TIDMHL.
RNS Number : 6690Q
Hargreaves Lansdown PLC
03 September 2014
Hargreaves Lansdown plc
Unaudited Preliminary Results Announcement Year ended 30 June
2014
Embargoed: for release at 0700h, 3 September 2014
Hargreaves Lansdown grows revenue, profits, assets under
administration and active client numbers to new record levels.
Hargreaves Lansdown plc ("Hargreaves Lansdown" or the "Company")
is pleased to announce its preliminary results for the year ended
30 June 2014.
Highlights:
-- Total assets under administration up 29% at GBP46.9 billion
-- Net revenue increased by 8% to GBP291.9 million
-- Operating profit increased by 8% to GBP208.0m
-- Continued strong organic growth
-- Total clients increased by 144,000 to 652,000 since June 2013
-- Total dividend up 8% at 32.00 pence per share
Year to Year to Change %
30 June 2014 30 June 2013
Net Revenue GBP291.9m GBP269.2m +8%
Profit before tax GBP209.8m GBP195.2m +7%
Operating profit margin
(on net revenue) 71.3% 71.5% -0.2pts
Total assets under administration GBP46.9bn GBP36.4bn +29%
Diluted earnings per share 34.2p 31.4p +9%
Net business inflows GBP6.4bn GBP5.1bn +25%
Ian Gorham, Chief Executive, commented:
"During the year we have continued to expand and improve the
services we provide to our clients whilst also dealing with major
regulatory change. Hargreaves Lansdown has not only retained but
furthered its market leading position. Our clients have entrusted a
further GBP6.4 billion to us such that we now administer GBP46.9
billion of assets. We have also welcomed 144,000 new clients during
the year, with clients now totalling 652,000. This has led to an 8%
increase in net revenues and 7% growth in profits. We thank our
diligent staff for their efforts and our clients for their
continued loyalty."
About us:
The Hargreaves Lansdown Group (the "Group") is the UK's largest
direct to investor "investment supermarket". The Group provides the
UK investing public with access to a wide choice of investments and
attracts high quality earnings derived from the value of
investments under administration or management, primarily through
its market leading Vantage service.
Our success can be attributed to innovative marketing, excellent
research and information and high retention and acquisition of
clients through the provision of first class service and good value
pricing. The company employs a unique direct marketing model which
is cost effective, scalable and affords a high profit margin whilst
giving clients access to low cost investing.
Unlike a traditional asset manager, the broad choice of
investments and products available through the Group and the
diversity of services means that even if a client chooses to switch
investments or into different asset classes or products, the wide
choice, from equity to cash management facilities, means the
client's assets are usually retained within the Hargreaves Lansdown
stable.
Contacts:
Hargreaves Lansdown +44 (0)117 988 9967
For media enquiries: For analyst enquiries:
Ian Gorham, Chief Executive Ian Gorham, Chief Executive
Danny Cox, Media Relations Tracey Taylor, Chief Financial
Officer
James Found, Investor Relations
Analysts' presentation
Hargreaves Lansdown will be hosting an investor and analyst
presentation at 9.00am on 3 September 2014 following the release of
the results for the year ended 30 June 2014. Access is by
invitation only. Slides accompanying the analyst presentation will
be available this morning at www.hl.co.uk/investor-relations and an
audio recording of the analyst presentation will be available by
close of day.
Forward-looking statements
This document has been prepared to provide additional
information to shareholders to assess the current position and
future potential of the Group. It should not be relied on by any
other party for any other purpose. This document contains
forward-looking statements that involve risks and uncertainties.
The Group's actual results may differ materially from the results
discussed in the forward-looking statements as a result of various
economic factors or the business risks, some of which are set out
in this document.
Extract from Chairman's Statement
"I have great pleasure introducing our Annual Report for the
year ended 30 June 2014 in which we announce another strong set of
results."
This year has been dominated by regulation. The introduction of
the Retail Distribution Review in April has necessitated
significant Board and management attention. Successfully designing,
announcing and implementing a completely new charging structure for
our clients holding fund investments to the satisfaction of our
clients, our shareholders and the regulator was a major
achievement. Despite this challenge, we managed to maintain our
focus on growing the business organically, enhancing our digital
proposition, adding functionality to our stockbroking business
whilst continuing to work on improvements to and the long term
sustainability of our IT platform.
Notwithstanding these challenges, the Group has once again
increased both profits and assets under administration as we
achieved record new business flows and record new client numbers.
We continue to be a financially strong organisation with a simple,
strong, debt-free balance sheet retaining a healthy margin over the
regulatory capital adequacy requirements. Therefore after careful
review of the company's future cash requirements, the Board has
decided to increase the dividend by paying a second interim
ordinary dividend of 15.39p per share (2013: 14.38p) and an
increased special dividend of 9.61p per share (2013: 8.91p)
representing total dividends for the year of 32.0p per share (2013:
29.59p); an increase of 8%.
Good governance continues to be at the heart of what we do. The
majority of the agreed actions from last year's Board effectiveness
review have been implemented, with the introduction of more
frequent board meetings and a greater focus on strategy. Much
attention has been paid to developing the talent within the
business and refreshing the organisational structure to meet the
future challenges of the Group.
In October 2013, we made a number of changes to our Board and
Committee membership: we were delighted to welcome Shirley Garrood
to the Board as a new independent Non-Executive Director and
Chairman of the Audit Committee, Chris Barling was appointed as
Senior Independent Director and Chairman of the Remuneration
Committee and Jonathan Bloomer stepped down after over seven years
on the Board. Jonathan's extensive experience of the financial
services industry and thoughtful contributions have been very
valuable. On behalf of the Board I would like to thank him for all
his contributions.
As ever, the coming year will be a challenging one with
competition intensifying in all areas of our business but we remain
well placed to continue to satisfy our clients and thrive in our
chosen markets. Our people are integral to our success and, as
always my gratitude goes to the Board and the talented people we
employ for their continuing hard work, diligence and
enthusiasm.
Michael Evans
Chairman
3 September 2014
Extract from Chief Executive's Review
We are pleased to present our results for the year ended 30 June
2014, once again reporting record new clients (+89%), net new
business (+25%) and operating profits (+8%).
The year to 30 June 2014 was characterised by continued
substantial new asset and client flows into Hargreaves Lansdown's
services and successful adoption of extensive regulatory
change.
The standout result was our record growth in net new business
and clients. Net new business was GBP6.4 billion (+25%) and we
welcomed 144,000 net new clients (+89% compared to last year).
Hargreaves Lansdown is the largest business of its type in the
UK, with an estimated 32% of the direct investment market (Source:
The Direct Platform Guide Issue 4, February 2014), up from 28% last
year.
High service levels were rewarded not only through record new
clients and assets, but also through a number of awards. We were
delighted to be voted by Which? as the U.K.'s best and recommended
investment platform. Hargreaves Lansdown also won numerous other
awards, including the Platforum's best user experience and
Management Today's Britain's Most Admired Company for Speciality
and Other finance.
During the year the company had to cope with major regulatory
change, the most significant of which being the FCA's Retail
Distribution Review ("RDR"). We are pleased we have been able to
deliver this change successfully and delivered lower costs of
investing for the majority of our clients at the same time. We now
look forward to seeking to maintain our success in our growing
marketplace.
Hargreaves Lansdown's 2014 results
We are pleased to report a record profit before tax of GBP209.8
million, up 7% on last year's GBP195.2 million. Our ability to
attract and retain assets and clients by accessing key distribution
channels and delivery of service excellence continues to be a
primary driver of revenue growth. Our revenue has also been
enhanced by growth in complementary services such as stockbroking,
fund management, discretionary management and pension drawdown
services.
