TIDMHL.
RNS Number : 8373M
Hargreaves Lansdown PLC
19 September 2023
Hargreaves Lansdown plc
Results for the year ended 30 June 2023
Highlights:
-- Net new business of GBP4.8 billion
-- Assets Under Administration, up 8% to GBP134.0 billion driven
by net new business and positive market movement
-- 1,804,000 active clients, an increase of 67,000 in the year
-- Profit before tax increase of 50% to GBP402.7 million
-- Underlying profit before tax increase of 47% to GBP438.8 million
-- Ordinary dividend up 4.5% at 41.5 pence per share
Year ended Year ended Change %
30 June 2023 30 June 2022
=================================== ============== ============== =========
Net new business inflows GBP4.8bn GBP5.5bn -13%
=================================== ============== ============== =========
Total assets under administration GBP134.0bn GBP123.8bn +8%
=================================== ============== ============== =========
Revenue GBP735.1m GBP583.0m +26%
=================================== ============== ============== =========
Profit before tax GBP402.7m GBP269.2m +50%
=================================== ============== ============== =========
Underlying profit before
tax* GBP438.8m GBP297.5m +47%
=================================== ============== ============== =========
Diluted earnings per share 68.2p 45.6p +49%
=================================== ============== ============== =========
Underlying diluted earnings
per share* 74.3p 50.4p +47%
=================================== ============== ============== =========
Total dividend per share 41.5p 39.7p +4.5%
=================================== ============== ============== =========
*Underlying profit before tax and underlying diluted EPS
are Alternative Performance Measure which exclude the impact
of strategic investment and dual tech running costs. See
the Glossary of Alternative Performance Measures on page
35 for the full definitions and page 10 where a reconciliation
to the relevant statutory measure is provided.
Dan Olley, Chief Executive Officer, commented:
"We have delivered a robust financial performance for our full
year in what continues to be a challenging broader economic
environment. We welcomed a further 67,000 net new clients meaning
we now support over 1.8 million with their savings and investments
needs, with client retention stable at over 92%. We saw notable
growth into our Active Savings proposition which continues to show
the benefits of our diversified business model as we give our
clients access to competitive rates for their cash. We delivered
revenue growth of 26% year-on-year with cost growth within the
guided range delivering a statutory profit of GBP402.7 million, up
50% on 2022.
As I begin my CEO tenure, it is clear to me that at its core
this is a strong business with fantastic heritage that has
significant potential to benefit from the structural, demographic,
and regulatory shifts in the UK and the expected growth in the
wealth market.
My early focus is to ensure we are set up to capture this growth
opportunity, that we have pace of execution, cost discipline as we
travel on this journey, and that we are giving our people the best
opportunity to deliver for our clients and shareholders."
About us:
Hargreaves Lansdown is the UK's largest digital wealth
management service administering GBP134.0 billion of investments
for over 1,804,000 clients. Our purpose is to empower people to
save and invest with confidence. We aim to provide a lifelong,
secure home for people's savings and investments that offers great
value, an incredible service and makes their financial life
easy.
Contacts:
Hargreaves Lansdown
For media enquiries: For analyst enquiries:
Danny Cox, Head of Communications James Found, Head of Investor
Relations
+44(0)7989 672071 +44(0)7970 066634
Nick Cosgrove Amy Stirling, Chief Financial
Officer
Brunswick +44(0)207 404 5959
Analysts' presentation
Hargreaves Lansdown will be hosting a virtual investor and
analyst presentation at 09:00am on 19 September 2023 following the
release of the results for the year ended 30 June 2023. The meeting
can also be accessed remotely via a live dial-in facility. In order
to register as a participant please use the following link:
https://www.netroadshow.com/events/login?show=02eea776&confId=54378
Slides accompanying the analyst presentation will be available
this morning at www.hl.co.uk/investor-relations and an audio
recording of the analyst presentation will be available by close of
business on the day.
Alternative performance measure
Included in this announcement are various alternative
performance measures used by the Company in the course of
explaining the results for the year to 30 June 2023. These measures
are listed along with the calculations to derive them and an
explanation of why we use them on page 35 in the Glossary of
Alternative Financial Performance Measures. A reconciliation to
profit before tax is given in the Operating and Financial Review
section.
Forward-looking statements
This document has been prepared to provide additional
information to shareholders to assess the current position and
future potential of the Hargreaves Lansdown Group ("the Group"). It
should not be relied on by any other party for any other purpose.
This document contains forward-looking statements that involve
risks and uncertainties. The Group's actual results may differ
materially from the results discussed in the forward-looking
statements as a result of various economic factors or the business
risks, some of which are set out in this document.
Chief Executive's Review
Helping clients achieve better financial outcomes
I was delighted to move from being a Non-Executive Director to
CEO of your Company as of August this year. Our last financial year
has been a period of significant change and I will spend some time
outlining the financial and operational execution that the team has
delivered. However, before I do so, I want to set out some early
reflections as CEO, a role which gives me a very different lens on
the Group.
HL is a great business built on a fantastic heritage of
delivering its clients the best, most relevant information on an
industry-leading breadth of savings and investment solutions,
underpinned by a focus on providing client-led service and support
and making execution seamless and easy. What is clear to me as I
reflect on the interactions I have had with both HL clients and
non-clients alike since starting as CEO, is that getting these
basics right - for every client, every time - is still the core
driver of value. It is clear that our service and execution must
return to the high standards we and our clients expect and deserve.
This is a core focus for me. However, I have been very encouraged
by all my conversations with the Client and Service teams at HL.
They know that becoming the trusted financial partner for clients
is a right you must earn through every interaction. Their passion
for ensuring this happens is equal to mine, which is why I know we
will deliver this non-negotiable objective for HL and our
clients.
What was also clear from both my conversations with clients and
the regulatory initiatives in our sector, is that investing remains
a daunting task for a large proportion of the population. Many of
the people I have spoken to are confused by the array of jargon and
terminology, or put off by the wide range of product options
available to them. This often results in inertia as investing is
put off 'until tomorrow'. The current economic environment is only
exacerbating this issue, putting more demands on people's finances,
and dropping saving and investing down the list for many. The size
of our client base is a significant differentiator in enabling us
to have a strong gauge on changing client needs and our ability to
therefore respond to help make investing accessible and
understandable to everyone, with initiatives like Financially
Fearless, which aims to tackle money inequality and specifically
help women save and invest with confidence.
Doing this for a small number of clients may be relatively
straight forward. However, to offer this proactive and personalised
service in a scalable and cost-effective way to over 1.8 million
clients, each with different needs, knowledge and experience, is a
completely different challenge. It demands that we combine the best
of our curated knowledge and market insights, with advances in
technology and our digital platform, to help our clients identify
the best savings and investment options for them. For example,
earlier this year it became clear from our client interactions and
market trends that gilts could be an attractive yielding investment
option for higher rate taxpayers and those that have used their
full ISA allowance. Through personalised and targeted
education-based content, we were able to help clients take
advantage of this opportunity, investing over GBP430m in July.
As HL continues to help more clients reach good financial
outcomes, the opportunity to grow, and as a result drive long-term,
sustainable attractive returns and growth for all our stakeholders,
is clear. The alignment of the interests of the organisation, our
clients, our shareholders, and the regulator has never been
stronger.
This tells me that, at its core, our strategic direction is the
right one. We have a unique opportunity to benefit from structural
demographic and workplace behaviour shifts and the UK regulatory
changes to encourage greater saving and investment. However, the
world has changed since we set out the strategy in February 2022,
with a fundamentally different macro-economic and geopolitical
environment. We have also learnt lessons from the execution of the
strategy since then. Coming in as a new CEO with the teams 18
months into delivery, now is a good time to take stock, keep what
works and learn from areas where we can do even better. We will
refocus and refine our approach, where needed, to ensure we still
have our strategic initiatives in the right order and our resources
focused on the right areas to maximise value to clients,
colleagues, and shareholders. Work will also continue to develop
and mature our control environment to ensure we're managing all our
processes and controls efficiently and effectively as we scale
further.
Initial priorities
Being only a few weeks into my new role I am very much in
listening mode, speaking with our clients, shareholders and
colleagues to understand their views and insights. Based on what
I'm hearing from initial discussions and what I know from the time
I've spent on the Board, I am focused, in the near-term, on four
key areas.
1. Drive client and asset growth - Increase focus on tailored
client content and a seamless experience, backed by great service
and broad product range
2. Increase pace - Drive execution pace and agility to
continuously deliver additional client value at speed
3. Save to Grow - Continuously strive to be fitter and leaner as
a business, so we can save to invest more for clients
4. Focus on our people - Make HL great for colleagues and
clients - the right culture, with the right people in the right
roles, focused on the right things
I will be providing a more thorough update at the half year
results early in 2024. In the meantime, it is important to reflect
on the achievements and challenges of the last financial year.
Market backdrop
As the data from our Savings and Resilience Barometer shows, the
rising cost-of-living is putting pressure on the UK's financial
wellbeing. People have less disposable income, investor confidence
is low and the outlook remains uncertain. Markets have been
volatile and with interest rates rising, savers have looked to make
their cash work harder for them without always wanting to
invest.
This has been evident in the strong performance across our
Active Savings cash platform, which attracted record new business
of GBP3.2 billion in the year. Conversely, the challenging external
conditions and low investor confidence impacted net flows onto the
platform and stockbroking volumes, something that has been seen
across the sector.
Our focus has remained on supporting our clients and helping
them to achieve better financial outcomes during these challenging
times including helping them to build their financial awareness and
confidence, whilst at the same time continuing to deliver on our
strategy.
An example of this would be during the US banking crisis in
March this year, which followed the collapse of Silicon Valley
Bank. This was a challenging time for many of our clients - insight
from our interactions with them told us they had questions around
their own investments in the banking sector and that they wanted
reassurance of the security of the cash they were holding with UK
banks. We acted quickly and wrote two specific articles and sent
targeted communications to clients we knew engaged with
macroeconomic news. Our articles attracted over 18,000 readers, who
spent almost a minute longer on the page than the average of our
other news articles, showing how clients value the relevance and
timeliness of our research.
