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Hargreaves Lansdown said profits fell last year after it increased investments in technology, and warned that difficult market conditions would weigh on investor confidence this year.
The UK’s largest DIY investment platform reported an 8 per cent drop in pre-tax profits to £183mn for the six months to the end of December as it spent more on technology and staff, while net inflows slowed sharply to £1bn.
Chief executive Dan Olley, who took up the role last August, said: “Our outflows have increased reflecting both the market backdrop and our product mix.”
Shares in Hargreaves fell almost 9 per cent in morning trading on Thursday.
The drop in earnings came despite a boost in revenues from customers holding cash on Hargreaves’s platform. The so-called funds supermarket said revenues increased 5 per cent year on year to £368mn.
Bristol-based Hargreaves said it was expecting the current “uncertain economic environment” to “remain and weigh on investor confidence” this year, as it headed into its crucial tax year-end period.
Investment platform clients have been pulling money from shares and funds in order to benefit from higher savings rates on cash. Hargreaves said that while it was still expecting to generate a strong revenue margin from cash this year, share dealing volumes were “muted”.
Hargreaves has struggled in recent years to attract new clients as competition has intensified from low-cost rivals. The platform increased its client numbers by 20,000 to 1.82mn in its first half — a slower rate of growth than in the same period in 2022 or 2021. Its client retention rate also fell slightly to 91.6 per cent.
Hargreaves’s share price peaked at more than £24 in 2019 but has since declined by about three quarters to just over £8. In December, the group was evicted from the blue-chip FTSE 100 index for the first time since 2011.
Assets under administration increased by £8.2bn to a record £142.2bn over the period, helped by a market rally at the end of last year. But Olley said Hargreaves needed to do more to “reposition” itself and invest in new technology.
Olley said Hargreaves had hired a “chief digital and technology officer” from UK data company Relx, and increased its technology spend to £24mn in the period, up 40 per cent from the same period in 2022. Staff costs increased from £86mn to £101mn year on year.
“We know that our clients have been impacted by the cost-of-living squeeze, however, we also know we have more to do to improve our service levels to meet our own high expectations and to evolve our digital journeys,” he said.
Analysts at Numis noted that revenue was £2mn ahead of consensus, adding that “investment in transforming the tech is progressing according to plan”.
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