We also report a 29% increase in client assets under
administration from GBP36.4 billion to GBP46.9 billion. Net new
business for the year was GBP6.4 billion (2013: GBP5.1 billion)
with market movement and other factors adding a further GBP4.1
billion. An additional net new 144,000 investors (2013: 76,000)
became clients during the year, of which 42,000 related to IPOs,
taking total active clients for Vantage and advised services
combined to 652,000.
Positive sentiment, allied to continued low interest rates,
served to improve stock markets during the year, with the FTSE
All-Share index advancing 9.4% in the year to 30 June 2014.
The interest rate environment remains depressed, and therefore
income from cash balances has reduced over the period. Interest
income should increase when rates recover. However, in the short
term we are experiencing reduced margins on cash balances which is
the primary reason why asset and client growth exceeded expansion
in profit.
A busy year of stock market activity has been beneficial to
Hargreaves Lansdown in terms of adding new clients and new
business. Of particular note was the Royal Mail flotation, where
around 118,000 people, approximately 18.5% of the UK public who
invested in Royal Mail shares, did so through Hargreaves Lansdown.
We saw days when up to 60,000 people tried to call Hargreaves
Lansdown, and during the two key weeks of the Royal Mail flotation
our website received 3.5 million hits. For a short period of time
this put pressure on service levels. We have implemented changes as
a result of this experience and service levels were improved as we
dealt with the combined peak impact of the TSB flotation and
Woodford fund launch in June 2014.
Our Corporate Vantage service continues to expand, with 211
schemes live or in implementation (2013: 167). This increase in
schemes has been accompanied by a 59% increase in Corporate Vantage
assets, which now stand at GBP984 million, and post year-end passed
the GBP1 billion landmark. Although this project remains long-term
in nature we remain satisfied with the success to date.
2014/2015 market outlook
There are welcome signs of a return to stronger economic trading
conditions, and greater capitalisation of banks has served to
enhance stability across most markets. Whether this will translate
into stronger stock markets remains to be seen. In particular
markets are likely to be influenced by the performance of Asian
economies, particularly China, and markets generally remain subject
to the influence of geopolitical events.
Company outlook
The delivery of the changes required by the Retail Distribution
Review engaged company resources and time for the best part of 18
months. Whilst regulatory intervention across the financial
services industry shows no sign of reducing, with the Retail
Distribution Review having been delivered successfully we are now
able to re-deploy staff and resources on improving the
business.
Our core strategic priorities remain as; the delivery of growth
in assets and client numbers through the provision of excellent and
efficient service, research and information at good value.
We shall also seek to enhance our complementary revenue
generating services over the coming year. This will include
expanding our range of successful multi-manager funds, enhancing
our cash strategy, and considering other growth opportunities. At
the same time, we will remain focused on our core business,
delivering improvements and enhancements to our service to delight
our clients, and continuing to enhance our distribution through the
addition of new channels.
The impact of regulation and government policy
During the year we implemented the remaining requirements of the
retail distribution review. From 1 March 2014 clients began paying
charges for holding investment funds with Hargreaves Lansdown, and
in return more commission received on those funds was returned to
them. By 6 April 2016 Hargreaves Lansdown will not retain any
commission on Vantage fund investments.
This change has been a massive undertaking, requiring the design
of a new competitive charging structure with few reference points,
and then the communication of the changes to clients and seamless
implementation. After an understandable period of familiarisation
and questions clients seem to have accepted the changes,
recognising the value of the Hargreaves Lansdown service and our
competitive charges and enjoying our (often exclusive) discounts on
fund management charges from leading houses that we have
negotiated. It was gratifying to note that the third quarter of our
year, where these changes took effect, was a record quarter. In
this year of change, client and asset retention ratios have
remained high at 93.3% and 92.3% respectively.
Regulation has also substantially affected revenue from cash in
the form of interest margin. The reasons for this are twofold. Risk
averse governments and regulators requiring greater capitalisation
of major banks has reduced banks' demand for cash deposits. At the
same time, recent regulatory constraints on the ability to place
cash on longer term deposit have also been imposed. There are
several potential mitigating strategies to partially address these
structural changes, focused around the technicalities of how monies
are classified and held. We expect that in the short term our cash
margin will reduce slightly but longer term these mitigating
strategies should offset some of the effect. If interest rates
rise, we also expect this to have a positive effect on revenue.
On the plus side, coupled with some welcome ISA changes,
revolutionary changes to pensions will mean that the UK public now
has previously unheard-of flexibility of pension saving. Whilst in
the short term we have seen a reduction in annuity business of
around 50%, this has been counteracted by a substantial shift to
drawdown arrangements. New assets into pensions drawdown
arrangements were up 35% on the year. From our perspective, the
opportunity to help clients make the most of their money for longer
is beneficial both for investors and for company revenue, as our
relationship with the client continues for longer under drawdown
than an annuity purchase. As we are a major provider of both
independent annuity broking and drawdown services in the UK, we are
planning a range of enhancements to our pension services to reflect
the opportunities offered by the new regime.
We also expect some positive regulatory change around the
information and guidance that we can give to clients. These changes
are currently being consulted upon by the Financial Conduct
Authority. There seems to be an increasing realisation amongst
government and regulators that providing online and telephone-based
information will be the most effective primary method for the UK
public to be properly informed about financial matters in future.
This realisation has been accelerated by various promises from the
authorities that the public will have access to "the information
they need", in particular as part of pensions reform. We welcome
these changes, which potentially allow us to expand our
information, research and ability to assist clients without
increased liability.
Corporate citizenship
Hargreaves Lansdown is an ethical company and champion of the
retail investor. We campaign tirelessly on behalf of retail
investors to improve their lot and their wealth.
This year we instigated further price competition within the
fund industry which has resulted in reduced costs of both active
and passive funds for investors. The market leading discounts we
have negotiated on some of the best UK funds will save our clients
millions of pounds over the coming years. The 2015 financial year
should also see the ability for children with child trust funds to
transfer them to Junior ISAs for the first time, allowing more than
6 million children to potentially benefit from lower charges,
better service and returns. This change is also something we have
campaigned for over a considerable period and we are delighted to
see it come to pass.
Other campaigns have included making it easier and quicker for
investors to transfer their investments and pensions from one
provider to another, campaigning to reform the retirement annuity
market, which means we welcome the Chancellor's recent announcement
of greater freedoms for pension investors at retirement, and we are
currently challenging HMRC on the issue of taxation of loyalty
bonuses, the so called "discount tax". A successful challenge would
see money being returned to investors.
Hargreaves Lansdown will again pay its corporate taxes in full
in the UK, and we shall continue to seek to be a role model for how
financial services companies deliver a great service, reputable
behaviour and profitability in harmony with the UK public.
During the year the company supported Penny Brohn Cancer Care as
its staff charity, the Youth Adventure Trust and the Wallace and
Gromit Grand Appeal, amongst others.
Conclusion
I would like to thank our clients, shareholders, staff and my
fellow directors in what has been a very busy year and one of
significant change. The support and dedication they have shown has
delivered another set of great results.
Ian Gorham
Chief Executive 3 September 2014
Extract from Business and Financial Review
Despite a year of significant regulatory change, we have
maintained our track record of growth and have again achieved
record results for the Group in terms of revenue and profits.
Record levels of organic growth from new business and new clients
mean that we now look after a record GBP46.9bn of AUA on behalf of
our clients.
Financial Performance
Year Year ended % movement
ended 30 June
30 June 2013
2014
GBP'million GBP'million
Revenue 358.4 292.4 +23%
Commission payable
/ loyalty bonus (66.5) (23.2) +187%
Net revenue 291.9 269.2 +8%
Other operating costs (83.1) (77.2) +8%
Total FSCS levy 0.8) 0.5
Operating profit 208.0 192.5 +8%
Non-operating income 1.8 2.7 -33%
Profit before taxation 209.8 195.2 +7%
Taxation (47.1) (46.2) +2%
Profit after taxation 162.7 149.0 +9%
Basic earnings per
share (pence) 34.5 31.7 +9%
Diluted earnings per
share (pence) 34.2 31.4 +9%
The Group achieved net revenues of GBP291.9m, an 8% increase
compared to FY 2013, driven primarily by increased levels of AUA
and share dealing commission.
