REG - Hargreaves Lansdown - Final Results
19/09/2023 07:00
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RNS Number : 8373M Hargreaves Lansdown PLC 19 September 2023
Hargreaves Lansdown plc
Results for the year ended 30 June 2023
Highlights:
· Net new business of £4.8 billion
· Assets Under Administration, up 8% to £134.0 billion driven by net
new business and positive market movement
· 1,804,000 active clients, an increase of 67,000 in the year
· Profit before tax increase of 50% to £402.7 million
· Underlying profit before tax increase of 47% to £438.8 million
· Ordinary dividend up 4.5% at 41.5 pence per share
Year ended Year ended Change %
30 June 2023 30 June 2022
Net new business inflows £4.8bn £5.5bn -13%
Total assets under administration £134.0bn £123.8bn +8%
Revenue £735.1m £583.0m +26%
Profit before tax £402.7m £269.2m +50%
Underlying profit before tax* £438.8m £297.5m +47%
Diluted earnings per share 68.2p 45.6p +49%
Underlying diluted earnings per share* 74.3p 50.4p +47%
Total dividend per share 41.5p 39.7p +4.5%
*Underlying profit before tax and underlying diluted EPS are Alternative
Performance Measure which exclude the impact of strategic investment and dual
tech running costs. See the Glossary of Alternative Performance Measures on
page 35 for the full definitions and page 10 where a reconciliation to the
relevant statutory measure is provided.
Dan Olley, Chief Executive Officer, commented:
"We have delivered a robust financial performance for our full year in what
continues to be a challenging broader economic environment. We welcomed a
further 67,000 net new clients meaning we now support over 1.8 million with
their savings and investments needs, with client retention stable at over 92%.
We saw notable growth into our Active Savings proposition which continues to
show the benefits of our diversified business model as we give our clients
access to competitive rates for their cash. We delivered revenue growth of
26% year-on-year with cost growth within the guided range delivering a
statutory profit of £402.7 million, up 50% on 2022.
As I begin my CEO tenure, it is clear to me that at its core this is a strong
business with fantastic heritage that has significant potential to benefit
from the structural, demographic, and regulatory shifts in the UK and the
expected growth in the wealth market.
My early focus is to ensure we are set up to capture this growth opportunity,
that we have pace of execution, cost discipline as we travel on this journey,
and that we are giving our people the best opportunity to deliver for our
clients and shareholders."
About us:
Hargreaves Lansdown is the UK's largest digital wealth management service
administering £134.0 billion of investments for over 1,804,000 clients. Our
purpose is to empower people to save and invest with confidence. We aim to
provide a lifelong, secure home for people's savings and investments that
offers great value, an incredible service and makes their financial life easy.
Contacts:
Hargreaves Lansdown
For media enquiries: For analyst enquiries:
Danny Cox, Head of Communications James Found, Head of Investor Relations
+44(0)7989 672071 +44(0)7970 066634
Nick Cosgrove Amy Stirling, Chief Financial Officer
Brunswick +44(0)207 404 5959
Analysts' presentation
Hargreaves Lansdown will be hosting a virtual investor and analyst
presentation at 09:00am on 19 September 2023 following the release of the
results for the year ended 30 June 2023. The meeting can also be accessed
remotely via a live dial-in facility. In order to register as a participant
please use the following link:
https://www.netroadshow.com/events/login?show=02eea776&confId=54378
(https://gbr01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.netroadshow.com%2Fevents%2Flogin%3Fshow%3D02eea776%26confId%3D54378&data=05%7C01%7Cjames.found%40hl.co.uk%7C5690df1cf3904d1215bc08db976313e1%7C90578e2dfce84c57a1a62b4909a9dc4d%7C0%7C0%7C638270224015675885%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=0m3iTDRJAn4gQVWbon60FzwBgdOOEJq0Mo3pcpjeGUQ%3D&reserved=0)
Slides accompanying the analyst presentation will be available this morning at
www.hl.co.uk/investor-relations (http://www.hl.co.uk/investor-relations) and
an audio recording of the analyst presentation will be available by close of
business on the day.
Alternative performance measure
Included in this announcement are various alternative performance measures
used by the Company in the course of explaining the results for the year to 30
June 2023. These measures are listed along with the calculations to derive
them and an explanation of why we use them on page 35 in the Glossary of
Alternative Financial Performance Measures. A reconciliation to profit before
tax is given in the Operating and Financial Review section.
Forward-looking statements
This document has been prepared to provide additional information to
shareholders to assess the current position and future potential of the
Hargreaves Lansdown Group ("the Group"). It should not be relied on by any
other party for any other purpose. This document contains forward-looking
statements that involve risks and uncertainties. The Group's actual results
may differ materially from the results discussed in the forward-looking
statements as a result of various economic factors or the business risks, some
of which are set out in this document.
Chief Executive's Review
Helping clients achieve better financial outcomes
I was delighted to move from being a Non-Executive Director to CEO of your
Company as of August this year. Our last financial year has been a period of
significant change and I will spend some time outlining the financial and
operational execution that the team has delivered. However, before I do so, I
want to set out some early reflections as CEO, a role which gives me a very
different lens on the Group.
HL is a great business built on a fantastic heritage of delivering its clients
the best, most relevant information on an industry-leading breadth of savings
and investment solutions, underpinned by a focus on providing client-led
service and support and making execution seamless and easy. What is clear to
me as I reflect on the interactions I have had with both HL clients and
non-clients alike since starting as CEO, is that getting these basics right -
for every client, every time - is still the core driver of value. It is clear
that our service and execution must return to the high standards we and our
clients expect and deserve. This is a core focus for me. However, I have been
very encouraged by all my conversations with the Client and Service teams at
HL. They know that becoming the trusted financial partner for clients is a
right you must earn through every interaction. Their passion for ensuring this
happens is equal to mine, which is why I know we will deliver this
non-negotiable objective for HL and our clients.
What was also clear from both my conversations with clients and the regulatory
initiatives in our sector, is that investing remains a daunting task for a
large proportion of the population. Many of the people I have spoken to are
confused by the array of jargon and terminology, or put off by the wide range
of product options available to them. This often results in inertia as
investing is put off 'until tomorrow'. The current economic environment is
only exacerbating this issue, putting more demands on people's finances, and
dropping saving and investing down the list for many. The size of our client
base is a significant differentiator in enabling us to have a strong gauge on
changing client needs and our ability to therefore respond to help make
investing accessible and understandable to everyone, with initiatives like
Financially Fearless, which aims to tackle money inequality and specifically
help women save and invest with confidence.
Doing this for a small number of clients may be relatively straight forward.
However, to offer this proactive and personalised service in a scalable and
cost-effective way to over 1.8 million clients, each with different needs,
knowledge and experience, is a completely different challenge. It demands that
we combine the best of our curated knowledge and market insights, with
advances in technology and our digital platform, to help our clients identify
the best savings and investment options for them. For example, earlier this
year it became clear from our client interactions and market trends that gilts
could be an attractive yielding investment option for higher rate taxpayers
and those that have used their full ISA allowance. Through personalised and
targeted education-based content, we were able to help clients take advantage
of this opportunity, investing over £430m in July.
As HL continues to help more clients reach good financial outcomes, the
opportunity to grow, and as a result drive long-term, sustainable attractive
returns and growth for all our stakeholders, is clear. The alignment of the
interests of the organisation, our clients, our shareholders, and the
regulator has never been stronger.
This tells me that, at its core, our strategic direction is the right one. We
have a unique opportunity to benefit from structural demographic and workplace
behaviour shifts and the UK regulatory changes to encourage greater saving and
investment. However, the world has changed since we set out the strategy in
February 2022, with a fundamentally different macro-economic and geopolitical
environment. We have also learnt lessons from the execution of the strategy
since then. Coming in as a new CEO with the teams 18 months into delivery, now
is a good time to take stock, keep what works and learn from areas where we
can do even better. We will refocus and refine our approach, where needed, to
ensure we still have our strategic initiatives in the right order and our
resources focused on the right areas to maximise value to clients, colleagues,
and shareholders. Work will also continue to develop and mature our control
environment to ensure we're managing all our processes and controls
efficiently and effectively as we scale further.
Initial priorities
Being only a few weeks into my new role I am very much in listening mode,
speaking with our clients, shareholders and colleagues to understand their
views and insights. Based on what I'm hearing from initial discussions and
what I know from the time I've spent on the Board, I am focused, in the
near-term, on four key areas.
1. Drive client and asset growth - Increase focus on tailored
client content and a seamless experience, backed by great service and broad
product range
2. Increase pace - Drive execution pace and agility to
continuously deliver additional client value at speed
3. Save to Grow - Continuously strive to be fitter and leaner as
a business, so we can save to invest more for clients
4. Focus on our people - Make HL great for colleagues and
clients - the right culture, with the right people in the right roles, focused
on the right things
I will be providing a more thorough update at the half year results early in
2024. In the meantime, it is important to reflect on the achievements and
challenges of the last financial year.
Market backdrop
As the data from our Savings and Resilience Barometer shows, the rising
cost-of-living is putting pressure on the UK's financial wellbeing. People
have less disposable income, investor confidence is low and the outlook
remains uncertain. Markets have been volatile and with interest rates rising,
savers have looked to make their cash work harder for them without always
wanting to invest.
This has been evident in the strong performance across our Active Savings cash
platform, which attracted record new business of £3.2 billion in the year.
Conversely, the challenging external conditions and low investor confidence
impacted net flows onto the platform and stockbroking volumes, something that
has been seen across the sector.
Our focus has remained on supporting our clients and helping them to achieve
better financial outcomes during these challenging times including helping
them to build their financial awareness and confidence, whilst at the same
time continuing to deliver on our strategy.
An example of this would be during the US banking crisis in March this year,
which followed the collapse of Silicon Valley Bank. This was a challenging
time for many of our clients - insight from our interactions with them told us
they had questions around their own investments in the banking sector and that
they wanted reassurance of the security of the cash they were holding with UK
banks. We acted quickly and wrote two specific articles and sent targeted
communications to clients we knew engaged with macroeconomic news. Our
articles attracted over 18,000 readers, who spent almost a minute longer on
the page than the average of our other news articles, showing how clients
value the relevance and timeliness of our research.
FY23 performance
In spite of the challenging backdrop, we have delivered robust financial
performance. The value of our proposition attracted £4.8 billion of net new
business and a further 67,000 net new clients, taking our total assets under
administration and active client numbers to £134.0 billion and 1.8 million
respectively.
Our investment in data and technology has helped us to support our clients in
the ways that suit them. In FY23, we had 249 million digital visits and mobile
engagement remained high - it is clear that more and more of our clients want
to manage their accounts on-the-go, and this is steering our "app first"
approach to developing our service going forward.
