REG - Hargreaves Lansdown - Final Results <Origin Href="QuoteRef">HRGV.L</Origin> - Part 3

Hargreaves LansdownAnnouncement

07/09/2016 07:05

- Part 3: For the preceding part double click  ID:nRSG1337Jb 

                                                              
 
 
In accordance with market practice, certain balances with clients, Stock
Exchange member firms and other counterparties totalling £555.5 million (2015:
£361.9 million) are included in trade payables. As stated in Note 9 above,
where we have a legal right of offset and the ability and intention to settle
net, trade payable balances have been presented net. The gross amount of trade
payables is £712.6 million and the gross amount offset in the balance sheet
with trade receivables is £157.2 million. There are no balances where there is
a legal right of offset but not a right of offset in accordance with
accounting standards, and no collateral has been posted for the balances that
have been offset. 
 
Other payables principally comprise amounts owed to clients as a loyalty bonus
and to staff as a bonus. Accruals and deferred income principally comprise
amounts outstanding for trade purchases and revenue received but not yet
earned on Group pension schemes where an ongoing service is still being
provided. 
 
13. Share capital 
 
                                                                           Year ended 30 June 2016  Year ended 30 June 2015  
                                                                           £'000                    £'000                    
 Authorised: 525,000,000 (2015: 525,000,000) ordinary shares of 0.4p each  2,100                    2,100                    
 Issued and fully paid: Ordinary shares of 0.4p each                       1,897                    1,897                    
                                                                                                                             
                                                                           Shares                   Shares                   
 Issued and fully paid: Number of ordinary shares of 0.4p each             474,318,625              474,318,625              
                                                                                                                             
 
 
The Company has one class of ordinary shares which carry no right to fixed
income. 
 
14. Note to the consolidated statement of cash flows 
 
                                                           Year ended 30 June 2016  Year ended 30 June 2015  
                                                           £'000                    £'000                    
                                                                                                             
 Profit for the year after tax                             177,256                  157,249                  
 Adjustments for:                                                                                            
 Investment revenues                                       (629)                    (987)                    
 Income tax expense                                        41,623                   41,789                   
 Depreciation of plant and equipment                       3,537                    3,279                    
 Amortisation of intangible assets                         1,678                    1,101                    
 Share-based payment expense                               2,525                    2,109                    
 Increase/(decrease) in provisions                         255                      (47)                     
                                                                                                             
 Operating cash flows before movements in working capital  226,245                  204,493                  
 Increase in receivables                                   (205,308)                (107,842)                
 Increase in payables                                      184,423                  116,340                  
                                                                                                             
 Cash generated from operations                            205,360                  212,991                  
 
 
15. Going concern 
 
The Group maintains on-going forecasts that indicate continued profitability
in the 2017 financial year.  Stress test scenarios are undertaken, the
outcomes of which show that the Group has adequate capital resources for the
foreseeable future even in adverse economic conditions.  The Group's business
is highly cash generative with a low working capital requirement; indeed, the
forecast cash flows show that the Group will remain highly liquid in the
forthcoming financial year. The Directors therefore believe that the Group is
well placed to manage its business risks successfully despite the current
uncertain economic outlook.  After making enquiries, the Directors'
expectation is that the Group will have adequate resources to continue in
operational existence for the foreseeable future.  Accordingly, they continue
to adopt the going concern basis in preparing this preliminary results
statement. 
 
Glossary of Alternative Financial Performance Measures 
 
Within the Preliminary Announcement various Alternative Financial Performance
Measures are referred to, which are non-GAAP (Generally Accepted Accounting
Practice) measures. They are used in order to provide a better understanding
of the performance of the Group and the table below states those which have
been used, how they have been calculated and why they have been used. 
 
