REG - Hargreaves Lansdown - Half-year Report
15/02/2023 07:16
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RNS Number : 9365P Hargreaves Lansdown PLC 15 February 2023
Hargreaves Lansdown plc
Interim results for the six months ended 31 December 2022
Highlights
· Net new business of £1.6 billion (H1 2022: £2.3 billion).
· Assets under administration up 2.3% since 30 June 2022 to £127.1
billion.
· 1,768,000 active clients, an increase of 31,000 in the first half.
(H1 2022: 1,693,000, increase of 48,000)
· First half Revenue up 20% year on year
· Underlying Profit before Tax and Statutory Profit before Tax
increased 30% and 31% year on year
· Interim dividend up 3.6% to 12.70 pence per share (H1 2022: 12.26p)
Financial highlights 6 months ended 31 December 2022 6 months ended 31 December 2021 Change % Year ended
30 June
2022
(H1 2023) (H1 2022) (FY 2022)
Net new business (NNB) £1.6bn £2.3bn -30% £5.5bn
Total assets under administration (AUA) £127.1bn £141.2bn -10% £123.8bn
Revenue £350.0m £291.1m +20% £583.0m
Profit before tax £197.6m £151.2m +31% £269.2m
Underlying profit before tax* £211.9m £163.5m +30% £297.5m
Diluted earnings per share 33.1p 25.7p +29% 45.6p
Underlying diluted earnings per share* 35.5p 27.8p +28% 50.4p
Interim dividend per share* 12.70p 12.26p +3.6% 39.7p
*Underlying profit before tax, underlying diluted earnings per share and
dividend per share are Alternative Performance Measures which exclude the
impact of strategic investment costs. See the Glossary of Alternative
Performance Measures on page 28 for the full definitions and pages 6 and 9
where reconciliation to the relevant statutory measures are provided.
Chris Hill, Chief Executive Officer, commented:
I'm delighted that we have delivered a strong financial performance over the
first half of the year, with year-on-year revenue growth of 20% and increasing
both underlying and statutory profit by around 30%.
Whilst challenging external conditions and low investor confidence impacted
asset values and stockbroking volumes in the period, clients have benefitted
from our diversified platform and we have progressed across all the strategic
priorities that we set out a year ago at our Capital Markets Day.
We welcomed a further 31,000 net new clients over the period taking our total
client numbers to 1.77 million with client retention increasing during the
period to 92.4%. Our focus remains on engaging with clients and helping them
to navigate the challenging backdrop.
The progress we have made over this period is the direct result of the hard
work of each of my colleagues and I would like to thank them for their ongoing
efforts.
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 / Caroline Daniel Amy Stirling, Chief Financial Officer
Brunswick Group +44(0)207 404 5959
Analysts' presentation
Hargreaves Lansdown will be hosting an analyst presentation at 9:00am on 15
February 2023 following the release of the results for the half year ended 31
December 2022. 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=7d865538&confId=44236
(https://gbr01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.netroadshow.com%2Fevents%2Flogin%3Fshow%3D7d865538%26confId%3D44236&data=05%7C01%7Cjames.found%40hl.co.uk%7Cbb3d9bc692874e1577c708daf878a259%7C90578e2dfce84c57a1a62b4909a9dc4d%7C0%7C0%7C638095495977170617%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000%7C%7C%7C&sdata=K35NTOibU0gghLX%2BNdbNYqKidYaUowugQYXorw7Lm%2BM%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 measures
Included in this announcement are various alternative performance measures
used by the Company in the course of explaining the results for the six months
ended 31 December 2022. These measures are listed along with the calculations
to derive them and an explanation of why we use them on page 26 in the
Glossary of Alternative Performance Measures. A reconciliation to profit
before tax is given in the Operating and Financial Review section.
Forward-looking statements
The Interim Results contain forward-looking statements which have been made in
good faith based on the information available to us at the time of the
approval of this report and should be treated with caution due to the inherent
risks and uncertainties, including both economic and business risk factors
some of which were set out in the 2022 Annual Report, underlying such
forward-looking information.
Unless otherwise stated, all figures below refer to the six months ended 31
December 2022 ("H1 2023"). Comparative figures are for the six months ended
31 December 2021 ("H1 2022"). Certain figures contained in this document,
including financial information, have been subject to rounding adjustments.
Accordingly, in certain instances the sum of the numbers in a column or a row
in tables contained in this document may not conform exactly to the total
figure given for that column or row.
LEI Number: 2138008ZCE93ZDSESG90
Chief Executive's Statement
The first half of our financial year has been another period of growth for
Hargreaves Lansdown ("HL") and we have continued to support our new and
existing clients whilst investing in our diversified business model.
Our strategy evolves our award-winning platform by combining the best of human
expertise, the capability of the colleagues that we already have, and augments
it with the use of data and technology to deliver an increasingly personalised
service that supports our clients to not only manage their wealth, but their
financial health and resilience. We are best placed to deliver on this agenda
because we have the largest client base in this sector, and the broadest
client interaction, which enables us to collect the most comprehensive set of
data points and this gives us a deep understanding of client needs. In 2023 we
have progressed across all our strategic priorities that we set out a year ago
at our Capital Markets Day.
We have long been focused on delivering the right client outcomes across our
products and services and understand the value of a diversified offering
enabling clients to make the right decisions and achieve their financial
objectives through the cycle. We have continued to build out our proposition
with the launch of new funds, the roll out of cloud-based technology in our
Service team and we have piloted our first augmented tool. Active Savings, our
cash savings service that we launched in 2018, to provide clients with access
to competitive savings rates has seen meaningful growth in the period. The
progress we have made during this year is the direct result of the hard work
of each of my colleagues and I would like to thank them for their ongoing
efforts.
It is hard to think of any financial analyst, economic forecaster or policy
expert who could have predicted the events of the past year. Over the last 12
months we have seen a ground war start in Europe, inflation reach 40-year
highs and central banks drive significant interest rate rises. The combined
effects of this challenging backdrop in 2022 have led to the lowest six-month
period on record for consumer confidence, while investor confidence also hit
its lowest level ever. Given this extended period of macroeconomic
uncertainty, our focus - as always - is on supporting clients with their
financial wellbeing and helping them to navigate this turbulence. A year like
2022 really affirms the importance of our core purpose - as a trusted partner
to empower people to save and invest with confidence and help improve the UK's
underlying financial resilience.
In October I informed the Board that I wished to step down as CEO. The search
for a successor has been completed with the announcement that Dan Olley will
take over later in the year. As a member of the plc Board, I have worked with
Dan since he joined in 2019 and he has provided valuable strategic insight
over that time. Dan is excited by the opportunities ahead for the business and
we look forward to him joining us in his new role during 2023.
Performance in the first half of the year
The business has performed well in the first half of the year; whilst
challenging external conditions and low investor confidence impacted asset
values and stockbroking volumes in the period, we have seen the return of
higher levels of net interest margin leading to revenue growth and increasing
Underlying Profit before Tax and Statutory Profit before tax by 29.6% and
30.7% respectively.
We delivered £1.6 billion of net new business in the first half, a reduction
on prior year reflecting the challenging market conditions and low investor
confidence. Over the period our clients took the opportunity to access
competitive cash rates with record flows to our Active Savings service as
interest rates became more favorable.
Our AUA at the end of the period was £127.1 billion including £1.7 billion
(H1 2022: £3.4bn) positive market movement and net new business of £1.6
billion. Average AUA for the period was £127.1 billion, 9% below that for the
prior year period reflecting negative market movement on the values of funds
and shares across January to June 2022.