We also continued building out our Better Investors programme in line with the
FCA's Consumer Duty regulation. This programme provides personalised content
to clients with the aim of helping them and their families achieve good
outcomes from their hard-earned savings. Topics include holding an appropriate
level of cash, portfolio diversification, the importance of regular investing
and the power of compounding. This educational-based content is just one way
in which HL fosters long-term client relationships and stable client retention
rates, at 92.2% (2022: 92.1%).
The impact of economic and financial challenges has seen the value of cash
withdrawals increase this year as families deal with the cost-of-living
issues, and this has led to a reduction in our asset retention rate, to 90.4%
(2022: 91.8%).
We know our high level of service is a critical part of what our clients value
and our Client Service Net Promoter Score fell to 45% (2022: 51%). Despite
implementing technology improvements and adding resource to our Service teams,
we had a very busy tax year end which meant increased waiting times for client
queries and our service levels falling below our expectations. This is an area
where we will improve further.
Revenue for the full year was £735.1 million, up 26% on the prior year (2022:
£583.0m). We have seen continued base rate increases throughout the year and
have passed over 85% of the benefit through to our clients over the last 12
months. Net interest margin has also increased as a result and it is
encouraging to see growth across all our key revenue lines in the second half
of the year.
We have delivered spend in line with our guidance with underlying costs of
£314.6 million (2022: £284.7m). In addition, strategic spend in the year was
£51.4 million (2022: £32.9m) of which £36.1 million was expensed and £15.3
million was capitalised.
Underlying Profit Before Tax increased 47% to £438.8 million (2022: £297.5m)
and Statutory Profit Before Tax increased by 50% to £402.7 million (2022:
£269.2m).
The dividend for the financial year has increased 4.5% to a total dividend of
41.5p for the full year, reflecting this year's positive financial
performance.
Strategic delivery
Our focus this year has been on building out our client value proposition,
while laying the foundations that will allow us to accelerate our growth and
scale efficiency. Progress overall has been slower than we originally
anticipated, but we have though made good progress on several initiatives as
set out below.
Active Savings - With interest rates continuing to rise and clients looking
for an easy way to make their cash work harder, we have expanded our partner
banks and building societies to a total of 17, launched a new Cash ISA, and
offered market-leading rates for 59% of the year, leading to record net flows
of £3.2 billion and a closing AUA of £7.8 billion across more than 175,000
client accounts. Further improvement is needed to accelerate onboarding of
banks.
Funds - Our new US and UK Income funds support clients looking to put together
their own diversified portfolio, and we launched four managed Portfolio funds
which offer greater diversification in a single investment for those who wish
to take a more hands-off approach. AUM in these funds now totals £2.2
billion. We remain focused on continuing to improve the performance of our
funds and creating more efficiency in the time-to-market of new fund launches.
We will launch a new tool that helps less experienced clients and their
families choose the right HL account for their situation, and the most
suitable investment solutions to meet their needs.
Trading - This year, we relaunched our enhanced online Share Exchange service
to help clients make the most of their tax allowances, brought in a new online
voting solution, giving more power to retail investors, and reduced the cost
of share dealing for almost 500,000 clients by removing the dealing charge for
regular investors and those reinvesting dividends.
Investing - We reduced the management charge for the Lifetime ISA and removed
charges completely for Junior ISAs, reducing costs and supporting families in
saving for the future and creating lifelong, and beyond, relationships by
encouraging intergenerational wealth transfer.
Service - As well as making tactical changes, such as reallocating resource
across the business to better support clients over the period, we have
commenced the roll out a Cloud-based telephony system. This has started to
improve the client experience, drive colleague efficiency and improve the
quality of data captured to drive even better service and provide client
insights into our digital and service roadmaps. As I said, this is a core
focus for me.
Cost Savings - We launched Pay by Bank for our clients using Active Savings
towards the end of financial year. This not only makes it easier for clients
to top up their accounts, but will also generate meaningful cost savings for
HL. By year end, the adoption rate was already at 25% and we will be rolling
it our across other accounts through the course of this year.
As well as client proposition improvements, we have made progress in building
more secure foundations to improve our operational resilience and risk
management, whilst continuing to invest in our client facing digital products.
In the year, we continued work and have made progress towards the FCA's 2025
Operational Resilience deadline. The Board approved our annual Operational
Resilience Self-Assessment for the year to 31 March 2023, which we evolved
from the 2022 assessment to add greater rigour and structure to the process.
The Board also attested our compliance with the FCA's Consumer Duty by the end
of July. I am pleased to report that our Consumer Duty programme confirmed
that our existing embedded focus on good client outcomes has led to no major
change requirements across all the FCA prescribed dimensions, with only minor
enhancements identified to further support our clients in reaching good
outcomes.
I am pleased that our colleague engagement surveys showed some improvement
during the year, reflecting both our focus on helping colleagues build their
financial resilience and building an inclusive and client focused culture. As
ever there is more to do, which is why this is one of my four initial focus
areas. We have also made good progress against our Inclusion and Diversity
priorities, increasing gender and ethnicity representation across the business
through both our new early talent programmes and improved recruitment
processes, which have increased senior representation across the board.
On ESG, this year we have continued to strengthen our requirements as part of
our Wealth Shortlist research, with all funds included on the shortlist
meeting our minimum ESG requirements. We have also launched our new ESG
Investment Policy and our Stewardship and Engagement Policy and are reporting
on Scope 3 Financed Emissions across the portfolio of HL managed funds.
Finally, work continues to progress development of our enhanced relevance and
personalisation engine within the HL digital platform. Sitting under both our
digital and human interaction experiences, this engine will ensure clients
receive the most relevant information, the best service and a seamless and
easy experience, however they chose to engage with us.
Outlook and guidance
The current economic climate is likely to remain much the same for the coming
financial year, and so will continue impacting investor confidence. This will
provide a continued tailwind for flows into Active Savings but a potential
constraint on net new investment flows and dealing volumes, although we will
proactively mitigate this by helping all HL clients identify the opportunities
that do exist and could be right for them, as we did with gilts. We will also
provide tools to help clients efficiently consolidate assets to save them time
and help us provide increasingly personalised services, whether they want to
interact digitally or speak to an HL colleague directly.
Against this backdrop, we have already started to take initial actions on cost
and will continue to carefully manage all operating costs and efficiency
improvements whilst balancing with the importance of providing the high level
of service and support that our ever-growing client base demands.
In terms of our financial outlook for FY24, Amy Stirling has provided some
detailed guidance in her CFO's report.
It has been a busy first few weeks in the new role, and I have thoroughly
enjoyed hearing from many of our clients, colleagues and shareholders. I'm
looking forward to the coming months as I focus on my initial priority areas
of driving growth, increasing pace, identifying opportunities to save to grow
and ensuring we have the right people in the right roles and focusing on the
right things, so we are truly future fit to deliver for our clients and, in
turn, for our shareholders.
Dan Olley
Chief Executive Officer
18 September 2023
Financial Review
Assets Under Administration (AUA) and Net New Business (NNB)
Year ended Year ended
30 June 2023 30 June 2022
£bn £bn
Opening AUA 123.8 135.5
Platform growth* 2.3 4.3
Movement to Active Savings* (0.7) (0.3)
Active Savings growth 3.2 1.5
Total Net New Business 4.8 5.5
Market growth and other 5.4 (17.2)
Closing AUA 134.0 123.8
* Platform growth, Movement to Active Savings and Active Savings Growth are
alternative Performance Measures. See the Glossary of Alternative Performance
Measures on page 35 for the full definition.
Hargreaves Lansdown provides the leading direct wealth management service in
the UK.
The continued strength of our brand and breadth of services available to
clients on our platform has seen us grow net new business every quarter this
year despite the continued challenging macroeconomic backdrop for our clients.
Total net new business for the year was £4.8 billion (2022: £5.5bn). Of
this figure, platform growth was £2.3 billion (2022: £4.3bn) with £0.7
billion (2022: £0.3bn) of net movement into Active Savings, where we saw a
significant increase in flows, contributing £3.2 billion (2022: £1.5bn) of
new money to the £4.8 billion total growth.
Total AUA increased by 8% to £134.0 billion at the year end (2022 £123.8bn).
This increase was supported by the net new business uplift and £5.4 billion
of positive market movement across the year, after the negative market growth
experienced in the first half returned to positive in the second half.
AUA for the period of £134.0 billion was 8% above that for the prior year.
The increase has occurred across both halves of the year, with the second
half of the year providing two thirds of the increase. Market growth and
other represents the impact of the underlying market and other retained
investment income. In the current period this movement is driven by the
changes in the market.
Throughout the year we have maintained our focus on engaging with clients to
help them improve their financial engagement and resilience. During this
period of low investor confidence, we have supported them in navigating the
challenging economic backdrop. We were pleased to see that despite the
financial impacts of the cost-of-living challenges, our client retention rate
remained consistent at 92.2% (2022: 92.1%).
Asset retention reduced to 90.4% (2022: 91.8%) for the year, as we saw a
higher level of cash withdrawals from specific cohorts of clients to help with
cost-of-living increases or to fund large expenses and major life events.
We introduced 67,000 net new clients in the year (2022: 92,000), growing our
active client base by 4% to 1,804,000.
An active client is defined as one who holds an account containing £100 or
more with us. The average age of new clients remains consistent with recent
periods at 36 (2022: 36) and we are encouraged by the quality of clients we
are welcoming who brought an average NNB of £19,809, up 27% on last year
(2022: £15,565). This was driven by greater numbers of new clients opening
Active Savings accounts, which attract a higher opening balance - during the
year there were 17,000 new Active Savings accounts (2022: 7,000).
Income Statement
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Revenue 735.1 583.0
Operating costs (350.7) (313.0)
Finance and other income 19.0 -
Finance costs (0.7) (0.8)
Profit before tax 402.7 269.2
Tax (79.0) (53.4)
Profit after tax 323.7 215.8
Profit before tax 402.7 269.2
Adjusted for:
Strategic Investment Costs (including dual running costs) 36.1 28.3
- Underlying profit before tax* 438.8 297.5
- Tax on underlying profit* (86.1) (59.0)
Underlying profit after tax* 352.7 238.5
* Underlying profit before tax, Tax on underlying profit, and Underlying
profit after tax for the period exclude strategic investment costs (including
dual running costs) of £36.1 million (2022: £28.3m). See the Glossary of
Alternative Performance Measures on page 35 for the full definition.
Revenue
Total revenue for the period increased 26% to £735.1 million (2022:
£583.0m), with all key revenue lines increasing in the second half of the
year driven by a return to growth in all asset classes excluding cash as asset
levels benefitted from positive market movements and net new business.
Year-on-year revenue growth reflects an improvement to Net Interest Margin
following a period of historic low interest rates, and the level of cash held
by clients in both their Investment and Savings accounts more than offsetting
the impact of lower average asset values and lower stockbroking volumes
resulting from negative market movements and low levels of investor
confidence.
