Hargreaves Lansdown PLC Half-year Report

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Hargreaves Lansdown PLC Half-year Report

Hargreaves Lansdown (LSE:HL.)
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RNS Number : 5026B

Hargreaves Lansdown PLC

31 January 2020

Hargreaves Lansdown plc

Interim results for the six months ended 31 December 2019

Hargreaves Lansdown plc ("HL" or "the Group") today announces interim results for the six month period ended 31 December 2019.

Highlights

   --    Net new business of GBP2.3 billion. 
   --    Assets under administration up 22% since 31 December 2018 to GBP105.2 billion. 
   --    1,274,000 active clients, an increase of 50,000 since 30 June 2019. 
   --    Profit before tax increase of 12% to GBP171.1 million. 
   --    Interim dividend up 9% to 11.2 pence per share (H1 2019: 10.3p) 

Chris Hill, Chief Executive Officer, commented:

"The first half of our financial year was another period of growth. Despite market challenges, the resilience of our business, continued execution of our strategy and our focus on ensuring the right outcomes for clients, means we have seen growth and increased market share through the period.

We are confident that the diversified nature of Hargreaves Lansdown, our continued investment where we see opportunity and market leading client offering, mean that we are well placed to help our clients prosper, whilst delivering strong and sustainable returns for shareholders."

 
 Financial highlights                   6 months    6 months   Change   Year ended 
                                        ended 31    ended 31        %      30 June 
                                        December    December                  2019 
                                            2019        2018 
                                       (H1 2020)   (H1 2019)             (FY 2019) 
===================================  ===========  ==========  =======  =========== 
 Net new business                      GBP2.31bn   GBP2.53bn      -9%     GBP7.3bn 
===================================  ===========  ==========  =======  =========== 
 Total assets under administration    GBP105.2bn   GBP85.9bn     +22%    GBP99.3bn 
  (AUA) 
===================================  ===========  ==========  =======  =========== 
 Revenue                               GBP257.9m   GBP236.4m      +9%    GBP480.5m 
===================================  ===========  ==========  =======  =========== 
 Profit before tax                     GBP171.1m   GBP153.4m     +12%    GBP305.8m 
===================================  ===========  ==========  =======  =========== 
 Diluted earnings per share                29.3p       26.1p     +12%        52.0p 
===================================  ===========  ==========  =======  =========== 
 Interim dividend per share                11.2p       10.3p      +9%        10.3p 
===================================  ===========  ==========  =======  =========== 
 
 
 

Contacts:

Hargreaves Lansdown

   For media enquiries:                                                        For analyst enquiries: 

Danny Cox, Head of Communications James Found, Head of Investor Relations

   +44(0)117 317 1638                                                           +44(0)117 988 9898 

Chris Hill, Chief Executive Officer Philip Johnson, Chief Financial Officer

 
 
 

Analyst presentation

Hargreaves Lansdown will be hosting an analyst presentation at 9.00am on 31 January 2020 following the release of these results for the half year ended 31 December 2019. Attendance is by invitation only. A conference call facility will be in place with the following participant dial-in numbers - UK (toll free) 0800 640 6441, UK (local) 020 3936 2999 and all other locations +44 20 3936 2999. The participant access code is 601416. Slides accompanying the analyst presentation will be available at www.hl.co.uk/investor-relations and an audio recording of the analyst presentation will be available by close of business on the day.

The Interim Results contain forward-looking statements which have been made in good faith based on the information available to us at the time of the approval of this report and should be treated with caution due to the inherent risks and uncertainties, including both economic and business risk factors some of which were set out in the 2019 Annual Report, underlying such forward-looking information.

Unless otherwise stated, all figures below refer to the six months ended 31 December 2019 ("H1 2020"). Comparative figures are for the six months ended 31 December 2018 ("H1 2019"). Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances the sum of the numbers in a column or a row in tables contained in this document may not conform exactly to the total figure given for that column or row.

LEI Number: 2138008ZCE93ZDSESG90

Chief Executive's Statement

Growth in challenging market conditions

The first half of our financial year was another period of growth for Hargreaves Lansdown as we reinforced our support for our clients and invested in our differentiated service. Our purpose remains to empower people to save and invest with confidence. To do this we must continuously deliver an exceptional client experience and respond to their evolving needs.

The external market was challenging in the second half of 2019, with political uncertainty, a General Election in the UK, Brexit and world trade tariffs all raising concerns. As we have seen in previous unpredictable periods, client confidence and retail investment flows were affected. The Investment Association reported weak retail fund flows throughout and the suspension of the two Woodford funds also contributed to the general unease.

Against this backdrop, we continue to implement our strategy. The benefits of our client focused business model, the broad range of our investments and savings proposition and our leading client service have seen AUA rise 22% over the past year to GBP105.2 billion and a 12% increase in profit before tax to GBP171.1 million. Client numbers grew by 50,000 to 1,274,000 and client retention is consistent with prior periods at 93.3%. In addition, our latest share of the direct to consumer platform market has increased from 40.5% to 41.8%*.

Earlier this month we entered into an agreement to sell FundsLibrary Limited, our data management and digital services business, to Broadridge Financial Solutions, Inc. The decision to sell reflected our view that, as a business to business service, it was no longer core to our overall business. The deal is expected to complete at the end of February 2020 and I wish staff, management and business every success in the future.

* Source: Platforum UK D2C: Market Overview, February 2020 (provisional), data as at 30 September 2019.

Delivering value for clients through our service

Our clients remain at the centre of everything that we do. They require information that builds knowledge and confidence and helps them to understand the decisions they have to make to meet their individual needs. We provide this together with an ever greater range of investment and savings products and solutions, and make it easy to access and manage them all in one place. With an ever-shifting regulatory and tax environment, our clients need support from us more than ever before.

By providing the services and solutions our clients need, when they need them, engaging with them at the right times and communicating in ways they prefer, we optimise the value we can bring to a lifelong relationship and help them to achieve outcomes that are right for them.

As a leading financial services company we take our responsibilities very seriously, striving to play our role in setting the highest standards and recognising the challenges as a result. We are committed to transparency and engagement with our clients as we support them with their evolving needs over the long term. Over the past year, we have removed various fees such as exit fees and ancillary charges which leaves us with what we consider is now one of the most transparent pricing structures in our sector.

Increasing numbers of our clients are approaching retirement and we are mindful of the challenges they face. During the period we launched a range of 'wake up' packs, helping clients to better understand their options and challenges regarding tax, income and investment. We also made improvements to our annuity process to help clients to secure enhanced annuities, and hence higher income, where available. Although interest rates remain low, we maintain our view that annuities are an important part of a range of tools we offer to get to the right outcomes for clients in retirement.

The period has seen continued growth and development of Active Savings as an innovative way to manage cash savings, which now has over GBP1.6bn of AUA and 46,000 customers using the service. This provides access to better rates for those that hold cash, whether they are in accumulation phase or in retirement. Banks increasingly recognise the relative importance of this platform as a means to raise deposits and development has continued with ICICI now offering an Easy Access Account and two new banks offering Fixed Term products. We continue to look at ways of extending this proposition further, including offering a new Cash ISA account in the coming months.

Our Multi-Manager fund range began a project late in 2018 to transfer assets they invest in into segregated mandates rather than off-the-shelf retail funds. This process gives the team greater control over who manages the underlying funds, and how they run them, as well as reducing the cost of being invested in these funds to our clients. The process is working well as we extend this to the benefit of investors.

Our values and culture underpin our client service and proposition

Our values and our culture are hugely important to us and underpin our client focus. I firmly believe that not only are these critical to how an organisation reacts in tough situations, but how it is prepared to learn and put that experience to work to the benefit of clients. The Woodford fund suspensions were disappointing and frustrating for us and our clients, but their impact and the learnings have been incorporated into developments to our service.

The FCA's 2017 review into best buy lists highlighted that they were a positive tool for investors and help them to make decisions. Our clients agree with this. However, we have now carried out a thorough review of our Wealth 50, spoken to clients to ascertain their views about our favourite funds list, and sought other independent insights. As a result, we will be making changes over the coming months to incorporate what we have learned from this research, including a greater focus on transparency of process. This will include adding more detail, greater transparency and a new structure to our research notes, for those clients who want a deeper level of information, and new functionality on our platform to help those who want to follow a more independent path.

It has been well documented that Philip Johnson and I, together with Lee Gardhouse and Mark Dampier decided to waive our bonuses for the 2019 financial year and we also waived platform fees for both the Woodford Equity Income Fund and the Woodford Income Focus Fund. A dedicated helpdesk team was created to support clients impacted by the closure of the Woodford Equity Income fund, and guide them through the coming months as it is wound up. We have been in regular and close communication with our clients and kept them fully informed with any updates. This has included writing to any of those invested in Woodford Equity Income, Woodford Income Focus and Woodford Patient Capital, either directly or through our Multi-Manager portfolios, 18 times with updates since the suspension of the Woodford Equity Income in June.

Additionally, we have communicated throughout the period with a number of parties to encourage a broad consideration of options for the Woodford Income Focus Fund that would maximise value for unit holders. We polled clients to ensure that we were aligned to their needs, asking for their preferred outcome. We are pleased that the appointment of an alternative manager brings a resolution for these unit holders and that the fund will be open again in due course.

Finally, we are adding non-executive directors to the Hargreaves Lansdown Fund Managers Limited (HLFM) board to provide independent challenge and oversight closer to investment decisions. The first, John Troiano, joins us from Schroders where he was Global Head of Distribution. John's global asset management and investment experience will add further breadth to the knowledge base and skills to both the Plc Board as well as HLFM.