We welcomed a further 31,000 net new clients over the period taking our total
client numbers to 1.77 million with client retention increasing during the
period to 92.4% (FY22: 92.1%). Once a client joins our platform they have
access to our diverse range of products and will utilise a broad range of our
services over the lifelong relationship they have with us, as evidenced by 30%
of clients who started with Active Savings going on to open an investment
product within a year. Our focus remains on engaging with clients and helping
them to navigate the challenging backdrop, in whatever format is easiest and
most efficient for them, as highlighted by the 119 million digital visits,
over 48 million client log-ins to our mobile app and over 967,000 views of our
online content and articles we saw over the period as we continued to act as
our clients trusted source and partner.
We delivered a strong financial performance over the period. Revenue increased
by 20% to £350.0 million reflecting both an improvement to net interest
margin following a period of historically low interest rates and higher levels
of cash held by clients in both their Investment and Savings accounts. This
also reflects the strength of our diversified business model: whilst share
transaction levels have fallen year on year, they are still higher than before
the pandemic and whilst they have fallen, we have benefited from our cash
savings platform in flows and overall improving returns on cash.
We maintained focus on managing our overall spend with underlying costs of
£146.1 million (H1 2022 £127.6m), and £23.4 million (H1 2022 £12.3m) of
Total Strategic Spend incurred as we have scaled up our strategic activity in
the period. Consequently, Underlying Profit before Tax increased to £211.9
million (H1 2022: £163.5m) and Statutory Profit before Tax to £197.6 million
(H1 2022: £151.2m) in the first half.
The Board has declared an interim dividend of 12.70 pence per share, a 3.6%
increase on H1 FY22.
Strategic Delivery
We are one year on from our Capital Markets Day and I am pleased with the
progress that we have made. Over the period we have rephased our delivery
focus prioritising efficiency activities within our Service areas in line with
our wider cost discipline. The scale of our data supports our deep
understanding of our clients and their needs. It informs our proposition,
enables us to improve our service and drives our development of the next
generation client experience.
Growth
Active Savings -We now support over 146,000 clients with their cash savings
and the service has £6.3 billion of AUA, making us the largest retail savings
platform in the UK. We continue to build the margin associated with the
service which was 11bps for the period (H1 2022: 4bps).
Investment Solutions - A key focus of our strategy is to evolve our investment
solutions, offering funds and investment tools to support clients with a broad
range of needs. We launched the HL Growth Fund, a multi-asset retirement
saving fund for our Workplace Solution clients, in December 2021, and it now
has £321 million assets under management. In this half year we launched the
HL US Fund, the first of our single asset and geography "building blocks",
designed to help clients build a diversified portfolio. The US has been a
growing sector of client interest and investment in recent years and since
launch the fund has taken £143 million of new money and now has £500
million+ AUM (including conversion from relevant historic HL Multi-Manager
funds). We have also converted the £1.8 billion (HL Multi-Manager Income
& Growth Fund) into the HL UK Income Fund, with this conversion driving
cost efficiencies including a 10bps cost reduction for clients.
These "building block" funds are managed by HL Fund Managers using segregated
mandates, bringing together the very best of HL and world-leading asset
managers. We will continue to build out our offering over the rest of the year
including launching four HL Managed Portfolios and more "building blocks."
Next Generation "Augmented" Client Experience - Our deep data insight and our
understanding of clients means we are very clear on the next generation
experience they need to build and manage their financial resilience. Our
digital wealth management service of the future will feature a range of
capabilities enabling all our clients to access digital insight and tools as
and when they need it. We recognise that the full-advice model is not right or
accessible for everyone but that many will benefit from additional guidance
and support in moments that matter, such as when choosing first investments or
moving towards retirement. This can be done by combining the expertise of
human-led advice/guidance augmented by technology and data for those clients
that decide they need the next level of support. Whether clients choose to
utilise our offering by making their own investment decisions, benefit from
the services of a coach or go on to take advice, our investment in the
underlying data, tools and capabilities is driving a better client experience,
helping client retention, better client outcomes and higher lifetime value.
The first foundations of our next generation client experience are already
driving results underpinned by our comprehensive data. Our Better Investors
programme has now delivered over 690,000 nudges and driven improved client
understanding of a broad range of investment topics, from diversification to
risk. Our Savings & Resilience barometer methodology is providing
important insight for clients and policymakers on the impact of the
cost-of-living-crisis. The success of this work provides important insight as
we develop our client experience and has fed directly into the pilot launch of
the first of our digital tools which is being tested with clients. The
Financial Health-Check enables clients to get a personalised report with
educational content and peer comparison of their financial position. We will
also be piloting financial coaching, alongside this, enabling clients to
access a coach to help them navigate these tools and ensure they are empowered
to make informed decisions in their saving, investment and retirement
planning.
Service, Efficiency & Digital Backbone
Throughout the period we have continued to develop our cloud-based
architecture. We have selected and established foundational partnerships that
enable us to access industry leading technology and provide an enhanced, more
resilient and scalable, and more personalised, service.
Enhancing the quality of engagement - In the first half we started the
roll-out of a Cloud Contact Centre platform through our partner Amazon Web
Services (AWS). The initial roll-out includes steering calls to the helpdesk
agent best placed to help and has already generated efficiency improvements in
live teams including a 13% reduction in average call handling time. We will
continue to enhance this service over 2023.
Driving innovation & building simplicity - We have made significant
improvements to our trading functionality during the period, including a
partnership with Retail Book (REX) to enable our clients to access equity
primary capital raises (including IPOs). This is part of our effort to ensure
we offer a market leading service to clients and ensure that retail investors
get access to opportunities. We have also launched a new digital voting tool
in partnership with Broadridge, enabling clients to have a greater say on
governance of companies they invest in. In January we launched our updated
Share Exchange service (previously known as Bed & ISA). This delivers a
market leading UK and Overseas equity to equity Bed & ISA and Bed &
SIPP functionality. It is a key tax planning tool for clients particularly
given recent announcements around Capital Gains Tax and the new process will
enable them to Bed & ISA/SIPP shares at the mid-price supported by
best-in-class digital service.
Digital backbone - Our partnerships have enabled us to design, develop and
deliver across a number of key areas ranging from delivering and directing
website and client journeys, to removing complexity in key processes such as
streamlining payments and data management and storage, saving colleagues time
and reducing the cost to create new content, while providing a consistent and
accessible experience.
Delivering efficiency - A key focus of our strategic delivery is on driving
efficiency into our processes to enhance the experience for clients and
colleagues whilst enabling cost savings. We have delivered cost savings of
£10.4 million across our Service and Digital teams. This comprises savings of
£3.2 million driven through procurement and productivity improvements in key
service functions and as we start to see efficiency benefits from our cloud
capability come through, we have been able to reskill and repurpose headcount
in the Digital team taking specific teams out of BAU activity and into
strategic project generating £7.2 million of savings in our underlying cost.
FY23 Guidance and medium-term Outlook
We are well underway with the execution of our strategy and I am confident
this will deliver for our clients, shareholders and wider stakeholders. In the
second half of our financial year, the current uncertain economic environment
and market conditions are likely to continue to impact investor confidence and
in turn, net new business and dealing volumes. In terms of our financial
guidance for FY23 we are now expecting:
· Overall revenue margin of between 50 and 55 basis points,
primarily reflecting the higher revenue margin on cash resulting from higher
interest rates. The margin for each asset class being:
o Funds 38-39 basis points (no change)
o HL Funds 55-60 basis points (no change)
o Shares 30-35 basis points (no change)
o Cash 160-170 basis points
· Underlying cost growth towards the top end of the range
(9.5-11.5%)
· Total Strategic Investment Costs (including dual running costs)
of £50-£55 million but with no change to our overall strategic spend to the
end of 2026 of £225 million (including £50 million of dual running costs).