Continued robust control of costs and scalable operations has
contributed to maintain a high net operating profit margin which
fell slightly to 71.3% (FY 2013: 71.5%).
The effective tax rate for the Group this year was 22.4% (FY
2013: 23.7%). The 8% increase in operating profit, together with a
lower rate of corporation tax, combined to increase the diluted
earnings per share from 31.4 pence to 34.2 pence per share.
Assets Under Administration (AUA) and new business inflows
During the year the value of total AUA has increased by 29%. The
Group achieved net new business inflows of GBP6.4 billion, and the
positive impact of the rise in investment markets and other growth
factors increased
client assets by a further GBP4.1 billion. Total AUA can be broken down as follows:
At 30 June At 30 June 2013 %
2014
(GBP'billion) (GBP'billion) movement
Vantage Assets Under Administration
(AUA) 44.2 34.2 +29%
Assets Under Administration
and Management (AUM)
- Portfolio Management Service
(PMS) 2.6 2.1 +24%
- Multi-manager funds held outside
of PMS 1.9 1.2 +58%
AUM Total 4.5 3.3 +36%
Less: Multi-manager funds (AUM)
included in Vantage AUA (1.9) (1.2) +58%
Multi-manager funds (AUM) included
in Vantage AUA ((1.9) (1.2) +58%
Total Assets Under Administration 46.9 36.4 +29%
Net new business in the Vantage SIPP, ISA and other Vantage
nominee accounts was respectively GBP2.1 billion, GBP2.2 billion
and GBP1.8 billion (2013: GBP1.8 billion, GBP1.9 billion, GBP1.1
billion), in total GBP6.1 billion (2013: GBP4.8 billion).
Net new business generated within PMS was also strong at GBP304
million (2013: GBP271 million). The increase was assisted by an
increase in the number of financial advisers employed by the Group
this year.
Investment markets improved during the year, with the average
month-end level of the FTSE All-Share index being 11.9% higher
compared to FY 2013, contributing to market growth of GBP4.0
billion in Vantage AUA and GBP0.2 billion in PMS.
The second half of the year is our busiest as the tax year-end
is an important driver of new business. This year GBP3.60 billion
of net new business came in the second half versus GBP3.45m for the
prior year comparative. The comparative was boosted by the
introduction of a loyalty bonus on Vantage SIPP accounts, the
requirement to offer in-specie transfer of client assets following
phase 1 of RDR and significantly increasing stock markets. This
year UK stock markets have largely been flat in the second half and
the only real fresh impetus has come from the TSB IPO and Woodford
fund launches both of which took place in June 2014 and resulted in
cGBP293m of new business. Achieving such a strong net new business
figure, in a period when we have communicated and implemented the
significant client tariff changes resulting from the Retail
Distribution Review, has been very pleasing and testament to the
value our clients place on our services.
Cash deposit rates on offer from banks have remained at
historically low levels, partly as a result of the government's
"Funding for Lending" scheme. Those seeking a higher return have
turned to alternative investment options such as funds and shares,
which offer higher yields and potential capital growth. This factor
has spurred clients to divert more of their savings into
investments in Vantage.
More clients are investing through Hargreaves Lansdown than ever
before. In total we now administer investments for 652,000 clients
(2013: 507,000, +29%).
Total revenue
Following the implementation of the RDR we now focus on the net
revenue of the Group as this gives a better indication of the
year-on-year performance. Total net revenue was up 8% for the year
as the group benefitted from record highs of AUA, net new business,
new active clients and transaction volumes.
Vantage net revenue increased by 8% but was held back by the
reduction in interest revenue resulting from lower interest
margins. The increase in other revenue streams excluding interest
revenue was 29%, which shows that the underlying performance of the
division is strong but was held back by the interest rate margin
which is a factor largely outside of our control. The Discretionary
division only has a negligible amount of interest revenue and hence
the growth in AUA and net new business can clearly be seen as
drivers of the strong 32% growth in revenue. Third party and other
services net revenue fell principally as we focus less on third
party business and because of the drop off in annuity commission
following pension reforms introduced in the March 2014 budget.
Other services such as foreign currency and Funds Library continue
to show underlying growth and we would expect this to continue.
Net Revenue % movement Year ended Year ended
30 June 30 June
2014 2013
GBP'million GBP'million
Vantage +8% 221.0 204.3
Discretionary +32% 44.9 34.0
Third Party and Other services -16% 26.0 30.9
Total net revenue +8% 291.9 269.2
Growing the value of AUA was a key factor in driving net revenue
up by 8%. Average levels of AUA were up by 36% in Vantage. The
assets held in Vantage can be split between funds, shares and other
stock and cash.
The net revenue margin earned on each asset class varies.
Investment funds on average represented 54% of Vantage AUA and the
net revenue margin earned was 56 bps (2013: 62bps). The reduction
related to the new RDR pricing implemented in March 2014 which
represented a conscious investment by Hargreaves Lansdown to make
investing in funds cheaper for our clients. This is in accordance
with our long-term strategy of lowering the cost of investing for
our clients over time which in turn will help retain existing and
attract new clients and assets. The pre-RDR net margin on funds was
60bps while post RDR it was 49bps. Looking ahead the post RDR net
revenue margin will trend down as we move through the transition
phase of RDR until April 2016 when any renewal commissions still
received from fund management groups relating to pre-RDR funds will
be passed on fully to clients. From this point, barring any other
changes, we would expect the net revenue margin earned on
investment funds to be c44bps.
Shares on average represented 37% of Vantage AUA. The revenue
margin on shares and other stock was 35bps (2013: 37bps). The
increase in share dealing volumes helps to improve the margin but
counteracting that are the caps in place in the SIPP and Stocks and
Share ISA accounts, which limit the ability to charge fees on
shares once holdings are above GBP44,444 in the SIPP and GBP10,000
in the ISA. Over time as clients grow their portfolio of shares
this could cause a slight dilution to the margin.
Cash on average represented 9% of Vantage AUA. As mentioned
above, as expected, the interest revenue margin earned on cash
balances has fallen significantly during the year from an average
of 185bps in FY2013 to an average of 91bps in FY2014. We start the
2015 financial year with an interest revenue margin for July 2014
of 70 bps.
In the short term cash margin is likely to continue to reduce as
interest rates attainable from banks fall further, largely as a
result of BASEL 3 and CRD 4 regulatory changes affecting banks and
new FCA regulations which effectively restrict the use of term
deposits to durations of no more than 30 days. There is an
alternative treatment available for client money held in the SIPP,
which equates to 51% of total client money, such that term deposits
may still be used. Work is progressing to achieve this treatment
which will mitigate some of the downward pressure on the interest
revenue margin. In addition we are exploring other options
available to us that will enable us to achieve a better return on
cash balances and offer improved cash services to our clients.
Following a period of unprecedented low interest rates in the UK,
sentiment suggests that within the next 12 months the Bank of
England may start to increase interest rates. Such a move should
have a positive effect on the interest revenue margin.
Vantage
As highlighted in the Chief Executive's statement, during the
year we implemented the remaining requirements of the RDR. As a
consequence the total revenue earned from investment funds held by
clients significantly increased as a new platform fee was
introduced ranging from 45bps down to nil depending on the value of
funds held by clients in their various accounts. At the same time
commission income is being received from the fund management groups
on funds purchased by clients before the RDR implementation date.
Where we still receive commission on these pre RDR or "legacy
funds" the vast majority is now passed back to our clients in the
form of a significantly higher loyalty bonus. In order to compare
performance year-on-year it is therefore necessary to look at net
revenue which is total revenue less the loyalty bonus.