Dividend

The Board believes the Group has strong profitability, liquidity and a capital position to execute its strategy without financial constraint and to operate a sustainable and progressive ordinary dividend policy. We remain confident in our business model and the Board has declared a 9% rise in the interim dividend to 11.2 pence per share. The Board remains committed to paying special dividends when sufficient excess cash and capital exist after taking account of the Group's growth, investment and regulatory capital requirements at the time.

Outlook

We remain excited by the structural growth opportunity in the UK savings and investments market and remain confident in our ability to deliver sustainable growth through the cycle. The secular transfer of long term financial provision from businesses to individuals, an increase in life expectancy, ongoing low asset yields, and a complex saving and investment environment all present immense challenges for our clients. We believe Hargreaves Lansdown is well placed to support them with these challenges through our client focused business model, broad investment and savings proposition and leading client service.

The strength and resilience of our business model has ensured that the business delivered continued net new business and profit growth during the period. Since the Election we have seen an increase in investor confidence, which has translated into increased client activity and early signs of renewed net flows into retail funds. We hope that this sentiment will continue through the key tax year end season and beyond, and remain confident that we are well placed to help our clients prosper and deliver strong and sustainable returns for our shareholders.

I would like to thank our clients for their continued support and recommendation and I would also like to recognise my colleagues for all their hard work, dedication and commitment during a challenging period.

Chris Hill

Chief Executive Officer

Financial Review

Assets Under Administration (AUA) and Net New Business (NNB)

 
                       Unaudited          Unaudited          Unaudited 
                     3 months to        3 months to     6 months ended 
                    30 September   31 December 2019   31 December 2019 
                            2019              GBPbn              GBPbn 
                           GBPbn 
=================  =============  =================  ================= 
Opening AUA                 99.3              101.8               99.3 
Net New Business             1.7                0.6                2.3 
Market growth 
 & other                     0.8                2.8                3.6 
Closing AUA                101.8              105.2              105.2 
=================  =============  =================  ================= 
 

The diversified nature of Hargreaves Lansdown, the breadth of our product offering and the provision of high quality services tailored to the needs of our clients has allowed us to deliver continued net new business inflows against a backdrop of uncertainty around UK politics, Brexit, global macro issues such as trade tariffs, a significant decline in UK investor confidence and weak retail flows across the market as a whole.

Net new business for the first half totalled GBP2.3 billion. This was driven through a variety of channels including organic new client growth, ongoing wealth consolidation onto our platform from existing clients, continued flows into our cash management service "Active Savings" and direct back book transfers from J.P. Morgan and Baillie Gifford. New business in the period, particularly in the second quarter, was impacted by weak investor sentiment arising from the factors mentioned above. However, lead generation and client engagement has remained strong during the period and we have seen a pick-up in activity as we have moved into January 2020. We introduced 50,000 net new clients to our services in the six months to 31 December 2019 and grew our active client base by a further 4% to 1,274,000.

Total AUA increased by 6% to GBP105.2 billion as at 31 December 2019 (GBP99.3 bn as at 30 June 2019). This was driven by GBP2.3 billion of net new business (H1 2019: GBP2.5bn) plus significant positive stock market movements impacting asset values.

Income Statement

 
                              Unaudited          Unaudited          Audited 
                         6 months ended     6 months ended          Year to 
                            31 December        31 December     30 June 2019 
                                   2019               2018             GBPm 
                                   GBPm               GBPm 
====================  =================  =================  =============== 
Revenue                           257.9              236.4            480.5 
Operating costs                  (89.2)             (85.1)          (179.4) 
Fair value gains on 
 derivatives                        1.0                1.1              2.2 
Finance income                      1.6                1.2              2.8 
Finance costs                     (0.2)              (0.2)            (0.3) 
====================  =================  =================  =============== 
Profit before tax                 171.1              153.4            305.8 
Tax                              (31.8)             (29.3)           (58.2) 
====================  =================  =================  =============== 
Profit after tax                  139.3              124.1            247.6 
====================  =================  =================  =============== 
 

Revenue

Revenue for the period was up 9% to GBP257.9 million (H1 2019: GBP236.4 million), driven by AUA that on average was up 12.6% and increased net interest on client money as interest rate margins rose as expected. Revenue growth was slightly below the rate of AUA growth due to the waiving of platform fees on Woodford funds (c. GBP2.3m), net outflows within the HL Multi-manager funds and the removal of various fees such as exit and transfer fees.

The table below breaks down revenue, average AUA and margins earned across the main asset classes which our clients hold with us:

 
                           6 months ended                 6 months ended               Year ended 30 June 
                          31 December 2019               31 December 2018                     2019 
=================  =============================  =============================  ============================= 
                    Revenue    Average   Revenue   Revenue    Average   Revenue   Revenue    Average   Revenue 
                       GBPm        AUA    margin      GBPm        AUA    margin      GBPm        AUA    margin 
                                 GBPbn       bps                GBPbn       bps                GBPbn       bps 
=================  ========  =========  ========  ========  =========  ========  ========  =========  ======== 
 
 Funds(1)             109.6    54.6(7)        40     103.2    50.1(7)        41     206.2    50.6(7)        41 
 Shares(2)             45.7       35.0        26      42.1       30.8        27      86.2       31.4        27 
 Cash(3)               46.0       11.2        82      33.2        9.9        67      73.2       10.2        72 
 HL Funds(4)           33.9     9.2(7)        73      34.7     9.3(7)        74      68.3     9.2(7)        74 
 Other(5)              22.7     1.3(6)         -      23.2     0.2(6)         -      46.6     0.5(6)         - 
 Double-count(7)          -   (9.1)(7)         -         -   (9.3)(7)         -         -   (9.1)(7)         - 
=================  ========  =========  ========  ========  =========  ========  ========  =========  ======== 
 Total                257.9   102.2(7)         -     236.4    91.0(7)         -     480.5    92.8(7)         - 
=================  ========  =========  ========  ========  =========  ========  ========  =========  ======== 
 

1 Platform fees and renewal commission.

2 Stockbroking commission and equity holding charges.

3 Net interest earned on client money.

4 Annual management charge on HL Funds, i.e. excluding the platform fee, which is included in revenue on Funds.

5 Advisory fees, Funds Library revenues, Active Savings and ancillary services (e.g. annuity broking, distribution of VCTs and HL Currency and Market Services).

6 Average cash held via Active Savings.

7 HL Funds AUM included in Funds AUA for platform fee and in HL Funds for annual management charge. Total average AUA excludes HL Fund AUM to avoid double-counting.

Revenue on Funds increased by 6% to GBP109.6m (H1 2019: GBP103.2m) due to AUA growth from net new business and market growth. Funds remain our largest client asset class at 53% of average AUA (H1 2019: 55%), and the revenue margin earned on these in the period was in line with our expectations at 40bps (H1 2019: 41bps). As anticipated the fund margin has been slightly impacted as we waived the platform fee throughout the period on holdings in the Woodford Equity Income Fund and on the Woodford Income Focus Fund since its suspension in October 2019. Revenue margins on Funds have been broadly stable following the completion of the Retail Distribution Review and we continue to expect them to remain at similar levels over the remainder of the financial year. Funds AUA at the end of the period was GBP55.9 billion (H1 2019: GBP46.6bn).

Revenue on Shares increased by 9% to GBP45.7m (H1 2019: GBP42.1m) and the revenue margin of 26bps (H1 2019: 27bps) was at the low end of our expected range. This margin is primarily a result of the ratio of dealing volumes to AUA, and over the past three years average Shares AUA has grown by 60% whilst average dealing volumes have only grown 23%. Average stockbroking commissions per deal have been constant, as has the proportion of Shares to Total AUA on the platform and the proportion of our clients that hold equities. This denominator-driven change is therefore bringing the revenue margin ratio down, rather than any real margin deterioration and, as a result, we are tightening our modelling guidance in normal dealing volume environments to 24 to 28 basis points going forward. Shares AUA at the end of the period was GBP36.5 billion (H1 2019: GBP28.5bn).

Revenue on Cash increased by 39% to GBP46.0m (H1 2019: GBP33.2m) as increased AUA levels were combined with an increase in the net interest margin to 82bps (H1 2019 67bps). This was slightly ahead of our communicated expectations at the start of the year that margins would be within a 70bps to 80bps range for the period. For a while now expectations have been that the base rate of interest is likely to fall meaning rates being secured on term deposits now are typically lower than those last year. As a result we expect that the margin will be lower in the second half of the year. Cash accounts for 11% of average AUA (H1 2019: 11%) and, assuming there are no further rate changes, we anticipate the net interest margin on Cash for the 2020 financial year will continue to be in the range of 75bps to 80bps. Cash AUA at the end of the period was GBP11.1 billion (H1 2019: GBP10.4bn).

HL Funds consist of ten Multi-Manager funds, on which the management fee is 75bps per annum, and three Select equity funds, on which the management fee is 60bps. Revenue from HL Funds has fallen by 2% this year to GBP33.9m (H1 2019: GBP34.7m) due to modest net outflows as we have not actively marketed these funds whilst the Woodford Equity Income Fund holding within them has been suspended. The fees are collected on a daily basis whereas the Group calculates average AUM on a month end basis, resulting in a headline margin for the period of 73bps (H1 2019: 74bps). Please note that the platform fees on these assets are included in the Funds line and hence total average AUA of GBP102.2 billion (H1 2019: GBP91.0bn) excludes HL Funds AUM to avoid double-counting. HL Funds AUM at the end of the period was GBP9.4 billion (H1 2019: GBP8.6bn).

