But, it said it expects this to improve in the second half, which is traditionally a much stronger period as it includes the end of the tax year.
For the period, the group saw £2.25bn in net new assets added, bringing total assets under administration to £49.1bn, up 13% on the comparable period in 2013. It also grew its client base by 23,000, down significantly from the 77,000 new clients reported for the comparable period in 2014. But, this number included 32,000 that joined as a direct result of the Royal Mail share offer. And, as Hargreaves Lansdown pointed out, over the comparable period in 2014, share markets were up over 10%.
Indeed, CEO, Ian Goram pointed out, over the same period, UK net retail fund sales reported by the Investment Association fell 34%.
He added: “Hargreaves Lansdown business activity continued to perform well compared to the wider retail investing market during the period. Recent data from The Platforum showed Hargreaves Lansdown's market share continues to increase year-on-year. Both client and asset retention also remained excellent at 93.1% (H1 2014: 93.3% and 92.3% respectively). Client satisfaction remained high at 94.4%”
For the six months, net revenue rose 1% to £144.1m, while operating margins slipped slightly.
Profit before tax slipped 2% to £101.9m, on the back of lower interest rates achieved on client cash and lower charges on its Vantage platform.
According to a note out from Numis Securities: “Overall HL continues to gain market share in the high growth self-directed retail investment market. We believe the market concern about transitory margin pressure is unwarranted but the market is expected to continue to presume HL guilty until it proves itself innocent. Asset retention and customer satisfaction remained excellent and market leading at 93% and 94% respectively.”
Outlook
Goram noted that because the level of earnings has a direct relationship to the value of stock markets, a portion of the firm’s profitability remains out of its control.
But, he added: “Progressively lower interest rates for savers has been a recurring theme since 2012. This continuing scenario makes equity investment even more attractive, as the yields available on equities and bonds far outstrip those now available on cash. However, interest rates continue to reduce across the savings and investment industry, including that received by Hargreaves Lansdown which when combined with the reduced revenue on funds has meant our profit growth has lagged the growth in our assets under administration in the short term.”
The group said it plans to launch two new multi-manager funds in order to broaden its fund range following the success of the Hargreaves Lansdown Multi-manager UK Growth Fund, which attracted £162 million at launch.
It also said it plans to launch a retirement planner service in April in a bid to take advantage of the forthcoming changes to the pensions regime.
Goram said: “This initiative aims to take advantage of our position as both a major provider of drawdown services and independent annuity broker, providing clients with flexible pension choices. We expect the package of tools, income functionality, help and advice to be very popular given that over 143,000 people have asked Hargreaves Lansdown for information about pensions in the last six months. The service is expected to be ready for 6 April 2015, with enhancements scheduled in subsequent months.”