The table below breaks down revenue, average AUA and margins earned during the
period:
Year ended 30 June 2023 Year ended 30 June 2022
Revenue £m Average AUA £bn Revenue margin bps Revenue £m Average AUA £bn Revenue margin bps
Funds(1) 236.4 60.7(8) 39 254.5 65.3(8) 39
Shares(2) 147.7 48.8 30 194.9 52.3 37
Cash(3) 268.7 14.0 192 50.0 13.6 37
HL Funds(4) 54.3 8.4(8) 65 60.3 8.8(8) 69
Active Savings(5) 8.7 6.4⁶ 14 1.8 3.86 5
Other(7) 19.3 - - 23.3 - -
Double-count(8) - (8.3)(8) - - (8.7)(8) -
Total 735.1 130.0(8) - 583.0 135.1(8) -
Revenue margin is an alternative performance measure, see the Alternative
Performance Measures glossary on page 35 for the full definition.
1 Platform fees.
2 Stockbroking commission and equity holding charges.
3 Net interest earned on cash held in investment accounts.
4 Annual management charge on HL Funds, i.e. excluding the platform fee,
which is included in revenue on Funds.
5 Revenue from Active Savings earned as fees from partner banks.
6 Average cash held via Active Savings.
7 Advisory fees and ancillary services (e.g. annuity broking,
distribution of VCTs and HL Currency Services).
8 HL Funds AUM included in Funds AUA for platform fee and in HL Funds
for annual management charge. Total average AUA excludes HL Fund AUM to avoid
double-counting.
Funds
Funds continue to be the largest asset class on the platform at 47% of
average AUA for the year and 46% of closing AUA (2022: 47%) reflecting the
significant range of investment solutions available to meet a broad range of
client needs. Revenue on Funds decreased by 7% to £236.4 million (2022:
£254.5m) reflecting the decrease in average AUA, particularly in the first
half, with this revenue line returning to growth in the second half of the
year. Revenue margin on funds was flat at 39bps.
Funds remain one of our largest sources of revenue, with the margin for this
year having remained stable on the prior year.
During the year, decisions have been taken to reduce fees on the Lifetime
ISA (LISA), from 45bps at base to 25bps, and remove all fees on Junior ISA
accounts. As a result, we expect the fund revenue margin to fall slightly in
the next financial year and be in the range of 36.5bps to 38.5bps, driven
primarily by the full year impact of the fee cuts made in the Junior ISA and
LISA accounts in FY23.
Shares
Revenue on Shares decreased by 24% to £147.7 million (2022: £194.9m) and the
revenue margin of 30bps (2022: 37bps) was at the low end of our expected
range. This was as a result of a reduction in deal volumes, reflecting
comparatively lower investor confidence as clients deal with cost-of-living
issues, rising interest rates and market volatility and also the impact of the
decline in the value of equities under administration, given the previously
mentioned market volatility.
Average deals per trading day in the first half of the year were 31,000 and
rose in the second half of the year to 35,000 per day. However, total deal
volumes, including automated deals such as dividend reinvestment, decreased by
21% to 8.3 million (2022: 10.5m) but were in line with the low end of our
expectation of deals per trading day. Dealing peaked in January 2023 at 39,000
deals per trading day, propelled by news of growth in UK, US and European
markets. This compared with a low in December of 27,000, given the seasonally
quieter Christmas period. Overseas dealing volumes fell slightly and
represented 21% of our total client driven deals (2022: 22%).
Client driven trading is higher than levels seen prior to the pandemic and we
continue to improve our client experience in relation to share trading, with
improvements to best execution on trades and the removal of fees for income
reinvestment and regular share savings. As and when investor confidence
improves we believe we are well placed to see a return to higher trading
volumes. Shares AUA, at the end of the year, was £50.8 billion (2022:
£45.9bn).
Revenue guidance on shares for the next financial year is 28bps to 32bps. This
incorporates the full year impact of the price changes on the Junior ISA,
income reinvestment and regular savings.
Cash
Cash held in Investment accounts plays an important role in clients' portfolio
management by providing access to the broad range of products and services
available on our platform. We manage this cash according to clear principles
which are set out in our Platform Client Fairness Policy. In determining
rates, HL considers the client need, characteristics and behaviour by account
type and the flexibility or limitations of the account when determining and
reviewing the rates paid to clients. For example, we pay higher rates of
interest where the accounts have more product restrictions (e.g. the SIPP over
an unwrapped account) and where clients will hold higher cash balances (e.g.
the Drawdown account). The step up in base rate has increased interest earned
on cash and, as a result, we have increased both the amount and the proportion
earned by clients during the period. The level of cash held in Investment
accounts increased during the period with average cash AUA of £14.0 billion
(2022: £13.6bn) which also contributed to the increase in revenue.
The average cash balance represented 10.8% of total average AUA, an increase
from 10% in the prior year. However, across the year, cash held in investments
accounts has been reducing as clients use existing funds on the platform to
invest, and for certain clients we are seeing increased cash withdrawals to
fund planned and unplanned needs. Our closing cash AUA at the end of 2023 was
£13.1 billion (2022: £15.0bn).
Revenue on cash significantly increased in the year to £268.7 million (2022:
£50.0m) reflecting increases in the Bank of England base rate during the
period and the level of cash held by clients in investment accounts, partially
offset by the pass through rate to clients. Seven rate increases were made
during the year, taking the base rate from 125bps in July 2022 to 500bps as at
30 June 2023, compared to the changes in the previous year, which saw five
increases taking the rate from 10bps to 125bps as at 30 June 2022.
Over the last twelve months, we have passed over 85% of the benefit of base
rate increases to our clients and should we see further increases from here,
we would expect to do broadly the same.
As a result, our guidance for net interest margin for the next financial year
is 180bps to 200bps.
HL Funds
During the year we have delivered two new Building Block funds (US Fund and UK
Income fund) and four new Portfolio funds (Cautious, Balanced, Moderately
Adventurous and Adventurous), all of which come with a lower annual management
charge than our existing fund offerings. These funds give clients access to
key asset classes and are structured via segregated mandates so they can be
held directly and also invested into by our flagship HL Managed funds. The
sector-focused funds within the existing HL Multi-Manager range will be
converted over time, resulting in further efficiencies and reductions in costs
for investors.
Despite a very challenging market context for fund flows, across the year we
saw net flows into the fund range of £0.3 billion, driven largely by the fund
launches. HL Funds' AUM at the end of 2023 was £8.7 billion.
Revenues on HL Funds were down 10.0% to £54.3m (2022: £60.3m). The main
driver of this was average funds under management being down 5% versus last
year and lower margin, largely as a result of the launch of new, lower cost
funds delivered in the year. The margin on HL Funds has reduced to 65bps
(2022: 69bps) accordingly.
HL Funds are a key part of our strategy and we continue to launch further
funds across FY24, including a Global Corporate Bond fund that launched in
July 2023. This will continue to improve the overall proposition and
competitiveness of our own investment funds and will continue to bring net
inflows. The margin for 2024 is therefore expected to reduce and be in the
range of 55bps to 60bps.
Active Savings
Revenue from Active Savings has grown significantly in the year to £8.7
million (2022: £1.8m) driven by the changes in the base rate and the increase
in AUA. The average margin throughout the year was 14bps (2022: 5bps).
We have continued with the increased marketing of Active Savings from the end
of the last financial year and we have subsequently seen strong flows across
the period totaling £3.2 billion (2022: £1.5bn). As at 30 June 2023 the AUA
was £7.8 billion (2022: £4.6bn) and over 175,000 clients now have
an Active Savings account.
Looking forward, we will continue our focus on growing the Active Savings
service through adding additional partner banks and improving functionality,
particularly within our app.
Our revenue margin for the next financial year is expected to be in the
range of 15bps to 20bps.
Other
Other revenues comprise advisory fees and ancillary services, such as annuity
broking and distribution of VCTs. The amount has declined year-on-year, with
the largest movements seen in distribution income in respect of third party
services, where lower investor confidence for trading services has been
partially offset by increased revenues from Annuity arrangement fees, due to
the increase in rates available for these products.
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Ongoing revenue* 612.6 414.1
Transactional revenue* 122.5 168.9
Total revenue 735.1 583.0
*Definitions are shown in the Glossary of Alternative Financial Performance
measures on page 35.
The Group's business model offers clients a broad range of asset classes to
suit their needs in differing market environments and as such, benefits from a
diversified revenue stream. The Group's revenues are largely ongoing in
nature, as shown in the table above. The proportion of ongoing revenues has
increased to 83% in the period (2022: 71%) as the transactional stockbroking
commission decreased versus last year and the net interest income increased
significantly as the base rate of interest increased. Ongoing revenue is
primarily comprised of platform fees on funds and equities, fund management
fees, net interest income and ongoing advisory fees. This increased by 48% to
£612.6 million (2022: £414.1m) driven by improved net interest margin from
the higher interest rates earned, which more than offset lower platform fees
and management fees from lower average AUA levels.
Transactional revenue primarily comprises stockbroking commission and advisory
event-driven fees. This decreased by 27% to £122.5 million (2022: £168.9m)
reflecting the 26% decrease in client-driven equity dealing volumes.
Underlying operating costs
Year ended Year ended 30 June 2022
30 June 2023 £m
£m
Underlying cost Underlying cost
People costs* 167.9 144.2
Activity costs* 45.5 50.4
Technology costs* 38.8 28.7
Support costs* 56.3 49.3
Underlying costs (pre-FSCS) 308.5 272.6
Total FSCS levy 6.1 12.1
Underlying operating costs** 314.6 284.7
* Definitions have been amended and are shown in the Glossary of Alternative
Financial Performance Measures on page 35. The amendment has been made to
align to the way that the Board discusses matters internally.
**Underlying operating costs exclude strategic investment costs (including
dual running costs) of £36.1 million (2022: £28.3m). See the Glossary of
Alternative Performance Measures on page 35 for the full definition.
Underlying operating costs
Underlying operating costs increased by 10.5% to £314.6 million (2022:
£284.7m) reflecting wage and cost inflation, annualisation of headcount
growth, increased technology spend, offset by lower volume driven Activity
costs and a reduction in the FSCS levy.
People costs
People costs increased 16% to £167.9 million (2022: £144.2m) as we
invested to support our colleagues through the course of the year. Our pay
award for the year was an average of 5% and we have made further changes to
colleague pay. Given the economic backdrop, we have reset junior colleagues
compensation, providing a higher level of guaranteed earnings throughout the
year and we have seen additional wage inflation in specific functions,
addressing skill scarcity and retention. In addition we made a £1.1m
one-off support payment for colleagues to help offset the impact of inflation.
Our headcount remained flat during the first half of the year, with targeted
additions made in the second half of the year in our Service and Digital
teams to support increased client contact and improving our systems and
security respectively. The impact of the annualisation of 2022 headcount
increases was also felt in the year and contributed 3% to the increase in the
current year.
