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Hargreaves Lansdown shares take a hit as profits fall

Hargreaves Lansdown shares take a hit as profits fall

Despite falling profits at Hargreaves Lansdown, the firm is set to benefit from the pension freedoms with a new retirement planner service launching in April.

The Bristol-based firm reported that in the six months to 31 December profits were £101.9m - down 2 per cent on the first half of 2014.

News of the drop in profits led to a 7.56 per cent fall in the company’s share price to 966p by the time the markets closed on 4 Wednesday.

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Hargreaves Lansdown also welcomed fewer new clients into its fold, with only 23,000 joining over the last six months of 2014 compared to 77,000 in the first.

The firm’s chief executive Ian Gorham has said the latter figure was inflated by the huge interest in the Royal Mail share offer which made the drop appear more stark.

Excluding new clients brought to the company by the share offer, Mr Gorham said the figure for the first six months of 2014 was 45,000.

Mr Gorham said: “Revenue was improved by additional clients, assets and growth in our multi-manager funds.

“This growth was tempered by the effect of lower interest rates on client cash and reduced revenue on client fund assets held on the Vantage platform as a result of the reduced charges for clients introduced in March 2014.

“As expected these factors have had a short-term impact on profit growth. The impact from lower interest rates will continue for the rest of the 2015 financial year.

“The impact of the new fund charges will annualise in March 2015. The 2016 financial year will therefore see the comparative effect of these factors abate.”

Mr Gorham added that the firm would launch a retirement planner in April to take advantage of the new pension freedoms, and claimed 143,000 people had already got in touch to ask about them.

The broker firm will also be launching a cash management service with a peer-to-peer lending service within the next 18 to 24 months.

Mr Gorham said: “Work on these initiatives has already commenced, and will connect clients with more cash and savings options, allowing clients to actively manage their cash savings through Hargreaves Lansdown.

“Cash savings deposits have not previously been a target market for the group and represent a substantial opportunity.”

Overall assets under administration at Hargreaves Lansdown were up 4.7 per cent to £49.1bn.

Analyst view

Analysts at Barclays said the firm is being hit by headwinds including cash yield and its Vanguard fee structure.

But they said: “For FY16 we believe these two headwinds should start to wash through and in terms of competitive positioning we believe there are grounds for more optimism.

“Flows and customer numbers are recovering quarter on quarter and asset retention ratios have stabilized.

“We continue to believe that Hargreaves remains well positioned medium-term to capture the lion’s share of future DIY investors.”