The firm reported a 47% jump in net new business inflows for the first quarter of the financial year, which saw brokers Liberum revise its recommendation from sell to hold, and Numis raise its earnings expectations for the group.
According to Liberum, its sell stance of the last 16 months was predicated on the basis of revenue margin pressure.
“We believe this has now largely worked its way through the business and earnings will be driven more by AuA growth. We do expect a further squeeze on revenue margins but at a much lesser rate.
For Numis, the reported numbers mean it has upgraded its half year AuA forecast from £55.1bn to £56.9bn and its earnings forecasts have also risen 3% from 36.5p to 37.3p for this year and to 44.0p from 42.8p for next year.
“The Lloyds bank share sale is undoubtedly positive for HL and we believe more people will deal through HL than any other provider with this and many other issues,” Numis said, adding: “Hargreaves Lansdown dominates a growth industry and its market position does not seem to have been negatively impacted by the RDR changes. Each margin decline drives the minimum efficient scale target further away from the generally small and unprofitable competition.”
Hargreaves reported net new business inflows of £1.43bn during the first three months of the 2016 financial year, compared to the first quarter of 2015. Net revenue for the period rose 11% to £78.5m against the 2015 comparable period, while total active clients rose by 24,000 to 760,000 during the period.
According to CEO, Ian Gorham, the increase in revenue was driven by strong growth in year on year assets, and to a lesser extent increased equity dealing volumes. This was in part reflected in the growth seen in assets under administration within the firm’s Vantage platform. While AUA fell between Q4 2015 and Q1 2016, from £52.3bn to £51.9bn, on a year-on-year basis, the move is more significant, rising from £44.3bn in Q1 2015 to £52.3bn in the first three months of the 2016 financial year.
According to Hargreaves, the quarter-on-quarter decrease can be attributed to the £1.8bn negative impact of stock market performance seen during the period, which overwhelmed the £1.4bn in net new business inflows.
The firm’s portfolio management service (PMS) and range of multi‐manager funds saw assets fall 0.5% to £5.84bn in the three months to end September 2015, on the back of poor market performance.
Looking ahead, Gorham said, early indications suggest considerable interest in next year’s Lloyds share sale, which bodes well for the firm.
“A sizeable number of people buy their first ever share via an IPO, and retail share offers are therefore very important in encouraging the UK public to invest,” Gorham added.