FY23 performance
In spite of the challenging backdrop, we have delivered robust
financial performance. The value of our proposition attracted
GBP4.8 billion of net new business and a further 67,000 net new
clients, taking our total assets under administration and active
client numbers to GBP134.0 billion and 1.8 million
respectively.
Our investment in data and technology has helped us to support
our clients in the ways that suit them. In FY23, we had 249 million
digital visits and mobile engagement remained high - it is clear
that more and more of our clients want to manage their accounts
on-the-go, and this is steering our "app first" approach to
developing our service going forward.
We also continued building out our Better Investors programme in
line with the FCA's Consumer Duty regulation. This programme
provides personalised content to clients with the aim of helping
them and their families achieve good outcomes from their
hard-earned savings. Topics include holding an appropriate level of
cash, portfolio diversification, the importance of regular
investing and the power of compounding. This educational-based
content is just one way in which HL fosters long-term client
relationships and stable client retention rates, at 92.2% (2022:
92.1%).
The impact of economic and financial challenges has seen the
value of cash withdrawals increase this year as families deal with
the cost-of-living issues, and this has led to a reduction in our
asset retention rate, to 90.4% (2022: 91.8%).
We know our high level of service is a critical part of what our
clients value and our Client Service Net Promoter Score fell to 45%
(2022: 51%). Despite implementing technology improvements and
adding resource to our Service teams, we had a very busy tax year
end which meant increased waiting times for client queries and our
service levels falling below our expectations. This is an area
where we will improve further.
Revenue for the full year was GBP735.1 million, up 26% on the
prior year (2022: GBP583.0m). We have seen continued base rate
increases throughout the year and have passed over 85% of the
benefit through to our clients over the last 12 months. Net
interest margin has also increased as a result and it is
encouraging to see growth across all our key revenue lines in the
second half of the year.
We have delivered spend in line with our guidance with
underlying costs of GBP314.6 million (2022: GBP284.7m). In
addition, strategic spend in the year was GBP51.4 million (2022:
GBP32.9m) of which GBP36.1 million was expensed and GBP15.3 million
was capitalised.
Underlying Profit Before Tax increased 47% to GBP438.8 million
(2022: GBP297.5m) and Statutory Profit Before Tax increased by 50%
to GBP402.7 million (2022: GBP269.2m).
The dividend for the financial year has increased 4.5% to a
total dividend of 41.5p for the full year, reflecting this year's
positive financial performance.
Strategic delivery
Our focus this year has been on building out our client value
proposition, while laying the foundations that will allow us to
accelerate our growth and scale efficiency. Progress overall has
been slower than we originally anticipated, but we have though made
good progress on several initiatives as set out below.
Active Savings - With interest rates continuing to rise and
clients looking for an easy way to make their cash work harder, we
have expanded our partner banks and building societies to a total
of 17, launched a new Cash ISA, and offered market-leading rates
for 59% of the year, leading to record net flows of GBP3.2 billion
and a closing AUA of GBP7.8 billion across more than 175,000 client
accounts. Further improvement is needed to accelerate onboarding of
banks.
Funds - Our new US and UK Income funds support clients looking
to put together their own diversified portfolio, and we launched
four managed Portfolio funds which offer greater diversification in
a single investment for those who wish to take a more hands-off
approach. AUM in these funds now totals GBP2.2 billion. We remain
focused on continuing to improve the performance of our funds and
creating more efficiency in the time-to-market of new fund
launches. We will launch a new tool that helps less experienced
clients and their families choose the right HL account for their
situation, and the most suitable investment solutions to meet their
needs.
Trading - This year, we relaunched our enhanced online Share
Exchange service to help clients make the most of their tax
allowances, brought in a new online voting solution, giving more
power to retail investors, and reduced the cost of share dealing
for almost 500,000 clients by removing the dealing charge for
regular investors and those reinvesting dividends.
Investing - We reduced the management charge for the Lifetime
ISA and removed charges completely for Junior ISAs, reducing costs
and supporting families in saving for the future and creating
lifelong, and beyond, relationships by encouraging
intergenerational wealth transfer.
Service - As well as making tactical changes, such as
reallocating resource across the business to better support clients
over the period, we have commenced the roll out a Cloud-based
telephony system. This has started to improve the client
experience, drive colleague efficiency and improve the quality of
data captured to drive even better service and provide client
insights into our digital and service roadmaps. As I said, this is
a core focus for me.
Cost Savings - We launched Pay by Bank for our clients using
Active Savings towards the end of financial year. This not only
makes it easier for clients to top up their accounts, but will also
generate meaningful cost savings for HL. By year end, the adoption
rate was already at 25% and we will be rolling it our across other
accounts through the course of this year.
As well as client proposition improvements, we have made
progress in building more secure foundations to improve our
operational resilience and risk management, whilst continuing to
invest in our client facing digital products.
In the year, we continued work and have made progress towards
the FCA's 2025 Operational Resilience deadline. The Board approved
our annual Operational Resilience Self-Assessment for the year to
31 March 2023, which we evolved from the 2022 assessment to add
greater rigour and structure to the process. The Board also
attested our compliance with the FCA's Consumer Duty by the end of
July. I am pleased to report that our Consumer Duty programme
confirmed that our existing embedded focus on good client outcomes
has led to no major change requirements across all the FCA
prescribed dimensions, with only minor enhancements identified to
further support our clients in reaching good outcomes.
I am pleased that our colleague engagement surveys showed some
improvement during the year, reflecting both our focus on helping
colleagues build their financial resilience and building an
inclusive and client focused culture. As ever there is more to do,
which is why this is one of my four initial focus areas. We have
also made good progress against our Inclusion and Diversity
priorities, increasing gender and ethnicity representation across
the business through both our new early talent programmes and
improved recruitment processes, which have increased senior
representation across the board.
On ESG, this year we have continued to strengthen our
requirements as part of our Wealth Shortlist research, with all
funds included on the shortlist meeting our minimum ESG
requirements. We have also launched our new ESG Investment Policy
and our Stewardship and Engagement Policy and are reporting on
Scope 3 Financed Emissions across the portfolio of HL managed
funds.
Finally, work continues to progress development of our enhanced
relevance and personalisation engine within the HL digital
platform. Sitting under both our digital and human interaction
experiences, this engine will ensure clients receive the most
relevant information, the best service and a seamless and easy
experience, however they chose to engage with us.
Outlook and guidance
The current economic climate is likely to remain much the same
for the coming financial year, and so will continue impacting
investor confidence. This will provide a continued tailwind for
flows into Active Savings but a potential constraint on net new
investment flows and dealing volumes, although we will proactively
mitigate this by helping all HL clients identify the opportunities
that do exist and could be right for them, as we did with gilts. We
will also provide tools to help clients efficiently consolidate
assets to save them time and help us provide increasingly
personalised services, whether they want to interact digitally or
speak to an HL colleague directly.
Against this backdrop, we have already started to take initial
actions on cost and will continue to carefully manage all operating
costs and efficiency improvements whilst balancing with the
importance of providing the high level of service and support that
our ever-growing client base demands.
In terms of our financial outlook for FY24, Amy Stirling has
provided some detailed guidance in her CFO's report.
It has been a busy first few weeks in the new role, and I have
thoroughly enjoyed hearing from many of our clients, colleagues and
shareholders. I'm looking forward to the coming months as I focus
on my initial priority areas of driving growth, increasing pace,
identifying opportunities to save to grow and ensuring we have the
right people in the right roles and focusing on the right things,
so we are truly future fit to deliver for our clients and, in turn,
for our shareholders.
Dan Olley
Chief Executive Officer
18 September 2023
Financial Review
Assets Under Administration (AUA) and Net New Business (NNB)
Year ended Year ended
30 June 2023 30 June 2022
GBPbn GBPbn
============================ ============= =============
Opening AUA 123.8 135.5
Platform growth* 2.3 4.3
Movement to Active Savings* (0.7) (0.3)
Active Savings growth 3.2 1.5
---------------------------- ------------- -------------
Total Net New Business 4.8 5.5
Market growth and other 5.4 (17.2)
Closing AUA 134.0 123.8
============================ ============= =============
* Platform growth, Movement to Active Savings and Active Savings
Growth are alternative Performance Measures. See the Glossary of
Alternative Performance Measures on page 35 for the full
definition.
Hargreaves Lansdown provides the leading direct wealth
management service in the UK.
The continued strength of our brand and breadth of services
available to clients on our platform has seen us grow net new
business every quarter this year despite the continued challenging
macroeconomic backdrop for our clients.
Total net new business for the year was GBP4.8 billion (2022:
GBP5.5bn). Of this figure, platform growth was GBP2.3 billion
(2022: GBP4.3bn) with GBP0.7 billion (2022: GBP0.3bn) of net
movement into Active Savings, where we saw a significant increase
in flows, contributing GBP3.2 billion (2022: GBP1.5bn) of new money
to the GBP4.8 billion total growth.
Total AUA increased by 8% to GBP134.0 billion at the year end
(2022 GBP123.8bn). This increase was supported by the net new
business uplift and GBP5.4 billion of positive market movement
across the year, after the negative market growth experienced in
the first half returned to positive in the second half.
AUA for the period of GBP134.0 billion was 8% above that for the
prior year. The increase has occurred across both halves of the
year, with the second half of the year providing two thirds of the
increase. Market growth and other represents the impact of the
underlying market and other retained investment income. In the
current period this movement is driven by the changes in the
market.
Throughout the year we have maintained our focus on engaging
with clients to help them improve their financial engagement and
resilience. During this period of low investor confidence, we have
supported them in navigating the challenging economic backdrop. We
were pleased to see that despite the financial impacts of the
cost-of-living challenges, our client retention rate remained
consistent at 92.2% (2022: 92.1%).
Asset retention reduced to 90.4% (2022: 91.8%) for the year, as
we saw a higher level of cash withdrawals from specific cohorts of
clients to help with cost-of-living increases or to fund large
expenses and major life events.
We introduced 67,000 net new clients in the year (2022: 92,000),
growing our active client base by 4% to 1,804,000.
An active client is defined as one who holds an account
containing GBP100 or more with us. The average age of new clients
remains consistent with recent periods at 36 (2022: 36) and we are
encouraged by the quality of clients we are welcoming who brought
an average NNB of GBP19,809, up 27% on last year (2022: GBP15,565).