Other revenues are made up of advisory fees, our FundsLibrary data services, Active Savings and ancillary services such as annuity broking, distribution of VCTs and the Hargreaves Lansdown Currency and Market Services. These revenues are primarily transactional and not impacted by market growth. They declined by 2% in the period mainly because of the removal of various fees such as exit charges. Assets held within Active Savings on the platform and the related revenue are not yet broken out into a separate category in the table above. As highlighted previously we believe it is strategically imperative to capture the scale advantage of being a first mover. Consequently our focus remains on growing AUA at present. Our chosen route for achieving this in the current low interest rate environment is via reducing our revenue margins to ensure the rates offered on Active Savings are highly competitive. This will attract the new clients and assets into the service that we need to capitalise on the opportunity. As at 31 December 2019 the AUA was GBP1.6 billion (H1 2019: GBP0.4 billion).

 
                                  Unaudited                       Unaudited                         Audited 
                             6 months ended                  6 months ended                         Year to 
                                31 December                     31 December                    30 June 2019 
                                       2019                            2018                            GBPm 
                                       GBPm                            GBPm 
======================  ===================  ==============================  ============================== 
Recurring revenue                     209.9                           190.3                           387.3 
Transactional revenue                  43.2                            41.8                            84.3 
Other revenue                           4.8                             4.3                             8.9 
Total revenue                         257.9                           236.4                           480.5 
======================  ===================  ==============================  ============================== 
 

The Group's revenues are largely recurring in nature, as shown in the table above, with the proportion of recurring revenues increasing slightly to 81% in the period (H1 2019: 80%). Recurring revenue is primarily comprised of platform fees, Hargreaves Lansdown fund management fees, interest on client money, equity holding charges and advisory fees. This grew by 10% to GBP209.9 million (H1 2019: GBP190.3 million) due to increased average AUA from continued net new business and higher margins on cash. Recurring revenues provide greater profit resilience and hence we believe they are of higher quality than non-recurring revenues.

Transactional revenue is primarily made up of stockbroking commission and advisory event-driven fees. This increased by 3% to GBP43.2 million (H1 2019: GBP41.8 million) with higher equity dealing volumes being the key driver.

Other revenue is derived from the provision of funds data services and research to external parties through FundsLibrary. This was up 12% from GBP4.3 million to GBP4.8 million driven by new Solvency II and MiFID II services.

Operating costs

 
                                        Unaudited          Unaudited        Audited 
                                   6 months ended     6 months ended     Year ended 
                                      31 December        31 December        30 June 
                                             2019               2018           2019 
                                             GBPm               GBPm           GBPm 
===========================  ====================  =================  ============= 
Staff costs                                  50.5               49.5           97.2 
Marketing and distribution 
 costs                                        6.0                6.0           12.7 
Depreciation, amortisation 
 & financial costs                            8.4                5.8           12.4 
Other costs                                  22.6               23.5           50.3 
---------------------------  --------------------  -----------------  ------------- 
                                             87.5               84.8          172.6 
Total FSCS levy                               1.7                0.3            6.8 
===========================  ====================  =================  ============= 
Total operating costs                        89.2               85.1          179.4 
===========================  ====================  =================  ============= 
 

Having gone through a period of investment catch up, costs continue to be tightly managed in line with market conditions of the time. Hargreaves Lansdown is a growing business and higher client numbers and associated activity levels will however continue to require investment in our marketing, proposition and servicing functions as we look forward. Technology and efficiency programmes improve our scalability, thereby allowing us to invest productivity gains into extending our proposition and our platform functionality. We believe this reinvestment cycle underpins our future growth.

During the first half of 2020, excluding the FSCS levy, operating costs increased by 3% to GBP87.5 million versus GBP84.8 million in the comparable H1 2019 period. This control of costs has been made whilst administering significant net new flows of business and clients, improving market share, maintaining high client retention rates and continuing the development of our product and growth capabilities.

Staff costs rose by 2% to GBP50.5 million (H1 2019: GBP49.5 million). Average staff numbers increased by 4% from 1,534 in H1 19 to 1,588 in H1 20 with the key increases being in Technology, Marketing and in Operations, in line with higher client activity levels and the expansion of our capabilities

Marketing and distribution costs were in line with prior year at GBP6.0 million (H1 2019: GBP6.0 million). Although we continued to invest in our digital marketing presence, targeted marketing campaigns for the likes of Active Savings and engagement with existing and target clients around Brexit and the general election, other marketing expenses were reduced. We expect to increase marketing activity in the second half and through the tax year end following a rise in investor confidence, client engagement and activity levels. This conscious investment into our growth will likely see marketing cost return to their 2018 normalised levels, adjusted for the growth in the business since that period.

Depreciation, amortisation and financial costs increased by GBP2.6 million. In the period the Group has adopted the new accounting standard IFRS 16 "Leases" whereby operating leases have been capitalised and brought on to the balance sheet. As a result there has been an additional GBP1.6 million of depreciation charged in the period. Previously the lease costs were part of our office running costs and included within the category of "other costs" in the table above, which largely explains why other costs have decreased by GBP0.9 million to GBP22.6 million (H1 2019: GBP23.5 million). The remaining GBP1.0 million increase in depreciation, amortisation and financial costs is a result of higher capital spend in recent years, primarily on our core in-house IT systems, hardware and software for increased employee numbers and the Active Savings platform.

Total capitalised expenditure in the period was GBP4.7 million (H1 2019: GBP6.5 million). The majority of this expenditure was for cyclical replacement of IT hardware, the continued project to enhance the capacity and capability of our key administration systems, the ongoing development of Active Savings and the acquisition of books of business from J.P. Morgan and Baillie Gifford.

The Financial Services Compensation Scheme (FSCS) levy is typically charged in the second half of the year so ordinarily there is no charge in the first half, however, in December 2019 an interim levy of GBP1.5 million was charged by the FSCS and there was an additional charge of GBP0.2 million relating to an under accrual of the prior year's levy. By comparison, in the prior year, there was an interim levy of GBP0.3 million. 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 levy reflects the cost of compensation payments paid by the industry in proportion to the amount of each participant's relevant eligible income. As usual, the second half of the year will be impacted by the FSCS levy, which for last year resulted in a final net charge of GBP6.8 million.

Profit before tax

Hargreaves Lansdown's success is built around delivering high service standards, efficiently dealing with ever growing volumes of business and investing in further growth opportunities. This investment is key to driving future growth and ensuring we have a scalable operating platform which we believe will be to the benefit of both clients and shareholders across the market cycle. As a result, the Group has grown profit before tax by 12% to GBP171.1 million (H1 2019: GBP153.4 million).

Disposal of FundsLibrary Limited

On 21 January 2020, the Group entered into an agreement to sell FundsLibrary Limited to Broadridge Financial Solutions, Inc. This transaction is expected to complete at the end of February 2020 and will result in net proceeds to the Group of approximately GBP40 million. Revenues from FundsLibrary are already separately disclosed and we estimate ongoing annual profits will reduce by two to three million pounds following completion.

Tax

The effective tax rate for the period was 18.6% (H1 2019: 19.1%), in line with the standard rate of UK corporation tax. The Group's tax strategy is published on our website at http://www.hl.co.uk

Earnings per share

 
                                         Unaudited         Unaudited         Audited 
                                    6 months ended    6 months ended         Year to 
                                       31 December       31 December    30 June 2019 
                                              2019              2018            GBPm 
                                              GBPm              GBPm 
================================  ================  ================  ============== 
 Operating profit                            169.7             152.4           303.3 
 Finance income                                1.6               1.2             2.8 
 Finance costs                               (0.2)             (0.2)           (0.3) 
================================  ================  ================  ============== 
 Profit before tax                           171.1             153.4           305.8 
 Tax                                        (31.8)            (29.3)          (58.2) 
================================  ================  ================  ============== 
 Profit after tax                            139.3             124.1           247.6 
================================  ================  ================  ============== 
 Weighted average number 
  of shares for the calculation 
  of diluted EPS                             475.6             475.8           475.8 
================================  ================  ================  ============== 
 Diluted EPS (pence 
  per share)                                  29.3              26.1            52.0 
================================  ================  ================  ============== 
 

Diluted EPS increased by 12% from 26.1 pence to 29.3 pence, reflecting the Group's positive trading performance. The Group's basic EPS was also 29.3 pence, compared with 26.1 pence in H1 2019.

Capital and liquidity management

Hargreaves Lansdown looks to create long-term value for shareholders by balancing our desire to deliver profit growth, capital appreciation and an attractive dividend stream to shareholders with the need to maintain a market-leading offering and high service standards for our clients.

The Group seeks to maintain a strong net cash position and a robust balance sheet with sufficient capital and liquidity to fund ongoing trading and future growth, in line with our strategy of offering a lifelong, secure home for people's savings and investments. The Group has a high conversion rate of operating profits to cash and its net cash position at 31 December 2019 was GBP317.6 million (H1 2019: GBP321.8 million) as cash generated through trading offset the payments of the 2019 final and special dividends. This includes cash on longer-term deposit and is before funding the 2020 interim dividend of GBP53.1 million.

