Elevated dealing volumes fuel revenues at Hargreaves Lansdown

Hargreaves Lansdown PLC (LON:HL) today published a trading update regarding the four month period to April 30, 2020.

Revenue for the first four months of 2020 was £190.2 million (2019: £159.5m). The period had two distinct phases where revenues initially benefited from a greater level of AUA at the beginning of the calendar year and a higher cash revenue margin. However, at the start of March, the significant market falls caused by COVID-19 and the subsequent emergency cuts to the UK base rate of interest negatively impacted asset-related revenue streams.

These impacts were more than offset by significantly higher stock broking revenues driven by record dealing activity. March and April both saw a series of new daily records and monthly dealing levels more than double the highs ever experienced before this period. Overall, this has resulted in year to date revenue of £448.1 million (2019: £395.9m), 13% higher than last year.

Given the volumes seen in the period, the company now expects the full year revenue margin on shares to be in the range of 35bps to 40bps. Based on there being no further interest rate changes, Hargreaves Lansdown’s guidance for the full year cash margin would be in the range of 70bps to 75bps.

Net new business was £4.0 billion during the period (2019: £2.9 billion), taking year to date net inflows to £6.3 billion (2019: £5.4 billion). This is a strong rebound from the difficult macro and political environment for retail investment flows during the first half of the financial year.

Net new business growth was driven by the usual factors of existing clients using their tax allowances during the ISA season, ongoing wealth consolidation onto Hargreaves Lansdown’s platform from existing clients and flows into its cash management service “Active Savings”, where AUA is now over £2 billion. This growth was further accelerated following the significant market falls in early March, as existing clients added money to their accounts and new clients joined Hargreaves Lansdown to take advantage of the opportunity to invest at lower prices.

Net new clients for the period were 94,000, taking total active client numbers to 1,368,000. The company saw substantial numbers of net new clients in the period, taking year to date net new clients to 144,000.

Falling stock markets driven by the global impact of COVID-19 have led to a negative market movement in AUA in the period of £12.4 billion. There was also a withdrawal of cash by one of Hargreaves Lansdown’s founders following a reduction in their Hargreaves Lansdown plc shareholding earlier this year. When combined with net new business and market movements, AUA was £96.7 billion as at April 30, 2020.

The Group says it continues to have a robust capital and liquidity position, additionally supported by the receipt of £40 million Funds Library net disposal proceeds at the end of February 2020. The Board’s current intention remains to operate its stated dividend policy for the 2020 financial year.