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14 May 2020

Hargreaves Lansdown  – Trading Update

Share Price 1592p

Mkt Cap £7551m

Conflict Disclosure: No Holding

 

 

  • Update Net inflows of 3.8% in the 4 month period to April. AUM down 8% to £96.7m. Revenue was £190m (+19% yoy) and ytd revenue is up 13% to £448m. Dealing activity was strong in the period. Dividend expected to be paid as usual.

 

  • Estimates Revenue to June 20 is expected to be £503m. 89% of that has been delivered in the first 10 months. Upgrades despite market falls.

 

  • Valuation PE 29X Yield 2.7% AJ Bell trades on 55X.

 

  • Conclusion With the recent news that RGL Management says it is now close to launching a class action for HL’s marketing of Woodford the unmentioned elephant sauntering past the boardroom door is the potential Woodford claims. But trading is good evidenced by the chart below. Personally not sure risk/reward is reflected in valuation.

7 February 2020

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Hargreaves Lansdown– Book Build 

Share Price 1708p

Mkt Cap £8.1bn

Conflict Disclosure: No Holding

  • Book Build Peter Hargreaves is selling £500m of stock by book build announced at 4.51pm yesterday. “Due to strong investor demand” he has decided to sell a few more raising £550m at a 6.3% discount to the price. This is stated to be part of long term financial planning to diversify his assets. His stake reduces from 32% to 24%.
  • Valuation PE 29.3X Yield 2.7%
  • Conclusion With the shares down 30% since last May this seems a remarkable time to be selling stock. It would appear the placing wasn’t to fulfil unprecedented investor demand. I am aware of 3 legal firms pursuing class actions against Hargreaves over Woodford. Investor losses run into the billions, which may be painful for HL to have to compensate.  While the company may be pregnant with forecast upgrades the medium risk seems to be all on the downside. Perhaps Mr Hargreaves feels the same.

3 February 2020

31 January 2020

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Hargreaves Lansdown– H1 Results 

Share Price 1879p

Mkt Cap £8,914m

Conflict Disclosure: No Holding

  • Results 0.6% net inflows in the 3 months to December is the lowest number since I started recording flows in June 2012. Notwithstanding that AUM are up 6% over 6 months and up 22% over 12 months to £105.2bn. H1 Revenue up 9% to £257.9bn and PBT up 12% to £171m. APS up 12% to 29.3p and DPS up 9% to 11.2p. The outlook is excited by structural growth. There are early signs of renewed flows since the election.
  • Estimates 11% revenue growth is anticipated to June 2020 and 12.6% PBT growth. That leaves £171m PBT to deliver in H2 which is exactly what has been delivered in H1. Looks too low.
  • Valuation PER 32X Yield 2.4%
  • Culture The 104 Glassdoor reviews average an average score of 3.7 which is middle of the road. Some reviews refer to the company getting too big. It may be that the culture has now moved away from the entreneurial energy it once had.
  • Conclusion It remains a good and expensive platform. Like St James’ Place. The shares might perform OK but I suspect large and expensive financial services providers will continue to be pilloried by the media.

10 October 2019

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Hargreaves Lansdown – Trading Statement 

Share Price £18.16

Market Cap £8.6bn

Conflict Disclosure: No Holding

  • Update 1.7% net inflows in the 3 months to September has combined with a modest market tailwind to lift AUM 2.5% to £101.8bn. Revenue of £128m is 6% up year on year. The statement says a period of elevated investment in people, marketing and technology has been validated by net new business flows
  • Estimates Forecasts for the year to July 2020 anticipate 11.5% revenue growth year on year which will need an acceleration from the 6% reported in Q1.
  • Valuation PER 31X Yield 2.5%
  • Conclusion The Hargreaves model is now looking tired and expensive. With net flows in line with most wealth managers and the company referring to a period of investment as the 63% operating normalises so will the rating.

