Hargreaves Lansdown's revenues lifted by Brexit but uncertainty looms

Hargreaves Lansdown’s first quarter revenue increased but the financial services company was affected by low investor confidence in the wake of the Brexit result from the EU referendum as new business flows fell.

In trading update for the three months ended 12 October, the company reported a record net quarterly revenue of £90.6m, a 15% increase from the first quarter in 2015, due to higher asset values and very strong share dealing volumes following the EU referendum.

However, new business inflows fell 22% to £1.11bn as “uncertainty about the future economic environment weighing on investors’ minds” in the wake of the Brexit result, albeit this was against a first quarter performance last year which was boosted by new pension freedoms and junior ISAs.

New money and transfers were comparable to last year but the company said it experienced higher levels of cash withdrawals in the early part of the quarter following the referendum, particularly from the fund and share account.

Assets under administration increased by £5.9bn to £67.6bn from June.

New active clients totalled 20,000, down 17% versus the same quarter last year which was boosted by about 7,000 new junior ISA clients.

Client and asset retention rates were 94.6% and 93.4% for the quarter, slightly higher compared to the 94% and 93.7% respectively last year.

Total client numbers now 856,000, down 2.3% and client initiated share deals of about 1.03m in the quarter, up 49%.

The FTSE 100 company said future stock market levels and investor confidence will have a significant part to play during the rest of the financial year.

“However, we remain confident in the execution of our strategy to take advantage of the structural growth opportunity in the UK savings and investments market to the benefit of our clients and shareholders.”

Paul McGinnis, an analyst at Shore Capital, said the £1.11bn of new business inflows represents 18% of his full year forecast of £6.2bn and is consistent with normal seasonality.

Positive market movements of £4.8bn, or 7.8%, accounted for the uplift of the majority of the assets under administration in the quarter and “compare favourably” against Shore Capital’s full year forecast of £6.2bn.

He said: “We also noted the news yesterday that Interactive Investor will be combining with TD Direct to form a direct platform with pro-forma with assets under administration of circa £18bn, just over a quarter of the size of Hargreaves Lansdown. This comes days after Vanguard announced plans to launch a platform for investors to be able to hold its (passive) funds and offer a service similar to that of loss-making robo-adviser Nutmeg.

“While we would expect a degree of consolidation given the generally low level of profitability in the sector (Hargreaves Lansdown apart), we are sceptical that this will lead to any discernible loss of market share or price discounting from market leader Hargreaves Lansdown.”

Shares in Hargreaves Lansdown were down 2.26% to 1,209p at 0952 BST.