This was driven by greater numbers of new clients opening Active
Savings accounts, which attract a higher opening balance - during
the year there were 17,000 new Active Savings accounts (2022:
7,000).
Income Statement
Year ended Year ended
30 June 2023 30 June 2022
GBPm GBPm
============================================ ============= ===============
Revenue 735.1 583.0
Operating costs (350.7) (313.0)
Finance and other income 19.0 -
Finance costs (0.7) (0.8)
Profit before tax 402.7 269.2
============================================ ============= ===============
Tax (79.0) (53.4)
Profit after tax 323.7 215.8
-------------------------------------------- ------------- ---------------
Profit before tax 402.7 269.2
Adjusted for:
Strategic Investment Costs (including dual
running costs) 36.1 28.3
* Underlying profit before tax* 438.8 297.5
* Tax on underlying profit* (86.1) (59.0)
============================================ ============= ===============
Underlying profit after tax* 352.7 238.5
============================================ ============= ===============
* Underlying profit before tax, Tax on underlying profit, and
Underlying profit after tax for the period exclude strategic
investment costs (including dual running costs) of GBP36.1 million
(2022: GBP28.3m). See the Glossary of Alternative Performance
Measures on page 35 for the full definition.
Revenue
Total revenue for the period increased 26% to GBP735.1 million
(2022: GBP583.0m), with all key revenue lines increasing in the
second half of the year driven by a return to growth in all asset
classes excluding cash as asset levels benefitted from positive
market movements and net new business. Year-on-year revenue growth
reflects an improvement to Net Interest Margin following a period
of historic low interest rates, and the level of cash held by
clients in both their Investment and Savings accounts more than
offsetting the impact of lower average asset values and lower
stockbroking volumes resulting from negative market movements and
low levels of investor confidence.
The table below breaks down revenue, average AUA and margins
earned during the period:
Year ended 30 June 2023 Year ended 30 June 2022
====================================== ======================================
Revenue Average Revenue Revenue Average Revenue
GBPm AUA GBPbn margin bps GBPm AUA GBPbn margin bps
Funds(1) 236.4 60.7(8) 39 254.5 65.3(8) 39
Shares(2) 147.7 48.8 30 194.9 52.3 37
Cash(3) 268.7 14.0 192 50.0 13.6 37
HL Funds(4) 54.3 8.4(8) 65 60.3 8.8(8) 69
Active Savings(5) 8.7 6.4 14 1.8 3.86 5
Other(7) 19.3 - - 23.3 - -
================== ========= ============ ============= ========= ============ =============
Double-count(8) - (8.3)(8) - - (8.7)(8) -
================== ========= ============ ============= ========= ============ =============
Total 735.1 130.0(8) - 583.0 135.1(8) -
================== ========= ============ ============= ========= ============ =============
Revenue margin is an alternative performance measure, see the
Alternative Performance Measures glossary on page 35 for the full
definition.
1 Platform fees.
2 Stockbroking commission and equity holding charges.
3 Net interest earned on cash held in investment accounts.
4 Annual management charge on HL Funds, i.e. excluding the
platform fee, which is included in revenue on Funds.
5 Revenue from Active Savings earned as fees from partner banks.
6 Average cash held via Active Savings.
7 Advisory fees and ancillary services (e.g. annuity broking,
distribution of VCTs and HL Currency Services).
8 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.
Funds
Funds continue to be the largest asset class on the platform at
47% of average AUA for the year and 46% of closing AUA (2022: 47%)
reflecting the significant range of investment solutions available
to meet a broad range of client needs. Revenue on Funds decreased
by 7% to GBP236.4 million (2022: GBP254.5m) reflecting the decrease
in average AUA, particularly in the first half, with this revenue
line returning to growth in the second half of the year. Revenue
margin on funds was flat at 39bps.
Funds remain one of our largest sources of revenue, with the
margin for this year having remained stable on the prior year.
During the year, decisions have been taken to reduce fees on the
Lifetime ISA (LISA), from 45bps at base to 25bps, and remove all
fees on Junior ISA accounts. As a result, we expect the fund
revenue margin to fall slightly in the next financial year and be
in the range of 36.5bps to 38.5bps, driven primarily by the full
year impact of the fee cuts made in the Junior ISA and LISA
accounts in FY23.
Shares
Revenue on Shares decreased by 24% to GBP147.7 million (2022:
GBP194.9m) and the revenue margin of 30bps (2022: 37bps) was at the
low end of our expected range. This was as a result of a reduction
in deal volumes, reflecting comparatively lower investor confidence
as clients deal with cost-of-living issues, rising interest rates
and market volatility and also the impact of the decline in the
value of equities under administration, given the previously
mentioned market volatility.
Average deals per trading day in the first half of the year were
31,000 and rose in the second half of the year to 35,000 per day.
However, total deal volumes, including automated deals such as
dividend reinvestment, decreased by 21% to 8.3 million (2022:
10.5m) but were in line with the low end of our expectation of
deals per trading day. Dealing peaked in January 2023 at 39,000
deals per trading day, propelled by news of growth in UK, US and
European markets. This compared with a low in December of 27,000,
given the seasonally quieter Christmas period. Overseas dealing
volumes fell slightly and represented 21% of our total client
driven deals (2022: 22%).
Client driven trading is higher than levels seen prior to the
pandemic and we continue to improve our client experience in
relation to share trading, with improvements to best execution on
trades and the removal of fees for income reinvestment and regular
share savings. As and when investor confidence improves we believe
we are well placed to see a return to higher trading volumes.
Shares AUA, at the end of the year, was GBP50.8 billion (2022:
GBP45.9bn).
Revenue guidance on shares for the next financial year is 28bps
to 32bps. This incorporates the full year impact of the price
changes on the Junior ISA, income reinvestment and regular
savings.
Cash
Cash held in Investment accounts plays an important role in
clients' portfolio management by providing access to the broad
range of products and services available on our platform. We manage
this cash according to clear principles which are set out in our
Platform Client Fairness Policy. In determining rates, HL considers
the client need, characteristics and behaviour by account type and
the flexibility or limitations of the account when determining and
reviewing the rates paid to clients. For example, we pay higher
rates of interest where the accounts have more product restrictions
(e.g. the SIPP over an unwrapped account) and where clients will
hold higher cash balances (e.g. the Drawdown account). The step up
in base rate has increased interest earned on cash and, as a
result, we have increased both the amount and the proportion earned
by clients during the period. The level of cash held in Investment
accounts increased during the period with average cash AUA of
GBP14.0 billion (2022: GBP13.6bn) which also contributed to the
increase in revenue.
The average cash balance represented 10.8% of total average AUA,
an increase from 10% in the prior year. However, across the year,
cash held in investments accounts has been reducing as clients use
existing funds on the platform to invest, and for certain clients
we are seeing increased cash withdrawals to fund planned and
unplanned needs. Our closing cash AUA at the end of 2023 was
GBP13.1 billion (2022: GBP15.0bn).
Revenue on cash significantly increased in the year to GBP268.7
million (2022: GBP50.0m) reflecting increases in the Bank of
England base rate during the period and the level of cash held by
clients in investment accounts, partially offset by the pass
through rate to clients. Seven rate increases were made during the
year, taking the base rate from 125bps in July 2022 to 500bps as at
30 June 2023, compared to the changes in the previous year, which
saw five increases taking the rate from 10bps to 125bps as at 30
June 2022.
Over the last twelve months, we have passed over 85% of the
benefit of base rate increases to our clients and should we see
further increases from here, we would expect to do broadly the
same.
As a result, our guidance for net interest margin for the next
financial year is 180bps to 200bps.
HL Funds
During the year we have delivered two new Building Block funds
(US Fund and UK Income fund) and four new Portfolio funds
(Cautious, Balanced, Moderately Adventurous and Adventurous), all
of which come with a lower annual management charge than our
existing fund offerings. These funds give clients access to key
asset classes and are structured via segregated mandates so they
can be held directly and also invested into by our flagship HL
Managed funds. The sector-focused funds within the existing HL
Multi-Manager range will be converted over time, resulting in
further efficiencies and reductions in costs for investors.
Despite a very challenging market context for fund flows, across
the year we saw net flows into the fund range of GBP0.3 billion,
driven largely by the fund launches. HL Funds' AUM at the end of
2023 was GBP8.7 billion.
Revenues on HL Funds were down 10.0% to GBP54.3m (2022:
GBP60.3m). The main driver of this was average funds under
management being down 5% versus last year and lower margin, largely
as a result of the launch of new, lower cost funds delivered in the
year. The margin on HL Funds has reduced to 65bps (2022: 69bps)
accordingly.
HL Funds are a key part of our strategy and we continue to
launch further funds across FY24, including a Global Corporate Bond
fund that launched in July 2023. This will continue to improve the
overall proposition and competitiveness of our own investment funds
and will continue to bring net inflows. The margin for 2024 is
therefore expected to reduce and be in the range of 55bps to
60bps.
Active Savings
Revenue from Active Savings has grown significantly in the year
to GBP8.7 million (2022: GBP1.8m) driven by the changes in the base
rate and the increase in AUA. The average margin throughout the
year was 14bps (2022: 5bps).
We have continued with the increased marketing of Active Savings
from the end of the last financial year and we have subsequently
seen strong flows across the period totaling GBP3.2 billion (2022:
GBP1.5bn). As at 30 June 2023 the AUA was GBP7.8 billion (2022:
GBP4.6bn) and over 175,000 clients now have an Active Savings
account.
Looking forward, we will continue our focus on growing the
Active Savings service through adding additional partner banks and
improving functionality, particularly within our app.
Our revenue margin for the next financial year is expected to be
in the range of 15bps to 20bps.
Other
Other revenues comprise advisory fees and ancillary services,
such as annuity broking and distribution of VCTs. The amount has
declined year-on-year, with the largest movements seen in
distribution income in respect of third party services, where lower
investor confidence for trading services has been partially offset
by increased revenues from Annuity arrangement fees, due to the
increase in rates available for these products.
