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Hargreaves Lansdown reports turbulent year with more to come

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Hargreaves Lansdown, [LSE:HL] the Bristol-based financial advisor, released its annual financial report for the year ended 30 June 2022 on Friday morning (5th August).

With revenue declining to GBP583m, and net income taking a 27% hit compared to the previous year, the financial services company has suffered a somewhat turbulent time. The news comes following months of high inflation rates and decreasing consumer and business confidence, which have plagued financial markets since the start of the year.

Hargreaves Lansdown sells funds, shares and related products to retail investors across the UK. Since its formation in 1981, the firm has grown to serve over 1.7 million clients and administer GBP132bn worth of assets, whilst also employing approximately 1,700 staff. As of 2022, Hargreaves Lansdown is the UK’s largest direct-to-investor investment platform.

The Hargreaves Lansdown platform enables investors to hold different types of investments together in one place with one valuation and dealing service. Available products include ISA, SIPP, and a Fund & Share dealing account. The group also provides financial advisory, stockbroking and annuity broking services for private investors, and advice to companies on group pension schemes.

Hargreaves Lansdown’s annual financial report revealed that revenue figures fell by over 7% from a year prior to GBP583m, whilst profits before tax fell by more than a quarter to GBP269m. Assets under administration at the FTSE100-listed company fell in value by 9% to GBP123.8bn in the year to June 30, while new business flows were down 37% compared with the previous year.

Tough markets

Evidently, the tough market conditions witnessed over the past few months following the Covid-19 pandemic and the conflict in Eastern Europe between Russia and Ukraine have caused market turmoil and led to Hargreaves Lansdown’s finances taking a hit. Soaring inflation rates, rising interest rates, and falling confidence amongst key economic agents have taken its toll on the company.

“Inflation has significantly impacted Hargreaves Lansdown’s customers’ ability to save, but we see this a temporary phenomenon as real income rarely declines for protracted periods of time. Lower customer savings rates were compounded by negative markets,” said James Hamilton, a financial analyst at Numis Securities.

Although shares in Hargreaves Lansdown have almost halved in the last 12 months, the company’s share price rose by over 4% on Friday and a further 8% on Monday morning, supporting the claim that its financial results beat analysts’ estimates. The operational side of the business performed respectably given the circumstances, and its consistent marketing spend meant it added a net 92,000 customers to the platform.

HL has seen its shares range from 759p to 1,603p over a 52-week period. The advisor’s market capitalisation is GBP5.3bn and has offered investors a year-to-date return of -29.3% and a one-year return of -41.6%.

Furthermore, while growth has slowed down over the past year, Hargreaves Lansdown is clearly still growing at an impressive rate – net inflows of GBP5.5bn are particularly impressive. The business has also recently announced it is set to launch a new range of in-house funds in a bid to improve the competitiveness of its products. These funds will be launched with lower management fees than the current multi-manager range available through the investment platform and investors in some of the pre-existing funds will be moved into the new lower-priced range on launch.

It is important for retail and institutional investors not to get carried away with the company’s operational successes, however. Chris Hill, chief executive of Hargreaves Lansdown, has warned that the company is “in for a tough time over the next few months” and is expecting “continued economic and geopolitical turbulence” in the year ahead, which may negatively affect its operations.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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