Hargreaves sees new business fall

Hargreaves sees new business fall

Hargreaves Lansdown has reported a 16 per cent slide in new business during the second half of last year, despite posting a jump in profits and assets under administration over the period.

According to a market update published today (8 February), the fund supermarket saw net business inflows fall to £2.3bn in the six months ending 31 December, from the £2.8bn posted over the same period in 2015.

Yet in terms of profit, Hargreaves seems to have sailed through the market turmoil of 2016, posting a 20 per cent jump in pre-tax profits during the second half of last year. 

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The FTSE 100 firm saw profits before tax reach £131m in the six months ending 31 December, up from the £108m posted over the same period in 2015, helped by the firm’s increased cost controls.

Ian Gorham, Hargreaves Lansdown’s chief executive, said the period was “unusual” due to the impact of political and macroeconomic developments, including the Brexit vote.

The firm pointed out that new business into its Vantage service tends to be seasonal, with greater inflows between January and June due to the timing of the end of the UK’s tax year and because many individuals review their investments around this time.

It also said new assets and clients into the portfolio management service "remained behind expectations", and said it is continuing with its review of the offering to try to improve lead flows.

Mr Gorham said low investor confidence typically reduces enthusiasm for retail investment, with the firm seeing confidence drop to a low point in November last year.

Fund manager Nick Train has been outspoken about his confidence in Hargreaves Lansdown and has added to his holdings in the firm, despite the 17 per cent drop in its share price.

Low investor confidence coupled with higher asset values meant Hargreaves saw a higher level of client cash withdrawals during the period.

However, the fund supermarket largely managed to retain clients, and added an extra 40,000 new clients to its books during the half year, which takes its total active clients to 876,000.

Assets under administration now stand at £70bn, up from the £59bn posted over the same period in 2015.

The Hargreaves chief pointed out that the weak pound has served to boost the value of client assets invested in overseas funds and equities.

Peter Lenardos, analyst at RBC Capital Markets, said Hargreaves’ results are ahead of expectations.

However, he pointed out that there is a downside risk in terms of the firm’s valuations, with potential catalysts including unfavourable regulation and heightened competition.

Mr Lenardos added: “Hargreaves continues to meet expectations and management remains focused on growing both the core business and new initiatives going forward.”

Hargreaves expects to launch further funds this year, including the HL Select UK Income Shares fund.