Trading platform announced it has record levels of assets under administration
Companies: Hargreaves Lansdown plc
Hargreaves Lansdown (LSE: HL.) released a healthy Q1 2017 Trading Update this morning with record levels of quarterly revenue and Assets Under Administration (AUA). The growth in new business inflows slowed to £1.11bn, 22% below inflows in Q1 2016, but this is unsurprising given that was a record quarter driven by the pension reforms and Junior ISAs.
The most interesting part of the announcement was the huge increase in trading activity with client initiated share deals numbering 1,031,000 in the quarter, a 49% increase on the 691,000 initiated in Q1 2016. This appears to be driven by the much-publicized sky high trading activity the morning after the Brexit vote, where many trading platforms struggled to service the demand. Management highlight:
"we experienced higher levels of cash withdrawals in the early part of the quarter following the EU referendum, particularly from the Fund and Share account where investments tend to be less sticky and trading profits can be more easily withdrawn"
Overall, Hargreaves continued its relentless march, reasserting itself as the gorilla of the sector. Record net quarterly revenue of £90.6m is up 15% vs Q1 2016, total clients rose to 856,000, up 20,000 from June 2016, and AUA increased by £5.9 billion to a record £67.6 billion.
The fact that this quarter included the one-off event of a Brexit vote and the incredible dislocation that brought to markets, we would expect some of this record quarter to not repeat in subsequent trading periods. And Management do strike a cautious tone:
"Despite the higher stock market levels, investor confidence has fallen and there remains much uncertainty about the future economic environment weighing on investors' minds...
...As ever, future stock market levels and investor confidence will have a significant part to play during the remainder of our financial year. However, we remain confident in the execution of our strategy..."
Looking at valuation, Hargreaves is currently trading on a 30x forward PE ratio using consensus 2016 forecasts of 40.4p taken from the FT. Analysts are forecasting a full-year 2017 dividend of 36.5p, implying a coverage ratio of only 1.1x.
The shares opened down 2% in early trading as investors focussed more on the slowdown in customer and fund inflows, as well as the caution on future investor uncertainty. Over the last 12 months, shares are down 5.5%.