Hargreaves Lansdown PLC

Hargreaves Lansdown PLC (LON: HL.) is the number one ‘investment supermarket’ for private investors in the United Kingdom. The company has helped investors to save tax, money, and time on their investments and also have more than 35 years of experience. Presently, the company is trusted with over £85 billion by 1,136,000 clients and have employed more than 1,300 people. It is based in Bristol and is a constituent of FTSE 100 index.

Financial Highlights (for the six months 31^st December 2019, £million)

(Source: Interim Presentation, Company Website)

Led by a variety of channels comprising organic new client growth, continuing wealth consolidation onto the platform from current clients, continued flows into the cash management service “Active Savings” and direct back book transfers from Baillie Gifford and J.P. Morgan, the net new business decreased by 9% to £2.31 billion in H1 FY2020from £2.53 billion in H1 FY2019. New business in the current period, mainly in the second quarter of 2020, was impacted by weak investor sentiment arising from the factors mentioned above. On 31^st December 2019, the total AUA (assets under administration) surged by 6% to £105.2 billion against the previous period (30 June 2019: £99.3 billion), driven by a net new business plus substantial positive stock market activities impacting asset values. For the first half of 2020, the client numbers increased by 50,000 to 1,274,000 and client retention is consistent with previous periods at 93.3%. Revenue increased by 9% to £257.9 million in H1 FY20 (H1 2019: £236.4 million), due to an increased net interest on client money as interest rate margins rose as anticipated and AUA that on average increased by 12.6%. Profit before tax surged by 12% to £171.1 million in the current periodas compared with the corresponding period of the last year (H1 2019: £153.4 million). Diluted earnings per share stood at 29.3 pence in H1 FY20. The interim dividend per share stood at 11.2 pence, an increase of 9% from the same period of the last year. 

Share Price Performance

Daily Chart as at February-03-20, before the market closed (Source: Thomson Reuters)

Hargreaves Lansdown PLC shares were trading at GBX 1,748.40 at the time of writing before the market close (at 8:15 AM GMT) on 3^rd February 2020 and were up by 1.36% versus the previous day closing price. Stock 52 weeks High and Low are GBX 2,437.19/GBX 1,615.29. The group’s stock is reflecting the higher volatility as against the benchmark index based on the company’s beta of 1.35.

Conclusion
As per the outlook seen in the interim report, the company has a structural growth opportunity and execution of the strategy are well-positioned. On 31^st January 2020, the stock fell by 8.22%, driven by a drop in new business for its most recent fiscal half-year. The company came under the spotlight when Mr Woodford’s flagship equity income fund was frozen, comprising a quarter of Hargreaves’s client base. New business dipped on fragile investor’s confidence, caused by the US-China trade war and Brexit, the UK general election in December, as well as the Woodford scandal. As per the result, there is a weak environment in the retail fund flows and also the suspension of the two Wood funds contributed to the general unease. Hence, its better to stay watchful on costs in spite of the revenue and client growth experienced during the present period and the group is mindful of the external market environment.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the current price of GBX 1,758 (as on 3rd February 2020, before the market close at 8:20 AM GMT), while we look for any upcoming catalysts in the near term.

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