Year ended Year ended
30 June 2023 30 June 2022
GBPm GBPm
======================= ============= =============
Ongoing revenue* 612.6 414.1
Transactional revenue* 122.5 168.9
Total revenue 735.1 583.0
======================= ============= =============
*Definitions are shown in the Glossary of Alternative Financial
Performance measures on page 35.
The Group's business model offers clients a broad range of asset
classes to suit their needs in differing market environments and as
such, benefits from a diversified revenue stream. The Group's
revenues are largely ongoing in nature, as shown in the table
above. The proportion of ongoing revenues has increased to 83% in
the period (2022: 71%) as the transactional stockbroking commission
decreased versus last year and the net interest income increased
significantly as the base rate of interest increased. Ongoing
revenue is primarily comprised of platform fees on funds and
equities, fund management fees, net interest income and ongoing
advisory fees. This increased by 48% to GBP612.6 million (2022:
GBP414.1m) driven by improved net interest margin from the higher
interest rates earned, which more than offset lower platform fees
and management fees from lower average AUA levels.
Transactional revenue primarily comprises stockbroking
commission and advisory event-driven fees. This decreased by 27% to
GBP122.5 million (2022: GBP168.9m) reflecting the 26% decrease in
client-driven equity dealing volumes.
Underlying operating costs
Year ended Year ended 30 June 2022
30 June 2023 GBPm
GBPm
============================ =============== =========================
Underlying cost Underlying cost
============================ =============== =========================
People costs* 167.9 144.2
Activity costs* 45.5 50.4
Technology costs* 38.8 28.7
Support costs* 56.3 49.3
Underlying costs (pre-FSCS) 308.5 272.6
Total FSCS levy 6.1 12.1
============================ =============== =========================
Underlying operating
costs** 314.6 284.7
============================ =============== =========================
* Definitions have been amended and are shown in the Glossary of
Alternative Financial Performance Measures on page 35. The
amendment has been made to align to the way that the Board
discusses matters internally.
** Underlying operating costs exclude strategic investment costs
(including dual running costs) of GBP36.1 million (2022: GBP28.3m).
See the Glossary of Alternative Performance Measures on page 35 for
the full definition.
Underlying operating costs
Underlying operating costs increased by 10.5% to GBP314.6
million (2022: GBP284.7m) reflecting wage and cost inflation,
annualisation of headcount growth, increased technology spend,
offset by lower volume driven Activity costs and a reduction in the
FSCS levy.
People costs
People costs increased 16% to GBP167.9 million (2022: GBP144.2m)
as we invested to support our colleagues through the course of the
year. Our pay award for the year was an average of 5% and we have
made further changes to colleague pay. Given the economic backdrop,
we have reset junior colleagues compensation, providing a higher
level of guaranteed earnings throughout the year and we have seen
additional wage inflation in specific functions, addressing skill
scarcity and retention. In addition we made a GBP1.1m one-off
support payment for colleagues to help offset the impact of
inflation.
Our headcount remained flat during the first half of the year,
with targeted additions made in the second half of the year in our
Service and Digital teams to support increased client contact and
improving our systems and security respectively. The impact of the
annualisation of 2022 headcount increases was also felt in the year
and contributed 3% to the increase in the current year.
Activity
Activity costs comprise marketing costs, dealing-related costs,
and payment costs for client cash transferred onto the platform.
Overall activity costs have reduced by GBP4.9 million during the
period reflecting the lower dealing volumes, higher payment volumes
driven by Active Savings and GBP5 million cost savings achieved
through renegotiation of third-party dealing contracts.
Payment costs have increased in line with the level of cash
added to the platform. In Q4, we introduced Pay by Bank
capabilities to those clients using Active Savings to make it
easier to transfer funds onto the platform whilst significantly
reducing the associated transaction cost. We have seen encouraging
take up so far and will be rolling out to all clients during next
year. Marketing costs, including client acquisition, client
engagement and brand awareness, have remained stable year-on-year
as we have continued to invest to drive awareness of our breadth of
savings and investment solutions, particularly in the run up to tax
year end this year.
Technology
Technology costs increased to GBP38.8 million (2022: GBP28.7m)
driven by software support fees and service subscriptions as we
build out our digital capability and transfer our systems to the
Cloud and improving the security of our IT environment. This
requires the use of more third-party software, leading to an
increase in license and subscription costs throughout the year.
Support
Support costs, which include legal and professional fees, office
running costs, depreciation and amortisation increased to GBP56.3
million (2022: GBP49.3m). Including the impact of higher energy
costs and a GBP1.8 million one off increase in the dilapidations
provision, office running costs account for GBP3.5 million of this
increase. Insurance costs and professional fees have increased as
have travel expenses as staff returned to more normalised working
patterns.
The Financial Services Compensation Scheme (FSCS) levy run by
the FCA decreased to GBP6.1 million (2022: GBP12.1m), due to a
scheme surplus from the prior year, which reduced the amount the
FCA needed to raise for the current year. The FSCS is the
compensation scheme of last resort for customers of authorised
financial services firms. At present, we expect that the levy cost
next year will return to being in line with the prior year and as a
result, expect to see Underlying cost growth of 9% - 11% for the
next financial year.
Strategic Investment Costs
(including Dual Running Costs)
Total strategic spend in the year was GBP51.4 million, of which
GBP36.1 million has been expensed and GBP15.3 million has been
capitalised in line with our accounting policy. As the programme
scales up in both overall activity and individual project scale, we
expect our spend to increase further next year. Spend primarily
comprises staff (including contractor) costs and associated
professional fees, associated compliance, infrastructure and
support costs. With our strategic investment programme now well
underway, the strategic investment costs incurred in the period are
in addition to the business as usual, or underlying, costs of the
business.
We have previously presented strategic investment costs and dual
running costs as separate measures for the purpose of reporting our
underlying costs. Through review, we determined that the use of a
further Alternative Performance Measure provides no additional
clarity or insight to readers or users of the financial statements
regarding our approach to our Strategic Investment Programme. As
such, we have reverted to using strategic investment cost as a
single measure.
Profit before tax
During the year, GBP19.0 million of Finance Income resulted from
term deposits of corporate cash being placed at higher interest
rates. Finance costs comprise the undrawn cost of the Group's
Revolving Credit Facility and the interest incurred on the Group's
leases.
On an underlying basis, profit before tax increased by 47% to
GBP438.8 million (2022: GBP297.5m). On a statutory basis profit
before tax increased by 50% to GBP402.7 million (2022:
GBP269.2m).
Tax
The effective tax rate for the period was 19.7% (2022: 19.9%).
This is despite the higher rate of tax in effect from April 2023
and its impact on the Group in the year. This was largely driven by
reclaims on our prior year submissions for R&D credits.
The Group's tax strategy is published on our website at
http://www.hl.co.uk
Earnings per share
Year ended Year ended
30 June 30 June 2022
2023 GBPm
GBPm
======================================================= =========== ==============
Operating profit 384.4 270.0
Finance and other income 19.0 -
Finance costs (0.7) (0.8)
======================================================= =========== ==============
Profit before tax 402.7 269.2
Tax (79.0) (53.4)
Profit after tax 323.7 215.8
======================================================= =========== ==============
Underlying profit before tax* 438.8 297.5
======================================================= =========== ==============
Tax on underlying profit* (86.1) (59.0)
======================================================= =========== ==============
Underlying profit after tax* 352.7 238.5
======================================================= =========== ==============
Weighted average number of shares for the calculation
of diluted EPS 474.6 474.5
Diluted EPS (pence per share) 68.2 45.6
======================================================= =========== ==============
* Underlying profit before tax, Tax on underlying profit before
tax, Underlying profit after tax and Underlying diluted EPS for the
year exclude strategic investment costs (including dual running
costs) of GBP36.1 million (2022: GBP28.3m). See the Glossary of
Alternative Performance Measures on page 35 for the full
definitions.
Diluted EPS increased by 50% from 45.6 pence to 68.2 pence, in
line with the Group's increase in profits. The Group's basic EPS
was 68.3 pence, compared with 45.6 pence in 2022.
Underlying diluted EPS increased by 48% from 50.4 pence to 74.3
pence. (See Glossary of Alternative Performance Measures on page 35
for the full definition). The Group's underlying basic EPS was 74.4
pence, compared with 50.4 pence in 2022.
Capital and liquidity management
Hargreaves Lansdown looks to create long-term value for
shareholders by balancing delivery of profit growth, capital
appreciation and an attractive dividend stream to shareholders with
the need to invest in the business to maintain a broad savings and
investment 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. The Group's net cash position at
30 June 2023 was GBP503.3 million (2022: GBP508.0m). Cash generated
from operations more than offset the payments of the 2022, final
ordinary dividend and the 2023 interim dividend. This includes cash
on longer-term deposit and is before funding the 2023 final
dividend of GBP136.6 million.
The Group has a Revolving Credit Facility agreement with
Barclays Bank to provide access to a further GBP75 million of
liquidity. This is 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 manage the impact of dilution from operating our
share-based compensation schemes.
The healthy net cash position provides both a source of
competitive advantage and support to our client offering. It
provides security to our clients and allows us to provide them with
an excellent service, for example through using surplus liquidity
to allow same day switching between products that have mismatched
settlement dates.
Capital
Year ended Year ended
30 June 30 June 2022
2023 GBPm
GBPm
================================================== =========== ==============
Shareholder funds 709.7 575.1
Less: goodwill, intangibles and other deductions (54.7) (41.0)
================================================== =========== ==============
Tangible capital 655.0 534.1
Less: provision for dividend (136.6) (130.2)
================================================== =========== ==============
Qualifying regulatory capital 518.4 403.9
Less: estimated capital requirement (248.3) (219.1)
================================================== =========== ==============
Estimated capital surplus 270.1 184.8
================================================== =========== ==============
Total attributable shareholders' equity, as at 30 June 2023,
made up of share capital, share premium, retained earnings and
other reserves increased to GBP709.7 million (2022: GBP575.1m) due
to the increased profit in the year. Having made appropriate
deductions as shown in the table above, estimated surplus capital
amounts to GBP270.1 million.
HL plc has four subsidiary companies authorised and regulated by
the FCA. The FCA's Investment Firm Prudential Regime (IFPR) applies
to the Group and HL completes this assessment through the Group
Internal Capital Adequacy and Risk Assessment (ICARA) processes.