· 3% Ordinary dividend growth.
Delivering a Proposition and Service that meets our clients' needs
The work to deliver our strategy enables us to move in step with the
industry's regulatory direction, building the leading digital wealth
management service to drive client outcomes which are the focus of the
Consumer Duty and address the advice/guidance gap. Support from across the
political spectrum and regulatory focus continues to grow for the importance
of reform on this issue to benefit consumers in building their financial
resilience. We welcome the announced review of the advice and guidance
boundary and are clear that the smart use of data can transform outcomes for
consumers.
Strong execution across our initiatives will enable the next stage of growth
and market leadership, enhancing our diversified proposition, increasing
scalability across our service and technology, and delivering operating
efficiency and leverage. Despite the challenging conditions that have
characterised the last year we have made significant progress. We continue to
enhance our lifelong relationship with clients, build client retention and
generate new flows across our expanding services. We look ahead to the rest of
2023 with confidence.
Chris Hill
Chief Executive Officer
Financial Review
Assets Under Administration (AUA) and Net New Business (NNB)
Unaudited Unaudited Unaudited
6 months ended 3 months to 3 months to
31 December 2022 31 December 2022 30 September 2022
£bn £bn £bn
Opening AUA 123.8 122.7 123.8
Platform growth* 0.3 0.1 0.2
Movement to Active Savings* (0.4) (0.2) (0.2)
Active Savings growth 1.7 1.0 0.7
Total Net New Business 1.6 0.9 0.7
Market growth and other 1.7 3.5 (1.8)
Closing AUA 127.1 127.1 122.7
*Platform growth and Movement to Active Savings are alternative performance
measures. See the Glossary of Alternative Performance Measures on page 28 for
the full definition
Total net new business for the first half of 2023 was £1.6 billion (FY22
£2.3bn). Platform growth was £0.3 billion (H1 2022: £1.9bn) in the first
half, with £0.4 billion (H1 2022: £0.1bn) of movement into Active Savings,
which also attracted a further £1.3 billion (£0.5bn) of new money to
Hargreaves Lansdown, generating £1.7 billion growth in total.
Total AUA increased by 3% to £127.1 billion at the period end, (FY22
£123.8bn) driven by net new business as explained above and £1.7 billion of
positive market movement during the first six months.
Throughout the period, we have maintained our focus on engaging with clients
and helping them to navigate the challenging economic backdrop and
consequential impact on investing and investor confidence and to improve their
financial engagement and resilience. Our focus on service and the value our
clients place on our offering continues to be evidenced by client and asset
retention rates, which remain strong at 92.4% and 91.4% respectively (FY2022:
92.1% and 91.8%).
We introduced 31,000 net new clients to our services in the six months to 31
December 2022 (H1 2022: 48,000), growing our active client base by 2% to
1,768,000. 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 37 (H1 2022: 35) and we are encouraged by the quality of
clients we are welcoming who brought an average NNB of £17,090, up 29% on
last year (H1 2022: £13,231), driven by greater numbers of clients opening
Active Savings accounts, which attract a higher opening balance.
AUA for the period of £127.1 billion was 10% below that for the prior year
period. The drop was driven by significant market falls and subsequent adverse
market movement on the values of funds and shares across January to June 2022.
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.
Income Statement
Unaudited Unaudited
6 months ended 6 months ended
31 December 2022 31 December 2021
£m £m
Revenue 350.0 291.1
Operating costs (160.4) (139.9)
Finance and other income 8.4 0.4
Finance costs (0.4) (0.4)
Profit before tax 197.6 151.2
Tax (40.4) (29.2)
Profit after tax 157.2 122.0
Profit before tax 197.6 151.2
Adjusted for:
Total strategic spend
- Strategic Investment Costs (including dual running costs) 14.3 12.3
Underlying profit before tax* 211.9 163.5
Tax on underlying profit* (43.3) (31.6)
Underlying profit after tax* 168.6 131.9
*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 £14.3 million. See the Glossary of Alternative Performance
Measures on page 28 for the full definition.
Revenue
Revenue for the period increased 20% to £350.0 million (H1 2022: £291.1m),
reflecting both 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 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:
6 months ended 6 months ended
31 December 2022 31 December 2021
Revenue Average AUA Revenue margin* Revenue Average AUA Revenue margin
£m £bn bps £m £bn bps
Funds(1) 117.9 59.5(7) 40 133.2 68.1(7) 39
Shares(2) 70.2 47.4 30 101.8 54.5 37
Cash(3) 121.6 14.5 168 11.3 12.8 18
HL Funds(4) 27.0 8.2(7) 66 31.4 9.1(7) 69
Other(5) 13.3 5.6(6) - 13.4 3.5(6) -
Double-count(7) - (8.1)(7) - - (9.0)(7) -
Total 350.0 127.1(7) - 291.1 139.0(7) -
* Revenue margin is an alternative performance measure, see the Alternative
Performance Measures glossary on page 28 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 Advisory fees, revenue from Active Savings and ancillary services (e.g.
annuity broking, distribution of VCTs and HL Currency Services).
6 Average cash held via Active Savings.
7 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.
Revenue on Funds decreased by 11% to £117.9m (H1 2022: £133.2m) reflecting
the 13% decrease in average AUA, with revenue margin broadly flat at 40bps.
Funds AUA at the end of the period was £59.6 billion (31 December 2021:
£69.0bn).
Revenue on Shares decreased by 31% to £70.2m (H1 2022: £101.8m) and the
revenue margin of 30bps (H1 2022: 37bps) was at the low end of our expected
range. This margin is primarily a result of the ratio of dealing volumes to
AUA. In the period client driven deal volumes fell by 31% to 3.1 million (H1
2022: 4.5m), whereas the average Shares AUA has fallen by 13%. The drop in
deal volumes reflects continued low levels of investor confidence, that were
also seen in the second half of FY22.
Total deal volumes (including automated deals such as dividend reinvestment)
decreased by 25% to 4.0 million (H1 2022: 5.3m) but were in line with the
expectation of c32,000 deals per trading day. This peaked in September at
35,000 deals per trading day, largely as a result of the Government's
mini-budget, to a low in December of 27,000 given the seasonally quieter
Christmas period. Despite the more recent reduction in volumes, client driven
trading is higher than levels seen prior to the pandemic. We are well placed
to benefit from a future rise in investor confidence and any subsequent growth
in share trading across the industry, however we expect to see these more
muted volumes continue through much of the second half of our financial year.
Shares AUA at the end of the period was £47.1 billion (31 December 2021:
£55.2bn).
Revenue on cash significantly increased in the period to £121.6m (31
December 2021: £11.3m) reflecting increases in the Bank of England base rate
(Base rate) during the period, partially offset by the pass through rate to
clients and the level of cash held by clients in investment accounts. Four
rate increases were made during the period, taking the base rate from 125bps
in July 2022 to 350bps as at 31 December 2022, compared to the prevailing rate
of 25bps as at 31 December 2021.
Cash held in Investment accounts is placed with UK PRA regulated
counterparties and is managed in accordance with the prevailing consumer
regulation which considers term, credit risk and counterparty exposure.