 Measure                                                                                 Calculation                                                                                                                                                                                                                                                                                                  Why we use this measure                                                                                                                                                   
 Cash conversion ratio (%)                                                               The operating cash flows for the year divided by the operating profits for the year.                                                                                                                                                                                                                         Provides a measure of the efficiency with which profits are converted into cash.                                                                                          
 Discretionary recurring net revenue (%)                                                 The total value of the annual management charge earned on the Hargreaves Lansdown Multi-Manager funds and the management fees and ongoing adviser charges for the PMS service divided by the total discretionary net revenue.                                                                                Provides a measure of the quality of our earnings. We believe recurring revenue provides greater profit resilience and hence it is of higher quality.                     
 Dividend pay-out ratio (%)                                                              The total dividend per share divided by the basic Earnings Per Share (EPS) for a financial year.                                                                                                                                                                                                             Provides a measure of the level of profits paid out to shareholders and the level retained in the business.                                                               
 Dividend per share (pence per share)                                                    Total dividend payable relating to a financial year divided by the total number of shares eligible to receive a dividend. Note ordinary shares held in the Hargreaves Lansdown Employee Benefit Trust have agreed to waive all dividends (see Note 6 to the consolidated financial statements).              Dividend per share is pertinent information to shareholders and investors and provides them with the ability to assess the dividend yield of the Hargreaves Lansdown PLC  
                                                                                                                                                                                                                                                                                                                                                                                                      shares.                                                                                                                                                                   
 Net revenue (£)(See Income Statement on page 12 for the reconciliation of net revenue)  Total revenue less commission payments which are primarily loyalty bonuses paid to Vantage clients.                                                                                                                                                                                                          Because of the changes brought about to the client charging structure by the Retail Distribution Review ("RDR") there was a transitional period (from 1 March 2014 to 1   
                                                                                                                                                                                                                                                                                                                                                                                                      April 2016). From 1 March 2014 revenue was increased as Hargreaves Lansdown earned both a new platform fee from clients and the existing renewal commission from the Fund 
                                                                                                                                                                                                                                                                                                                                                                                                      Management Groups based on the value of funds held by clients. At the same time the loyalty bonus paid to clients was significantly increased on the pre-RDR funds to     
                                                                                                                                                                                                                                                                                                                                                                                                      largely mitigate the impact of the new platform fee. In order to aid comparability during the period of transition to 1 April 2016 the net revenue measure became the most 
                                                                                                                                                                                                                                                                                                                                                                                                      useful comparative measure of revenue as it better reflected the underlying income relating to funds held by clients.                                                     
 Percentage of Vantage net recurring revenue (%)                                         The total value of renewal commission (after deducting loyalty bonuses), platform fees, management fees and interest earned on client money divided by the total Vantage net revenue.                                                                                                                        Provides a measure of the quality of our earnings. We believe recurring revenue provides greater profit resilience and hence it is of higher quality.                     
 Vantage net revenue margin (%)                                                          Total Vantage net revenue divided by the average value of assets under administration which includes the Portfolio Management Services assets under management held in funds on which a platform fee is charged.                                                                                             Provides the most comparable means of tracking, over time, the margin earned on the assets under administration and is used by management to assess business performance. 
 Vantage net revenue margin from cash (%)                                                Net revenue from cash (net interest earned on the value of client money held on the Vantage platform divided by the average value of assets under administration held as client money.                                                                                                                       Provides a means of tracking, over time, the margin earned on cash held by our clients.                                                                                   
 Vantage net revenue margin from funds (%)                                               Net revenue derived from funds held by clients (platform fees, initial commission less loyalty bonus) divided by the average value of assets under administration held as funds, which includes the Portfolio Management Services assets under management held in funds on which a platform fee is charged.  Provides the most comparable means of tracking, over time, the margin earned on funds held by our clients.                                                                
 Vantage net revenue margin from shares (%)                                              Net revenue from shares (stockbroking commissions, management fees where shares are held in a SIPP or ISA, less the cost of dealing errors) divided by the average value of assets under administration held as shares.                                                                                      Provides a means of tracking, over time, the margin earned on shares held by our clients.                                                                                 
 
 
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