Our assessment of HL's capital requirements takes account of the
regulatory requirements.
Consistent with the IFPR requirements, HLAM is specifically
required to disclose regulatory capital information; this is
available on the Group's website at
https://www.hl.co.uk/investor-relations .
Dividend
Dividend (pence per share)
2023 2022
========================= ======= =======
Interim dividend paid 12.70p 12.26p
Final dividend declared 28.80p 27.44p
========================= ======= =======
Total dividend 41.50p 39.70p
========================= ======= =======
The Board has declared an increase in the total ordinary
dividend of 4.5% taking the ordinary dividend per share to 41.50
pence (2022: 39.7 pence per share of ordinary dividend). The
ordinary dividend is made up of an interim dividend of 12.70 pence
per share that was paid on 31 March 2023 (2022: 12.26 pence per
share) and a final ordinary dividend of 28.8 pence per share (2022:
27.44 pence per share). Subject to shareholder approval of the
final ordinary dividend at the 2023 AGM, the final dividend will be
paid on 15 December 2023 to all shareholders on the register at the
close of business on 17 November 2023.
In terms of capital allocation, our priority continues to be to
ensure our robust financial health, maintaining a meaningful
capital surplus over the regulatory minimum. The Board has begun
discussion regarding the overall approach to capital allocation
acknowledging that we are currently in a period of investment and
the importance of shareholder return. As a result and subject to
market conditions and the Group's growth, investment and regulatory
capital requirements, we expect to continue to grow the ordinary
dividend at least 4% in the next financial year.
Amy Stirling
Chief Financial Officer
18 September 2023
SECTION 1: RESULTS FOR THE YEAR
Consolidated Income Statement for the year ended 30 June
2023
Year ended
Year ended 30 June
30 June 2023 2022
Note GBPm GBPm
Revenue 735.1 583.0
Operating costs 1.3 (350.7) (313.0)
Operating profit 384.4 270.0
Finance and other income 1.5 19.0 -
Finance costs 1.6 (0.7) (0.8)
Profit before tax 402.7 269.2
Tax 1.7 (79.0) (53.4)
Profit for the financial
year 323.7 215.8
Attributable to:
Owners of the parent 323.8 216.3
Non-controlling interest (0.1) (0.5)
323.7 215.8
Earnings per share
Basic earnings per share
(pence) 1.8 68.3 45.6
Diluted earnings per share
(pence) 1.8 68.2 45.6
The results relate entirely to continuing operations.
Consolidated Statement of Comprehensive Income for the year
ended 30 June 2023
Year ended Year ended
30 June 30 June
2023 2022
GBPm GBPm
Profit for the financial year 323.7 215.8
Total comprehensive income for the financial year 323.7 296.3
Attributable to:
Owners of the parent 323.8 296.7
Non-controlling interest (0.1) (0.4)
323.7 296.3
--------------------------------------------------- ----------- ------------
The results relate entirely to continuing operations.
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 .
Year ended Year ended
30 June 30 June 2022
2023
GBPm GBPm
Revenue:
Ongoing revenue
Platform fees 270.5 289.1
Fund management fees 54.3 60.3
Ongoing advice charges 7.4 8.3
Active Savings revenue (1) 8.7 1.8
Net interest income 268.7 50.0
Renewal commission 3.0 4.6
Transactional revenue
Fees on stockbroking transactions 116.9 164.6
Initial advice charges 4.7 4.0
Other transactional income 0.9 0.3
Total Revenue 735.1 583.0
----------------------------------- ------------ ----------------
(1) Active Savings revenue was previously disclosed within net
interest income and is now disclosed separately.
1.2 Segmental reporting
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 direct wealth management
service administering investments in ISA, SIPP and Fund & Share
accounts, and providing cash management services for individuals
and corporates in the United Kingdom. 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
Operating profit has been arrived at after Year ended Year ended
charging: 30 June 2023 30 June 2022
GBPm GBPm
Depreciation of owned plant and equipment
and right-of-use assets 8.5 8.9
Amortisation of other intangible assets 6.8 6.2
Impairment of intangible assets - 1.0
Operating lease rentals payable - property - 0.1
FSCS costs 6.1 12.1
Activity costs(2)
* Marketing costs 20.7 25.8
* Dealing & financial services costs 23.4 24.6
Technology costs(*) 40.4 29.7
Support costs (1)
* Legal and professional costs 40.9 33.1
* Office running costs 8.4 4.9
* Other operating costs 16.2 11.2
Staff (including contractors) costs (note
1.4) 179.3 155.5
-------------------------------------------- --------------- ---------------
Operating costs 350.7 313.0
-------------------------------------------- --------------- ---------------
(*) The line item description of this category has changed from
the prior year.
(1) Support costs includes costs previously known as legal and
professional fees and office running costs. Also included in
support costs are compensation and compliance costs, other finance
costs, insurance costs and fair value movements on investments
(note 2.1).
(2) Activity costs now includes costs previously known as
marketing costs and dealing and financial services costs.
1.4 Staff costs
Year ended Year ended
30 June 30 June
2023 2022
The average monthly number of employees of the No. No.
Group (including executive Directors and contractors)
was:
Operating and support functions 1,558 1,533
Administrative functions 661 576
2,219 2,109
-------------------------------------------------------- ----------- ------------
Their aggregate remuneration comprised: GBPm GBPm
Wages and salaries 149.9 122.2
Social security costs 14.4 14.2
Share-based payment expenses 8.2 8.4
Other pension costs 16.0 13.2
-------------------------------------------------------- ----------- ------------
Total costs paid for staffing 188.5 158.0
-------------------------------------------------------- ----------- ------------
Capitalised in the year (9.2) (2.5)
Staff (including contractors) costs as a deduction
to operating profit 179.3 155.5
-------------------------------------------------------- ----------- ------------
Included in the above figures are 143 (2022: 80) contractors
with a total cost of GBP15.5 million (2022: GBP6.0m).
1.5 Finance and other income
Year ended Year ended
30 June 30 June
2023 2022
GBPm GBPm
Interest on bank deposits 15.8 -
Other income 3.2 -
19.0 -
------------------------------------------------- ----------------- -----------
1.6 Finance costs
Year ended Year ended
30 June 30 June
2023 2022
GBPm GBPm
Commitment fees 0.3 0.3
Interest incurred on lease payables 0.4 0.5
Finance costs 0.7 0.8
------------------------------------- ------------- -----------
1.7 Tax
Year ended Year ended
30 June 2023 30 June
2022
GBPm GBPm
Current tax: on profits for the year 80.0 52.3
Current tax: adjustments in respect of prior
years (0.2) (0.4)
Deferred tax (note 2.4) (0.8) 1.0
Deferred tax: adjustments in respect of prior
years (note 2.4) - 0.5
79.0 53.4
----------------------------------------------- -------------- ------------
Corporation tax is calculated at 20.5% of the estimated
assessable profit for the year to 30 June 2023 (2022: 19%).
In addition to the amount charged to the Consolidated Income
Statement, certain tax amounts have been charged or (credited)
directly to equity as follows:
Year ended Year ended
30 June 30 June 2022
2023
GBPm GBPm
Deferred tax relating to share-based payments (0.2) (0.6)
Current tax relating to share-based payments (0.1) 0.1
----------------------------------------------- ----------- ---------------
(0.3) (0.5)
----------------------------------------------- ----------- ---------------
Factors affecting tax charge for the year
It is expected that the ongoing effective tax rate will remain
at a rate approximating to the standard UK corporation tax rate in
the medium term, except for the impact of deferred tax arising from
the timing of exercising of share options which is not under our
control. Following the enactment of Finance Act 2021 the standard
UK corporation tax rate was at 19% before increasing to 25% from 1
April 2023. Accordingly, the Group's taxable profits for this
accounting year are taxed at 20.5%. Deferred tax has been
recognised at either 20.5% or 25% depending on the rate expected to
be in force at the time of the reversal of the temporary
difference.
Factors affecting future tax charge
Any increase or decrease to the share price of Hargreaves
Lansdown plc will impact the amount of tax deduction available in
future years on the value of shares acquired by staff under share
incentive schemes.
The charge for the year can be reconciled to the profit per the
Income Statement as follows:
Year ended Year ended
30 June 2023 30 June 2022
GBPm GBPm
Profit before tax 402.7 269.2
---------------------------------------------- -------------- ----------------
Tax at the standard UK corporate tax rate of
20.5% (2022: 19.0%) 82.6 51.1
Non-taxable income (5.7) 0.1
Items not allowable for tax 2.3 2.3
Additional deduction for tax purposes (0.2) (0.2)
Adjustments in respect of prior years 0.1 0.1
Foreign tax suffered 0.1 0.1
Impact of the change in tax rate (0.2) (0.1)
Tax expense for the year 79.0 53.4
---------------------------------------------- -------------- ----------------
Effective tax rate 19.7% 19.9%
---------------------------------------------- -------------- ----------------
The additional deduction for tax purposes only arises from
enhanced capital allowances available from the super deduction on
qualifying plant and machinery purchased within the financial year
ended 30 June 2023.
1.8 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 year,
including ordinary shares held in the Hargreaves Lansdown Employee
Benefit Trust (EBT) and Hargreaves Lansdown SIP Trust (SIP) reserve
which have vested unconditionally with employees.
Diluted earnings per share is calculated adjusting the weighted
average number of ordinary shares outstanding to assume conversion
of all potentially dilutive ordinary shares.
The weighted average number of anti-dilutive share options and
awards excluded from the calculation of diluted earnings per share
was 1,285,599 at 30 June 2023 (2022: 429,519).