Interest earned on cash reflects bank appetite for liquidity, deposit term on
offer as well as the Base rate. The step up in base rates has increased
interest earned on cash and as a result we have increased both the amount and
the proportion passed through to clients during the period. The level of cash
held in Investment accounts increased during the period with average cash AUA
of £14.5bn (31 December 21: £12.8bn) also contributing to the increase in
revenue.
Cash represented 11.4% of total average AUA, an increase from 9.2% in the
prior year, reflecting client current preference for cash given the volatile
market backdrop and investor confidence. As investor confidence improves, we
would expect to see this preference for cash held in investment accounts to
reduce as a proportion of AUA as clients choose to invest in funds and
equities, which will impact revenue in each of these asset classes.
HL Funds now comprise nine Multi-Manager funds, three Select equity funds, two
new HL funds- the US fund, which launched in November 2022 and the UK Income
Fund which was created by converting previous Multi-Manager funds, alongside
our HL Growth fund, which is used as the Workplace pension default fund as we
build out our own fund client offering. The average funds under management
were down 10% versus last year, driven by market valuations and therefore
impacting revenues which were down 14% to £27.0m (H1 2022: £31.4m). In the
second half, we will continue to build out our own fund offering, including
three ready-made Investment Portfolios launching in March.
Other revenues comprise advisory fees, Active Savings and ancillary services
such as annuity broking, distribution of VCTs. The amount has remained stable
year on year, due to the increase in Active Savings revenue, offsetting the
change to our paper based statement charging, which has been phased out.
Active Savings
Our focus is on growing Active Savings cash balances through offering
competitive savings rates to attract and retain new clients and cash assets on
the platform. Across the period, the base rate increase has facilitated more
appealing and often market leading rates on offer for clients. We have
continued with the step increase of marketing Active Savings from the end of
last financial year and we have subsequently seen strong flows across the
period totalling £1.7 billion (H1 2022: £0.6bn). As at 31 December 2022 the
AUA was £6.3 billion (31 December 2021: £3.8bn) and over 146,000 clients now
have an Active Savings account.
Unaudited Unaudited
6 months ended 6 months ended
31 December 2022 31 December 2021
£m £m
Ongoing revenue* 293.2 201.1
Transactional revenue* 56.8 90.0
Total revenue 350.0 291.1
* Ongoing revenue and Transactional revenue are alternative performance
measures, see the Alternative Performance Measures glossary on page 28 for the
full definitions
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 84% in the period (H1 2022: 69%) as the transactional
stockbroking commission decreased versus last year and the net interest income
increased significantly as the base rate of interest has 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 46% to £293.2 million (H1 2022: £201.1m) 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. Ongoing
revenues provide greater profit resilience and hence we believe they are of
higher quality than transactional revenues.
Transactional revenue primarily comprises stockbroking commission and advisory
event-driven fees. This decreased by 37% to £56.8 million (H1 2022: £90.0m)
reflecting the 31% decrease in client driven equity dealing volumes.
Underlying operating costs*
Unaudited Unaudited
6 months ended 6 months ended
31 December 2022 31 December 2021
£m £m
Underlying cost Underlying cost
Labour costs* 81.5 67.6
Activity costs* 19.3 22.7
Technology costs* 17.2 11.2
Support costs* 28.1 26.1
Underlying costs (pre-FSCS) 146.1 127.6
Total FSCS levy - -
Underlying operating costs** 146.1 127.6
*Definitions have been amended and are shown in the Glossary of Alternative
Financial Performance Measures on page 28.
**Underlying costs excludes £14.3 million of strategic investment costs
(including dual running costs). See the Glossary of Alternative Performance
Measures on page 28 for the full definition.
Underlying costs
Underlying costs increased by 14.5% to £146.1 million (H1 2022: £127.6m)
reflecting inflation, annualisation of headcount growth in FY22, increased
technology spend and one off costs incurred in the period.
Labour costs increased 21% to £81.5 million (H1 2022: £67.6m) reflecting the
annualisation of the FY22 increase in headcount and salary inflation of c5%
overall which has been weighted towards our more junior colleagues.
Acknowledging the financial impact that the current environment is continuing
to have on colleagues, we have also announced a one-off Support Payment for
colleagues who continue to feel the impact of cost inflation of £1.1 million.
Activity costs comprise marketing costs, dealing related costs, and payment
costs for client cash transferred onto the platform. Overall Dealing costs
have reduced £5.7 million during the period reflecting the £2.0 million
benefit of renegotiation of 3(rd) party costs and the decrease in volumes
experienced in the first half of the year. Payment costs have increased in
line with the level of cash added to the platform including Active Savings.
Technology costs increased by 54% to £17.2 million (H1 2022: £11.2m). This
was driven by software support fees and service subscriptions as we build out
our digital capability and utilise more third-party services that are cloud
based to enable our staff to work in new ways.
Support costs, which include legal and professional fees, office running
costs, depreciation and amortisation, increased by £2.0 million to £28.1
million (H1 2022: £26.1m). Including the impact of higher energy costs and a
£1.8 million one off increase to the dilapidations provision, these have been
offset by lower external professional fees for third party support,
specifically in relation to non-strategic project support as we bring more
expertise in house. Insurance costs and travel expenses have also increased as
staff returned to more normalised working patterns.
Strategic Investment Costs (including Dual Running Costs)
Total strategic spend in the period was £23.4 million in the first half, of
which £14.3 million has been expensed in the year and £9.1 million
capitalised in line with our accounting policy. This represents an increase of
£11.1 million in total spend over H2 FY22 as the programme scales up in both
overall activity and individual project scale. 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 have 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 period, £8.4m 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.
On an underlying basis, profit before tax increased by 30% to £211.9 million
(H1 2022: £163.5m). On a statutory basis profit before tax increased by 31%
to £197.6 million (H1 2022: £151.2.0m).
Tax
The effective tax rate for the period was 20.4% (H1 2022: 19.3%), which
reflects the higher rate of tax in effect from April 2023 and its impact on
the Group in the year. We are required to treat our tax across the period
based on our treatment of tax for the purposes of our tax return for the year.
The Group's tax strategy is published on our website at http://www.hl.co.uk
(http://www.hl.co.uk)
Earnings per share
Unaudited Unaudited
6 months ended 6 months ended
31 December 2022 31 December 2021
£m £m
Operating profit 189.6 151.2
Finance income 8.4 0.4
Finance costs (0.4) (0.4)
Profit before tax 197.6 151.2
Underlying profit before tax* 211.9 163.5
Tax (40.4) (29.2)
Profit after tax 157.2 122.0
Tax on underlying profit* (43.3) (31.6)
Underlying profit after tax* 168.6 131.9
Weighted average number of shares for the calculation of diluted EPS 474.6 474.5
Diluted EPS (pence per share) 33.1 25.7
Underlying diluted EPS (pence per share)* 35.5 27.8
*Underlying profit before tax, Tax on underlying profit before tax, Underlying
profit after tax and Underlying diluted EPS for the period exclude strategic
investment costs of £14.3 million (H1 2022: £12.3m). See the Glossary of
Alternative Performance Measures on page 28 for the full definitions.
Diluted EPS increased by 29% from 25.7 pence to 33.1 pence, in line with the
Group's increase in profits. The Group's basic EPS was 33.2 pence, compared
with 25.8 pence in H1 2022.
Underlying diluted EPS increased by 28% from 27.8 pence to 35.5 pence. (See
Glossary of Alternative Performance Measures on page 30 for the full
definition). The Group's underlying basic EPS was 35.6 pence, compared with
27.9 pence in H1 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 with the need to invest in the business to maintain a
market-leading offering and high service standards for our clients.