Activity
Activity costs comprise marketing costs, dealing-related costs, and payment
costs for client cash transferred onto the platform. Overall activity costs
have reduced by £4.9 million during the period reflecting the lower dealing
volumes, higher payment volumes driven by Active Savings and £5 million cost
savings achieved through renegotiation of third-party dealing contracts.
Payment costs have increased in line with the level of cash added to the
platform. In Q4, we introduced Pay by Bank capabilities to those clients using
Active Savings to make it easier to transfer funds onto the platform whilst
significantly reducing the associated transaction cost. We have seen
encouraging take up so far and will be rolling out to all clients during next
year. Marketing costs, including client acquisition, client engagement and
brand awareness, have remained stable year-on-year as we have continued to
invest to drive awareness of our breadth of savings and investment solutions,
particularly in the run up to tax year end this year.
Technology
Technology costs increased to £38.8 million (2022: £28.7m) driven by
software support fees and service subscriptions as we build out our digital
capability and transfer our systems to the Cloud and improving the security of
our IT environment. This requires the use of more third-party software,
leading to an increase in license and subscription costs throughout the year.
Support
Support costs, which include legal and professional fees, office running
costs, depreciation and amortisation increased to £56.3 million (2022:
£49.3m). Including the impact of higher energy costs and a £1.8 million
one off increase in the dilapidations provision, office running costs
account for £3.5 million of this increase. Insurance costs and professional
fees have increased as have travel expenses as staff returned to more
normalised working patterns.
The Financial Services Compensation Scheme (FSCS) levy run by the FCA
decreased to £6.1 million (2022: £12.1m), due to a scheme surplus from the
prior year, which reduced the amount the FCA needed to raise for the current
year. The FSCS is the compensation scheme of last resort for customers of
authorised financial services firms. At present, we expect that the levy cost
next year will return to being in line with the prior year and as a result,
expect to see Underlying cost growth of 9% - 11% for the next financial year.
Strategic Investment Costs
(including Dual Running Costs)
Total strategic spend in the year was £51.4 million, of which £36.1 million
has been expensed and £15.3 million has been capitalised in line with our
accounting policy. As the programme scales up in both overall activity and
individual project scale, we expect our spend to increase further next year.
Spend primarily comprises staff (including contractor) costs and associated
professional fees, associated compliance, infrastructure and support costs.
With our strategic investment programme now well underway, the strategic
investment costs incurred in the period are in addition to the business as
usual, or underlying, costs of the business.
We have previously presented strategic investment costs and dual running costs
as separate measures for the purpose of reporting our underlying costs.
Through review, we determined that the use of a further Alternative
Performance Measure provides no additional clarity or insight to readers or
users of the financial statements regarding our approach to our Strategic
Investment Programme. As such, we have reverted to using strategic investment
cost as a single measure.
Profit before tax
During the year, £19.0 million of Finance Income resulted from term deposits
of corporate cash being placed at higher interest rates. Finance costs
comprise the undrawn cost of the Group's Revolving Credit Facility and the
interest incurred on the Group's leases.
On an underlying basis, profit before tax increased by 47% to £438.8
million (2022: £297.5m). On a statutory basis profit before tax increased by
50% to £402.7 million (2022: £269.2m).
Tax
The effective tax rate for the period was 19.7% (2022: 19.9%). This is despite
the higher rate of tax in effect from April 2023 and its impact on the Group
in the year. This was largely driven by reclaims on our prior year submissions
for R&D credits.
The Group's tax strategy is published on our website at http://www.hl.co.uk
Earnings per share
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Operating profit 384.4 270.0
Finance and other income 19.0 -
Finance costs (0.7) (0.8)
Profit before tax 402.7 269.2
Tax (79.0) (53.4)
Profit after tax 323.7 215.8
Underlying profit before tax* 438.8 297.5
Tax on underlying profit* (86.1) (59.0)
Underlying profit after tax* 352.7 238.5
Weighted average number of shares for the calculation of diluted EPS 474.6 474.5
Diluted EPS (pence per share) 68.2 45.6
* Underlying profit before tax, Tax on underlying profit before tax,
Underlying profit after tax and Underlying diluted EPS for the year exclude
strategic investment costs (including dual running costs) of £36.1 million
(2022: £28.3m). See the Glossary of Alternative Performance Measures on page
35 for the full definitions.
Diluted EPS increased by 50% from 45.6 pence to 68.2 pence, in line with the
Group's increase in profits. The Group's basic EPS was 68.3 pence, compared
with 45.6 pence in 2022.
Underlying diluted EPS increased by 48% from 50.4 pence to 74.3 pence. (See
Glossary of Alternative Performance Measures on page 35 for the full
definition). The Group's underlying basic EPS was 74.4 pence, compared with
50.4 pence in 2022.
Capital and liquidity management
Hargreaves Lansdown looks to create long-term value for shareholders by
balancing delivery of profit growth, capital appreciation and an attractive
dividend stream to shareholders with the need to invest in the business to
maintain a broad savings and investment offering and high service standards
for our clients.
The Group seeks to maintain a strong net cash position and a robust balance
sheet with sufficient capital and liquidity to fund ongoing trading and future
growth. The Group's net cash position at 30 June 2023 was £503.3 million
(2022: £508.0m). Cash generated from operations more than offset the payments
of the 2022, final ordinary dividend and the 2023 interim dividend. This
includes cash on longer-term deposit and is before funding the 2023 final
dividend of £136.6 million.
The Group has a Revolving Credit Facility agreement with Barclays Bank to
provide access to a further £75 million of liquidity. This is undrawn and
was put in place to further strengthen the Group's liquidity position and
increase our cash management flexibility. The Group also funds a share
purchase programme to manage the impact of dilution from operating
our share-based compensation schemes.
The healthy net cash position provides both a source of competitive advantage
and support to our client offering. It provides security to our clients and
allows us to provide them with an excellent service, for example through
using surplus liquidity to allow same day switching between products that
have mismatched settlement dates.
Capital
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Shareholder funds 709.7 575.1
Less: goodwill, intangibles and other deductions (54.7) (41.0)
Tangible capital 655.0 534.1
Less: provision for dividend (136.6) (130.2)
Qualifying regulatory capital 518.4 403.9
Less: estimated capital requirement (248.3) (219.1)
Estimated capital surplus 270.1 184.8
Total attributable shareholders' equity, as at 30 June 2023, made up of share
capital, share premium, retained earnings and other reserves increased to
£709.7 million (2022: £575.1m) due to the increased profit in the year.
Having made appropriate deductions as shown in the table above, estimated
surplus capital amounts to £270.1 million.
HL plc has four subsidiary companies authorised and regulated by the FCA. The
FCA's Investment Firm Prudential Regime (IFPR) applies to the Group and HL
completes this assessment through the Group Internal Capital Adequacy and Risk
Assessment (ICARA) processes. Our assessment of HL's capital requirements
takes account of the regulatory requirements.
Consistent with the IFPR requirements, HLAM is specifically required to
disclose regulatory capital information; this is available on the Group's
website at https://www.hl.co.uk/investor-relations
(https://www.hl.co.uk/investor-relations) .
Dividend
Dividend (pence per share)
2023 2022
Interim dividend paid 12.70p 12.26p
Final dividend declared 28.80p 27.44p
Total dividend 41.50p 39.70p
The Board has declared an increase in the total ordinary dividend of 4.5%
taking the ordinary dividend per share to 41.50 pence (2022: 39.7 pence per
share of ordinary dividend). The ordinary dividend is made up of an interim
dividend of 12.70 pence per share that was paid on 31 March 2023
(2022: 12.26 pence per share) and a final ordinary dividend of 28.8 pence
per share (2022: 27.44 pence per share). Subject to shareholder approval of
the final ordinary dividend at the 2023 AGM, the final dividend will be paid
on 15 December 2023 to all shareholders on the register at the close of
business on 17 November 2023.
In terms of capital allocation, our priority continues to be to ensure our
robust financial health, maintaining a meaningful capital surplus over the
regulatory minimum. The Board has begun discussion regarding the overall
approach to capital allocation acknowledging that we are currently in a period
of investment and the importance of shareholder return. As a result and
subject to market conditions and the Group's growth, investment and regulatory
capital requirements, we expect to continue to grow the ordinary dividend at
least 4% in the next financial year.
Amy Stirling
Chief Financial Officer
18 September 2023
SECTION 1: RESULTS FOR THE YEAR
Consolidated Income Statement for the year ended 30 June 2023
Year ended Year ended
30 June 2023 30 June 2022
Note £m £m
Revenue 735.1 583.0
Operating costs 1.3 (350.7) (313.0)
Operating profit 384.4 270.0
Finance and other income 1.5 19.0 -
Finance costs 1.6 (0.7) (0.8)
Profit before tax 402.7 269.2
Tax 1.7 (79.0) (53.4)
Profit for the financial year 323.7 215.8
Attributable to:
Owners of the parent 323.8 216.3
Non-controlling interest (0.1) (0.5)
323.7 215.8
Earnings per share
Basic earnings per share (pence) 1.8 68.3 45.6
Diluted earnings per share (pence) 1.8 68.2 45.6
The results relate entirely to continuing operations.
Consolidated Statement of Comprehensive Income for the year ended 30 June 2023
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Profit for the financial year 323.7 215.8
Total comprehensive income for the financial year 323.7 296.3
Attributable to:
Owners of the parent 323.8 296.7
Non-controlling interest (0.1) (0.4)
323.7 296.3
The results relate entirely to continuing operations.
1.1 Revenue
Revenue represents fees receivable from financial services provided to
clients, net interest income on client money and management fees charged to
clients. It relates to services provided in the UK and is stated net of value
added tax.
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Revenue:
Ongoing revenue
Platform fees 270.5 289.1
Fund management fees 54.3 60.3
Ongoing advice charges 7.4 8.3
Active Savings revenue (1) 8.7 1.8
Net interest income 268.7 50.0
Renewal commission 3.0 4.6
Transactional revenue
Fees on stockbroking transactions 116.9 164.6
Initial advice charges 4.7 4.0
Other transactional income 0.9 0.3
Total Revenue 735.1 583.0
(1) Active Savings revenue was previously disclosed within net interest income
and is now disclosed separately.
1.2 Segmental reporting
Under IFRS 8, operating segments are required to be determined based upon the
way the Group generates revenue and incurs expenses and the primary way in
which the Chief Operating Decision Maker (CODM) is provided with financial
information. In the case of the Group, the CODM is considered to be the
Executive Committee.
It is the view of the Board and of the Executive Committee that there is only
one segment, being the direct wealth management service administering
investments in ISA, SIPP and Fund & Share accounts, and providing cash
management services for individuals and corporates in the United Kingdom.
Given that only one segment exists, no additional information is presented in
relation to it, as it is disclosed throughout these financial statements.
The Group does not rely on any individual customer and so no additional
customer information is reported.