Year ended Year ended
30 June 30 June
2023 2022
GBPm GBPm
Earnings
Earnings for the purposes of basic and diluted
EPS - net profit attributable to equity holders
of the parent company 323.8 216.3
-------------------------------------------------------------- --------------- ---------------
Number of shares
Weighted average number of ordinary shares 474,318,625 474,318,625
Weighted average number of shares held by HL
EBT and SIP (242,404) (444,685)
Weighted average number of shares held by HL
EBT and SIP that have vested unconditionally
with employees 89,116 74,702
-------------------------------------------------------------- --------------- ---------------
Weighted average number of ordinary shares for
the purposes of basic EPS 474,165,337 473,948,642
Weighted average number of dilutive share options
held by HL EBT and SIP that have not vested unconditionally
with employees 686,256 579,869
Weighted average number of ordinary shares for
the purposes of diluted EPS 474,851,593 474,528,511
-------------------------------------------------------------- --------------- ---------------
Earnings per share Pence Pence
Basic EPS 68.3 45.6
Diluted EPS 68.2 45.6
-------------------------------------------------------------- --------------- ---------------
SECTION 2: ASSETS & LIABILITIES
Consolidated Statement of Financial Position as at 30 June
2023
At 30 June At 30 June
2023 2022
Note GBPm GBPm
ASSETS
Non-current assets
Goodwill 1.3 1.3
Other intangible assets 50.4 37.3
Property, plant and equipment 17.4 22.5
Deferred tax 2.4 2.6 1.9
71.7 63.0
Current assets
Investments 2.1 0.5 0.8
Trade and other receivables 2.2 836.9 523.5
Cash and cash equivalents 2.3 373.3 488.3
Current tax assets 3.4 0.6
1,214.1 1,013.2
Total assets 1,285.8 1,076.2
LIABILITIES
Current liabilities
Trade and other payables 2.5 565.5 488.3
565.5 488.3
Net current assets 648.6 524.9
Non-current liabilities
Provisions 3.0 2.6
Non-current lease liabilities 2.6 7.6 11.8
Total liabilities 576.1 502.7
Net assets 709.7 573.5
EQUITY
Share capital 3.1 1.9 1.9
Shares held by EBT (6.4) (3.6)
EBT reserve (1.0) (2.4)
Retained earnings 715.2 579.2
Total equity, attributable to the owners
of the parent 709.7 575.1
Non-controlling interest - (1.6)
Total equity 709.7 573.5
2.1 Investments
Year ended Year ended
30 June 30 June 2022
2023
GBPm GBPm
At beginning of year 0.8 0.9
Purchases 2.0 0.7
Disposals (2.3) (0.8)
------------------------------------------------- ----------- ---------------
At end of year 0.5 0.8
------------------------------------------------- ----------- ---------------
Comprising:
Current asset investment - UK-listed securities
valued at quoted market price 0.5 0.8
------------------------------------------------- ----------- ---------------
GBP0.5million (2022: GBP0.8m) of investments are classified as
held at fair value through profit and loss, being deal-related
short-term investments. Fair value movements on investments are
included in other support costs, as disclosed in note 1.3.
Investment balances are short-term positions the Group takes as
a result of deals placed either in error or due to having to take
positions where clients are no longer able to hold an investment.
The gross gains and losses in relation to fair value include
movements where no investment position is taken and are as shown
below:
Fair value movement on investments
Year ended Year ended
30 June 30 June 2022
2023
GBPm GBPm
Gross gains 0.6 0.4
Gross losses (2.1) (1.3)
-------------- ----------- ---------------
(1.5) (0.9)
-------------- ----------- ---------------
2.2 Trade and other receivables
Year ended Year ended
30 June 30 June 2022
2023
GBPm GBPm
Financial assets
Trade receivables 510.3 432.6
Term deposits 130.0 20.0
Accrued income 169.0 49.0
Other receivables 7.6 3.7
------------------------ ----------- ---------------
816.9 505.3
Non-financial assets
Prepayments 20.0 18.2
------------------------ ----------- ---------------
836.9 523.5
---------------------- ----------- ---------------
In accordance with market practice, certain balances with
clients, Stock Exchange member firms and other counterparties
totalling GBP486.0 million (2022: GBP409.5m) 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 GBP659.7 million (2022:
GBP532.6m) and the gross amount offset in the Statement of
Financial Position with trade payables is GBP186.6 million (2022:
GBP130.1m). Other than counterparty balances, trade receivables
primarily consist of fees and amounts owed by clients and renewal
commission owed by fund management groups. 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.
Given the short-term nature of the Group's receivables and the
expectation of the Group in relation to its counterparties, there
has been no material expected credit loss recognised in the
period.
The Group does not have any contract assets in respect of its
revenue contracts with customers (2022: GBPnil).
2.3 Cash and cash equivalents
Year ended Year ended
30 June 30 June
2023 2022
GBPm GBPm
Cash and cash equivalents
Group cash and cash equivalent
balances 368.0 488.0
Restricted cash - balances held
by HL EBT 5.3 0.3
----------------------------------- -------------- --------------
373.3 488.3
--------------------------------- -------------- --------------
At 30 June 2023, 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 GBP7,214 million (2022:
GBP8,665m). In addition, there were pension trust and Active
Savings cash accounts held on behalf of clients not governed by the
client money rules of GBP6,224 million (2022: GBP6,533m). The
client retains the ownership in both these deposits and cash
accounts, and accordingly, they are not included in the Statement
of Financial Position of the Group.
Restricted cash balances relate to the balances held within the
HL Employee Benefit Trust. These are strictly held for the purpose
of purchasing shares to satisfy options under the Group's share
option schemes.
2.4 Deferred tax
Deferred tax assets/(liabilities) arise because of temporary
differences only. The following are the major deferred tax
assets/(liabilities) recognised and movements thereon during the
current and prior reporting years. Deferred tax has been recognised
at either 20.5% or 25% depending upon the rate expected to be in
force at the time of the reversal of the temporary difference. A
deferred tax asset in respect of future share option deductions has
been recognised based on the Company's share price as at 30 June
2023.
Other deductible
Fixed assets Share-based temporary
tax relief payments differences Total
GBPm GBPm GBPm GBPm
At 1 July 2021 0.3 2.5 0.9 3.7
Charge to income (0.8) (0.7) - (1.5)
Charge to equity - (0.3) - (0.3)
------------------------------- ------------- ------------ ----------------- ----------
At 30 June 2022 (0.5) 1.5 0.9 1.9
(Charge)/credit to income (0.2) 1.0 - 0.8
Charge to equity - - (0.1) (0.1)
------------------------------- ------------- ------------ ----------------- ----------
At 30 June 2023 (0.7) 2.5 0.8 2.6
------------------------------- ------------- ------------ ----------------- ----------
Deferred tax expected to be recovered or settled:
Within 1 year after reporting
date (0.5) 0.1 0.2 (0.2)
> 1 year after reporting
date (0.2) 2.4 0.6 2.8
------------------------------- ------------- ------------ ----------------- ----------
(0.7) 2.5 0.8 2.6
------------------------------- ------------- ------------ ----------------- ----------
2.5 Trade and other payables
Year ended Year ended
30 June 30 June 2022
2023
GBPm GBPm
Financial liabilities
Trade payables 487.4 406.7
Current lease liabilities 4.6 4.6
Other payables 38.0 31.0
----------------------------- ----------- -----------------
530.0 442.3
Non-financial liabilities
Deferred income 0.3 0.3
Accruals 26.5 38.5
Social security and other
taxes 8.7 7.2
----------------------------- ----------- -----------------
565.5 488.3
In accordance with market practice, certain balances with
clients, Stock Exchange member firms and other counterparties
totalling GBP483.5 million (2022: GBP404.9m) are included in trade
payables, similar to the treatment of trade receivables. As stated
in note 2.2 above, 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 staff as a
bonus and rebates due to the regulated funds operated by the Group.
Accruals and deferred income principally comprise amounts
outstanding for trade purchases and receipts from clients, where
cash is received in advance for certain services.
All balances classified as deferred income in the prior year
have been recognised in revenue in the current year.
2.6 Long-term liabilities
Year ended Year ended
30 June 30 June
2023 2022
GBPm GBPm
Lease liabilities greater than
12 months 7.6 11.8
---------------------------------- -------------- --------------
SECTION 3: EQUITY
Consolidated Statement of Changes in Equity for the year ended
30 June 2023
Attributable to the owners of
the Parent
Shares Non-
Share held Retained controlling Total
capital by EBT EBT reserve earnings Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 July 2021 1.9 (4.8) (3.1) 599.5 593.5 (1.1) 592.4
-------------------------- --------- -------- ------------ ---------- ---------- ------------- --------
Total comprehensive
income(1) - - - 216.3 216.3 (0.5) 215.8
Employee Benefit
Trust
Shares sold in the
year - 5.4 - - 5.4 - 5.4
Shares acquired in
the year - (4.2) - - (4.2) - (4.2)
HL EBT share sale - - (2.8) - (2.8) - (2.8)
Reserve transfer
on exercise of share
options - - 3.5 (3.5) - - -
Employee share option
scheme
Share-based payments
expense (note 1.4) - - - 8.4 8.4 - 8.4
Current tax effect
of share-based payments
(note 1.7) - - - 0.1 0.1 0.1
Deferred tax effect
of share-based payments
(note 1.7) - - - (0.6) (0.6) - (0.6)
Dividend paid (note
3.2) - - - (241.0) (241.0) - (241.0)
--------------------------
At 30 June 2022 1.9 (3.6) (2.4) 579.2 575.1 (1.6) 573.5
Total comprehensive
income(1) - - - 323.8 323.8 (0.1) 323.7
Change in ownership - - - (1.7) (1.7) 1.7 -
Employee Benefit
Trust
Shares sold in the
year - 2.2 - - 2.2 - 2.2
Shares acquired in
the year - (5.0) - - (5.0) - (5.0)
HL EBT share sale - - (2.2) - (2.2) - (2.2)
Reserve transfer
on exercise of share
options - - 3.6 (3.6) - - -
Employee share option
scheme
Share-based payments
expense (note 1.4) - - - 8.2 8.2 - 8.2
Current tax effect
of share-based payments
(note 1.7) - - - (0.1) (0.1) - (0.1)
Deferred tax effect
of share-based payments
(note 1.7) - - - (0.2) (0.2) - (0.2)
Dividend paid (note
3.2) - - - (190.4) (190.4) - (190.4)
At 30 June 2023 1.9 (6.4) (1.0) 715.2 709.7 - 709.7
-------------------------- --------- -------- ------------ ---------- ---------- ------------- --------
(1) Total comprehensive income includes Profit for the year and
the total comprehensive income presented is equal to Profit in both
years presented.