As a result, 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 has a high conversion rate of operating
profits to cash and its net cash position at 31 December 2022 was £445.4
million (H1 2022: £432.8m). Despite this being the first year of our
investment programme, cash generated from operations more than offset the
payments of the 2022, final ordinary dividend. The cash position includes cash
on longer-term deposit and is before funding the 2023 interim dividend of
£60.3 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.
Total attributable shareholders' equity, as at 31 December 2022, made up of
share capital, share premium, retained earnings and other reserves increased
to £603.9 million (H1 2022: £534.6m) as continued profitability more than
offset both the Strategic spend resulting from the Investment programme and
payment of 2022 final dividend
HL plc has four subsidiary companies authorised and regulated by the FCA. The
FCA's Investment Firm Prudential regime (IFPR) came into effect on 1(st)
January 2022 focusing on the potential harm firms can pose to consumers and
markets. 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 new regulatory requirements.
Consistent with the new IFPR requirements, HLAM specifically is 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
In line with Group's dividend policy and previous guidance, the Board has
declared an increased interim dividend of 12.70 pence per share (H1 2022:
12.26 pence per share). The interim dividend will be paid on 31 March 2023 to
all shareholders on the register at 3 March 2023.
Directors' Responsibility Statement
The Directors confirm that these condensed interim financial statements have
been prepared in accordance with UK adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R, namely:
· an indication of important events that have occurred during the
first six months of the financial year and their impact on the condensed set
of consolidated financial statements, and a description of the principal risks
and uncertainties for the remaining six months of the financial year; and
· material related-party transactions in the first six months and
any material changes in the related party transactions described in the last
Annual Report.
The Directors of Hargreaves Lansdown plc are listed on page 30 of the Interim
Report and Condensed Consolidated Financial Statements 6 months ended 31
December 2022.
By order of the Board:
Amy Stirling
Chief Financial Officer
14 February 2023
Independent review report to Hargreaves Lansdown plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Hargreaves Lansdown plc's condensed consolidated interim
financial statements (the "interim financial statements") in the Interim
results for the six months ended 31 December 2022 of Hargreaves Lansdown plc
for the 6 month period ended 31 December 2022 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Consolidated Statement of Financial Position as at
31 December 2022;
· the Condensed Consolidated Income Statement and Condensed
Consolidated Statement of Comprehensive Income for the period then ended;
· the Condensed Consolidated Statement of Cash Flows for the period
then ended;
· the Condensed Consolidated Statement of Changes in Equity for the
period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim results for the six
months ended 31 December 2022 of Hargreaves Lansdown plc have been prepared in
accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Interim results for the
six months ended 31 December 2022 and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the
interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Interim results for the six months ended 31 December 2022, including the
interim financial statements, is the responsibility of, and has been approved
by the directors. The directors are responsible for preparing the Interim
results for the six months ended 31 December 2022 in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Interim results for the six
months ended 31 December 2022, including the interim financial statements, the
directors are responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend
to liquidate the group or to cease operations, or have no realistic
alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Interim results for the six months ended 31 December 2022
based on our review. Our conclusion, including our Conclusions relating to
going concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of this report.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority and for no other purpose. We do not, in giving this conclusion,
accept or assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
14 February 2023
Section 1: Results for the period
Condensed Consolidated Income Statement
for the period ended 31 December 2022
Note Unaudited Unaudited
6 months ended 31 December 6 months ended 31 December
2022 2021
£m £m
Revenue 1.1 350.0 291.1
Operating costs 1.3 (160.4) (139.9)
Operating profit 189.6 151.2
Finance income 8.4 0.4
Finance costs (0.4) (0.4)
Profit before tax 197.6 151.2
Tax 1.4 (40.4) (29.2)
Profit for the period 157.2 122.0
Attributable to:
Owners of the parent 157.3 122.2
Non-controlling interest (0.1) (0.2)
157.2 122.0
Earnings per share 1.5 33.2 25.8
Basic earnings per share (pence)
Diluted earnings per share (pence) 33.1 25.7
The results relate entirely to continuing operations.
After the Statement of Financial Position date, the Directors declared an
ordinary interim dividend of 12.70 pence per share payable on 31 March 2023 to
shareholders on the register at 3 March 2023.
In the prior year Fair value gains on derivatives was presented as a separate
financial statement line item. In the current period it has been removed as
the value was nil for the current and comparative period.
Condensed Consolidated Statement of Comprehensive Income
for the period ended 31 December 2022
Unaudited Unaudited
6 months ended 31 December 6 months ended 31 December
2022 2021
£m £m
Profit for the period 157.2 122.0
Total comprehensive income for the financial period 157.2 122.0
Attributable to:
Owners of the parent 157.3 122.2
Non-controlling interest (0.1) (0.2)
157.2 122.0
The results relate entirely to continuing operations.
Section1: Results for the period
Notes to the Condensed Consolidated Statement of Comprehensive Income
for the period ended 31 December 2022
1.1 Revenue
Revenue represents fees receivable from financial services provided to
clients, management fees charged to clients and net interest income (see note
2.4 for further details regarding money held on behalf of clients). It relates
to services provided in the UK and is stated net of value added tax.
The largest source of revenue for the Group encompasses ongoing revenue, which
includes platform fees, fund management fees, net interest income, ongoing
advice charges and renewal commission.
The other source is revenue earned on individual transactions and is primarily
made up of fees on stockbroking transactions and advisory event driven fees,
referred to as initial advice charges in the table below. The price is
determined in relation to the specific transaction type and are frequently
flat fees. There is no variable consideration in relation to transactional
revenue.
Revenue Unaudited Unaudited
6 months ended 31 December 6 months ended 31 December
2022 2021
£m £m
Ongoing revenue
Platform fees 135.1 150.8
Fund management fees 27.0 31.4
Ongoing advice charges 3.7 4.3
Net interest income 124.9 12.0
Renewal commission 2.5 2.6
Transactional revenue
Fees on stockbroking transactions 54.6 86.2
Initial advice charges 1.7 2.0
Other transactional income 0.5 1.8
Total Revenue 350.0 291.1
1.2 Segment information
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. 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: Unaudited Unaudited
6 months 6 months ended 31 December
ended 31 2021
December
2022 £m
£m
Depreciation of owned plant and equipment and right-of-use assets 4.1 4.5
Amortisation of other intangible assets 3.1 3.0
Impairment of intangible assets - -
Activity costs 19.5 22.7
Data and technology costs 18.0 13.9
Support costs(1) 29.6 22.2
Staff (including contractors) costs 86.1 73.7
Operating costs 160.4 139.9
(1) Included in support costs are compliance costs, legal and professional
fees, other banking charges and insurance costs.
1.4 Tax Unaudited
6 months ended 31 December Unaudited
2022 6 months ended 31 December
2021
£m
£m
Current tax: on profits for the period 40.4 29.3
Current tax: adjustments in respect of prior years - (0.1)
Deferred tax 0.1 0.1
Deferred tax: adjustments in respect of prior years (0.1) (0.1)
40.4 29.2
In addition to the amount charged to the Consolidated Income Statement,
certain tax amounts have been charged/(credited) directly to equity as
follows:
Unaudited Unaudited
6 months ended 31 December 6 months
2022 ended 31
December
£m 2021
£m
Deferred tax relating to share-based payments (0.2) 0.4
Current tax relating to share-based payments 0.3 0.2
0.1 0.6
1.5 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 period, including ordinary shares held in the
EBT which have vested unconditionally with employees.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding by assuming the conversion of all
dilutive potential ordinary shares.
