Overview
Hargreaves Lansdown Plc (HL) is a provider of investment management products and services to private investors in the UK. It offers a range of investment products, investment services, financial planning and advice. Its flagship service, Vantage, is a direct-to-private investor fund and wrap platform which enables clients to hold and manage their investments, including unit trusts, open-ended investment company, equities, bonds, investment trusts and cash irrespective of the tax vehicle. The company is having an employee base of 1,300 professionals.

Recent News
On 4th June 2019, theHargreaves Lansdown plc announced the selection of Dan Olley as an Independent Non-Executive Director and will also be part of the company’s Risk Committee. Dan has a technical background and helps companies in digital transformations.

Trading Update (1st Jan 2019 – 30th April 2019)
The company’s net revenue stood £159.5 million for the period (2018: £150.6 million), representing an increased cash revenue margin and a higher level of AUA. The company added 53,000 net new clients despite poor market conditions and added the net new business of 2.9 billion pounds for the period. The company’s net new year to date business stood at £5.4 billion with 1,188,000 active customers.

Financial Highlights - H1 Financial Year 2019 (£, million)

(Source: Interim Results, Company Website)
 
The net new business for the first half of FY2019 was reported at £2.53 billion, a decrease of 24% over the last year as a result of uncertainty regarding Brexit, significant decline in the UK investor confidence and net retail outflows across the market. However, the company added 45,000 net new clients, taking its total active clients to 1,136,000. The closing assets under administration remained flat at £97.8 billion. At 93.5 per cent, the client retention rate has remained very high. The total net revenue for the period increased by 9 per cent to £236.4 million against £216 million in H1 FY18. Driven by the company’s positive trading performance, diluted EPS rose by 4 per cent to 26.1 pence from 25 pence in H1 FY18. The management announced an interim dividend per share of 10.3 pence, an increase of 2 per cent against the last year.

Share Price Performance

Daily Chart as at June-24-19, before the market close(Source: Thomson Reuters)

On 24 June 2019, at the time of writing (before market close, GMT 1:12 PM), Hargreaves Lansdown Plc shares were trading at GBX 1,891.50, down by 0.60per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 2,447.33/GBX 1,622.00. The company’s outstanding market capitalisation was around £9 billion with a dividend yield of 1.70 per cent.

Valuation Methodology


Conclusion
Although the company’s profitability margins increased slightly in the latest reporting period, the business environment does not augur well for its performance. The geopolitical and economic uncertainties in the United Kingdom as well as abroad has caused significant volatility in the market. The Brexit implication, stiff competition, and operational risks may affect the growth of the company. 
Keeping in mind the weak relative valuation of the company and the associated risks, we recommend the investors to “Avoid” taking fresh positions at the closing price of GBX 1,903 (as on 21^st June 2019).
 
*All forecasted figures and Peers information has been taken from Thomson Reuters.

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