3.1 Share capital
Year ended Year ended
30 June 30 June 2022
2023
GBPm GBPm
Authorised: 525,000,000 (2022: 525,000,000)
ordinary shares of 0.4p each 2.1 2.1
Issued and fully paid: ordinary shares of
0.4p each 1.9 1.9
--------------------------------------------- ------------ --------------
Shares Shares
Issued and fully paid: number of ordinary
shares of 0.4p each 474,318,625 474,318,625
--------------------------------------------- ------------ --------------
The Company has one class of ordinary shares which carry no
right to fixed income.
The shares held by the EBT represents the cost of shares in
Hargreaves Lansdown plc purchased in the market and held by the
Hargreaves Lansdown 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 HL 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. Throughout the prior
year, the non-controlling interest in Hargreaves Lansdown Savings
Limited was held by Stuart Louden, an employee of the Group. During
the prior year an agreement was reached to purchase Stuart Louden's
shares which was executed during the year and at the year end the
Company had 100% control of Hargreaves Lansdown Savings
Limited.
3.2 Dividends
Amounts recognised as distributions to equity holders in the
year:
Year ended Year ended
30 June 30 June
2023 2022
GBPm GBPm
2022 final dividend of 27.44p (final dividend
2021: 26.6p) per share 130.2 126.0
2022 special dividend of 12.0p per share - 56.9
2023 interim dividend of 12.70p (2022: 12.26p)
per share 60.2 58.1
------------------------------------------------ ----------- ------------
Total dividends paid during the year 190.4 241.0
------------------------------------------------ ----------- ------------
After the end of the reporting period, the Directors declared a
final ordinary dividend of 28.80p pence per share payable on 15
December 2023 to shareholders on the register on 17 November 2023.
Dividends are required to be recognised in the financial statements
when paid, and accordingly the declared dividend amounts are not
recognised in these financial statements, but will be included in
the 2023 financial statements as follows:
GBPm
2023 final dividend of 28.80 p (2022 final
dividend: 27.44p) per share 136.6
Total dividends 136.6
--------------------------------------------- ---------
The payment of these dividends will not have any tax
consequences for the Group.
Under an arrangement dated 30 June 1997 the Hargreaves Lansdown
Employee Benefit Trust, which held the following number of ordinary
shares in Hargreaves Lansdown plc at the date shown, has agreed to
waive all dividends.
Year ended Year ended
30 June 30 June
2023 2022
No. of shares No. of shares
Number of shares held by the Hargreaves Lansdown
Employee Benefit Trust 779,080 424,035
Representing percentage of called-up share
capital 0.16% 0.09%
-------------------------------------------------- ----------------- -----------------
SECTION 4: CONSOLIDATED STATEMENT OF CASH FLOWS
Consolidated Statement of Cash Flows for the year ended 30 June
2023
Year ended
30 June Year ended
2023 30 June 2022
Note GBPm GBPm
Net cash from operating activities
Profit for the year after tax 323.7 215.8
Adjustments for:
Income tax expense 1.7 79.0 53.4
Depreciation of plant and equipment 1.3 8.5 8.9
Amortisation of intangible
assets 1.3 6.8 6.2
Impairment of intangible assets 1.3 - 1.0
Share-based payment expense 1.4 8.2 8.3
Interest on lease liabilities 1.6 0.4 0.5
Increase/(decrease) in provisions 0.4 (0.1)
Operating cash flows before
movements in working capital 427.0 294.0
(Increase)/decrease in receivables (203.4) 305.8
Increase/(decrease) in payables 72.2 (285.7)
--------------------------------------- -------- -------------- ------------------
Cash generated from operations 295.8 314.1
--------------------------------------- -------- -------------- ------------------
Income tax paid (80.5) (51.2)
Net cash generated from operating
activities 215.3 262.9
Investing activities
(Increase)/decrease in term
deposits (110.0) 40.0
Purchase of property, plant
and equipment (3.5) (2.8)
Cash capitalisation of intangible
assets (19.2) (10.9)
Proceeds on disposal of investments 0.3 0.1
Net cash generated (used in)/from
investing activities (132.4) 26.4
Financing activities
Purchase of own shares in EBT (5.0) (4.2)
Proceeds on sale of own shares
in EBT 2.2 2.8
Payment of principal in relation
to lease liabilities (4.7) (3.9)
Dividends paid to owners of
the parent 3.2 (190.4) (241.0)
Net cash used in financing
activities (197.9) (246.3)
Net (decrease)/increase in
cash and cash equivalents (115.0) 43.0
Cash and cash equivalents
at beginning of year 2.3 488.3 445.3
Cash and cash equivalents
at end of year (including
restricted cash) 2.3 373.3 488.3
Section 5: OTHER NOTES
5.1 General information
Hargreaves Lansdown plc (the Company and ultimate parent of the
Group) is a company incorporated and domiciled in the United
Kingdom under the Companies Act 2006 whose shares are publicly
traded on the London Stock Exchange. The address of the registered
office is One College Square South, Anchor Road, Bristol, BS1 5HL,
United Kingdom. The nature of the Group's operations and its
principal activities are set out in the Operating and Financial
Review.
These financial statements are presented in millions of pounds
sterling (GBPm) which is the currency of the primary economic
environment in which the Group operates.
Basis of preparation
These financial statements have been prepared in accordance with
UK-adopted international accounting standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards. The financial statements are
prepared on a going concern basis as discussed below.
The preparation of financial statements in conformity with IFRSs
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Company's accounting policies.
These results do not represent the audited financial statements
of the Group.
Going concern
The Group maintains ongoing forecasts that indicate continued
profitability in the 2023 financial year. Stress test scenarios are
undertaken, the outcomes of which show that the Group has adequate
capital resources for the foreseeable future even in adverse
economic conditions. The Group's business is highly cash generative
with a low working capital requirement; indeed, the forecast cash
flows show that the Group will remain highly liquid in the
forthcoming financial year. The Directors therefore believe that
the Group is well placed to manage its business risks successfully
despite the current uncertain economic outlook. After making
enquiries, the Directors' expectation is that the Group will have
adequate resources to continue in operational existence for a
period of at least 12 months from the date of approval of the Group
Financial statements. Accordingly, they continue to adopt the going
concern basis in preparing this preliminary results statement.
5.2 Contingencies
The Group operates in a highly regulated environment and, in the
ordinary course of business, provides information to various
regulators and authorities as part of informal and formal requests
and enquiries. In addition, the Group receives complaints or claims
in relation to its services from time to time brought by clients,
investors or other third parties. These may be notified to the
Group or directly to third parties, such as the Financial Ombudsman
Service in the case of client and investor complaints investigated
and not upheld by the Group. These include enquiries, complaints
and a threatened claim relating to the LF Equity Income Fund
(formerly the Woodford Equity Income Fund).
The Company received a letter purporting to be a pre-action
letter from a law firm in March 2021. In June 2021, the Company
rejected all the claims made for lack of a substantive basis of
claim. The Company is aware that the law firm has since filed a
claim form with the court against both Link Fund Solutions Limited
and Hargreaves Lansdown Asset Management Limited ("HLAM") for an
unspecified amount in October 2022. As at the date of issuing these
financial statements, the law firm has not yet confirmed that it
has secured sufficient funding to progress the claim, HLAM has not
been served with the claim form and no timetable has been set for
the conduct of any claim.
All such matters are periodically reassessed, with the
assistance of external professional advisers where appropriate, to
determine the likelihood of the Group incurring a liability. There
are inherent uncertainties in the outcome of such matters and it is
not practicable to reliably estimate the financial impact if any,
on the Group's results or net assets at the period end.
These matters have been re-assessed throughout the financial
year and the above statement is accurate as at the reporting date
and up to the date of issue.
5.3 Related party transactions
The Company has a related party relationship with its
subsidiaries, its Directors and members of the Executive Committee
(the 'key management personnel'). Transactions between the Company
and its key management personnel are disclosed below. Details of
transactions between the Company and other related parties are also
disclosed below.
Trading transactions
The Company entered into the following transactions with
Directors within the Hargreaves Lansdown Group and related parties
who are not members of the Group:
Throughout the prior year, the non-controlling interest in HL
Savings Limited was held by Stuart Louden, an employee of the
Group. During the prior year an agreement was reached to purchase
Stuart Louden's shares which was executed during the year and at
the year end the Company had 100% control of Hargreaves Lansdown
Savings Limited.
5.3 Related party transactions continued
During the years ended 30 June 2023 and 30 June 2022 the Company
has been party to a lease with P K Hargreaves, a significant
shareholder during the year and former Director, for rental of the
old head office premises at Kendal House. A five year lease was
signed in April 2021 for a rental of part of the building, to be
used for disaster recovery purposes at a market rate rent of GBP0.1
million per annum. No amount was outstanding at either year
end.
During the years ended 30 June 2023 and 30 June 2022, the Group
has provided a range of investment services in the normal course of
business to shareholders on normal third-party business terms.
Directors and staff are eligible for a slight discount on some
of the services provided.
Remuneration of key management personnel
The remuneration of the key management personnel of the Group,
being those personnel who were a member of the Board or Executive
Committee during the relevant year shown, is set out below in
aggregate for each of the categories specified in IAS 24 Related
Party Disclosures.
Year ended Y ear ended
30 June 30 June
2023 2022
GBPm GBPm
Short-term employee benefits 8.1 8.6
Post-employment benefits 0.4 0.4
Other long-term benefits 0.5 0.4
Termination benefits 0.9 0.5
Share-based payments 2.1 5.2
----------------------------- ----------- --------------
12.1 15.1
----------------------------- ----------- --------------
Non-Executive Directors fees 1.1 1.0
----------------------------- ----------- --------------
The table above has been updated to include Non-executive
Directors Fees, which were not included in the prior year.
In addition to the amounts, six key management personnel (2022:
eight) received gains of GBP1.0 million (2022: GBP1.6m) as a result
of exercising share options. During the year, awards were made
under executive option schemes for nine key management personnel
(2022: nine).
Included within the previous table are the following amounts
paid to Executive Directors of the Company who served during the
relevant year. Full details of Directors' remuneration, including
numbers of shares exercised, are shown in the Directors'
remuneration report.