The Group has a Revolving Credit Facility agreement with Barclays Bank to provide access to a further GBP75 million of liquidity. This is currently undrawn and was put in place to further strengthen the Group's liquidity position and increase our cash management flexibility. The Group also funds a share purchase programme to ensure we avoid any dilution from operating our share-based compensation schemes.

Total attributable shareholders' equity, as at 31 December 2019, made up of share capital, share premium, retained earnings and other reserves increased to GBP442.5 million (H1 2019: GBP385.5 million) as continued profitability more than offset dividend payments. Included within shareholders' equity are distributable reserves of GBP441.0 million (H1 2019: GBP381.3million).

The Group has three subsidiary companies authorised and regulated by the Financial Conduct Authority ("FCA") and one subsidiary authorised by the FCA under the Payment Services Regulations 2017. These firms have capital resources at a level which satisfies both their regulatory capital requirements and their working capital requirements and, as a group, we maintain a robust balance sheet retaining a capital base over and above regulatory capital requirements. Further disclosures are published in the Pillar 3 document on the Group's website www.hl.co.uk/investor-relations/key-financial-data.

Dividend

Hargreaves Lansdown has a progressive ordinary dividend policy. The Board considers the dividend on a total basis, with the intention of maintaining the ordinary payout ratio at around 65% across the market cycle and looking to return excess cash to shareholders in the form of a special dividend after the year-end. Any such return will be determined according to market conditions and after taking account of the Group's growth, investment and regulatory capital requirements at the time. The Board is confident that Hargreaves Lansdown has sufficiently strong financial, liquidity and capital positions to execute its strategy without constraints and can operate a sustainable and progressive ordinary dividend policy going forward.

Given the Group's dividend policy, the Board has declared an increased interim dividend of 11.2 pence per share (H1 2019: 10.3 pence per share). The interim dividend will be paid on 9 March 2020 to all shareholders on the register at 14 February 2020.

AGM withdrawal of Resolution 18

Hargreaves Lansdown plc notes its inclusion on the Investment Association Register with respect to the withdrawal of resolution 18 - political donations and expenditure - at its Annual General Meeting (AGM) on 10 October 2019. The purpose of this resolution, which is standard in FTSE 100 companies, was to obtain precautionary approval, within defined minimal limits, should any such expenditure (as defined by the Companies Act 2006) be made in the normal course of business. There was and remains no intention for the Company to make any political donations or expenditure at this time. The Company recognises that the withdrawal of resolutions is rare and less than ideal and that in such an event, the Corporate Governance Code requires that the Company consult with its shareholders. We have and continue to consider the position and engage with our shareholders on this matter and may consult further should any further action be required.

Directors Responsibility Statement

The Directors confirm that this consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

-- an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of consolidated financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

-- material related-party transactions in the first six months and any material changes in the related party transactions described in the last Annual Report.

The Directors of Hargreaves Lansdown plc are listed on page 27 of the Interim Report and Condensed Consolidated Financial Statements 6 months ended 31 December 2019.

By order of the Board:

Philip Johnson

Chief Financial Officer

30 January 2020

Independent review report to Hargreaves Lansdown plc

Report on the Interim results for the six months ended 31 December 2019

Our conclusion

We have reviewed Hargreaves Lansdown plc's Interim results for the six months ended 31 December 2019 (the "interim financial statements") in the half-yearly report of Hargreaves Lansdown plc for the 6 month period ended 31 December 2019. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

   --      the Condensed Consolidated Statement of Financial Position as at 31 December 2019; 

-- the Condensed Consolidated Income Statement and Condensed Consolidated Statement of Comprehensive Income for the period then ended;

   --      the Condensed Consolidated Statement of Cash Flows for the period then ended; 
   --      the Condensed Consolidated Statement of Changes in Equity for the period then ended; and 
   --      the explanatory notes to the interim financial statements. 

The interim financial statements included in the half-yearly report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 5.1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The half-yearly report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the half-yearly report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

30 January 2020

Section 1: Results for the period

Condensed Consolidated Income Statement

for the period ended 31 December 2019

 
                                    Unaudited     Unaudited   Audited 
                                     6 months      6 months      Year 
                                        ended         ended        to 
                                  31 December   31 December   30 June 
                                         2019          2018      2019 
                                      IFRS 16        IAS 17    IAS 17 
 
                           Note          GBPm          GBPm      GBPm 
 
Revenue                    1.1          257.9         236.4     480.5 
Fair value gains on 
 derivatives                              1.0           1.1       2.2 
Operating costs            1.3         (89.2)        (85.1)   (179.4) 
 
 
Operating profit                        169.7         152.4     303.3 
 
Finance income             1.4            1.6           1.2       2.8 
Finance costs                           (0.2)         (0.2)     (0.3) 
 
 
Profit before tax                       171.1         153.4     305.8 
 
Tax                        1.5         (31.8)        (29.3)    (58.2) 
 
 
  Profit for the period                 139.3         124.1     247.6 
 
 
Attributable to: 
Owners of the parent                    139.2         124.0     247.4 
Non-controlling interest                  0.1           0.1       0.2 
 
 
                                        139.3         124.1     247.6 
 
 
 
 Earnings per share 
  (pence) 
  Basic earnings per 
  share                                   1.6       29.3     26.1     52.1 
 Diluted earnings per 
  share                                             29.3     26.1     52.0 
 
 
  The results relate entirely to continuing operations. 
 
  After the balance sheet date, the Directors declared an 
  ordinary interim dividend of 11.2 pence per share payable 
  on 9 March 2020 to shareholders on the register at 14 February 
  2020. 
 
 

The principal statements for prior periods have not been restated upon the adoption of IFRS 16 - see note 5.1 for further details.

Condensed Consolidated Statement of Comprehensive Income

for the period ended 31 December 2019

 
                                                 Unaudited  Unaudited 
                                                  6 months   6 months   Audited 
                                                  ended 31   ended 31   Year to 
                                                  December   December   30 June 
                                                      2019       2018      2019 
                                                   IFRS 16     IAS 17    IAS 17 
 
                                                      GBPm       GBPm      GBPm 
 
           Profit for the period                     139.3      124.1     247.6 
 
 
           Total comprehensive income for the 
            financial period                         139.3      124.1     247.6 
 
 
           Attributable to: 
           Owners of the parent                      139.2      124.0     247.4 
           Non-controlling interest                    0.1        0.1       0.2 
 
 
                                                     139.3      124.1     247.6 
 
 
   1.1     Revenue 

Revenue represents fees receivable from financial services provided to clients, net interest income on client money and management fees charged to clients. It relates to services provided in the UK and is stated net of value added tax. Recurring revenue is the largest source of income for the Group encompassing: platform fees, fund management fees, interest on client money and ongoing adviser charges.

Transactional revenue is mainly comprised of: fees on stockbroking transactions, initial adviser charges and renewal commission. The price is determined in relation to the specific transaction type and are frequently flat fees.

Other revenue is made up entirely of the provision of funds data services and research to external parties through FundsLibrary.

 
                                     Unaudited      Unaudited      Audited 
                                      6 months       6 months         Year 
                                      ended 31          ended           to 
                                      December    31 December      30 June 
                                          2019           2018         2019 
 
           Revenue                        GBPm           GBPm         GBPm 
 
           Recurring revenue             209.9          190.4        387.3 
           Transactional revenue          43.2           41.7         84.3 
           Other revenue                   4.8            4.3          8.9 
 
           Revenue                       257.9          236.4        480.5 
 
 
   1.2       Segment information 

Under IFRS 8, operating segments are required to be determined based upon the way the Group generates revenue and incurs expenses and the primary way in which the Chief Operating Decision Maker (CODM) is provided with financial information. In the case of the Group, the CODM is considered to be the Executive Committee.

It is the view of the Board and of the Executive Committee that there is only one segment, being the Group - a direct-to-investor investment service administering investments in ISA, SIPP and Fund & Share accounts, providing services for individuals and corporates. It is considered that segmental reporting does not provide a clearer or more accurate view of the reporting within the Group. Given that only one segment exists, no additional information is presented in relation to it, as it is disclosed throughout these financial statements.

The Group does not rely on any individual customer and so no additional customer information is reported.

   1.3       Operating costs 
 
                                          Unaudited      Unaudited   Audited 
                                           6 months       6 months      Year 
                                           ended 31          ended        to 
                                           December    31 December   30 June 
                                               2019           2018      2019 
 
           Operating costs                     GBPm           GBPm      GBPm 
 
           Depreciation                         4.2            2.5       5.4 
           Amortisation                         2.6            2.3       4.6 
           Marketing and distribution 
            costs                               6.0            6.0      12.7 
Operating lease payables                        0.1            1.8       3.4 
Office running costs - excluding 
 operating lease payables                       1.7            2.0       3.4 
           FSCS costs                           1.7            0.3       6.8 
           Other costs                         22.4           20.7      45.9 
           Staff costs                         50.5           49.5      97.2 
 
           Operating costs                     89.2           85.1     179.4 
 
 

In the current period operating lease payables include only short term leases due to the adoption of IFRS 16. See note 5.1 for further details. Other costs include data costs, dealing costs, computer maintenance, legal and professional fees, as well as irrecoverable VAT.