The weighted average number of anti-dilutive share options and awards excluded
from the calculation of diluted earnings per share was 1,510,318 as at 31
December 2022 (nil at 31 December 2021).
1.5 Earnings per share (EPS) (continued)
Unaudited Unaudited
6 months ended 31 December 6 months ended 31 December
2022 2021
Earnings (all from continuing operations) £m £m
Earnings for the purposes of basic and diluted EPS - net profit attributable 157.2 122.2
to equity holders of the parent Company
Number of shares Number Number
Weighted average number of ordinary shares 474,318,625 474,318,625
Weighted average number of shares held by HL EBT
(292,518) (487,907)
Weighted average number of share options held in relation to shares held by HL 45,480 35,670
EBT which have vested unconditionally with employees
474,071,587 473,866,388
Weighted average number of shares for the purposes of basic EPS
Weighted average number of dilutive share options held in relation to shares 527,453 667,192
held by HL EBT that have not vested unconditionally with employees
474,599,040 474,533,580
Weighted average number of shares for the purpose of diluted EPS
Earnings per share Pence Pence
Basic EPS 33.2 25.8
Diluted EPS 33.1 25.7
Section 2: Assets & Liabilities
Condensed Consolidated Statement of Financial Position
for the period ended 31 December 2022
Note Unaudited Audited at 30
at 31 December June
2022 2022
£m £m
ASSETS:
Non-current assets
Goodwill 1.3 1.3
Other intangible assets 2.1 44.8 37.3
Property, plant and equipment 2.1 20.1 22.5
Deferred tax assets 1.8 1.9
68.0 63.0
Current assets
Investments 2.2 0.7 0.8
Trade and other receivables 2.3 676.3 523.5
Cash and cash equivalents 2.4 255.4 488.3
Current tax assets - 0.6
932.4 1,013.2
Total assets 1,000.4 1,076.2
LIABILITIES:
Current liabilities
Trade and other payables 2.5 381.0 488.3
Current tax liabilities 1.1 -
382.1 488.3
Net current assets 550.3 524.9
Non-current liabilities
Provisions 4.4 2.6
Non-current lease liabilities 10.0 11.8
Total liabilities 396.5 502.7
Net assets 603.9 573.5
EQUITY:
Share capital 3.1 1.9 1.9
Shares held by EBT (1.7) (3.6)
EBT reserve (1.1) (2.4)
Retained earnings 604.8 579.2
Total equity, attributable to the owners of the parent 603.9 575.1
Non-controlling interest - (1.6)
Total equity 603.9 573.5
2.1 Changes in capital expenditure since the last annual Statement
of Financial Position date
Capital expenditure
During the six months ended 31 December 2022, the Group acquired fixtures,
fittings, plant, equipment and software assets and internally generated
intangibles with a cost of £12.1 million (year to 30 June 2022: £13.7m).
2.2 Investments
Unaudited Audited
at at
31 December 30 June
2022 2022
£m £m
At beginning of period 0.8 0.9
Sales (0.6) (0.8)
Purchases 0.5 0.7
At end of period 0.7 0.8
Comprising:
Current asset investment - listed securities valued at quoted market price 0.7 0.8
£0.7 million (30 June 2022: £0.8m) of investments are classified as held at
fair value through profit and loss. These investments are all Level 1
financial instruments in line with the fair value hierarchy under IFRS 7 and
there have been no transfers between levels in the period.
2.3 Trade and other receivables
Unaudited Audited at
at 30 June
31 December 2022
2022
£m £m
Financial assets:
Trade receivables 344.4 432.6
Term deposits 190.0 20.0
Other receivables 3.7 3.7
Accrued income 121.2 49.0
659.3 505.3
Non-financial assets:
Prepayments 17.0 18.2
676.3 523.5
Trade and other receivables comprise fees due from clients and counterparty
positions. They are subsequently measured at amortised cost using the
effective interest method less any expected credit losses. The financial
assets are held in order to collect the contractual cash flows and those cash
flows are payments of interest and principal only. The Group recognises
Expected Credit Losses (ECLs) relating to trade receivables in line with the
simplified approach per IFRS 9 and calculated based on the historic
information available from the preceding years alongside factors impacting the
individual debtors, economic conditions and forecast expectations. Impairment
losses are recognised immediately in the Income Statement.
Term deposits comprise cash deposits held by UK licensed banks for a period of
greater than three months, over which there is no recall during the term of
the deposit.
In accordance with market practice and accounting standards on trade date
accounting, certain balances with clients, Stock Exchange member firms and
other counterparties totalling £323.0 million (30 June 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 £422.4 million and the gross amount offset in
the Statement of Financial Position with trade payables is £99.4 million.
Other than these 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.
2.4 Cash and cash equivalents
Unaudited Audited at
at 31 December 30 June
2022 2022
£m £m
Group cash and cash equivalent balances 255.1 488.0
Restricted cash - balances held by HL EBT 0.3 0.3
255.4 488.3
Cash and cash equivalents comprise cash in hand and demand deposits that are
readily convertible to a known amount of cash, subject to insignificant
changes in value and are holdings of less than three months or those over
which the Group has an immediate right of recall. The carrying amount of these
assets is approximately equal to their fair value.
At 31 December 2022, 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 £7,910 million (30 June 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 £6,376 million (30 June
2022: £6,533m). The client retains the beneficial interest in both these
deposits and cash accounts, and accordingly, they are not included in the
Statement of Financial Position of the Group.
2.5 Trade and other payables
Unaudited Audited at
at 31 December 30 June
2022 2022
£m £m
Financial liabilities:
Trade payables 324.2 406.7
Current lease liabilities 4.6 4.6
Other payables 21.0 31.0
349.8 442.3
Non-financial liabilities:
Deferred income 0.2 0.3
Accruals 25.3 38.5
Social security and other taxes 5.7 7.2
381.0 488.3
In accordance with market practice, certain balances with clients, Stock
Exchange member firms and other counterparties totalling £319.9 million (30
June 2022: £404.9m) are included in trade payables. As stated in note 2.3,
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 of certain
services.
2.6 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.
2.6 Contingencies (continued)
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.
Section 3: Equity
Condensed Consolidated Statement of Changes in Equity
for the period ended 31 December 2022
Attributable to the owners of the Parent
Share capital Shares held by EBT EBT reserve Retained earnings Total Non-controlling interest Total equity
£m £m £m £m £m £m £m
Audited at 30 June 2021 1.9 (4.8) (3.1) 599.5 593.5 (1.1) 592.4
Total comprehensive income(1) - - - 122.2 122.2 (0.2) 122.0
Increase in non-controlling interest through investment - - - - - 0.2 0.2
Employee Benefit Trust:
Shares sold in the period - 4.9 - - 4.9 - 4.9
Shares acquired in the period - (3.6) - - (3.6) - (3.6)
HL EBT share sale - - (2.6) - (2.6) - (2.6)
Reserve transfer on exercise of share options - - 2.1 (2.1) - - -
Employee share option scheme:
Share-based payments expense - - - 4.8 4.8 - 4.8
Current tax effect of share-based payments - - - (0.2) (0.2) - (0.2)
Deferred tax effect of share-based payments - - - (0.4) (0.4) - (0.4)
Dividend paid (note 3.2) - - - (182.9) (182.9) - (182.9)
Unaudited at 31 December 2021 1.9 (3.5) (3.6) 540.9 535.7 (1.1) 534.6
Audited at 30 June 2022 1.9 (3.6) (2.4) 579.2 575.1 (1.6) 573.5
Total comprehensive income(1) - - - 157.3 157.3 (0.1) 157.2
Increase in non-controlling interest through investment - - - - - - -
Change in ownership - - - (1.7) (1.7) 1.7 -
Employee Benefit Trust:
Shares sold in the period - 1.9 - - 1.9 - 1.9
Shares acquired in the period - - - - - - -
HL EBT share sale - - (1.9) - (1.9) - (1.9)
Reserve transfer on exercise of share options - - 3.2 (3.2) - - -
Employee share option scheme:
Share-based payments expense - - - 3.3 3.3 - 3.3
Current tax effect of share-based payments - - - (0.3) (0.3) - (0.3)
Deferred tax effect of share-based payments - - - 0.2 0.2 - 0.2
Dividend paid (note 3.2) - - - (130.0) (130.0) - (130.0)
Unaudited at 31 December 2022 1.9 (1.7) (1.1) 604.8 603.9 - 603.9
(1) Total comprehensive income includes profit for the period and the total
comprehensive income presented is equal to profit in both periods presented.
