Hargreaves Lansdown profits surge as investors cash in on rising rates

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105 shares, 166 points

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Hargreaves Lansdown reported a 50 per cent rise in annual profits as customers ploughed billions of pounds into its savings products, even as it earned less from share dealing and investing.

The funds supermarket posted pre-tax profits of £403mn in the 12 months to the end of June on Tuesday, beating analysts’ consensus, as customers opted to park money in cash amid a cost of living crisis and higher interest rates. Revenue rose 26 per cent year on year, to £735mn.

New chief executive Dan Olley pointed to “a challenging broader economic environment” and said he wanted to see more Britons investing.

“In the US, everyone I know invests, whether it’s for their kids’ college funds or their 401(k) [pension] top-up . . . in the UK it’s only a minority who call themselves confident investors,” said Olley, who became chief six weeks ago.

Hargreaves, which is the UK’s largest trading platform with 1.8mn customers, has seen investors shift money into its savings products as tough economic conditions damped their appetite for risk.

Customers added £3.2bn to the company’s active savings products over its financial year, allowing it to benefit from the spread between the rates it offered and the base rate.

But fees from share dealing, fund management and advice all fell year on year, and inflows stood at £4.8bn, down from £5.5bn in the same period last year. Hargreaves added 67,000 new customers in total.

Hargreaves said people had “less disposable income, investor confidence is low and the outlook remains uncertain”. It added that, amid volatile markets, “savers have looked to make their cash work harder for them without always wanting to invest”.

The company’s shares rose almost 6 per cent on Tuesday, to more than £8.

Olley set out four priorities for the business, including growing clients and assets, increasing the pace of execution and reducing costs. He said he aimed to expand the Hargreaves app to offer services that currently can be accessed only on the website.

“I‘m definitely not expecting the world to get rosy any time soon,” he told the Financial Times. “But in the medium term we are also in a growing market, we understand what our clients want and need from us and we have the right strategy and areas of focus to deliver it.”

Olley cited the educational resources the platform offered customers regarding gilts, which he said resulted in £400mn of UK sovereign bonds being bought across the platform in a few weeks.

Hargreaves has endured a turbulent year, after co-founder Peter Hargreaves criticised the platform’s push into high-tech financial advice and called for jobs cuts.

The company has started a process to find a successor to chair Deanna Oppenheimer, who is preparing to step down in the wake of Hargreaves’s comments, and the share price, which is down 66 per cent in the past five years, from highs of £24 in 2019.

Hargreaves is also experiencing pressure on fees from rivals. It costs more to invest in listed securities via Hargreaves than competitors including Interactive Investor, AJ Bell and Barclays. The company also charges the most among peers to hold £50,000 in an ISA investment wrapper, according to Boring Money.

Analysts at Numis said its year-end performance was “strong”, noting high rates of client retention and the company’s cost savings plan seemed to be “on track”.

Source: Financial Times

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105 shares, 166 points

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