Hargreaves Lansdowne is exposed to falling markets and consumer confidence
Profits fell and new business in investment platform Hargreaves Lansdown slowed, as tough market conditions and inflation weighed on investor confidence.
The value of the UK-listed company’s assets under management fell 9 per cent to £123.8bn in the year to June 30, while new business flows were down 37 per cent compared to the previous year.
Earnings before tax fell by more than a quarter to 269.2 million pounds, but still beat analysts’ estimates.
“We can all look at what’s happening at the moment and say we’re going through a tough time over the next few months,” CEO Chris Hill told the Financial Times.
Last year, he said, was the company’s highest ever level of new business flows. He added that this situation has “returned to normal” since then, “but trading levels are still ahead of what we were in the pandemic.”
Shares in Hargreaves Lansdown have nearly halved over the past year, but are up 7 percent on Friday.
The company had a record trading year in 2021 as increasing savings rates and booming markets attracted large numbers of retail investors.
However, conditions have changed dramatically, with rising inflation eating away at savings. Meanwhile, high interest rates, the fallout from the pandemic and the war in Ukraine have disrupted previously booming markets and pushed up prices for consumers.
Hill noted that consumer confidence hit an all-time low in the UK in June, and activity slowed across the entire wealth management sector. The company expects “continued economic and geopolitical turmoil” in the coming year.
“Inflation has severely impacted HL clients’ ability to save, but we see this as a temporary phenomenon where real income rarely declines for long periods of time. Low clients’ savings rates are compounded by negative markets,” said James Hamilton, of broker Numis.
Hamilton added that strategic inward investment by Hargreaves Lansdown, largely on technology upgrades, was slightly less than expected at £28m “although we expect that to be offset this year”. The company announced plans to invest £175 million over the next five years in February.