The Vantage division increased its net revenues by GBP16.7
million or 8%, from GBP204.3 million to GBP221.0 million. Positive
growth factors were the 29% growth in AUA this year, the impact of
a full year's income on assets gathered during the previous year
and the significantly higher share dealing volumes which improved
stockbroking commission by GBP12.3m. Offsetting these growth
factors was, as expected, a further decline in interest on client
money which fell from GBP58.7 million to GBP33.7 million as the
interest rate margin declined significantly.
The GBP6.1 billion growth in AUA resulting from net new business
inflows, or 'organic growth', represented 18% this year (2013:
20%).
The increase in AUA derived from stock market and other growth
factors was 12% (2013: 19%). The combined impact of organic growth
and market growth resulted in SIPP AUA growing by 28%, ISA by 26%
and the Fund and Share account by 35%.
Included within the Fund and Share account is a significant
holding in Hargreaves Lansdown plc shares which increased in value
by 31% during the year. Excluding Hargreaves Lansdown shares, the
growth in Fund and Share AUA was 37%.
As at 30 June 2014, the value of the Vantage ISA was GBP17.1
billion, (30 June 2013: GBP13.6 billion), the Vantage SIPP was
GBP13.4 billion (30 June 2013: GBP10.4 billion) and the Vantage
Fund and Share Account was GBP13.8 billion (30 June 2013: GBP10.2
billion).
During the year the number of active Vantage clients increased
by 143,000 to 643,000, including a total of 16,000 new Corporate
Vantage scheme members, taking the total Corporate Vantage members
to 42,000 (2013: 26,000). We now administer 192,000 SIPP accounts,
462,000 ISA accounts and 243,000 Fund and Share accounts on behalf
of our clients.
28% more clients contributed to their SIPP than in the year to
30 June 2013, with the average new contribution into a Vantage SIPP
this year reducing by 6% to GBP8,275. There was a also a 41%
increase to the number of clients subscribing to their Vantage
Stocks and Share ISA with the average subscription decreasing by 3%
to GBP8,178.
Clients continued to transfer SIPP and ISA investments held
elsewhere into our Vantage service. The value of transfers in
increased this year by a significant 24%. More clients sought to
consolidate their investments and benefit from the advantages of
having them all held in one place with a company they trust.
Clients have decreased their cash weightings during the period
as investor sentiment improved and clients were prepared to take on
more risk given the low interest rates available on cash. The
composition of assets across the whole of Vantage at 30 June 2014
was 9% cash (30 June 2013: 10%), 36% stocks and shares (30 June
2013: 34%), and 55% investment funds (30 June 2013: 56%).
A number of our clients make regular contributions into their
ISA, SIPP or Fund and Share accounts. The 'Regular Savers' service
has been growing steadily since being introduced 11 years ago, and
as at 30 June 2014 we had 81,000 clients (2013: 66,000) saving a
total of GBP28 million each month by way of direct debit
instruction. Our Corporate Vantage service has the potential to
significantly increase the value of regular monthly savings and
Corporate Vantage clients currently subscribe an additional GBP12.5
million each month.
Vantage clients transacted 6.3 million fund deals (2013: 5.1
million) and 3.0 million share deals in the year (2013: 1.9
million). No charge is made to our clients for dealing in
investment funds and therefore fund dealing does not generate
revenues. The increased volume of share dealing resulted in an
increase in stockbroking commission of GBP12.4m to a total of
GBP39.0 million.
Discretionary and Managed
The Discretionary division earns recurring income on underlying
investments held in the Group's Portfolio Management Service (PMS),
and on investments in the Group's multi-manager funds. Net revenue
in the Discretionary division increased by 32% from GBP34.0 million
to GBP44.9 million. The growth in net new business helped grow
initial charges and the increase in AUA helped to increase
management fees and ongoing advice charges. In addition following
the implementation of RDR from 1 March 2014, the annual management
fee charged on the HL Multi-Manager funds of 0.75% has been
retained wholly within the discretionary division. Previously under
the legacy fund class charged at 1.00% there would have been a 0.5%
renewal commission paid into Vantage where Vantage clients held the
fund. The net impact is an effective increase in revenue to the
discretionary division.
The value of assets managed by Hargreaves Lansdown through its
own range of multi-manager funds and PMS increased by 39% to GBP4.6
billion as at 30 June 2014 (2013: GBP3.3 billion). The growth in
assets is due to net new business of GBP0.9 billion combined with a
market increase of GBP0.4 billion.
Our advisory service generates initial and ongoing advice fees
on assets introduced into PMS. The Group has increased the number
of financial advisers during the year from 92 as at 30 June 2013 to
101 as at 30 June 2014. We aim to capture more of the advised
market, particularly as many Independent Financial Advisers and
high street banks continue to exit this market on the back of
regulatory rules such as the Retail Distribution Review. Increased
adviser numbers has helped drive a 12% increase in net new business
introduced into PMS during the year. Net new business amounted to
GBP304 million (2013: GBP271m). The proportion of PMS assets
invested in Hargreaves Lansdown multi-manager funds as at 30 June
2014 was 90% (2013: 89%).
Third Party and Other Services
Third party and other services net revenues fell 16% during the
year, from GBP30.9 million to GBP26.0 million.
The key reason for the decline has been the reduction in annuity
volumes brokered following pension reforms introduced in the March
2014 budget and hence the commission income received. The reforms
have introduced greater flexibility in terms of how people access
their pension savings and as a result the demand for annuities has
declined. Annuity income has fallen from GBP7.7m in 2013 to GBP4.7m
this year.
The total revenues from Hargreaves Lansdown Currency and Markets
(CFDs, spread betting and currency services) were up GBP0.5m on
last year as increased numbers of clients utilise these additional
services, driving transactional volumes higher.
Revenue from our Funds Library service remained the same at
GBP6.0 million; however, the service has experienced underlying
growth in client numbers and recurring revenues during the year but
did not get a repeat of the one-off development revenues achieved
in the previous year.
Third party business has been in decline over recent years.
Although the Group continues to act as an intermediary for some
third party pension schemes there is a focus on the Corporate
Vantage service which together with regulatory changes means that
we expect that third party business will continue to decline.
Total operating costs
Total operating costs are made up of operating costs which are
under our control plus the Financial Services Compensation Scheme
(FSCS) costs that are outside our control.
Year ended Year ended % movement
30 June 30 June
2014 2013
GBP'million GBP'million
Commission payable /
loyalty bonus 66.5 23.2 +187%
Other operating costs:
Staff costs 51.3 50.3 +2%
Marketing and distribution
costs 11.3 11.0 +3%
Office running costs 4.2 3.8 +11%
Depreciation, amortisation
& financial costs 3.0 2.0 +50%
Other costs 13.3 10.1 +32%
Other operating costs 83.1 77.2 +8%
Total FSCS levy 0.8 (0.5) +160%
Total operating costs 150.4 99.9 +51%
Commission payable is primarily the portion of renewal income
which the Group receives on investment funds held in Vantage which
is rebated to clients as a 'loyalty bonus'. This rebate was paid to
clients throughout the year but following the implementation of the
RDR in March the amounts paid back to clients were significantly
increased to effectively compensate them for the introduction of a
new platform fee.
Other than commission payable staff costs remain our largest
expense. The number of staff on a full-time equivalent basis
(including directors) at 30 June 2014 was 844, and the average
number of staff during the year was 794, an increase of 9% against
an average of 731 for the comparative year.
The increase in staff numbers resulted from increased investment
in IT and web services, along with recruitment of additional
financial advisors and administrative staff to deal with the
growing volume of account openings, transfers and helpdesk
calls.