 
          1.4 Finance income 
                               Unaudited     Unaudited 
                                6 months      6 months   Audited 
                                ended 31      ended 31   Year to 
                                December      December   30 June 
                                    2019          2018      2019 
 
                                    GBPm          GBPm      GBPm 
 
 Interest on bank deposits           1.6           1.2       2.8 
 
 
                                     1.6           1.2       2.8 
 
 
 
 
 
                             1.5 Tax 
                                             Unaudited        Unaudited    Audited 
                                              6 months         6 months       Year 
                                              ended 31         ended 31         to 
                                              December         December    30 June 
                                                  2019             2018       2019 
 
                                                  GBPm             GBPm       GBPm 
 
 
   The tax charge for the period is based on the prevailing 
   standard rate of tax for the year to 30 June 2020 of 
   18.5% (30 June 2019: 19.0%). 
 Current tax - on profits for 
  the period                                      32.1             29.1       58.4 
 Current tax - adjustments 
  in respect of prior years                          -                -        0.1 
 Deferred tax                                    (0.3)              0.2      (0.2) 
 Deferred tax - adjustments 
  in respect of prior years                          -                -      (0.1) 
 
 
                                                  31.8             29.3       58.2 
 
 
 
 
 

In addition to the amount charged to the income statement, certain tax amounts have been charged / (credited) directly to equity as follows:

 
                                                 Unaudited      Unaudited 
                                                  6 months       6 months     Audited 
                                                     ended          ended     Year to 
                                               31 December    31 December     30 June 
                                                      2019           2018        2019 
 
                                                      GBPm           GBPm        GBPm 
 
  Deferred tax relating to share-based 
  payments                                             0.1            0.6         0.6 
  Current tax relating 
   to share-based payments                           (0.3)          (0.3)       (1.0) 
 
 
                                                     (0.2)            0.3       (0.4) 
 
 
 
 
   1.6        Earnings per share (EPS) 

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 by adjusting the weighted average number of ordinary shares outstanding by assuming the 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 nil as at 31 December 2019 (nil at 31 December 2018 and nil at 30 June 2019).

 
                                                             Unaudited  Unaudited 
                                                              6 months   6 months    Audited 
                                                              ended 31   ended 31    Year to 
                                                              December   December    30 June 
                                                                  2019       2018       2019 
 
 Earnings (all from continuing                                    GBPm       GBPm       GBPm 
  operations) 
 Earnings for the purposes of 
 basic and diluted EPS being net 
 profit attributable to equity 
 holders of the parent Company                                   139.2      124.0      247.4 
 
 
 
 
 
Number of shares                                Number       Number       Number 
Weighted average number of ordinary 
 shares 
 
 Weighted average number of shares 
 held by HL EBT                            474,318,625  474,318,625  474,318,625 
 
                                             (122,231)    (145,347)    (125,270) 
Weighted average number of share 
 options held by HL EBT which have 
 vested unconditionally with employees         369,192      289,018      382,065 
-----------------------------------------  -----------  -----------  ----------- 
 
  Weighted average number of shares 
  for the purposes of basic EPS            474,565,586  474,462,296  474,575,420 
 
Weighted average number of dilutive 
 share options held by HL EBT that 
 have not vested unconditionally 
 with employees                              1,002,809    1,327,508    1,189,428 
 
 
  Weighted average number of shares 
  for the purpose of diluted EPS           475,568,395  475,789,804  475,764,848 
-----------------------------------------  -----------  -----------  ----------- 
 
Earnings per share                               Pence        Pence        Pence 
Basic EPS                                         29.3         26.1         52.1 
Diluted EPS                                       29.3         26.1         52.0 
 
 

Section 2: Assets & Liabilities

Condensed Consolidated Statement of Financial Position

for the period ended 31 December 2019

 
                                            Unaudited  Unaudited  Audited 
                                                at 31      at 31    at 30 
                                             December   December     June 
                                                 2019       2018     2019 
                                              IFRS 16     IAS 17   IAS 17 
 
                                      Note       GBPm       GBPm     GBPm 
ASSETS: 
Non-current assets 
Goodwill                                          1.3        1.3      1.3 
Other intangible assets                2.1       22.9       18.2     23.0 
Property, plant and equipment          2.1       34.0       15.4     16.0 
Deferred tax assets                               3.8        3.3      3.8 
 
 
                                                 62.0       38.2     44.1 
 
 
Current assets 
Trade and other receivables            2.3      795.2      626.0    748.6 
Cash and cash equivalents              2.4      184.8      112.5    179.3 
Investments                            2.2        0.9        0.4      1.1 
Derivative financial instruments                  0.1        0.2      0.1 
Current tax assets                                  -        0.8        - 
Assets classified as held for sale     2.5       13.9          -        - 
 
 
                                                994.9      739.9    929.1 
 
 
Total assets                                  1,056.9      778.1    973.2 
 
 
 
LIABILITIES: 
Current liabilities 
Trade and other payables               2.6      588.8      363.0    485.7 
Derivative financial instruments                    -        0.1        - 
Current tax liabilities                           0.1       28.5     27.5 
Liabilities associated with assets 
 classified as held for sale           2.5        2.9          -        - 
 
 
                                                591.8      391.6    513.2 
 
 
Net current assets                              403.1      348.3    415.9 
 
 
Non-current liabilities 
Provisions                                        0.7        1.0      0.7 
Lease liabilities                                21.9          -        - 
 
 
Total liabilities                               614.4      392.6    513.9 
 
 
Net assets                                      442.5      385.5    459.3 
 
 
 
EQUITY: 
Share capital                          3.1        1.9        1.9      1.9 
Shares held by Employee Benefit 
 Trust reserve                                  (5.0)      (4.6)    (3.4) 
EBT reserve                                     (0.1)        5.6      1.5 
Retained earnings                               444.2      381.3    457.9 
 
 
Total equity, attributable to the 
 owners of the parent                           441.0      384.2    457.9 
 
Non-controlling interest                          1.5        1.3      1.4 
 
Total equity                                    442.5      385.5    459.3 
 
 

The principal statements for prior periods have not been restated upon the adoption of IFRS 16 - see note 5.1 for further details.

After the end of the period the Group has entered into an arrangement that impacts the accounting and presentation for the Groups financial position. See note 2.5 for further details

   2.1       Changes in capital expenditure since the last annual balance sheet date 

Capital expenditure

During the six months ended 31 December 2019, the Group acquired fixtures, fittings, plant, equipment and software assets and internally generated intangibles with a cost of GBP4.7 million (H1 2019: GBP6.5 million, year to 30 June 2019: GBP17.1 million).

The additional increase in fixed assets is due to the adoption of IFRS 16, which has increased Property, plant and equipment by GBP20.8m - see note 5.1 for further details.

   2.2        Investments 
 
                                                                                     Audited 
                                                     Unaudited         Unaudited          at 
                                                at 31 December    at 31 December     30 June 
                                                          2019              2018        2019 
 
                                                          GBPm              GBPm        GBPm 
 
At beginning of period                                     1.1               1.5         1.5 
Sales                                                    (0.2)             (1.1)       (0.4) 
Purchases                                                    -                 -           - 
 
 
           At end of period                                0.9               0.4         1.1 
 
 
           Comprising: 
         Current asset investment - UK 
          listed securities valued at quoted 
          market price                                     0.9               0.4       1.1 
 
 

GBP0.9 million (31 December 2018: GBP0.4 million, 30 June 2019: GBP1.1 million) of investments are classified as held at fair value through profit and loss. These investments are all level 1 financial instruments in line with the fair value hierarchy under IFRS 7 and there have been no transfers between levels in the period.

   2.3        Trade and other receivables 
 
                         Unaudited   Unaudited   Audited 
                             at 31       at 31        at 
                          December    December   30 June 
                              2019        2018      2019 
 
                              GBPm        GBPm      GBPm 
 
Financial assets: 
Trade receivables            578.0       355.2     461.4 
Term deposits                135.0       210.0     215.0 
Other receivables              4.4         4.9       4.5 
 
 
                             717.4       570.1     680.9 
Non-financial assets: 
Accrued income                69.6        50.5      59.1 
Prepayments                    8.2         5.4       8.6 
 
 
                             795.2       626.0     748.6 
 
 

Trade and other receivables are measured at initial recognition at amortised cost in accordance with IFRS 9. Assessment has been made of the expected credit loss in relation to debtors, as required under IFRS 9, this measure requires assessment of the past default experience for debtors, grouped by type and with reference to available information both historic and forward-looking.

In accordance with market practice, certain balances with clients, Stock Exchange member firms and other counterparties totalling GBP529.1 million (31 December 2018: GBP331.3 million, 30 June 2019: GBP429.3 million) are included in trade receivables. These balances are presented net where there is a legal right of offset and the ability and intention to settle net. The gross amount of trade receivables is GBP629.8 million and the gross amount of offset in the balance sheet with trade payables is GBP95.8 million. Other than counterparty balances trade receivables primarily consist of fees and amounts owed by clients. There are no balances where there is a legal right of offset but not a right of offset in accordance with accounting standards, and no collateral has been posted for the balances that have been offset.

   2.4        Cash and cash equivalents 
 
                                   Unaudited  Unaudited   Audited 
                                       at 31      at 31        at 
                                    December   December   30 June 
                                        2019       2018      2019 
 
                                        GBPm       GBPm      GBPm 
Group cash and cash equivalent 
 balances                              182.6      111.8     179.0 
Restricted cash - balances held 
 by Hargreaves Lansdown EBT              2.2        0.7       0.3 
 
 
                                       184.8      112.5     179.3 
 
 

Cash and cash equivalents comprise cash on hand and demand deposits held by the Group that are readily convertible to a known amount of cash. The carrying amount of these assets is approximately equal to their fair value.