1.3 Operating costs
Operating profit has been arrived at after charging: Year ended Year ended
30 June 2023 30 June 2022
£m £m
Depreciation of owned plant and equipment and right-of-use assets 8.5 8.9
Amortisation of other intangible assets 6.8 6.2
Impairment of intangible assets - 1.0
Operating lease rentals payable - property - 0.1
FSCS costs 6.1 12.1
Activity costs(2)
- Marketing costs 20.7 25.8
- Dealing & financial services costs 23.4 24.6
Technology costs(*) 40.4 29.7
Support costs (1)
- Legal and professional costs 40.9 33.1
- Office running costs 8.4 4.9
- Other operating costs 16.2 11.2
Staff (including contractors) costs (note 1.4) 179.3 155.5
Operating costs 350.7 313.0
( )
(*)The line item description of this category has changed from the prior year.
(1) Support costs includes costs previously known as legal and professional
fees and office running costs. Also included in support costs are compensation
and compliance costs, other finance costs, insurance costs and fair value
movements on investments (note 2.1).
(2) Activity costs now includes costs previously known as marketing costs and
dealing and financial services costs.
1.4 Staff costs
Year ended Year ended
30 June 2023 30 June 2022
The average monthly number of employees of the Group (including executive No. No.
Directors and contractors) was:
Operating and support functions 1,558 1,533
Administrative functions 661 576
2,219 2,109
Their aggregate remuneration comprised: £m £m
Wages and salaries 149.9 122.2
Social security costs 14.4 14.2
Share-based payment expenses 8.2 8.4
Other pension costs 16.0 13.2
Total costs paid for staffing 188.5 158.0
Capitalised in the year (9.2) (2.5)
Staff (including contractors) costs as a deduction to operating profit 179.3 155.5
Included in the above figures are 143 (2022: 80) contractors with a total cost
of £15.5 million (2022: £6.0m).
1.5 Finance and other income
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Interest on bank deposits 15.8 -
Other income 3.2 -
19.0 -
( )
1.6 Finance costs
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Commitment fees 0.3 0.3
Interest incurred on lease payables 0.4 0.5
Finance costs 0.7 0.8
1.7 Tax
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Current tax: on profits for the year 80.0 52.3
Current tax: adjustments in respect of prior years (0.2) (0.4)
Deferred tax (note 2.4) (0.8) 1.0
Deferred tax: adjustments in respect of prior years (note 2.4) - 0.5
79.0 53.4
Corporation tax is calculated at 20.5% of the estimated assessable profit for
the year to 30 June 2023 (2022: 19%).
In addition to the amount charged to the Consolidated Income Statement,
certain tax amounts have been charged or (credited) directly to equity as
follows:
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Deferred tax relating to share-based payments (0.2) (0.6)
Current tax relating to share-based payments (0.1) 0.1
(0.3) (0.5)
Factors affecting tax charge for the year
It is expected that the ongoing effective tax rate will remain at a rate
approximating to the standard UK corporation tax rate in the medium term,
except for the impact of deferred tax arising from the timing of exercising of
share options which is not under our control. Following the enactment of
Finance Act 2021 the standard UK corporation tax rate was at 19% before
increasing to 25% from 1 April 2023. Accordingly, the Group's taxable
profits for this accounting year are taxed at 20.5%. Deferred tax has been
recognised at either 20.5% or 25% depending on the rate expected to be in
force at the time of the reversal of the temporary difference.
Factors affecting future tax charge
Any increase or decrease to the share price of Hargreaves Lansdown plc will
impact the amount of tax deduction available in future years on the value of
shares acquired by staff under share incentive schemes.
The charge for the year can be reconciled to the profit per the Income
Statement as follows:
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Profit before tax 402.7 269.2
Tax at the standard UK corporate tax rate of 20.5% (2022: 19.0%) 82.6 51.1
Non-taxable income (5.7) 0.1
Items not allowable for tax 2.3 2.3
Additional deduction for tax purposes (0.2) (0.2)
Adjustments in respect of prior years 0.1 0.1
Foreign tax suffered 0.1 0.1
Impact of the change in tax rate (0.2) (0.1)
Tax expense for the year 79.0 53.4
Effective tax rate 19.7% 19.9%
The additional deduction for tax purposes only arises from enhanced capital
allowances available from the super deduction on qualifying plant and
machinery purchased within the financial year ended 30 June 2023.
1.8 Earnings per share (EPS)
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary
shares in free issue during the year, including ordinary shares held in the
Hargreaves Lansdown Employee Benefit Trust (EBT) and Hargreaves Lansdown SIP
Trust (SIP) reserve which have vested unconditionally with employees.
Diluted earnings per share is calculated adjusting the weighted average number
of ordinary shares outstanding to assume conversion of all potentially
dilutive ordinary shares.
The weighted average number of anti-dilutive share options and awards excluded
from the calculation of diluted earnings per share was 1,285,599 at 30 June
2023 (2022: 429,519).
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Earnings
Earnings for the purposes of basic and diluted EPS - net profit attributable 323.8 216.3
to equity holders of the parent company
Number of shares
Weighted average number of ordinary shares 474,318,625 474,318,625
Weighted average number of shares held by HL EBT and SIP (242,404) (444,685)
Weighted average number of shares held by HL EBT and SIP that have vested 89,116 74,702
unconditionally with employees
Weighted average number of ordinary shares for the purposes of basic EPS 474,165,337 473,948,642
Weighted average number of dilutive share options held by HL EBT and SIP that 686,256 579,869
have not vested unconditionally with employees
Weighted average number of ordinary shares for the purposes of diluted EPS 474,851,593 474,528,511
Earnings per share Pence Pence
Basic EPS 68.3 45.6
Diluted EPS 68.2 45.6
SECTION 2: ASSETS & LIABILITIES
Consolidated Statement of Financial Position as at 30 June 2023
At 30 June 2023 At 30 June 2022
Note £m £m
ASSETS
Non-current assets
Goodwill 1.3 1.3
Other intangible assets 50.4 37.3
Property, plant and equipment 17.4 22.5
Deferred tax 2.4 2.6 1.9
71.7 63.0
Current assets
Investments 2.1 0.5 0.8
Trade and other receivables 2.2 836.9 523.5
Cash and cash equivalents 2.3 373.3 488.3
Current tax assets 3.4 0.6
1,214.1 1,013.2
Total assets 1,285.8 1,076.2
LIABILITIES
Current liabilities
Trade and other payables 2.5 565.5 488.3
565.5 488.3
Net current assets 648.6 524.9
Non-current liabilities
Provisions 3.0 2.6
Non-current lease liabilities 2.6 7.6 11.8
Total liabilities 576.1 502.7
Net assets 709.7 573.5
EQUITY
Share capital 3.1 1.9 1.9
Shares held by EBT (6.4) (3.6)
EBT reserve (1.0) (2.4)
Retained earnings 715.2 579.2
Total equity, attributable to the owners of the parent 709.7 575.1
Non-controlling interest - (1.6)
Total equity 709.7 573.5
2.1 Investments
Year ended Year ended
30 June 2023 30 June 2022
£m £m
At beginning of year 0.8 0.9
Purchases 2.0 0.7
Disposals (2.3) (0.8)
At end of year 0.5 0.8
Comprising:
Current asset investment - UK-listed securities valued at quoted market price 0.5 0.8
£0.5million (2022: £0.8m) of investments are classified as held at fair
value through profit and loss, being deal-related short-term investments. Fair
value movements on investments are included in other support costs, as
disclosed in note 1.3.
Investment balances are short-term positions the Group takes as a result of
deals placed either in error or due to having to take positions where clients
are no longer able to hold an investment. The gross gains and losses in
relation to fair value include movements where no investment position is taken
and are as shown below:
Fair value movement on investments
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Gross gains 0.6 0.4
Gross losses (2.1) (1.3)
(1.5) (0.9)
2.2 Trade and other receivables
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Financial assets
Trade receivables 510.3 432.6
Term deposits 130.0 20.0
Accrued income 169.0 49.0
Other receivables 7.6 3.7
816.9 505.3
Non-financial assets
Prepayments 20.0 18.2
836.9 523.5
In accordance with market practice, certain balances with clients, Stock
Exchange member firms and other counterparties totalling £486.0 million
(2022: £409.5m) are included in trade receivables. These balances are
presented net where there is a legal right of offset and the ability and
intention to settle net. The gross amount of trade receivables is £659.7
million (2022: £532.6m) and the gross amount offset in the Statement of
Financial Position with trade payables is £186.6 million (2022: £130.1m).
Other than counterparty balances, trade receivables primarily consist of fees
and amounts owed by clients and renewal commission owed by fund management
groups. 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.
Given the short-term nature of the Group's receivables and the expectation of
the Group in relation to its counterparties, there has been no material
expected credit loss recognised in the period.
The Group does not have any contract assets in respect of its revenue
contracts with customers (2022: £nil).
2.3 Cash and cash equivalents
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Cash and cash equivalents
Group cash and cash equivalent balances 368.0 488.0
Restricted cash - balances held by HL EBT 5.3 0.3
373.3 488.3
At 30 June 2023, segregated deposit amounts held by the Group on behalf of
clients in accordance with the client money rules of the Financial Conduct
Authority amounted to £7,214 million (2022: £8,665m). In addition, there
were pension trust and Active Savings cash accounts held on behalf of clients
not governed by the client money rules of £6,224 million (2022: £6,533m).
The client retains the ownership in both these deposits and cash accounts, and
accordingly, they are not included in the Statement of Financial Position of
the Group.
Restricted cash balances relate to the balances held within the HL Employee
Benefit Trust. These are strictly held for the purpose of purchasing shares to
satisfy options under the Group's share option schemes.
2.4 Deferred tax
Deferred tax assets/(liabilities) arise because of temporary differences only.
The following are the major deferred tax assets/(liabilities) recognised and
movements thereon during the current and prior reporting years. Deferred tax
has been recognised at either 20.5% or 25% depending upon the rate expected to
be in force at the time of the reversal of the temporary difference. A
deferred tax asset in respect of future share option deductions has been
recognised based on the Company's share price as at 30 June 2023.
Fixed assets tax relief Share-based payments Other deductible temporary differences Total
£m £m £m £m
At 1 July 2021 0.3 2.5 0.9 3.7
Charge to income (0.8) (0.7) - (1.5)
Charge to equity - (0.3) - (0.3)
At 30 June 2022 (0.5) 1.5 0.9 1.9
(Charge)/credit to income (0.2) 1.0 - 0.8
Charge to equity - - (0.1) (0.1)
At 30 June 2023 (0.7) 2.5 0.8 2.6
Deferred tax expected to be recovered or settled:
Within 1 year after reporting date (0.5) 0.1 0.2 (0.2)
> 1 year after reporting date (0.2) 2.4 0.6 2.8
(0.7) 2.5 0.8 2.6
2.5 Trade and other payables
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Financial liabilities
Trade payables 487.4 406.7
Current lease liabilities 4.6 4.6
Other payables 38.0 31.0
530.0 442.3
Non-financial liabilities
Deferred income 0.3 0.3
Accruals 26.5 38.5
Social security and other taxes 8.7 7.2
565.5 488.3
In accordance with market practice, certain balances with clients, Stock
Exchange member firms and other counterparties totalling £483.5 million
(2022: £404.9m) are included in trade payables, similar to the treatment of
trade receivables. As stated in note 2.2 above, where we have a legal right of
offset and the ability and intention to settle net, trade payable balances
have been presented net.