The shares held by the Employee Benefit Trust ("the EBT") reserve represents
the cost of shares in Hargreaves Lansdown plc purchased in the market and held
by the Hargreaves Lansdown plc EBT to satisfy options under the Group's share
option schemes.
The EBT reserve represents the cumulative loss on disposal of investments held
by the Hargreaves Lansdown 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. The non-controlling interest in the period ended 31 December 2021
represented a 7.5% shareholding in Hargreaves Lansdown Savings Limited, which
is a subsidiary of the Company. During the period, the Company purchased all
of Stuart Louden's shares and therefore at 31 December 2022 the Company had
100% control of Hargreaves Lansdown Savings Limited.
3.1 Share capital Unaudited Audited at
at 31 December 30 June
2022 2022
£m £m
Issued and fully paid:
Ordinary shares of 0.4p 1.9 1.9
Shares Shares
Issued and fully paid:
Number of ordinary shares of 0.4p 474,318,625 474,318,625
The Company has one class of ordinary shares which carry no right to fixed
income.
3.2 Dividends paid
Unaudited Audited at
at 31 December 30 June
2022 2022
£m £m
Amounts recognised as distributions to equity holders in the period:
2022 Final dividend of 27.44p per share (2021 - 26.6p) 130.0 126.0
2022 Special Dividend of Nil p per share (2021 - 12.0p) - 56.9
2022 First interim dividend of 12.26p per share (2021 - 11.9p) - 58.1
Total 130.0 241.0
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.
Unaudited Audited at
at 31 December 30 June
2022 2022
Number of shares held by the 197,460 424,035
Hargreaves Lansdown Employee Benefit Trust
Representing % of called-up share capital 0.04% 0.09%
Section 4
Condensed Consolidated Statement of Cash Flows
as at 31 December 2022
Note Unaudited Unaudited
at 31 December at 31 December
2022 2021
£m £m
Net cash from operating activities
Profit for the period after tax 157.2 122.0
Adjustments for:
Income tax expense 40.4 29.2
Depreciation of plant and equipment 4.1 4.5
Amortisation of intangible assets 3.1 3.0
Impairment of intangible assets - -
Investment income (8.4) -
Share-based payment expense 3.3 4.8
Interest on lease liabilities 0.2 0.2
(Decrease)/increase in provisions 1.8 (1.7)
Operating cash flows before movements in working capital 201.7 162.0
Decrease/(increase) in receivables 17.2 208.6
(Decrease)/increase in payables (107.4) (221.4)
Cash generated from operations 111.5 149.2
Income tax paid (38.8) (28.3)
Interest received 8.4 -
Net cash generated from operating activities 81.1 120.9
Investing activities
(Increase)/decrease in term deposits (170.0) 40.0
(Purchase of)/Proceeds on disposal of investments 0.1 (2.3)
Purchase of property, plant and equipment 2.1 (1.6) (1.1)
Purchase of intangible assets 2.1 (10.5) (4.2)
Proceeds on disposal of subsidiary - -
Net cash from/(used in) investing activities (182.0) 32.4
Financing activities
Purchase of own shares in EBT - (3.6)
Proceeds on sale of own shares in EBT 0.1 2.3
Dividends paid to owners of the parent (130.0) (182.9)
Payments of principal in relation to lease liabilities (2.1) (1.5)
Net cash used in financing activities (132.0) (185.7)
Net (decrease)/increase in cash and cash equivalents (232.9) (32.4)
Cash and cash equivalents at beginning of period 488.3 445.3
Cash and cash equivalents at end of period (including restricted cash) 2.4 255.4 412.9
Section 5
Other Notes
as at 31 December 2022
5.1 Basis of preparation
This condensed consolidated interim financial report for the half-year
reporting period ended 31 December 2022 has been prepared using accounting
policies in accordance with UK-adopted International Accounting Standard 34,
'Interim Financial reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority. The
Interim Financial Statements have been prepared on the historical cost basis,
except for the revaluation of certain financial instruments, and are presented
in pounds sterling which is the currency of the primary economic environment
in which the Group operates.
The financial information contained in these Interim Financial Statements does
not constitute statutory accounts within the meaning of Section 434 of the
Companies Act 2006. However, the information has been reviewed by the
Company's auditor, PricewaterhouseCoopers LLP, and their report appears
earlier in this document. The financial information for the year ended 30 June
2022 has been derived from the audited financial statements of Hargreaves
Lansdown plc for that year, which have been reported on by
PricewaterhouseCoopers LLP and delivered to the Registrar of Companies. Copies
are available online at www.hl.co.uk (http://www.hl.co.uk) . The auditor's
report on those accounts was not qualified, did not include a reference to any
matters to which the auditor drew attention by the way of emphasis without
qualifying the report and did not contain statements under section 498 (2) or
(3) of the Companies Act 2006.
Going concern
Throughout the period, the Group was debt free, has continued to generate
significant cash, with £190m in term deposits at 31 December 2022 (see note
2.3) and has adequate financial resources available to meet its day-to-day
regulatory and working capital requirements.
The Directors have considered the resilience of the Group, taking account of
its current financial position, the principal risks facing the business in
severe but plausible scenarios and the effectiveness of any mitigating
actions. As a consequence, the Directors believe that the Group is well placed
to manage its business risks in the context of the current economic outlook
and has adequate financial resources to continue in operational existence for
a period of at least 12 months from the date of approval of these interim
financial statements. They therefore continue to adopt the going concern basis
in preparing the consolidated interim financial statements.
The same accounting policies, methods of computation and presentation have
been followed in the preparation of the Interim Financial Statements for the
six months ended 31 December 2022 as were applied in the Audited Annual
Financial Statements for the year ended 30 June 2022.
Changes in the composition of the Group
Throughout the prior period and prior year, the non-controlling interest in
Hargreaves Lansdown Savings Limited was held by Stuart Louden, an employee of
the Group. During the period an agreement was reached to purchase Stuart
Louden's shares and at the period end the Company had 100% control of
Hargreaves Lansdown Savings Limited.
Seasonality of operations
A high proportion of the Group's revenue is derived from the value of assets
under administration or management on the HL platform or within HL funds. The
values of these assets are influenced predominantly by new business volumes,
the stock market and client withdrawals.
Revenues are not considered to be seasonal, with approximately 50% of revenues
being earned in the second half of the financial year, based on previous
financial years. The Group revenue is however sensitive to the impact of net
new business inflows and interest rates during a particular period.