Group marketing and distribution spend increased by 3%, from
GBP11.0 million to GBP11.3 million and includes the costs of
printing and sending information and newsletters to existing and
potential clients, media advertising, online marketing and client
incentives. In the first half of the year only GBP4.5 million had
been incurred which was 20% down on the prior year but in the
second half spend increased to GBP6.8 million reflecting the
significant increase in marketing and client communication; we
communicated to all of our clients about the impact of the RDR and
the new pricing tariffs, about the discounts that we had negotiated
on many popular funds, about various IPOs including TSB and the
biggest fund launch for some years in the Woodford Equity Income
Fund. A key strategic focus for the business is our use of mobile
and digital media. We increasingly invest in paid search traffic,
cost per click relationships, HLTV and smart phone and tablet apps.
These have also contributed to additional cost this year but have
served to reinforce our strength in digital media which helps drive
client and asset recruitment.
Depreciation has increased significantly following the increase
in capital expenditure seen last year and this year.
Other costs which include dealing costs, insurance, computer
maintenance, external administration charges and irrecoverable VAT
increased by GBP3.2 million or 32%. These increases are a result of
the increased size and scale of the business and enhancement to the
services we have provided.
FSCS levy
Costs relating to the Financial Services Compensation Scheme
("FSCS") are beyond our control.
The FSCS is the compensation fund of last resort for customers
of authorised financial services firms. All authorised firms are
required to contribute to the running of the scheme and the cost of
compensation payments. Contributions to the scheme are proportional
to the amount of eligible income of a firm, rather than its risk
profile or track record of running a compliant service. As such, as
a large business we usually make a significant contribution to the
cost of compensation on investments we have never recommended or
been involved with. FSCS costs increased from a GBP0.5 million
credit to a GBP0.8 million charge this year. Last year we made a
successful challenge to the basis of calculation of the levy,
resulting in a refund of part of the FSCS levy relating to earlier
years.
Taxation
The charge for taxation increased in line with higher profits to
GBP47.1 million from GBP46.2 million. The effective tax rate fell
from 23.7% in 2013 to 22.4% in the current period due to the
standard UK corporation tax rate falling from 24% to 21% since the
start of the prior period, the 2014 applicable rate being 22.5%
(2013 23.75%). In total, taxation of GBP3.9 million has also been
credited directly to equity and relates to share-based
payments.
The Group's policy on corporate taxes is to pay the right amount
of tax at the right time. We aim to be transparent in our
activities; we prefer not to engage in aggressive, artificial or
sophisticated tax planning activities, and we actively engage with
the UK tax authorities both on corporate taxes and tax issues
affecting our clients.
Earnings per share (EPS)
The diluted EPS increased by 9% from 31.4 pence to 34.2 pence.
EPS is calculated as the earnings for the year divided by the total
weighted average fully diluted number of shares, including those
held by the Employee Benefit Trust (the "EBT"). Further information
on the EBT and potential dilution of share capital is provided
within the annual report.
Pension schemes
There were no changes to the defined contribution pension scheme
in the year, with staff and directors participating on equal terms.
Pension costs are recognised as an expense when the contribution is
payable.
Capital expenditure
Capital expenditure, primarily on IT hardware and software,
totalled GBP7.6 million this year, compared with GBP6.2 million
last year. The increase relates to the cyclical replacement of
hardware and the continuation of the project to enhance the
capacity of our key administration systems.
All of our core systems are developed and maintained in-house
and as such we have significant IT resource dedicated to IT support
and development. For the year ended 30 June 2014 an average of 86
staff were employed in developing our systems, with most of their
related costs expensed within staff costs. Any costs relating to
the development of new systems have been capitalised and will be
depreciated over the useful economic life of the new system once
implemented. In the year we capitalised GBP1.04 million of staff
costs.
Balance sheet and cash flow
The Group is soundly financed with a strong balance sheet and no
borrowings. This is an important strength which in addition to
being attractive to clients provides both resilience and
flexibility. The Group is highly cash generative and the cash
conversion ratio measured by the operating cash flows as a
percentage of operating profits remained high at 103%.
Group cash balances totalled GBP201.2 million at the end of the
year. The only significant cash outflow from profits has been the
second interim ordinary and special dividends totalling GBP109.1
million paid in September 2013 and an interim dividend of GBP32.9
million paid in April 2014.
The Group has four subsidiary companies authorised and regulated
by the Financial Conduct Authority (FCA). These firms maintain
capital resources at a level which satisfies both their regulatory
capital requirements and their working capital requirements.
Industry regulatory capital requirements have increased in recent
years and we expect this to continue as a result of FCA
requirements. The Group continues to hold a level of capital that
provides significant headroom over the regulatory minimum. As at 30
June 2014, the aggregated Pillar 1 regulatory capital requirement
across the four regulated subsidiary companies was approximately
GBP11.2 million compared to capital resources of approximately
GBP92.2 million. Capital resources equate to approximately three
times the Pillar 2 capital requirement, which the Board assessed as
adequate during our Individual Capital Adequacy Assessment Process
(ICAAP). Further disclosures are published in the Pillar 3 document
on the Group's website at www.hl.co.uk .
Increase in counterparty balances
In accordance with market practice, certain balances with
clients, Stock Exchange member firms and other counterparties are
included in the balance sheet. These balances fluctuate according
to the volume and value of recent trading. At the year-end, trade
receivables and trade payables included counterparty balances of
GBP242.9 million (2013: GBP231.2 million) and GBP241.1 million
(2013: GBP230.0 million) respectively.
Dividends
The Board remains committed to a progressive dividend
policy.
The Board has declared a second interim (final) ordinary
dividend of 15.39 pence and a special dividend of 9.61 pence per
ordinary share. These dividends will be paid on 26 September 2014
to all shareholders on the register at the close of business on 12
September 2014. This brings the total dividends in respect of the
year to 32.0 pence per ordinary share (2013: 29.59p), an increase
of 8%.
This total ordinary dividend pay-out equates to 65% (2013: 65%)
of post-tax profits, with a further 28% (2013: 28%) of post-tax
profits paid by way of special dividend. Any special dividend in
future years will depend upon future cash requirements and
therefore may vary.
Dividend per share 2014 2013 Change
Interim dividend paid 7.0p 6.30p +11%
Second interim dividend declared 15.39p 14.38p +7%
Total ordinary dividend 22.39p 20.68p +8%
Special dividend declared 9.61p 8.91p +8%
Total dividend for the year 32.00p 29.59p +8%
An arrangement exists under which the Hargreaves Lansdown EBT
has agreed to waive all dividends.
Tracey Taylor
Chief Financial Officer
3 September 2014
Consolidated Income Statement
Note Year Year
ended ended
30 June 30 June
2014 2013(2)
(Unaudited) (audited)
GBP'000 GBP'000
Revenue 2 358,393 292,403
Commission payable (66,526) (23,205)
Staff costs (51,280) (50,265)
Other operating costs (31,734) (27,005)
FSCS costs(1) (832) 532
Operating profit 208,021 192,460
Investment revenue 4 1,768 2,879
Other losses (3) (155)
Profit before tax 209,786 195,184
Tax 5 (47,052) (46,195)
Profit after tax 162,734 148,989
Attributable to:
Equity shareholders of
the parent Company 162,091 148,391
Non-controlling interest 643 598
162,734 148,989
Earnings per share
Basic earnings per share
(pence) 7 34.5 31.7
Diluted earnings per share
(pence) 7 34.2 31.4
All income, profits and earnings are in respect of continuing
operations
(1) (FSCS costs are those relating to the running of and the
levies issued under the Financial Services Compensation Scheme. For
the year ended 30 June 2013 a refund was received relating to
payments made in earlier years.)
(2) There has been a change in accounting policy which has
changed the presentation of operating costs (see Note 1 to the
financial statements).