Included within "Assets classified as held for sale" are cash and cash equivalents totalling GBP11.4m, these are classified in the same way as the cash and cash equivalents of the Group. See note 2.5 for further details.

At 31 December 2019 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 GBP5,634 million (31 December 2018: GBP10,426 million, 30 June 2019 GBP5,398 million). In addition there were cash balances held on behalf of clients not governed by the client money rules of GBP6,600 million (31 December 2018: GBP14.1 million, 30 June 2019: GBP6,075.7 million). The client retains the beneficial interest in both these deposits and cash accounts and accordingly they are not included in the balance sheet of the Group.

   2.5        Assets classified as held for sale 

After the reporting date the Group entered into an arrangement to sell FundsLibrary Ltd. As at the reporting date, the Group was committed to the sale of the subsidiary and as such the assets and liabilities of FundsLibrary Ltd are classified as held for sale and are shown separately in the Consolidated Statement of Financial Position. The assets and liabilities of the subsidiary are shown below:

 
                                      Unaudited 
                                             at 
                                    31 December 
                                           2019 
 
                                           GBPm 
 
Assets: 
Property, plant and equipment               0.7 
Intangible assets                           0.1 
Deferred tax assets                         0.2 
Trade and receivables                       1.5 
Cash and cash equivalents                  11.4 
 
 
Total assets                               13.9 
 
Liabilities: 
Trade and other payables                    2.1 
Current tax liabilities                     0.5 
Non-current lease liabilities               0.3 
 
 Total liabilities                          2.9 
 
Net assets                                 11.0 
 
 

Included in the property, plant and equipment of FundsLibrary Ltd is a right-of-use asset in relation to the offices of the company, carried at GBP0.4m. Included in trade and other payables are current lease liabilities of GBP0.2m.

   2.6        Trade and other payables 
 
                                   Unaudited   Unaudited   Audited 
                                       at 31       at 31        at 
                                    December    December   30 June 
                                        2019        2018      2019 
 
                                        GBPm        GBPm      GBPm 
 
Financial liabilities: 
Trade payables                         548.8       327.8     433.9 
Social security and other taxes          5.2         4.4       7.3 
Other payables                          23.1        17.9      19.6 
 
 
 
                                       577.1       350.1     460.8 
 
Non-financial liabilities: 
Accruals                                10.6        12.5      23.8 
Deferred income                          0.2         0.4       1.1 
Short term provisions                    0.9           -         - 
 
 
                                       588.8       363.0     485.7 
 
 

In accordance with market practice, certain balances with clients, Stock Exchange member firms and other counterparties totalling GBP531.1 million (31 December 2018: GBP327.1 million, 30 June 2019: GBP425.6 million) are included in trade payables. As stated in note 2.3, where we have a legal right of offset and the ability and intention to settle net, trade payable balances have been presented net.

Other payables principally comprise amounts owed to clients as a loyalty bonus and to staff as a bonus, as well as the current element of IFRS 16 lease payables. Accruals and deferred income principally comprise amounts outstanding for trade purchases and revenue received but not yet earned on workplace pension schemes administered on behalf of other groups, where an ongoing service is still being provided.

Section 3: Equity

Condensed Consolidated Statement of Changes in Equity

for the period ended 31 December 2019

 
 
                                            Shares 
                                              held 
                                  Share     by EBT        EBT    Retained             Non-controlling     Total 
                                capital    reserve    reserve    earnings     Total          interest    equity 
 
                                   GBPm       GBPm       GBPm        GBPm      GBPm              GBPm      GBPm 
 
 At 1 July 2018                     1.9      (3.5)        6.2       399.4     404.0               1.2     405.2 
 
 Total comprehensive 
  income                              -          -          -       124.0     124.0               0.1     124.1 
 
 Employee Benefit Trust: 
 Shares sold during 
  the period                          -        5.0          -           -       5.0                 -       5.0 
 Shares acquired in 
  the period                          -      (6.1)          -           -     (6.1)                 -     (6.1) 
 Loss on HL EBT share 
  sale                                -          -      (2.7)           -     (2.7)                 -     (2.7) 
 Reserve transfer on 
  exercise of share options           -          -        2.1       (2.1)         -                 -         - 
 
 Employee share option 
  scheme: 
 Share-based payments 
  expense                             -          -          -         2.0       2.0                 -       2.0 
 Current tax effect 
  of share-based payments             -          -          -         0.3       0.3                 -       0.3 
 Deferred tax effect 
  of share-based payments             -          -          -       (0.6)     (0.6)                 -     (0.6) 
 
 Dividend paid (note 
  3.2)                                -          -          -     (141.7)   (141.7)                 -   (141.7) 
----------------------------  ---------  ---------  ---------  ----------  --------  ----------------  -------- 
 
 At 31 December 2018                1.9      (4.6)        5.6       381.3     384.2               1.3     385.5 
 
 
 At 1 July 2019                     1.9      (3.4)        1.5       457.9     457.9               1.4     459.3 
 Impact of change in 
  accounting policy (note 
  5.1)                                -          -          -       (4.1)     (4.1)                 -     (4.1) 
 Revised balance as 
  at 1 July 2019                    1.9      (3.4)        1.5       453.8     453.8               1.4     455.2 
 
 Total comprehensive 
  income                              -          -          -       139.2     139.2               0.1     139.3 
 
 Employee Benefit Trust: 
 Shares sold during 
  the period                          -        3.8          -           -       3.8                 -       3.8 
 Shares acquired in 
  the period                          -      (5.4)          -           -     (5.4)                 -     (5.4) 
 Loss on HL EBT share 
  sale                                -          -      (2.4)           -     (2.4)                 -     (2.4) 
 Reserve transfer on 
  exercise of share options           -          -        0.8       (0.8)         -                 -         - 
 
 Employee share option 
  scheme: 
 Share-based payments 
  expense                             -          -          -         2.0       2.0                 -       2.0 
 Current tax effect 
  of share-based payments             -          -          -         0.3       0.3                 -       0.3 
 Deferred tax effect 
  of share-based payments             -          -          -       (0.1)     (0.1)                 -     (0.1) 
 
 Dividend paid (note 
  3.2)                                -          -          -     (150.2)   (150.2)                 -   (150.2) 
 
 
 At 31 December 2019                1.9      (5.0)      (0.1)       444.2     441.0               1.5     442.5 
 
 

The share premium account represents the difference between the issue price and the nominal value of shares issued.

The shares held by the 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 EBT 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 22% shareholding in Funds Library Limited and a 7.5% shareholding in Hargreaves Lansdown Savings Limited, both subsidiaries of the Company.

 
 3.1 Share capital                                                               Audited 
                                            Unaudited             Unaudited           at 
                                       at 31 December        at 31 December      30 June 
                                                 2019                  2018         2019 
 
                                                 GBPm                  GBPm         GBPm 
 Issued and fully paid: 
 Ordinary shares of 0.4p                          1.9                   1.9          1.9 
 
 
 
                                               Shares                Shares       Shares 
 Issued and fully paid: 
 Number of ordinary shares of 0.4p        474,318,625           474,318,625  474,318,625 
 
 
 
 

The Company has one class of ordinary shares which carry no right to fixed income.

   3.2           Dividends paid 
 
                                    Unaudited   Unaudited    Audited 
                                        at 31       at 31         at 
                                     December    December    30 June 
                                         2019        2018       2019 
 
                                         GBPm        GBPm       GBPm 
 
  Amounts recognised as distributions to equity holders 
   in the period: 
  2019 Final dividend of 22.1p 
   per share (2018 - 20.4p)             110.9       104.7      104.7 
  2019 Special Dividend of 8.3p 
   per share (2018 - 7.8p)               39.3        37.0       37.0 
  2019 First interim dividend of 
   10.3p per share                          -           -       48.8 
 
  Total                                 150.2       141.7      190.5 
 
 

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.

 
                                          Unaudited   Unaudited    Audited 
                                              at 31       at 31         at 
                                           December    December    30 June 
                                               2019        2018       2019 
 
 Number of shares held by the 
  Hargreaves Lansdown Employee Benefit 
  Trust                                     447,134     428,335    387,684 
 Representing % of called-up share 
  capital                                     0.09%       0.09%      0.08% 
 
 
 

Section 4

Condensed Consolidated Statement of Cash Flows

as at 31 December 2019

 
                                                                        Audited 
                                               Unaudited   Unaudited         at 
                                                   at 31       at 31    30 June 
                                                December    December       2019 
                                                    2019        2018 
 
                                        Note        GBPm        GBPm       GBPm 
 
 Net cash from operating activities 
 Profit for the period after 
  tax                                              139.3       124.1      247.6 
 Adjustments for: 
 Income tax expense                                 31.8        29.3       58.2 
 Depreciation of plant and 
  equipment                                          4.2         2.5        5.4 
 Amortisation of intangible 
  assets                                             2.6         2.3        4.6 
 Share-based payment expense                         2.1         2.0        3.9 
 Increase in provisions                                -         0.3          - 
 
 
 Operating cash flows before 
  movements in working capital                     180.0       160.5      319.7 
 (Increase)/decrease in receivables              (128.1)      (10.8)    (128.4) 
 (Decrease)/increase in payables                   104.3       (1.7)      121.0 
 
 
 Cash generated from operations                    156.2       148.0      312.3 
 Income tax paid                                  (58.8)      (21.8)     (50.8) 
 
 
 Net cash generated from operating 
  activities                                        97.4       126.2      261.5 
 