Other payables principally comprise amounts owed to staff as a bonus and
rebates due to the regulated funds operated by the Group. Accruals and
deferred income principally comprise amounts outstanding for trade purchases
and receipts from clients, where cash is received in advance for certain
services.
All balances classified as deferred income in the prior year have been
recognised in revenue in the current year.
2.6 Long-term liabilities
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Lease liabilities greater than 12 months 7.6 11.8
SECTION 3: EQUITY
Consolidated Statement of Changes in Equity for the year ended 30 June 2023
Attributable to the owners of the Parent
Share capital Shares held by EBT EBT reserve Retained earnings Total Non- Total
controlling equity
interest
£m £m £m £m £m £m £m
At 1 July 2021 1.9 (4.8) (3.1) 599.5 593.5 (1.1) 592.4
Total comprehensive income(1) - - - 216.3 216.3 (0.5) 215.8
Employee Benefit Trust
Shares sold in the year - 5.4 - - 5.4 - 5.4
Shares acquired in the year - (4.2) - - (4.2) - (4.2)
HL EBT share sale - - (2.8) - (2.8) - (2.8)
Reserve transfer on exercise of share options - - 3.5 (3.5) - - -
Employee share option scheme
Share-based payments expense (note 1.4) - - - 8.4 8.4 - 8.4
Current tax effect of share-based payments (note 1.7) - - - 0.1 0.1 0.1
Deferred tax effect of share-based payments (note 1.7) - - - (0.6) (0.6) - (0.6)
Dividend paid (note 3.2) - - - (241.0) (241.0) - (241.0)
At 30 June 2022 1.9 (3.6) (2.4) 579.2 575.1 (1.6) 573.5
Total comprehensive income(1) - - - 323.8 323.8 (0.1) 323.7
Change in ownership - - - (1.7) (1.7) 1.7 -
Employee Benefit Trust
Shares sold in the year - 2.2 - - 2.2 - 2.2
Shares acquired in the year - (5.0) - - (5.0) - (5.0)
HL EBT share sale - - (2.2) - (2.2) - (2.2)
Reserve transfer on exercise of share options - - 3.6 (3.6) - - -
Employee share option scheme
Share-based payments expense (note 1.4) - - - 8.2 8.2 - 8.2
Current tax effect of share-based payments (note 1.7) - - - (0.1) (0.1) - (0.1)
Deferred tax effect of share-based payments (note 1.7) - - - (0.2) (0.2) - (0.2)
Dividend paid (note 3.2) - - - (190.4) (190.4) - (190.4)
At 30 June 2023 1.9 (6.4) (1.0) 715.2 709.7 - 709.7
(1) Total comprehensive income includes Profit for the year and the total
comprehensive income presented is equal to Profit in both years presented.
3.1 Share capital
Year ended Year ended
30 June 2023 30 June 2022
£m £m
Authorised: 525,000,000 (2022: 525,000,000) ordinary shares of 0.4p each 2.1 2.1
Issued and fully paid: ordinary shares of 0.4p each 1.9 1.9
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.
The shares held by the EBT represents the cost of shares in Hargreaves
Lansdown plc purchased in the market and held by the Hargreaves Lansdown EBT
to satisfy options under the Group's share option schemes.
The EBT reserve represents the cumulative gain on disposal of investments held
by the HL EBT. The reserve is not distributable by the Company as the assets
and liabilities of the EBT are subject to management by the Trustees in
accordance with the EBT trust deed.
Non-controlling interests in the net assets of consolidated subsidiaries are
identified separately from the Group's equity therein.
Non-controlling interests consist of the minority's proportion of the net fair
value of the assets and liabilities acquired at the date of the original
business combination and the non-controlling interest's change in equity since
that date. Throughout the prior year, the non-controlling interest in
Hargreaves Lansdown Savings Limited was held by Stuart Louden, an employee of
the Group. During the prior year an agreement was reached to purchase Stuart
Louden's shares which was executed during the year and at the year end the
Company had 100% control of Hargreaves Lansdown Savings Limited.
3.2 Dividends
Amounts recognised as distributions to equity holders in the year:
Year ended Year ended
30 June 2023 30 June 2022
£m £m
2022 final dividend of 27.44p (final dividend 2021: 26.6p) per share 130.2 126.0
2022 special dividend of 12.0p per share - 56.9
2023 interim dividend of 12.70p (2022: 12.26p) per share 60.2 58.1
Total dividends paid during the year 190.4 241.0
After the end of the reporting period, the Directors declared a final ordinary
dividend of 28.80p pence per share payable on 15 December 2023 to shareholders
on the register on 17 November 2023. Dividends are required to be recognised
in the financial statements when paid, and accordingly the declared dividend
amounts are not recognised in these financial statements, but will be included
in the 2023 financial statements as follows:
£m
2023 final dividend of 28.80 p (2022 final dividend: 27.44p) per share 136.6
Total dividends 136.6
The payment of these dividends will not have any tax consequences for the
Group.
Under an arrangement dated 30 June 1997 the Hargreaves Lansdown Employee
Benefit Trust, which held the following number of ordinary shares in
Hargreaves Lansdown plc at the date shown, has agreed to waive all dividends.
Year ended Year ended
30 June 2023 30 June 2022
No. of shares No. of shares
Number of shares held by the Hargreaves Lansdown Employee Benefit Trust 779,080 424,035
Representing percentage of called-up share capital 0.16% 0.09%
SECTION 4: CONSOLIDATED STATEMENT OF CASH FLOWS
Consolidated Statement of Cash Flows for the year ended 30 June 2023
Year ended Year ended 30 June 2022
30 June 2023
Note £m £m
Net cash from operating activities
Profit for the year after tax 323.7 215.8
Adjustments for:
Income tax expense 1.7 79.0 53.4
Depreciation of plant and equipment 1.3 8.5 8.9
Amortisation of intangible assets 1.3 6.8 6.2
Impairment of intangible assets 1.3 - 1.0
Share-based payment expense 1.4 8.2 8.3
Interest on lease liabilities 1.6 0.4 0.5
Increase/(decrease) in provisions 0.4 (0.1)
Operating cash flows before movements in working capital 427.0 294.0
(Increase)/decrease in receivables (203.4) 305.8
Increase/(decrease) in payables 72.2 (285.7)
Cash generated from operations 295.8 314.1
Income tax paid (80.5) (51.2)
Net cash generated from operating activities 215.3 262.9
Investing activities
(Increase)/decrease in term deposits (110.0) 40.0
Purchase of property, plant and equipment (3.5) (2.8)
Cash capitalisation of intangible assets (19.2) (10.9)
Proceeds on disposal of investments 0.3 0.1
Net cash generated (used in)/from investing activities (132.4) 26.4
Financing activities
Purchase of own shares in EBT (5.0) (4.2)
Proceeds on sale of own shares in EBT 2.2 2.8
Payment of principal in relation to lease liabilities (4.7) (3.9)
Dividends paid to owners of the parent 3.2 (190.4) (241.0)
Net cash used in financing activities (197.9) (246.3)
Net (decrease)/increase in cash and cash equivalents (115.0) 43.0
Cash and cash equivalents at beginning of year 2.3 488.3 445.3
Cash and cash equivalents at end of year (including 2.3 373.3 488.3
restricted cash)
Section 5: OTHER NOTES
5.1 General information
Hargreaves Lansdown plc (the Company and ultimate parent of the Group) is a
company incorporated and domiciled in the United Kingdom under the Companies
Act 2006 whose shares are publicly traded on the London Stock Exchange. The
address of the registered office is One College Square South, Anchor Road,
Bristol, BS1 5HL, United Kingdom. The nature of the Group's operations and its
principal activities are set out in the Operating and Financial Review.
These financial statements are presented in millions of pounds sterling (£m)
which is the currency of the primary economic environment in which the Group
operates.
Basis of preparation
These financial statements have been prepared in accordance with UK-adopted
international accounting standards and with the requirements of the Companies
Act 2006 as applicable to companies reporting under those standards. The
financial statements are prepared on a going concern basis as discussed below.
The preparation of financial statements in conformity with IFRSs requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Company's accounting
policies.
These results do not represent the audited financial statements of the Group.
Going concern
The Group maintains ongoing forecasts that indicate continued profitability in
the 2023 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 a period of at least 12 months from the date of approval of the Group
Financial statements. Accordingly, they continue to adopt the going concern
basis in preparing this preliminary results statement.
5.2 Contingencies
The Group operates in a highly regulated environment and, in the ordinary
course of business, provides information to various regulators and authorities
as part of informal and formal requests and enquiries. In addition, the Group
receives complaints or claims in relation to its services from time to time
brought by clients, investors or other third parties. These may be notified to
the Group or directly to third parties, such as the Financial Ombudsman
Service in the case of client and investor complaints investigated and not
upheld by the Group. These include enquiries, complaints and a threatened
claim relating to the LF Equity Income Fund (formerly the Woodford Equity
Income Fund).
The Company received a letter purporting to be a pre-action letter from a law
firm in March 2021. In June 2021, the Company rejected all the claims made for
lack of a substantive basis of claim. The Company is aware that the law firm
has since filed a claim form with the court against both Link Fund Solutions
Limited and Hargreaves Lansdown Asset Management Limited ("HLAM") for an
unspecified amount in October 2022. As at the date of issuing these financial
statements, the law firm has not yet confirmed that it has secured sufficient
funding to progress the claim, HLAM has not been served with the claim form
and no timetable has been set for the conduct of any claim.
All such matters are periodically reassessed, with the assistance of external
professional advisers where appropriate, to determine the likelihood of the
Group incurring a liability. There are inherent uncertainties in the outcome
of such matters and it is not practicable to reliably estimate the financial
impact if any, on the Group's results or net assets at the period end.
These matters have been re-assessed throughout the financial year and the
above statement is accurate as at the reporting date and up to the date of
issue.
5.3 Related party transactions
The Company has a related party relationship with its subsidiaries, its
Directors and members of the Executive Committee (the 'key management
personnel'). Transactions between the Company and its key management personnel
are disclosed below. Details of transactions between the Company and other
related parties are also disclosed below.
Trading transactions
The Company entered into the following transactions with Directors within the
Hargreaves Lansdown Group and related parties who are not members of the
Group:
Throughout the prior year, the non-controlling interest in HL Savings Limited
was held by Stuart Louden, an employee of the Group. During the prior year an
agreement was reached to purchase Stuart Louden's shares which was executed
during the year and at the year end the Company had 100% control of Hargreaves
Lansdown Savings Limited.