5.2 Material events after interim period-end
After the interim Statement of Financial Position date, an ordinary interim
dividend of 12.70 pence per share (H1 2022: interim dividend 12.26 pence)
amounting to a total dividend of £60.3 million (2022: £58.1m) was declared
by the plc Directors. These financial statements do not reflect this dividend
payable.
There have been no other material events after the
end of the interim period.
5.3 Principal risks and uncertainties
The principal risks and uncertainties which could impact the Group for the
remainder of the financial year are those detailed on pages 51 to 59 of the
Group's Annual Report and Financial Statements 2022, a copy of which is
available on the Group's website, www.hl.co.uk. These remain the principal
risks and uncertainties for the second half of this financial year and beyond;
the key ones of which are listed below and they are regularly considered by
the Board.
Strategic risks
· Risk that propositions and activity are not aligned with HL's
strategic objectives
· Market performance negatively impacting the underlying assets
under administration
Operational risks
· IT operational environment
· Operational delivery
· Regulatory compliance
· Financial crime
· Appropriate data frameworks
· Duties to clients
· Operational Resilience
· People
The Group is exposed to interest rate risk, the risk of sustaining reduced
income from adverse movements in interest bearing assets. These assets
comprise cash, cash equivalents and term deposits. At 31 December 2022 the
value of such assets on the Group Statement of Financial Position was £445.4
million (at 31 December 2021: £432.9m). A 50bps (0.5%) move in interest
rates, in isolation, would therefore, not have a material direct impact on the
Group Statement of Financial Position or results. This exposure is monitored
to ensure that the Group is maximising its interest earning potential within
accepted liquidity and credit constraints. The Group has no external
borrowings and as such is not exposed to interest rate or refinancing risk on
borrowings.
As a source of revenue is based on the value of client cash under
administration, the Group also has an indirect exposure to interest rate risk
on cash balances held on behalf of clients. These balances are disclosed in
note 2.4 and do not form part of the Group Statement of Financial Position.
The table below highlights the theoretical impact of a sudden change in base
rate on net interest income in the Condensed Consolidated Income Statement.
The measure of 50bps is based on the average rate rise we have seen at each
change within the period.
Unaudited
at 31 December
2022
£m
£m
Net Interest Income +50bps (0.5%) 24.8
Net Interest Income -50bps (0.5%) (24.8)
The above disclosure is not intended as forward guidance or analysis and does
not take into account the behaviour of clients in relation to changes in
interest rates, nor does it forecast future cash holdings and the level of
pass through to clients. It is intended as a point in time indication of the
sensitivity of the net interest income revenue category in the reporting
period to unforeseen changes in the base rate.
5.4 Related party transactions
The Company has a related party relationship with its Directors and members of
the Executive Committee (the "key management personnel"). There were no
material changes to the related party transactions or arrangements during the
financial period; transactions are consistent in nature with the disclosure in
note 5.6 to the 2022 Annual Report.
As highlighted in note 5.1 at the end of the period, the Group purchased the
shareholding in Hargreaves Lansdown Savings Limited of Stuart Louden.
5.5 Financial instruments' fair value disclosure
The Group's financial assets and liabilities are held at fair value through
profit or loss. There have been no transfers of assets or liabilities between
levels of the fair value hierarchy.
The following table provides an analysis of financial instruments that are
measured subsequent to initial recognition at fair value, based on the fair
value hierarchy under IFRS 7:
Level 1 Total
Quoted prices
£m £m
Unaudited at 31 December 2022
Financial assets at fair value through profit or loss 0.7 0.7
0.7 0.7
Audited at 30 June 2022
Financial assets at fair value through profit or loss 0.8 0.8
0.8 0.8
The fair value of financial instruments traded in active markets is based on
quoted market prices at the end of the reporting period. Instruments included
in Level 1 comprise primarily equity investments and fund units entered into
on a counterparty basis.
Glossary of Alternative Performance Measures
Within the Interim Report and Condensed Financial Statements various
Alternative Financial Performance Measures are referred to, which are non-GAAP
(Generally Accepted Accounting Practice) measures. They are used in order to
provide a better understanding of the performance of the Group and the table
below states those which have been used, how they have been calculated and why
they have been used.
Measure Calculation Why we use this measure
Activity costs Total cost related to stockbroking, financial services costs and marketing This has been amended in the period to provide visibility of the costs that
costs on a transactional basis related to the volume of activity undertaken by are associated with both client numbers and transactional volumes, to allow
our clients. This measure is the same as the "dealing and financial services comparison from year to year
costs" plus the "marketing and costs" figures within note 1.3 less strategic
investment costs that fit this categorisation.
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
number of shares eligible to receive a dividend. Note ordinary shares held in provides them with the ability to assess the dividend yield of the 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).
Labour costs Total cost related to staff, equivalent to staff costs figure within note 1.3. Labour costs are our largest cost category and our people are the key driver
of our business and our strategy.
Ongoing revenue Revenue that is earned depending on the value of assets held on the platform, We believe ongoing revenue provides greater profit resilience and hence is of
including platform fees, management fees and interest earned on client money higher quality than transactional revenue.
and represents revenue earned over a period of time
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
platform, excluding cash placed with Active Savings. new business that is made up on assets brought onto the platform.
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
the business and the retention provided by Active Savings.
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
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
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
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.
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
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 investment costs (including dual running costs) The total Cost (excluding capitalisation), of the Strategic Investment Costs relating to the planning, commencement and dual running of the digital
Programme including staff and professional fees relating to the planning, technology strategy and core growth initiatives, which include staff costs,
commencement and dual running of the digital technology strategy, strategic professional fees and technology costs, that are considered separately to
growth initiatives and the cost of expanding associated compliance, reflect the impact on the results of the Group.
infrastructure and support functions.
Support costs Those costs other than labour, activity and technology costs that are part of Provides an assessment of our other costs.
the underlying business of the Group.
Calculated as the total cost, less labour activity and technology costs
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 performance of daily business. The measure is the same as technology costs proposition has on our costs.
within note 1.3 less any strategic investment costs that fit this
categorisation.
Transactional revenue Revenue that is not non-recurring in nature and dependent on a client Such revenue is not as high quality as ongoing revenue but helps to show the
instruction such as a deal to buy or sell shares or take advice. This diversification of our revenue streams.
represents revenue earned at a point in time.
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
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
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
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
excluding strategic investment costs (including dual running costs). development. This measure helps to provide clarity between the profit of the
business from period to period when those costs are not considered. This is
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
costs). underlying business performance as we go through a period of significant
strategic investment.
General Information
EXECUTIVE DIRECTORS
Chris Hill
Amy Stirling
NON-EXECUTIVE DIRECTORS
Andrea Blance
Adrian Collins (non-independent as represents Peter Hargreaves)
Penny James
Moni Mannings
Dan Olley
Deanna Oppenheimer
Roger Perkin
Darren Pope
John Troiano
COMPANY Secretary
Claire Chapman
INDEPENDENT AUDITOR
PricewaterhouseCoopers LLP, London
BROKERS
Barclays
Numis Securities Limited
REGISTRARS
Equiniti Limited
Registered Office
One College Square South
Anchor Road
Bristol
BS1 5HL
Registered number
02122142
WEBSITE
www.hl.co.uk
DIVIDEND CALENDAR
First dividend (interim)
Ex-dividend date* 2 March 2023
Record date** 3 March 2023
Payment date 31 March 2023
* Shares bought on or after the ex-dividend date will not qualify for the
dividend.
** Shareholders must be on the Hargreaves Lansdown plc share register on this
date to receive the dividend.
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