 
 Investing activities 
 Decrease/(increase) in term 
  deposits                                          80.0        12.0        7.0 
 Proceeds on disposal of investments                 0.2         1.1        0.4 
 Purchase of property, plant 
  and equipment                                    (2.1)       (4.1)      (7.6) 
 Purchase of intangible assets                     (2.6)       (2.4)      (9.5) 
 
 
 Net cash from / (used in) 
  investing activities                              75.5         6.6      (9.7) 
 
 
 Financing activities 
  Purchase of own shares in 
   EBT                                             (5.4)       (6.1)     (15.0) 
 Proceeds on sale of own shares 
  in EBT                                             1.4         2.2        7.7 
 Dividends paid to owners of 
  the parent                                     (150.2)     (141.7)    (190.5) 
 Payments of principal in relation                 (1.8)           -          - 
  to lease liabilities 
 
 
 Net cash used in financing 
  activities                                     (156.0)     (145.6)    (197.8) 
 
 
 
  Net (decrease) in cash and 
   cash equivalents                                 16.9      (12.8)       54.0 
  Cash and cash equivalents 
   at beginning of period                          179.3       125.3      125.3 
 
 
 Cash and cash equivalents 
  of Group at end of period                        196.2       112.5      179.3 
 Cash held as part of assets                      (11.4)           -          - 
  classified as held for sale 
  at end of period 
-------------------------------------  -----  ----------  ----------  --------- 
 Cash and cash equivalents 
  at end of period                       2.4       184.8       112.5      179.3 
 
 
 

The adoption of IFRS 16 and adjustments made in relation to the adoption of that standard have had no impact on cash flows. As a result the value of current lease liabilities included in other payables does not impact the change in payables in the current period.

Section 5

Other Notes

as at 31 December 2019

   5.1        Basis of preparation 

The consolidated Interim Financial Statements of Hargreaves Lansdown plc for the six months to 31 December 2019 have been prepared using accounting policies in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and in accordance with the International Accounting Standard (IAS) 34 Interim Financial Reporting and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority. The Interim Financial Statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments, and are presented in pounds sterling which is the currency of the primary economic environment in which the Group operates.

The financial information contained in these Interim Financial Statements does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. However, the information has been reviewed by the company's auditor, PricewaterhouseCoopers LLP, and their report appears earlier in this document. The financial information for the year ended 30 June 2019 has been derived from the audited financial statements of Hargreaves Lansdown plc for that year, which have been reported on by PricewaterhouseCoopers LLP and delivered to the Registrar of Companies. Copies are available online at www.hl.co.uk. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by the way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

Going concern

Throughout the period, the Group was debt free, has continued to generate significant cash and has considerable financial resources enabling it to meet its day-to-day working capital requirements.

The Directors have considered the resilience of the Group, taking account of its current financial position, the principal risks facing the business in severe but reasonable scenarios and the effectiveness of any mitigating actions. As a consequence, the Directors believe that the Group is well placed to manage its business risks in the context of the current economic outlook and have adequate financial resources to continue in operational existence for a period of at least 12 months from the date of approval of these interim financial statements. They therefore continue to adopt the going concern basis in preparing the consolidated interim financial statements.

Changes in accounting policy

In the period the Group has adopted one new accounting standard, IFRS 16 "Leases", which became applicable for the accounting period commencing 1 July 2019. The standard replaces IAS 17 "Leases". It fundamentally changes the way the Group accounts for leases, as previously unrecognised operating leases are now recognised on balance sheet as lease liabilities and right of use assets.

The Group has adopted the modified retrospective approach to application of the standard and as a result there has been no restatement of the prior period figures, but opening reserves have been adjusted. The opening liabilities in relation to these leases have been calculated as the present value of the future lease payments, at the point of adoption, discounted at the incremental borrowing rate as at 1 July 2019. The incremental borrowing rate for each lease is considered based on the relevant terms of the lease taking into account factors such as length of lease, the location and economic factors impacting the asset and the credit rating of the Group company entering into the lease. The rates range between 2.5% and 4.4% (2019: 2.5% and 4.4%), with a weighted average incremental borrowing rate of 2.8%

A reconciliation of the presented minimum lease payments under operating leases presented in the prior year, under IAS 17, to the liabilities under IFRS 16 are below:

 
                                        Audited 
                                             at 
                                        30 June 
                                           2019 
 
                                           GBPm 
Operating lease commitments as 
 at 30 June 2019                           23.9 
Impact of treatments for VAT                3.8 
Effect of discounting at relevant 
 incremental borrowing rate               (2.1) 
Short term lease                          (0.2) 
 
 
Lease liabilities recognised on 
 adoption                                  25.4 
 
 

On the date of adoption, the Group entered into another lease for property that has been accounted for under IFRS 16, but which did not impact the reconciliation upon adoption from operating lease commitments to the lease liabilities under IFRS 16. The value of this asset was GBP2.8m, it is included in the opening value of lease liabilities, but does not form part of the reconciliation to the operating lease commitments presented at 30 June 2019.

The right-of-use assets recognised in the period were initially measured on a retrospective basis, as though the standard had always been applied. The new lease entered into at the start of the period was measured as the value of the lease liability adjusted for the amounts of any prepaid or accrued lease payments and any dilapidation costs that were likely to be incurred.

   5.1        Basis of preparation (continued) 

All of the leases and the related right-of-use assets recognised in the period relate to property, being the offices of Group companies, as a result they have been accounted for as a part of property, plant and equipment, due to the other assets held under this classification by the group are complementary in nature. The total value of assets recognised as at 1 July 2019 was GBP20.8m.

Upon adoption of the standard, the following adjustments were made to the Statement of Financial Position as at 1 July 2019

-- Right-of-use assets, presented in Property, Plant and Equipment of GBP20.8m were recognised;

-- Lease liabilities of GBP28.2m were recognised, recognised in lease liabilities and other payables for non-current and current balances respectively;

   --      Accruals for lease incentives decreased by GBP3.3m; 
   --      Opening reserves were adjusted by GBP4.1m. 

In the six months to 31 December 2019 the adoption of IFRS 16 has led to a decrease in expenses in the period of GBP0.2m.

The standard affords a number of practical expedients upon transition to IFRS 16 and the Group has taken advantage of the following:

-- No reassessment has taken place of contracts previously identified as leases under IAS 17 and IFRIC 4;

   --      Reliance on assessments performed prior to adoption of whether or not a lease is onerous; 

-- Accounting for leases with a remaining life of less than 12 months as at the date of transition as short term leases;

-- Exclusion of initial direct costs from the measurement of right-of-use asset at the date of initial application.

The impact of the adoption of the standard on the accounting policies of the company are as follows:

   i.      Property, plant and equipment 

Property, plant and equipment now includes both owned and leased assets. Owned assets are measured initially at cost and subsequently at cost less accumulated depreciation.

Leased assets are measured initially at the present value of all future lease payments, less any prepaid or accrued rent or incentives and any expected dilapidation cost being the initial value. Subsequently, leased assets are measured at initial value less accumulated depreciation.

Depreciation is charged in a straight line across the useful economic life for both owned and leased assets, where the useful economic life is determined by management upon purchase for owned assets and is the lease term for all leased assets.

   ii.     Other payables 

Lease liabilities are included within current other payables and non-current lease liabilities, being initially calculated in line with IFRS 16. On inception a lease liability is measured as the present value of future lease payments, discounted at the incremental borrowing rate implied within the lease. The future lease payments of the group are fixed, except for those that relate to leases in a currency other than GBP, which may vary due to exchange rate movements.

Interest expense is occurred in relation to these leases, which is recognised as an expense in the period to which payment relates, on an accruals basis.

The group has other short term leases, which are leases with a remaining life of less than twelve months upon adoption of IFRS 16. Expenses in relation to rent are accounted for on a straight line basis, with expenses recognised in profit or loss.

Assets held for sale

Disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. The Group must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification. When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

Other than in relation to the adoption of IFRS 16 and assets held for sale, the same accounting policies, methods of computation and presentation have been followed in the preparation of the Interim Financial Statements for the six months ended 31 December 2019 as were applied in the Audited Annual Financial Statements for the year ended 30 June 2019.

   5.1        Basis of preparation (continued) 

Seasonality of operations

A high proportion of the Group's revenue is derived from the value of assets under administration or management on the HL platform or within HL funds. The values of these assets are influenced predominantly by new business volumes, the stock market and client withdrawals.

Revenues are not considered to be seasonal, with approximately 51% of revenues being earned in the second half of the financial year, based on previous financial years. The Group revenue is, however, sensitive to the impact of net new business inflows during a particular period. Given the current uncertainty around the consequences of the UK's decision to leave the EU, there is a possibility of a decline in net new business in the second half of the year, which could have a subsequent impact on revenues over the following 12 months.

   5.2       Material events after interim period-end 

After the interim balance sheet date, an ordinary interim dividend of 11.2 pence per share (H1 2019: interim dividend 10.3p) amounting to a total dividend of GBP53.1 million (2019: GBP48.8 million) was declared by the plc Directors. These financial statements do not reflect this dividend payable.

There have been no other material events after the end of the interim period.

   5.3        Principal risks and uncertainties 

The principal risks and uncertainties which could impact the Group for the remainder of the financial year are those detailed on pages 24 to 31 of the Group's Annual Report and Financial Statements 2019, a copy of which is available on the Group's website, www.hl.co.uk. These remain the principal risks and uncertainties for the second half of this financial year and beyond; the key ones of which are listed below and they are regularly considered by the Board.