5.3 Related party transactions continued
During the years ended 30 June 2023 and 30 June 2022 the Company has been
party to a lease with P K Hargreaves, a significant shareholder during the
year and former Director, for rental of the old head office premises at Kendal
House. A five year lease was signed in April 2021 for a rental of part of the
building, to be used for disaster recovery purposes at a market rate rent of
£0.1 million per annum. No amount was outstanding at either year end.
During the years ended 30 June 2023 and 30 June 2022, the Group has provided a
range of investment services in the normal course of business to shareholders
on normal third-party business terms.
Directors and staff are eligible for a slight discount on some of the services
provided.
Remuneration of key management personnel
The remuneration of the key management personnel of the Group, being those
personnel who were a member of the Board or Executive Committee during the
relevant year shown, is set out below in aggregate for each of the categories
specified in IAS 24 Related Party Disclosures.
Year ended Year ended
30 June 30 June
2023 2022
£m £m
Short-term employee benefits 8.1 8.6
Post-employment benefits 0.4 0.4
Other long-term benefits 0.5 0.4
Termination benefits 0.9 0.5
Share-based payments 2.1 5.2
12.1 15.1
Non-Executive Directors fees 1.1 1.0
The table above has been updated to include Non-executive Directors Fees,
which were not included in the prior year.
In addition to the amounts, six key management personnel (2022: eight)
received gains of £1.0 million (2022: £1.6m) as a result of exercising share
options. During the year, awards were made under executive option schemes for
nine key management personnel (2022: nine).
Included within the previous table are the following amounts paid to Executive
Directors of the Company who served during the relevant year. Full details of
Directors' remuneration, including numbers of shares exercised, are shown in
the Directors' remuneration report.
Year ended Year ended
30 June 30 June
2023 2022
£m £m
Short-term employee benefits 2.7 2.6
Post-employment benefits 0.1 0.1
Other long-term benefits 0.2 0.2
Share-based payments 0.6 1.4
3.6 4.3
In addition to the amounts above, Directors of the Company received gains of
£0.3 million relating to the exercise of share options (2022: £0.7m).
Year ended Year ended
30 June 30 June
2023 2022
£m £m
Emoluments of the highest paid Director 2.5(1) 1.9(1)
No. No.
Number of Directors who exercised share options during the year 1 2
Number of Directors who were members of money purchase pension schemes 2 2
1 The highest paid Director was the Chief Executive Officer and full details
of his emoluments can be found in the audited 'Remuneration payable' table in
the Directors' remuneration report.
Any amounts outstanding with related parties are unsecured and will be settled
in cash. No guarantees have been given or received in respect of amounts
outstanding. No provisions have been made for doubtful debts in respect of the
amounts owed by the related parties.
5.4 Non-statutory accounts
The consolidated financial information as noted in this document does not
constitute the Group's statutory financial statements for the years ended 30
June 2023 or 30 June 2022 but is derived from them. Statutory financial
statements for 2022 have been delivered to the registrar of companies and
those for 2023 will be delivered in due course. The auditors have reported on
both sets of financial statements and their report was (i) unqualified, (ii)
did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 of the Companies Act 2006.
Section 6: STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE
FINANCIAL STATEMENTS
The directors are responsible for preparing the Report and Financial
Statements 2023 and the financial statements in accordance with applicable law
and regulation.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the group and the
parent company financial statements in accordance with UK-adopted
international accounting standards.
Under company law, directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the group and parent company and of the profit or loss of the group for
that period. In preparing the financial statements, the directors are required
to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable UK-adopted international accounting
standards have been followed, subject to any material departures disclosed and
explained in the financial statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and parent company will
continue in business.
The directors are responsible for safeguarding the assets of the group and
parent company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are also responsible for keeping adequate accounting records
that are sufficient to show and explain the group's and parent company's
transactions and disclose with reasonable accuracy at any time the financial
position of the group and parent company and enable them to ensure that the
financial statements and the Directors' Remuneration Report comply with the
Companies Act 2006.
The directors are responsible for the maintenance and integrity of the parent
company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
The directors consider that the Report and Financial Statements 2023 and
accounts, taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the group's and parent
company's position and performance, business model and strategy.
Each of the directors, whose names and functions are listed in The Board of
Directors confirm that, to the best of their knowledge:
· the group and parent company financial statements, which have
been prepared in accordance with UK-adopted international accounting
standards, give a true and fair view of the assets, liabilities and financial
position of the group and parent company, and of the profit of the group; and
· the Strategic report includes a fair review of the development
and performance of the business and the position of the group and parent
company, together with a description of the principal risks and uncertainties
that it faces.
In the case of each director in office at the date the directors' report is
approved:
· so far as the director is aware, there is no relevant audit
information of which the group's and parent company's auditors are unaware;
and
· they have taken all the steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit information
and to establish that the group's and parent company's auditors are aware of
that information.
By order of the Board
Amy Stirling
Chief Financial Officer
18(th) September 2023
Executive Directors
Dan Olley
Amy Stirling
Non-Executive Directors
Deanna Oppenheimer
Andrea Blance
Adrian Collins
Penny James
Moni Mannings
Michael Morley
Roger Perkin
Darren Pope
John Troiano
Section 7: PRINCIPAL RISKS AND UNCERTAINTIES
Managing the risks to Hargreaves Lansdown is fundamental to delivering the
incredible levels of service our clients expect and generating returns for
shareholders. The Board has performed a robust assessment of the principal
risks facing the Group through a process of continual review, including those
that would threaten its business model, future performance, solvency and
liquidity. In making such an assessment the Board considers the likelihood of
each risk materialising in the short and longer term.
The principal risks and uncertainties faced by the Group are detailed below,
along with actions taken to mitigate and manage them. The principal risks are
categorised into strategic risks, operational risks and financial risks as per
our risk framework.
Strategic risks
Failure to execute strategic plans
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
The risk that HL does not deliver on the strategy or in the forecasted · Erosion of shareholder value · The Executive Committee and Board review strategy in the context · Technology and resiliency risk events · Commenced execution against three year strategy
timescales due to incorrect information or assumptions based on changing
of propositional design and service enhancement on a regular basis
market dynamics, inability to react to changes, or that the activities · Negative impact on our brand and reputation
· NNB v forecast · Progressed proposition enhancements including fund develop,
supporting the delivery of the strategy are inadequate or poorly designed.
· Oversight and tracking of strategic deliverables at senior level
active savings capacity and client communication and cash ISA wrapper
· Negative impact on client experience and HL's ability to maintain governance forums (i.e. Quarterly Business Review) · Client retention
market share
· Developed a Digital roadmap, including Cloud deployment and
· Clear objectives aligned to Executive owners and a supporting · Service rating engagement of enhancement telephonic capability
operating plan in place
Business Performance
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
The risk that HL does not meet the agreed business performance targets linked · Earning fluctuations · Diversified revenue streams balanced between recurring and · Profit Before Tax · Increased targeted marketing campaigns
to strategy, due to poor delivery, cost management and/or decision making.
transaction-based
· Blocker to delivery of strategic objectives
· Underlying Costs · Targeted pricing adjustments
· Monitoring and maintenance of client service
· Erosion of shareholder value and / or market share
· Client metrics (net, new and retention) · Prioritisation of internal investment on service, technology
· Executive and Board Governance
& risk
· Robust cost control
· Executive oversight and development of KPIs
Operational risks
Technology
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
As HL moves through its transformation, the risk of technology failing to meet · Inability to maintain operational efficiency · Scalable IT Architecture planning · Unplanned downtime of client facing applications · Formation of new teams to support strategy in tooling and
current business and future operational requirements or at the pace required
technology enablement
to deliver the strategic outcomes, or the risk of system/data being · Failure to deliver against strategy · Rolling internal and external monitoring of IT environment · Status of critical projects
unavailable resulting in disruption to business operations and the potential
· Leverage Cloud technology to improve transfer out processes
for customer detriment, financial loss, damage to reputation, regulatory fines · Poor client outcomes · Identification of contingency providers for technology · Core system monitoring
and/or censure.
· Broadened our Learning tools and introduced new mentoring and
· Reputational damage · IT recovery capability, planning and testing · System patching status coaching programmes
· Regulatory intervention · Technology risk events · Migration of client telephony services to Amazon Connect
· Full End-to-End IT Testing platform
· Platform security improvements
· Launched first cloud journey, improving our transfers process
· Operational Resilience programme
· Operational Plan, including prioritisation of IT development
Administration
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
Risk of failure or delay of any of the activities that are carried out in · Poor client service & outcome(s) · Ongoing First Line of Defence monitoring of controls, control · NPS · Focused workforce planning and tool deployment to support service
support of the actual process of administration of investing.
management, self-assessment and quality assurance
improvements
· Loss of client assets or money
· Risk events (including CASS breaches) and Compliance breach
· Process and procedural documents monitoring · Roll out of Amazon Connect telephony capability
· Reputational damage
· Training and development · Third party breaches · Enhancements to our transfer processes
· Failure to comply with Consumer Duty
· Operational MI · Complaints · Development of digital roadmap to drive further service
· Regulatory intervention
capability
· Control focus at key governance forums, including CASS Committee, · Helpdesk call quality
Executive Risk Committee and Operating Committee oversight
· Operational processing and transactional error rates
Regulatory Compliance
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
Risk that required regulatory change is not implemented to regulatory · Regulatory breaches · Regulatory horizon scanning and business impact analysis · Volume of new outputs from regulatory bodies · Investment into 'Foundation' strategic pillar
expectations or requirement and/or existing regulatory requirements are not
met. · Regulatory intervention · Compliance monitoring · Number of regulatory change projects · Consumer Duty implementation
· Reputational damage · Ongoing open dialogue with the FCA · Risk Events and Compliance breaches · CASS Improvement Plan
· Inability to deliver business strategy or objectives · Executive Risk Committee oversight · Complaints · First ICARA under new IFPR rules
· Increased and enhanced Compliance Monitoring capacity
Financial crime
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
Risk that HL fails to design or implement appropriate frameworks, including · Loss of sensitive data · Dedicated Chief Information Security Officer and team, and a · Fraud monitoring · Completion of Financial Crime transformation programme (part 1)
policies, processes, or technology, to counter HL being used to further
Security Operations Centre focused on the detection, containment and
financial crime by either internal or external parties · Poor client outcomes (including fraud) remediation of information security threats · Cyber threat assessment · Increased capability and capacity of Financial Crime teams
· Negative impact on confidence in HL · Dedicated Information Security, Anti Money laundering and Client · Time taken to address security vulnerabilities · Operational delivery of Client Risk Assessment tool
Protection teams in place
· Diminish the integrity of the financial system
· Number of Information Commissioner's Office (ICO) notifiable data · Delivery of enhanced client Sanction controls
· Specialist AML screening team protection breaches
· Regulatory intervention
· Formal policies and procedures and a robust, rolling risk-based
programme of penetration and vulnerability testing in place
· Enhanced Sanction control environment
· Horizon scanning peer group to understand industry trends
Data Management
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
Risk that HL fails to design or implement appropriate frameworks, including · Loss of sensitive data · Dedicated Chief Information Security Officer, Chief Data Officer · Data related Risk Events · New Data Risk Management Policy
policies, processes, or technology, to manage data and data storage
and Data Protection Officer in place
· Poor client outcomes (including fraud)
· Data reporting issues · Refresh of the suite of data standards supporting the policy
· Data Governance function
· Inefficient processing
· Data Privacy Impact Assessment completions · Established a cross organisational Data Panel to improve the
· Robust data access controls
management and use of data
· Regulatory intervention
· Cyber events
· Data storage standards
· Data Management and Information Security programmes
· Fraud events
· Monitoring of sensitive data usage
· Data Panel
Product & Proposition
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
Risk of developing/selling/communicating new products or maintaining existing · Poor client outcomes · Colleague communication and training · • Client survey results · • Delivery against forthcoming Consumer Duty regulations
products that result in poor outcomes for clients.