Consolidated Statement of Comprehensive Income
Year ended Year ended
30 June 30 June
2014 2013
(Unaudited) (Audited)
GBP'000 GBP'000
Profit for the financial year 162,734 148,989
Decrease in fair value of available-for-sale
investments - (160)
Total comprehensive income for the
financial year 162,734 148,829
Attributable to:-
Equity holders of the Company 162,091 148,231
Non-controlling interest 643 598
162,734 148,829
Consolidated Statement of Changes in Equity
Attributable to the owners of the Company
Share Share Investment Capital Shares EBT Retained Total Non-controlling Total
capital premium revaluation redemption held reserve earnings interest Equity
account reserve reserve by EBT
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June
2012 (audited) 1,897 8 160 12 (14,029) 10,014 158,932 156,994 425 157,419
Profit for
the period - - - - - - 148,391 148,391 598 148,989
Other comprehensive income:-
Net fair value
losses on
available-for-sale
assets - - (160) - - - - (160) - (160)
Employee Benefit
Trust:-
Shares sold
in the year - - - - 4,343 - - 4,343 - 4,343
Shares acquired
in the year - - - - (11,771) - - (11,771) - (11,771)
EBT share
sale net of
tax - - - - - 3,634 - 3,634 - 3,634
Employee share option scheme:-
Share-based
payments expense - - - - - - 2,386 2,386 - 2,386
Current tax
effect of
share-based
payments - - - - - - 482 482 - 482
Deferred tax
effect of
share-based
payments - - - - - - 3,546 3,546 - 3,546
Dividend paid - - - - - - (111,223) (111,223) (500) (111,723)
At 1 July
2013 (audited) 1,897 8 - 12 (21,457) 13,648 202,514 196,622 523 197,145
Profit for
the period - - - - - - 162,091 162,091 643 162,734
Other comprehensive income:-
Net fair value - - - - - - - - - -
losses on
available-for-sale
assets
Employee Benefit
Trust:-
Shares sold
in the year - - - - 10,123 - - 10,123 - 10,123
Shares acquired
in the year - - - - (4,887) - - (4,887) - (4,887)
EBT share
sale net of
tax - - - - - (103) - (103) - (103)
Employee share option scheme:-
Share-based
payments expense - - - - - - 2,016 2,016 - 2,016
Current tax
effect of
share-based
payments - - - - - - 3,848 3,848 - 3,848
Deferred tax
effect of
share-based
payments - - - - - - 56 56 - 56
Dividend paid - - - - - - (142,013) (142,013) (575) (142,588)
At 30 June
2014 (unaudited) 1,897 8 - 12 (16,221) 13,545 228,512 227,753 591 228,344
The share premium account represents the difference between the
issue price and the nominal value of shares issued.
The investment revaluation reserve represents the change in fair
value of available-for-sale investments held by the Group, net of
deferred tax.
The capital redemption reserve relates to the repurchase and
cancellation of the Company's own shares.
The Shares held by Employee Benefit Trust ("the EBT") reserve
represents the cost of shares in Hargreaves Lansdown plc purchased
in the market and held by the Hargreaves Lansdown plc Employee
Benefit Trust to satisfy options under the Group's share option
schemes.
The EBT reserve represents the cumulative gain on disposal of
investments held by the Hargreaves Lansdown EBT. The reserve is not
distributable by the Company as the assets and liabilities of the
EBT are subject to management by the Trustees in accordance with
the EBT trust deed.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the minority's
proportion of the net fair value of the assets and liabilities
acquired at the date of the original business combination and the
non-controlling interest's change in equity since that date. The
non-controlling interest represents a 25% shareholding in Library
Information Services Limited, a subsidiary of the Company.
Consolidated Balance Sheet
Note At 30 June At 30 June
2014 2013(1)
(Unaudited) (Audited)
GBP'000 GBP'000
Non-current assets
Goodwill 1,333 1,333
Other intangible assets 2,828 686
Property, plant and equipment 12,679 9,737
Investments - -
Deferred tax assets 11 6,750 6,988
23,590 18,744
Current assets
Trade and other receivables 9 303,863 284,215
Cash and cash equivalents 10 201,238 177,754
Investments 8 874 613
Current tax assets 29 26
506,004 462,608
Total assets 529,594 481,352
Current liabilities
Trade and other payables 12 280,922 259,945
Provisions 32 127
Current tax liabilities 20,049 23,858
301,003 283,930
Net current assets 205,001 178,678
Non-current liabilities
Provisions 247 277
247 277
Total liabilities 301,250 284,207
Net assets 228,344 197,145
Equity
Share capital 13 1,897 1,897
Share premium account 8 8
Investment revaluation - -
reserve
Capital redemption reserve 12 12
Shares held by Employee
Benefit Trust reserve (16,221) (21,457)
EBT reserve 13,545 13,648
Retained earnings 228,512 202,514
Total equity, attributable
to equity shareholders
of the parent Company 227,753 196,622
Non-controlling interest 591 523
Total equity 228,344 197,145
(1) Restated - see Note 1 to the financial statements
Consolidated Statement of Cash Flows
Year ended Year ended
30 June 30 June
2014 2013(1)
(Unaudited) (Audited)
Note GBP,000 GBP,000
Operating activities 14
Cash generated from operations 213,741 190,714
Income tax paid (46,720) (40,521)
Net cash from operating activities 167,021 150,193
Investing activities
Interest received 1,646 2,769
Dividends received from investments 122 110
Proceeds on disposal of available-for-sale
investments - 1,434
Purchases of property, plant
and equipment (5,018) (5,301)
Purchase of intangible fixed
assets (2,569) (915)
Purchase of available-for-sale
investments (262) (97)
Net cash used in investing
activities (6,081) (2,000)
Financing activities
Purchase of own shares in
EBT (4,887) (11,771)
Proceeds on sale of own shares
in EBT 10,019 7,978
Dividends paid to owners of
the parent (142,013) (111,223)
Dividends paid to non-controlling
interests (575) (500)
Net cash used in financing
activities (137,456) (115,516)
Net increase in cash and cash equivalents 23,484 32,677
Cash and cash equivalents
at beginning of year 177,754 145,077
Cash and cash equivalents
at end of year 201,238 177,754
(1) Restated - see Note 1 to the financial statements.
Notes to the Financial Statements
1. General information
Hargreaves Lansdown plc (the "Company") and ultimate parent of
the Group is a company incorporated in the United Kingdom under the
Companies Act 2006 whose shares are publicly traded on the London
Stock Exchange. The address of the registered office is One College
Square South, Anchor Road, Bristol, BS1 5HL, United Kingdom.
This Preliminary Announcement is presented in pounds sterling
which is the currency of the primary economic environment in which
the Group operates.
The consolidated financial statements contained in this
preliminary announcement do not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006. The financial
statements are extracted from the 2014 Group financial statements
which have yet to be signed and have not yet been delivered to the
Registrar of Companies. The audit of the statutory accounts for the
year ended 30 June 2014 is not yet complete. These accounts will be
finalised on the basis of the financial information presented by
the directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the company's
annual general meeting. The financial information included in this
preliminary announcement has been based on the Company's financial
statements which are prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted for use in the EU.
The principal accounting policies are set out in the Group's 2013
statutory accounts.
The comparative figures for the financial year ended 30 June
2013 are based on the statutory accounts for that year except for
the following where there has been a change in accounting policy
relating to cash and the presentation of the income statement:
-- Delivery versus payment exemptions from the FCA client money
rules are not taken by the Group. The related cash balances are at
all times held in trust as client money. Client settlement account
balances were previously shown as restricted cash. The accounting
policy has now been changed to reclassify these balances to trade
and other receivables, which better reflects the form of these
balances. The impact of this change is to reduce restricted cash by
GBP21.0 million (30 June 2013: GBP19.8 million, 30 June 2012:
GBP12.6 million) and increase trade and other receivables by an
equal amount. The subsequent impact on the cash flow statement for
the year to 30 June 2013 is that net cash from operating activities
was reduced by GBP7.2 million and the cash and cash equivalents at
the beginning of the year were decreased by GBP12.6 million to
GBP145.1 million. There was no impact on profit before tax in
either reporting period.