Operational risks

-- Cybercrime, fraud or security breaches in respect of the Group's information, data, software or information technology systems.

   --      Business continuity event. 
   --      Changing markets and increased competition. 

Financial risks

-- Risk of a decline in earnings due to a decline in interest rates or regulatory changes affecting interest income.

-- Fluctuations in the capital markets adversely affecting trading activity and /or the value of the Group's assets under administration.

The Group is exposed to interest rate risk, the risk of sustaining losses from adverse movements in interest bearing assets. These assets comprise cash, cash equivalents and term deposits. At 31 December 2019 the value of such assets on the Group balance sheet was GBP331.2 million (at 31 December 2018: GBP322.5 million). A 50bps (0.5%) move in interest rates, in isolation, would therefore, not have a material direct impact on the Group balance sheet or results. This exposure is continually monitored to ensure that the Group is maximising its interest earning potential within accepted liquidity and credit constraints. The Group has no external borrowings and as such is not exposed to interest rate or refinancing risk on borrowings.

As a source of revenue is based on the value of client cash under administration, the Group also has an indirect exposure to interest rate risk on cash balances held for clients. These balances are disclosed in note 2.4 and are not on the Group Statement of Financial Position.

   5.4        Related party transactions 

The Company has a related party relationship with its Directors and members of the Executive Committee (the "key management personnel"). There were no material changes to the related party transactions during the financial period; transactions are consistent in nature with the disclosure in note 5.6 to the 2019 Annual Report.

   5.5        Financial instruments' fair value disclosure 

The fair values of the Group's financial assets and liabilities are not materially different from their carrying values. There have been no transfers of assets or liabilities between levels of the fair value hierarchy and there are no non-recurring fair value measurements.

   5.5        Financial instruments' fair value disclosure (continued) 

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which fair value is observable:

 
                                            Level          Level 2            Level   Total 
                                                1         Directly                3 
                                           Quoted       observable           Inputs 
                                           prices    market inputs        not based 
                                      for similar       other than    on observable 
                                      instruments          Level 1           market 
                                                            inputs             data 
                                             GBPm             GBPm                     GBPm 
 Unaudited at 31 December 
  2019 
 Financial assets at fair 
  value through profit or 
  loss                                        0.9                -                -     0.9 
 Derivative financial assets                    -              0.1                -     0.1 
 Derivative financial liabilities               -                -                -       - 
----------------------------------  -------------  ---------------  ---------------  ------ 
                                              0.9              0.1                -     1.0 
----------------------------------  -------------  ---------------  ---------------  ------ 
 
 Unaudited at 31 December 
  2018 
 Financial assets at fair 
  value through profit or 
  loss                                        0.4                -                -     0.4 
 Derivative financial assets                    -              0.2                -     0.2 
 Derivative financial liabilities               -            (0.1)                -   (0.1) 
----------------------------------  -------------  ---------------  ---------------  ------ 
                                              0.4              0.1                -     0.5 
----------------------------------  -------------  ---------------  ---------------  ------ 
 
 Audited at 30 June 2019 
 Financial assets at fair 
  value through profit or 
  loss                                        1.1                -                -     1.1 
 Derivative financial assets                    -              0.1                -     0.1 
 Derivative financial liabilities               -                -                -       - 
----------------------------------  -------------  ---------------  ---------------  ------ 
                                              1.1              0.1                -     1.2 
----------------------------------  -------------  ---------------  ---------------  ------ 
 

The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. Instruments included in Level 1 comprise primarily equity investments and fund units entered into on a counter-party basis. As such there is no recurring valuation of financial instruments between reporting periods.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data, such as foreign currency exchange rates, where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Glossary of Alternative Performance Measures

Within the Interim Report and Condensed Financial Statements various Alternative Financial Performance Measures are referred to, which are non-GAAP (Generally Accepted Accounting Practice) measures. They are used in order to provide a better understanding of the performance of the Group and the table below states those which have been used, how they have been calculated and why they have been used.

 
 Measure         Calculation                             Why we use this measure 
 Dividend        The total dividend per                  Provides a measure of the level of 
  pay-out         share divided by the earnings           profits paid out to shareholders and 
  ratio           per share (EPS) for a financial         the level retained in the business. 
                  year. 
                --------------------------------------  -------------------------------------------- 
 Dividend        Total dividend payable                  Dividend per share is pertinent information 
  per share       relating to a financial                 to shareholders and investors and provides 
  (pence          year divided by the total               them with the ability to assess the 
  per share)      number of shares eligible               dividend yield of the Hargreaves Lansdown 
                  to receive a dividend.                  plc shares. 
                  Note ordinary shares held 
                  in the Hargreaves Lansdown 
                  Employee Benefit Trust 
                  have agreed to waive all 
                  dividends. 
                --------------------------------------  -------------------------------------------- 
 Operating       Profits after deducting                 Provides a measure of profitability 
  profit          operating costs but before              of the core operating activities and 
  margin          the impact of finance income            excludes non-core items. 
                  and other gains or losses 
                  divided by revenue. 
                --------------------------------------  -------------------------------------------- 
 Net new         Represents subscriptions,               Provides a measure of tracking the 
  business        cash receipts, cash and                 success of gathering assets on to the 
  inflows         stock transfers in less                 platform over time. 
                  cash withdrawals, cash 
                  and stock transfers out. 
                --------------------------------------  -------------------------------------------- 
 Percentage      The total value of renewal              Provides a measure of the quality of 
  of recurring    commission (after deducting             our earnings. We believe recurring 
  revenue         loyalty bonuses), platform              revenue provides greater profit resilience 
  (%)             fees, management fees and               and hence it is of higher quality than 
                  interest earned on client               non-recurring revenue. 
                  money divided by the total 
                  revenue. 
                --------------------------------------  -------------------------------------------- 
 Revenue         Total revenue divided by                Provides the most comparable means 
  margin          the average value of assets             of tracking, over time, the margin 
  (bps)           under administration which              earned on the assets under administration 
                  includes the Portfolio                  and is used by management to assess 
                  Management Services assets              business performance. 
                  under management held in 
                  funds on which a platform 
                  fee is charged. 
                --------------------------------------  -------------------------------------------- 
 Revenue         Revenue from cash (net                  Provides a means of tracking, over 
  margin          interest earned on the                  time, the margin earned on cash held 
  from cash       value of client money held              by our clients. 
  (bps)           on the platform divided 
                  by the average value of 
                  assets under administration 
                  held as client money). 
                --------------------------------------  -------------------------------------------- 
 Revenue         Revenue derived from funds              Provides the most comparable means 
  margin          held by clients (platform               of tracking, over time, the margin 
  from funds      fees, initial commission                earned on funds held by our clients. 
  (bps)           less loyalty bonus) divided 
                  by the average value of 
                  assets under administration 
                  held as funds, which includes 
                  the Portfolio Management 
                  Services assets under management 
                  held in funds on which 
                  a platform fee is charged. 
                --------------------------------------  -------------------------------------------- 
 Revenue         Management fees derived                 Provides a means of tracking, over 
  margin          from HL Funds (but excluding            time, the margin earned on HL Funds. 
  from HL         the platform fee) divided 
  Funds (bps)     by the average value of 
                  assets held in the HL Funds. 
                --------------------------------------  -------------------------------------------- 
 Revenue         Revenue from shares (stockbroking       Provides a means of tracking, over 
  margin          commissions, management                 time, the margin earned on shares held 
  from shares     fees where shares are held              by our clients. 
  (bps)           in a SIPP or ISA, less 
                  the cost of dealing errors) 
                  divided by the average 
                  value of assets under administration 
                  held as shares. 
                --------------------------------------  -------------------------------------------- 
 Recurring       Revenue that is received                We believe recurring revenue provides 
  revenue         every month depending on                greater profit resilience and hence 
                  the value of assets held                is of higher quality than non-recurring 
                  on the platform including               revenue. 
                  platform fees, management 
                  fees and interest earned 
                  on client money. 
                --------------------------------------  -------------------------------------------- 
 Transactional   Revenue that is non-recurring           Such revenue is not as high quality 
  revenue         in nature and dependent                 as recurring revenue but helps to show 
                  on a client instruction                 the diversification of our revenue 
                  such as a deal to buy or                streams. 
                  sell shares or take advice. 
                --------------------------------------  -------------------------------------------- 
 

General Information

EXECUTIVE DIRECTORS

Chris Hill

Philip Johnson

NON-EXECUTIVE DIRECTORS

Deanna Oppenheimer

Fiona Clutterbuck

Shirley Garrood

Dan Olley

Roger Perkin

Stephen Robertson

John Troiano (appointed 1 January 2020)

COMPANY Secretary

Alison Zobel

INDEPENDENT AUDITOR

PricewaterhouseCoopers LLP, London

BROKERS

Barclays

Numis Securities Limited

REGISTRARS

Equiniti Limited

Registered Office

One College Square South

Anchor Road

Bristol

BS1 5HL

Registered number

02122142

WEBSITE

www.hl.co.uk

DIVIDEND CALENDAR

 
                     First dividend 
                          (interim) 
 Ex-dividend date*      13 February 
                               2020 
 Record date**          14 February 
                               2020 
 Payment date          9 March 2020 
 

* Shares bought on or after the ex-dividend date will not qualify for the dividend.

** Shareholders must be on the Hargreaves Lansdown plc share register on this date to receive the dividend.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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