remuneration and controversial automated investment advice services,” said Neil Shah, an analyst at Edison Group.
“Overall, these results represent a positive step forward for the company, and it will be interesting to see how they continue to navigate the evolving financial landscape and attempt to increase investor activity as the cost-of-living crisis continues to rise.”
Shares in the firm jumped as much as seven per cent in early trade in London.