-- The presentation of the income statement has been changed
from the function of expense to the nature of expense format.
Following the implementation of the Retail Distribution Review in
March 2014 it is felt that this format provides users of the
accounts with more useful information.
The report of the auditors on the financial statements for the
year ended 30 June 2013, which were prepared in accordance with
IFRS, was unqualified, did not draw attention to any matters by way
of emphasis without qualifying their report and did not contain a
statement under section 498 (2) or 498 (3) of the Companies Act
2006. The financial statements for the financial year ended 30 June
2013 have been delivered to Companies House.
2. Revenue
Revenue represents commission receivable from financial services
provided to clients, interest income on settlement accounts and
management fees charged to clients. It relates to services provided
in the UK and is stated net of value added tax. An analysis of the
Group's revenue is as follows:
Revenue from services: Year ended Year
30 June ended
2014 30 June
2013
GBP'000
GBP'000
Recurring income 287,293 233,008
Transactional income 65,118 53,371
Other income 5,982 6,024
Total revenue 358,393 292,403
Recurring income principally comprises renewal income,
management fees and interest income on client money. Transactional
income principally comprises commission earned from stockbroking
transactions. Other income principally represents the amount of
fees receivable from the provision of funds library services. Part
of the renewal income is paid to our clients and shown as
commission payable in the Income Statement. Deducting the
commission payable from revenue gives a net revenue measure which
the group focuses on in order to aid comparison of performance
year-on-year.
3. Segment information
The Group is organised into three business segments, namely the
Vantage Division, the Discretionary Division and the Third
Party/Other Services Division. This is based upon the Group's
internal organisation and management structure and is the primary
way in which the Chief Operating Decision Maker (CODM) is provided
with financial information. The CODM has been identified as the
Board of Executive Directors.
The 'Vantage' division represents all activities relating to our
direct to private investor platform.
The 'Discretionary/Managed' division is focused on the provision
of managed services such as our Portfolio Management Service (PMS)
and range of Multi-Manager funds.
The 'Third Party/Other Services' division includes activities
relating to the broking of third party investments and pensions,
certificated share dealing and other niche services such as
currency, CFD's and spread betting. In this division, clients'
investments are not administered within the Group.
The 'Group' segment contains items that are shared by the Group
as a whole and cannot be reasonably allocated to other operating
segments.
Segment expenses are those that are directly attributable to a
segment together with the relevant portion of other expenses that
can reasonably be allocated to the segment. Gains or losses on the
disposal of available-for-sale investments, investment income,
interest payable and tax are not allocated by segment.
Segment assets and liabilities include items that are directly
attributable to a segment plus an allocation on a reasonable basis
of shared items. Corporate assets and liabilities are not included
in business segments and are thus unallocated. At 30 June 2014 and
2013, these comprise cash and cash equivalents, short-term
investments, tax-related and other assets or liabilities.
Consolidation adjustments relate to the elimination of
inter-segment revenues at arm's length prices, balances and
investments in group subsidiaries required on consolidation.
Vantage Discretionary Third Party/ Group Consolidation Consolidated
Other Services Adjustment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 30 June
2014
Revenue from external
customers 287,219 45,103 26,071 - - 358,393
Inter-segment revenue - 4,799 - - (4,799) -
Total segment revenue 287,219 49,902 26,071 - (4, 799) 358,393
Depreciation and
amortisation 1,853 279 368 - - 2,500
Investment revenue - - - 1,768 - 1,768
Other gains and
losses - - - (3) - (3)
Reportable segment
profit before tax 160,565 31,946 16,210 1,065 - 209,786
Reportable segment
assets 264,894 27,631 16,720 237,673 (17,324) 529,594
Reportable segment
liabilities (243,230) (13,200) (13,249) (46,744) 15,173 (301,250)
Net segment assets 21,664 14,431 3,471 190,929 (2,151) 228,344
Year ended 30 June
2013
Revenue from external
customers 227,204 34,140 31,059 - - 292,403
Inter-segment revenue - 4,889 - - (4,889) -
Total segment revenue 227,204 39,029 31,059 - (4,889) 292,403
Depreciation and
amortisation 1,243 183 289 - - 1,715
Investment revenue - - - 2,879 - 2,879
Other gains and
losses - - - (155) - (155)
Reportable segment
profit before tax 150,230 23,154 19,135 2,665 - 195,184
Reportable segment
assets 257,234 20,124 18,072 203,747 (17,825) 481,352
Reportable segment
liabilities (219,475) (17,473) (14,360) (48,572) 15,673 (284,207)
Net segment assets 37,759 2,651 3,712 155,175 (2,152) 197,145
Information about products/services
The Group's operating segments are business units that provide
different products and services. The breakdown of revenue from
external customers for each type of service is therefore the same
as the segmental analysis above.
Information about geographical area
All business activities are located within the UK.
Information about major customers
The Group does not rely on any individual customer.
4. Investment revenue
Year ended Year ended
30 June 30 June
2014 2013
GBP'000 GBP'000
Interest on bank deposits 1,646 2,769
Dividends from equity investment 122 110
1,768 2,879
5. Tax
Year ended Year ended
30 June 30 June
2014 2013
GBP'000 GBP'000
Current tax 46,758 46,698
Deferred tax (Note 10) 294 (503)
47,052 46,195
Corporation tax is calculated at 22.5% of the estimated
assessable profit for the year to 30 June 2014 (2013: 23.75%).
In addition to the amount charged to the income statement,
certain tax amounts have been charged or credited directly to
equity as follows:
Year ended Year ended
30 June 30 June
2014 2013
GBP'000 GBP'000
Deferred tax relating to share based
payments (56) (3,546)
Current tax relating to share-based
payments (3,848) (482)
(3,904) (4,028)
Factors affecting tax charge for the year
It is expected that the ongoing effective tax rate will remain
at a rate approximating to the standard UK corporation tax rate in
the medium term. The standard UK corporation tax rate was reduced
to 21% (from 23%) on 1 April 2014. Deferred tax has been recognised
at 20%, being the rate substantially enacted at the balance sheet
date. A deferred tax asset in respect of future share option
deductions has been recognised based on the Company's share price
as at 30 June 2014.
Factors affecting future tax charge
Any increase or decrease to the Company's share price will
impact the amount of tax deduction available in future years on the
value of shares acquired by staff under share incentive schemes.
The Finance Act 2013 received Royal Assent on 17 July 2013 and will
reduce the standard rate of UK corporation tax to 20% from 1 April
2015.
The charge for the year can be reconciled to the profit per the
income statement as follow:
Year ended Year ended
30 June 30 June
2014 2013
GBP'000 GBP'000
Profit before tax from
continuing operations 209,786 195,184
Tax 47,205 46,358
- at the UK corporation
tax rate of 22.5% 23.75%
Items (allowable) / not
allowable for tax (396) (148)
Effect of adjustments
relating to prior years 94 (107)
Impact of the changes
in tax rate 149 92
Tax expense for the year 47,052 46,195
Effective tax rate 22.4% 23.7%
6. Dividends
Year ended Year ended
30 June 30 June
2014 2013
GBP'000 GBP'000
Amounts recognised as distributions
to equity holders in the period:
2013 Second interim dividend of 14.38p
(2012: 10.65p) per share 67,355 49,756
2013 Special dividend of 8.91p (2012:
6.84p) per share 41,734 31,956
2014 First interim dividend of 7.0p
(2013: 6.3p) per share 32,924 29,511
Total dividends paid during the year 142,013 111,223
After the balance sheet date, the directors declared a second
interim (final) ordinary dividend of 15.39 pence per share and a
special dividend of 9.61 pence per share payable on 26 September
2014 to shareholders on the register on 12 September 2014.