· Negative reputational impact · Risk and incident monitoring and review · •Complaints · • Investment in Model Risk capabilities
· Regulatory censorship · Executive Risk Committee and Product Governance Committee · • Clients cancelling a new product or service · • Launch FlexInvest
oversight
· Corporate and social responsibility programme
· Whistleblowing process
· Fair value assessment
· Robust marketing and financial promotion controls
· Model Risk Management
Operational Resilience
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
Risk that HL fails to establish robust operational resilience solutions to · Poor client outcomes · Business Impact Analysis · System downtime · Enhancements to the End-to-End IT testing platform
support positive client outcomes.
· Policy or regulatory breaches · Business Continuity Plans · Process failures · Investment in Operational Resiliency tools and processes
· Operational inefficiencies or failures · Disaster Recovery Plans · Crisis management response · Review and enhancements to crisis management and incident
management approaches
· Reputational damage · Strong Incident Management capability
· Dedicated Operational Resiliency team and programme
· Regular incident scenario testing
· Scenario based playbooks
· Vulnerability remediation
· Operating Committee oversight
Employee Relations
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
The risk that HL does not adapt its employee relation components to meet the · Operational inefficiency or poor conduct · Effective performance and Talent Management · Colleague retention rates · Breathing Space payment for junior colleagues to help with cost
changing market environment and the way that HL will operate as it transforms,
of living
such as employee attraction, recruitment, onboarding, development, retention · Poor client outcomes · Regular review of employee reward offering to ensure competitive · Colleague absence monitoring
as well as employment laws which leads to employee/customer/HL detriment.
reward offering
· Improvements in 'Health & Wellbeing' support to all
· Reputational damage
· Gender Pay Gap colleagues
· Regular staff surveys and employee forums to understand morale
· Diversity & Inclusion · People communications through HL Way to support HL Values
· People agenda monitored at ExCo and Board
· Broadened out our Learning tools
· Robust whistleblowing policy and supporting processes
· New mentoring and coaching schemes
· Evolved our Responsible Business Strategy through our ESG
Taskforce
Change Management
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
The risk that HL change initiatives are not delivered in a timely manner or · Operational inefficiency · Delivery & Change Co-ordination Function · Change envelopes (financial budgets) · Development of Operating plan embedding strategic
fail to deliver the required business outcomes; resulting in compromised
priorities
delivery. · Poor client outcomes · Change Delivery Framework & controls · Delivery plans (milestones)
· Embedding of Change Delivery Framework and delivery controls and
· Reputational damage · Exco and Business Investment Committee oversight oversight processes
· Change delivery recruitment in 1LoD
· Ongoing Executive and management oversight mechanisms (replacing
ABR & QBR bullet)
Information Security
Risk Potential impact Mitigations Key risk indicators 2022/23 activity
The risk that information security protocols do not keep up with good · Service disruption or failure · Dedicated Chief information Security Officer in place · Vulnerability management effectiveness · Access control developments including privileged access
practices and developments resulting in unauthorised access, security breaches
management.
modification or loss resulting in the potential for customer detriment, · Compromise of sensitive and or corporate data · Organisational remit reporting through SMF24 · Cyber Events
financial loss, damage to reputation or regulatory fines/censure.
· Platform Security improvements.
· Negative reputational damage · Cyber Security Strategy and Plan · Cyber Threat assessment
· Cyber threat intelligence and Security monitoring improvements
· Impacted client outcomes · Cyber agenda monitored at Exco and Board · Third party governance KRIs
· Endpoint Security Improvements
· Regulatory censure/fines · Secure by Design regime for all change activities · Colleague security awareness and compliance
· Cyber Security controls aligned in industry good practice
· Security Testing and assurance regime
· Supply chain security assurance regime
· Cyber vulnerability management, monitoring, incident planning and
response
· Scenario testing for Senior Leadership. Formal scenario selection
and assessment for ICARA provision
Glossary of Alternative Financial Performance Measures
Within the 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 Definition Why we use this measure Reconciliation
Underlying Activity costs Underlying cost related to stockbroking, financial services costs and This has been amended in the period to provide visibility of the costs that This measure is the same as the Activity Costs figures within note 1.3 less
marketing costs on a transactional basis related to the volume of activity are associated with both client numbers and transactional volumes, to allow strategic investment costs that fit this categorisation of £0.1m.
undertaken by our clients. comparison from year to year.
Dividend per share (pence per share) Total dividend payable relating to a financial year divided by the total Dividend per share is pertinent information to shareholders and investors and N/A
number of shares eligible to receive a dividend. Note ordinary shares held in provides them with the ability to assess the dividend yield of Hargreaves
the Hargreaves Lansdown Employee Benefit Trust have agreed to waive all Lansdown plc shares.
dividends (see note 3.2 to the consolidated financial statements).
Underlying People costs Underlying cost related to staff, the main driver of cost in our business People costs are our largest cost category and our people are the key driver Equivalent to staff costs figure within note 1.3, less strategic investment
of our Business and our strategy. costs of £11.3m
Platform Growth The net value of new assets brought onto the platform less assets leaving the Provides the most useful measure of tracking, over time, the element of net N/A
platform, excluding cash placed with Active Savings. new business that is made up of assets brought onto the platform.
Net movement to Active Savings The net value of assets moving from the HL platform to Active Savings Separated out from Platform Growth to highlight the change in asset mix within N/A
the business and the retention provided by Active Savings.
Active Savings Growth The net value of new cash placed with Active Savings. Provides the most useful measure of tracking, over time, the element of net N/A
new business that is made up of cash brought into Active Savings.
Market growth and other The underlying market movement and other retained investment income, including Provides the best measure for highlighting changes in the AUA that are not N/A
dividends reinvested on behalf of clients directly impacted by client activity.
Net interest margin (bps) Revenue from cash divided by the average value of cash under administration, Provides the most comparable means of tracking, over time, the margin earned N/A
net of interest received by clients on the cash under administration after considering the amount received by
clients
Revenue margin (bps) Total revenue divided by the average value of assets under administration Provides the most comparable means of tracking, over time, the margin earned N/A
which includes the Portfolio Management Services assets under management held on the assets under administration and is used by management to assess
in funds on which a platform fee is charged. business performance.
Revenue margin from cash (bps) Revenue from cash (net interest earned on the value of client money held on Provides a means of tracking, over time, the margin earned on cash held by our N/A
the platform divided by the average value of assets under administration held clients.
as client money).
Revenue margin from funds (bps) Revenue derived from funds held by clients (platform fees, initial commission Provides the most comparable means of tracking, over time, the margin earned N/A
less loyalty bonus) divided by the average value of assets under on funds held by our clients.
administration held as funds, which includes the Portfolio Management Services
assets under management held in funds on which a platform fee is charged.
Revenue margin from HL Funds (bps) Management fees derived from HL Funds (but excluding the platform fee) divided Provides a means of tracking, over time, the margin earned on HL Funds. N/A
by the average value of assets held in the HL Funds.
Revenue margin from shares (bps) Revenue from shares (stockbroking commissions, management fees where shares Provides a means of tracking, over time, the margin earned on shares held by N/A
are held in a SIPP or ISA, less the cost of dealing errors) divided by the our clients.
average value of assets under administration held as shares.
Strategic investments costs The total Cost (excluding capitalisation), of the Strategic Investment Costs relating to the planning and commencement of the digital technology See page 9
(Including dual running costs) Programme including staff and professional fees relating to the planning, strategy and core growth initiatives, which include staff costs, professional
commencement and dual running of the digital technology strategy, strategic fees and technology costs, that are considered separately to reflect the
growth initiatives and the cost of expanding associated compliance, impact on the results of the Group.
infrastructure and support functions.
Underlying Support costs Underlying support costs includes costs previously known as legal and Provides an assessment of our other costs. The measure is the same as Support costs, within note 1.3, less strategic
professional fees and office running costs, including operating lease rentals. investment costs of £1.6m
Also included in underlying support costs are depreciation of owned plant and
equipment, amortisation of other intangible assets and impairment.
Underlying Technology costs Costs associated with the use of third-party software and data feeds used in Provides a means of understanding the impact that increasing or changing our The sum of Depreciation, Amortisation, Impairment, Operating lease rentals
the performance of daily business. proposition has on our costs. payable and Support costs per note 1.3, less strategic investment costs of
£22.7m
Underlying basic earnings per share Underlying profit after tax divided by the weighted average number of ordinary The calculation of basic earnings per share using statutory profit after tax N/A
shares for the purposes of basic EPS. adjusted for those costs that are related specifically to our strategic
investments.
Underlying costs Operating costs less strategic investment costs (including dual running Provides relevant information on the year-on-year cost of the underlying Operating costs per note 1.3 less £36.1m strategic investment costs
costs). business as we go through a period of significant strategic investment.
Underlying diluted earnings per share Underlying profit after tax divided by the weighted average number of ordinary The calculation of diluted earnings per share using statutory profit after tax N/A
shares for the purposes of diluted EPS. adjusted for those costs that are related specifically to our strategic
investments.
Underlying profit after tax Profit after tax attributable to equity holders of the parent company Profit after tax includes costs that are part of strategic planning and Profit after tax per the Statement of Comprehensive income after adding back
excluding Strategic investment costs (including dual running costs). development. This measure helps to provide clarity between the profit of the strategic investment costs and adjusting for a tax shield effect, as shown on
business from period to period when those costs are not considered. This is page 6
important as we go through a period of significant strategic investment.
Underlying profit before tax Profit before tax excluding Strategic investment costs (including dual running Provides the best measure for comparison of profit before tax of the Profit before tax per the Statement of Comprehensive income after adding back
costs). underlying business performance as we go through a period of significant strategic investment costs as shown on page 6
strategic investment.
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