20 June 2019

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Hargreaves Lansdown – Vanguard discounts 

Share Price 1859p

Mkt Cap £8.8bn

Conflict Disclosure : No holding

  • Vanguard As Vanguard’s range of UK active funds reached their 3 year anniversary fees have been cut indicating their intent to compete on price in the UK. The Global Equity Income Fund fee had fallen from 60 bps to 48bps.  No sign of that one in the HL Wealth 50 however.  The Jupiter Global Value Equity fund is in the Wealth 50 which carries a management fee of 53 bps (down from 95 bps), or the Rathbone Global Opportunities fund at 53 bps (discounted from 78 bps). 
  • Market changes Unless funds are very specialist it seems likely fee pressure will accelerate. This favours the small and specialist fund managers while larger ones will find themselves competing with Vanguard. And increasingly to be found competing on price in the Wealth 50 will become a badge of shame.  Certain fund managers, such as FundSmith, Liontrust and Montanaro can’t be found in the Wealth 50. They don’t provide discounts.  I suspect this is the beginning of the end of the Best Buy lists. Which will remove one of Hargreaves Lansdown’s scale benefits. They always used to liken themselves to Tesco.  But the arrival of Vanguard as a discounter leaves the field open to the likes of Lidl. Vanguard funds can be found in Interactive Investor’s Super 60 list. It seems that Hargreaves Lansdown may be caught in the middle selling Heinz ketchup.  I suspect we can expect Hargreaves’ Wealth 50 to be supplemented the ”Finest Range” – proudly fully priced.
  • ROE The warning signs were there with Tesco. Their ROE had been declining while their turnover and profits had been growing.  Hargreaves Lansdown ROE has been in decline while its turnover and profits have been growing. This could well be a significant point of change for Hargreaves Lansdown.
  • Valuation With the shares having fallen 24% in the last month they now trade at 31X PE and yield 2.5%
  • Conclusion Good businesses sometimes become complacent and the Wealth 50 error which came to light over backing Woodford may well be a sign that the company has failed to evolve with the times. There will be changes and this period is almost always accompanied by downgrades and derating. I suspect the shares can go quite a bit lower over the next 12 months.

15 May 2019

Hargreaves Lansdown – Trading Update

Share Price 2307p

Mkt Cap £10.9bn

Disclosure: No holding

  • Update Another strong ISA season for Hargreaves with net inflows of 3.4% in the 4 months to April. Markets helped by more than 10% bring total AUA to £97.8bn. Net revenue over 9 months was up 8% to £395m where higher margins on cash balances offset the lower volumes from stockbroking dealing.
  • Estimates The 9 month revenue figure of £395m represents 82% of the full year forecast so upgrades look likely.
  • Valuation PER 40, Yield 1.95%
  • Conclusion  This expensive platform to use is rather like St James Place, an unstoppable marketing machine. AJ Bell trades on 55X and Integrafin on 31X.  Probably a good place to park money but that doesn’t really feel like active fund management

29 January 2019

Hargreaves Lansdown – H1 Results 

Share Price 1797p

Mkt Cap £8.5bn

  • Results Q2 net new business was £1.2m or 1.3% of AUM. AJ Bell delivered 1.7% over the same quarter and Nucleus yesterday announced net inflows of 3.1%. AUM in total was down 9% tp £85.9bn. PBT over the half was up 4% to £153.4m and the interim dividend was increased 2%. The 9% revenue increase and 4% PBT increase underlines the investment in service the company is making. Note that of the £20.4m increase in revenue in H1 some £15m was extra revenue earned on cash balances. The outlook refers to long term growth.
  • Estimates Look for 11% PBT growth and 9% EPS growth to 54.2p for the full year to June 19. 4% growth in H1 makes this look a little challenging so estimates may be tweaked down on the back of markets although H2 is the stronger half yet to come.
  • Valuation PER 31X and yield 2.6%. I guess that’s cheap relative to AJ Bell’s 45X PER. It hurt saying HL is cheap, Really – on 31X delivering 4% PBT growth ?
  • Conclusion  High quality and in my mind another example of the market over valuing quality.