Dividends are required to be recognised in the financial statements
when paid, and accordingly the declared dividend amounts are not
recognised in these financial statements, but will be included in
the 2014 financial statements as follows:
GBP'000
2014 Second interim dividend of
15.39p (2013: 14.38p) per share 72,435
2014 Special dividend of 9.61p
(2013: 8.91p) per share 45,240
Under an arrangement dated 30 June 1997 the Hargreaves Lansdown
Employee Benefit Trust, which held the following number of ordinary
shares in Hargreaves Lansdown plc at the date shown, has agreed to
waive all dividends.
Year ended Year ended
30 June 30 June
2014 2013
Number of shares held by the Hargreaves
Lansdown Employee Benefit Trust 3,547,124 5,923,930
Representing % of called-up share capital 0.75% 1.25%
7. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in free issue during the period,
including ordinary shares held in the EBT reserve which have vested
unconditionally with employees.
Diluted earnings per share is calculated adjusting the weighted
average number of ordinary shares outstanding to assume conversion
of all dilutive potential ordinary shares.
The weighted average number of anti-dilutive share options and
awards excluded from the calculation of diluted earnings per share
was 179,414 at 30 June 2014 (2013: 320,210).
Year ended Year ended
30 June 30 June
2014 2013
GBP'000 GBP'000
Earnings (all from continuing operations):
Earnings for the purposes of basic and diluted
EPS - net profit attributable to equity holders
of parent company 162,091 148,391
Number of shares:
Weighted average number of ordinary shares for
the purposes of diluted EPS 474,365,495 471,923,756
Weighted average number of shares held by HL
EBT which have not vested unconditionally with
employees (4,109,730) (3,981,223)
Weighted average number of ordinary shares for
the purposes of basic EPS 470,255,765 467,942,533
Earnings per share: Pence Pence
Basic EPS 34.5 31.7
Diluted EPS 34.2 31.4
8. Investments
Year ended Year ended
30 June 30 June
2014 2013
GBP'000 GBP'000
At beginning of year 613 2,228
Sales - (1,712)
Purchases 261 97
At end of year 874 613
Comprising:
Current asset investment - UK listed securities
valued at quoted market price 610 349
Current asset investment - Unlisted securities
valued at cost 264 264
GBP610,000 (2013: GBP349,000) of investments are classified as
held at fair value through profit and loss and GBP264,000 (2013:
GBP264,000) are classified as available-for-sale.
Available-for-sale investments have been included at fair value
where a fair value can be reliably calculated, with the revaluation
gains and losses reflected in the investment revaluation reserve as
shown in the Consolidated Statement of Changes in Equity, until
sale when the cumulative gain or loss is transferred to the income
statement. If a fair value cannot be reliably calculated by
reference to a quoted market price or other method of valuation,
available-for-sale investments are included at cost where the
directors believe that this is not significantly different to fair
value, with a fair value adjustment recognised upon disposal of the
investment.
9. Trade and other receivables
At At
30 June 30 June
2014 2013
GBP'000 GBP'000
Financial assets:
Trade receivables* 262,257 249,697
Other receivables 6,039 962
268,296 250,659
Non-financial assets:
Prepayments and other accrued
income 35,567 33,556
303,863 284,215
*The prior period comparatives have been restated as a result of
a change in accounting policy. The impact of this is disclosed in
Note 1.
Trade and other receivables are measured at initial recognition
at fair value. Appropriate allowances for estimated irrecoverable
amounts are recognised in profit or loss when there is objective
evidence that the asset is impaired. In accordance with market
practice and IFRS, certain balances with clients, Stock Exchange
member firms and other counterparties totalling GBP242.9 million
(2013: GBP231.2 million) are included in trade receivables. These
balances are presented net where there is a legal right of offset.
The gross amount of trade receivables is GBP314.5 million and the
gross amount offset in the balance sheet with trade payables is
GBP71.6 million.
10. Cash and cash equivalents
At At
30 June 30 June
2014 2013
GBP'000 GBP'000
Restricted cash - balances held
by EBT 4,471 37
Group cash and cash equivalent
balances 196,767 177,717
201,238 177,754
Cash and cash equivalents comprise cash and institutional cash
funds with near-instant access held by the Group.
At 30 June 2014 segregated deposit amounts held by the Group on
behalf of clients in accordance with the client money rules of the
Financial Conduct Authority amounted to GBP4,045 million (2013:
GBP3,561 million). The client retains the beneficial interest in
these deposits and accordingly they are not included in the balance
sheet of the Group.
11. Deferred tax
The following are the major deferred tax assets recognised and
movements thereon during the current and prior reporting years.
Deferred tax has been recognised at 20%, being the rate in force at
the balance sheet date.
Accelerated Future relief Share-based Other deductible Total
tax depreciation on capital payments temporary differences
losses
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Group
At 30 June
2012 650 22 1,162 1,105 2,939
(Charge)/Credit
to income (203) (22) 465 263 503
Credit to equity - - 3,546 - 3,546
At 30 June
2013 447 - 5,173 1,368 6,988
(Charge)/Credit
to income (302) - 11 (3) (294)
Credit to equity - - 56 - 56
At 30 June
2014 145 - 5,240 1,365 6,750
12. Trade and other payables
At At
30 June 30 June
2014 2013
GBP'000 GBP'000
Current payables - Financial
assets:
Trade payables 242,153 231,192
Social security and other
taxes 11,488 10,063
Other payables 16,385 7,311
270,026 248,566
Current payables - Non-financial
assets:
Accruals and deferred income 10,896 11,379
280,922 259,945
In accordance with market practice and IFRS, certain balances
with clients, Stock Exchange member firms and other counterparties
totalling GBP241.1 million (2013: GBP230.0 million) are included in
trade payables. As stated in note 9 above, where we have a legal
right of offset trade payable balances have been presented net. The
gross amount of trade payables is GBP312.7 million and the gross
amount offset in the balance sheet with trade receivables is
GBP71.6 million.
Other payables principally comprise amounts owed to clients as a
loyalty bonus and to staff as a bonus. Accruals and deferred income
principally comprise amounts outstanding for trade purchases and
revenue received but not yet earned on group pension schemes where
an on-going service is still being provided.
13. Share capital
At At
30 June 30 June
2014 2013
GBP'000 GBP'000
Authorised:
525,000,000 ordinary shares of
0.4p each 2,100 2,100
Issued and fully paid:
Ordinary shares of 0.4p each 1,897 1,897
Shares Shares
Issued and fully paid:
Number of ordinary shares of 0.4p
each 474,318,625 474,318,625
The Company has one class of ordinary shares which carry no
right to fixed income.
14. Note to the consolidated cash flow statement
Year Year
ended ended
30 June 30 June
2014 2013
GBP'000 GBP'000
Profit for the year after tax 162,734 148,989
Adjustments for:
Investment revenues (1,768) (2,879)
Income tax expense 47,052 46,195
Depreciation of plant and equipment 2,074 1,352
Amortisation of intangible assets 426 363
Loss on disposal 3 155
Share-based payment expense 2,016 2,386
(Decrease)/increase in provisions (125) 127
Operating cash flows before movements
in working capital 212,412 196,688
Increase in receivables* (19,648) (128,967)
Increase in payables 20,977 122,993
Cash generated from operations* 213,741 190,714
*The prior period comparatives have been restated as a result of
a change in accounting policy. The impact of this is disclosed in
Note 1.
15. Going concern
The Group maintains ongoing forecasts that indicate continued
profitability in the 2015 financial year. Stress test scenarios are
undertaken, the outcomes of which show that the Group has adequate
capital resources for the foreseeable future even in adverse
economic conditions. The Group's business is highly cash generative
with a low working capital requirement; indeed, the forecast cash
flows show that the Group will remain highly liquid in the
forthcoming financial year. The Directors therefore believe that
the Group is well placed to manage its business risks successfully
despite the current uncertain economic outlook. After making
enquiries, the Directors' expectation is that the Group will have
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing this preliminary results statement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR QKBDDABKDNCK
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