Year ended Y ear ended
30 June 30 June
2023 2022
GBPm GBPm
Short-term employee benefits 2.7 2.6
Post-employment benefits 0.1 0.1
Other long-term benefits 0.2 0.2
Share-based payments 0.6 1.4
----------------------------- ----------- -------------
3.6 4.3
----------------------------- ----------- -------------
In addition to the amounts above, Directors of the Company
received gains of GBP0.3 million relating to the exercise of share
options (2022: GBP0.7m).
Year ended Y ear ended
30 June 30 June
2023 2022
GBPm GBPm
Emoluments of the highest paid Director 2.5(1) 1.9(1)
------------------------------------------------------- ----------- ----------------
No. No.
Number of Directors who exercised share options
during the year 1 2
Number of Directors who were members of money purchase
pension schemes 2 2
------------------------------------------------------- ----------- ----------------
1 The highest paid Director was the Chief Executive Officer and
full details of his emoluments can be found in the audited
'Remuneration payable' table in the Directors' remuneration
report.
Any amounts outstanding with related parties are unsecured and
will be settled in cash. No guarantees have been given or received
in respect of amounts outstanding. No provisions have been made for
doubtful debts in respect of the amounts owed by the related
parties.
5.4 Non-statutory accounts
The consolidated financial information as noted in this document
does not constitute the Group's statutory financial statements for
the years ended 30 June 2023 or 30 June 2022 but is derived from
them. Statutory financial statements for 2022 have been delivered
to the registrar of companies and those for 2023 will be delivered
in due course. The auditors have reported on both sets of financial
statements and their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 of the
Companies Act 2006.
Section 6: STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT
OF THE FINANCIAL STATEMENTS
The directors are responsible for preparing the Report and
Financial Statements 2023 and the financial statements in
accordance with applicable law and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the group and the parent company financial statements
in accordance with UK-adopted international accounting
standards.
Under company law, directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and parent company and of
the profit or loss of the group for that period. In preparing the
financial statements, the directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable UK-adopted international accounting
standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and parent
company will continue in business.
The directors are responsible for safeguarding the assets of the
group and parent company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain the
group's and parent company's transactions and disclose with
reasonable accuracy at any time the financial position of the group
and parent company and enable them to ensure that the financial
statements and the Directors' Remuneration Report comply with the
Companies Act 2006.
The directors are responsible for the maintenance and integrity
of the parent company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' confirmations
The directors consider that the Report and Financial Statements
2023 and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the group's and parent company's position
and performance, business model and strategy.
Each of the directors, whose names and functions are listed in
The Board of Directors confirm that, to the best of their
knowledge:
-- the group and parent company financial statements, which have
been prepared in accordance with UK-adopted international
accounting standards, give a true and fair view of the assets,
liabilities and financial position of the group and parent company,
and of the profit of the group; and
-- the Strategic report includes a fair review of the
development and performance of the business and the position of the
group and parent company, together with a description of the
principal risks and uncertainties that it faces.
In the case of each director in office at the date the
directors' report is approved:
-- so far as the director is aware, there is no relevant audit
information of which the group's and parent company's auditors are
unaware; and
-- they have taken all the steps that they ought to have taken
as a director in order to make themselves aware of any relevant
audit information and to establish that the group's and parent
company's auditors are aware of that information.
By order of the Board
Amy Stirling
Chief Financial Officer
18(th) September 2023
Executive Directors
Dan Olley
Amy Stirling
Non-Executive Directors
Deanna Oppenheimer
Andrea Blance
Adrian Collins
Penny James
Moni Mannings
Michael Morley
Roger Perkin
Darren Pope
John Troiano
Section 7: PRINCIPAL RISKS AND UNCERTAINTIES
Managing the risks to Hargreaves Lansdown is fundamental to
delivering the incredible levels of service our clients expect and
generating returns for shareholders. The Board has performed a
robust assessment of the principal risks facing the Group through a
process of continual review, including those that would threaten
its business model, future performance, solvency and liquidity. In
making such an assessment the Board considers the likelihood of
each risk materialising in the short and longer term.
T he principal risks and uncertainties faced by the Group are
detailed below, along with actions taken to mitigate and manage
them. The principal risks are categorised into strategic risks,
operational risks and financial risks as per our risk
framework.
Strategic risks
Failure to execute strategic
plans
Risk Potential Mitigations Key risk 2022/23 activity
impact indicators
------------------------------------------------------------ ----------------------------------------------------------- -------------------------------------------- ----------------------------------------------------------
The risk
that * Erosion of shareholder value * The Executive Committee and Board review strategy in * Technology and resiliency risk events * Commenced execution against three year strategy
HL does not the context of propositional design and service
deliver on enhancement on a regular basis
the * Negative impact on our brand and reputation * NNB v forecast * Progressed proposition enhancements including fund
strategy develop, active savings capacity and client
or in the * Oversight and tracking of strategic deliverables at communication and cash ISA wrapper
forecasted * Negative impact on client experience and HL's ability senior level governance forums (i.e. Quarterly * Client retention
timescales to maintain market share Business Review)
due to * Developed a Digital roadmap, including Cloud
incorrect * Service rating deployment and engagement of enhancement telephonic
information * Clear objectives aligned to Executive owners and a capability
or supporting operating plan in place
assumptions
based on
changing
market
dynamics,
inability
to
react to
changes,
or that the
activities
supporting
the
delivery
of the
strategy
are
inadequate
or poorly
designed.
------------------------------------------------------------ ----------------------------------------------------------- -------------------------------------------- ----------------------------------------------------------
Business Performance
Risk Potential Mitigations Key risk 2022/23 activity
impact indicators
--------------------------------------------------------- --------------------------------------------------- -------------------------------- --------------------------------------------------------
The risk
that * Earning fluctuations * Diversified revenue streams balanced between * Profit Before Tax * Increased targeted marketing campaigns
HL does not recurring and transaction-based
meet the
agreed * Blocker to delivery of strategic objectives * Underlying Costs * Targeted pricing adjustments
business * Monitoring and maintenance of client service
performance
targets * Erosion of shareholder value and / or market share * Client metrics (net, * Prioritisation of internal investment on service,
linked * Executive and Board Governance new and retention) technology & risk
to
strategy,
due to poor * Robust cost control * Executive oversight and development of KPIs
delivery,
cost
management
and/or
decision
making.
--------------------------------------------------------- --------------------------------------------------- -------------------------------- --------------------------------------------------------
Operational risks
Technology
Risk Potential Mitigations Key risk 2022/23 activity
impact indicators
--------------------------------------------------- ----------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------------
As HL moves
through its * Inability to maintain operational efficiency * Scalable IT Architecture planning * Unplanned downtime of client facing applications * Formation of new teams to support strategy in tooling
transformation, and technology enablement
the risk of
technology * Failure to deliver against strategy * Rolling internal and external monitoring of IT * Status of critical projects
failing to environment * Leverage Cloud technology to improve transfer out
meet current processes
business and * Poor client outcomes * Core system monitoring
future * Identification of contingency providers for
operational technology * Broadened our Learning tools and introduced new
requirements * Reputational damage * System patching status mentoring and coaching programmes
or at the pace
required to * IT recovery capability, planning and testing
deliver the * Regulatory intervention * Technology risk events * Migration of client telephony services to Amazon
strategic Connect
outcomes,
or the risk
of system/data * Full End-to-End IT Testing platform
being
unavailable
resulting in * Platform security improvements
disruption
to business
operations * Launched first cloud journey, improving our transfers
and the process
potential
for customer
detriment, * Operational Resilience programme
financial loss,
damage to
reputation, * Operational Plan, including prioritisation of IT
regulatory development
fines and/or
censure.
--------------------------------------------------- ----------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------------
Administration
Risk Potential Mitigations Key risk 2022/23 activity
impact indicators
------------------------------------------- --------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Risk of
failure * Poor client service & outcome(s) * Ongoing First Line of Defence monitoring of controls, * NPS * Focused workforce planning and tool deployment to
or delay of control management, self-assessment and quality support service improvements
any of the assurance
activities * Loss of client assets or money * Risk events (including CASS breaches) and Compliance
that are breach monitoring * Roll out of Amazon Connect telephony capability
carried * Process and procedural documents
out in support * Reputational damage
of the actual * Third party breaches * Enhancements to our transfer processes
process of * Training and development
administration * Failure to comply with Consumer Duty
of investing. * Complaints * Development of digital roadmap to drive further
* Operational MI service capability
* Regulatory intervention
* Helpdesk call quality
* Control focus at key governance forums, including
CASS Committee, Executive Risk Committee and
Operating Committee oversight * Operational processing and transactional error rates
------------------------------------------- --------------------------------------------------------------- ----------------------------------------------------------- -----------------------------------------------------------
Regulatory Compliance
Risk Potential Mitigations Key risk 2022/23 activity
impact indicators
----------------------------------------------------------- ------------------------------------------------------ --------------------------------------------------- ------------------------------------------------------------
Risk that
required * Regulatory breaches * Regulatory horizon scanning and business impact * Volume of new outputs from regulatory bodies * Investment into 'Foundation' strategic pillar
regulatory analysis
change is
not * Regulatory intervention * Number of regulatory change projects * Consumer Duty implementation
implemented * Compliance monitoring
to
regulatory * Reputational damage * Risk Events and Compliance breaches * CASS Improvement Plan
expectations * Ongoing open dialogue with the FCA
or
requirement * Inability to deliver business strategy or objectives * Complaints * First ICARA under new IFPR rules
and/or * Executive Risk Committee oversight
existing
regulatory * Increased and enhanced Compliance Monitoring capacity
requirements
are not met.
----------------------------------------------------------- ------------------------------------------------------ --------------------------------------------------- ------------------------------------------------------------
Financial crime
Risk Potential Mitigations Key risk 2022/23
impact indicators activity
----------------------------------------------------- ------------------------------------------------------------- -------------------------------------------------------- -----------------------------------------------------------
Risk that
HL * Loss of sensitive data * Dedicated Chief Information Security Officer and team, * Fraud monitoring * Completion of Financial Crime transformation
fails to and a Security Operations Centre focused on the programme (part 1)
design detection, containment and remediation of information
or * Poor client outcomes (including fraud) security threats * Cyber threat assessment
implement * Increased capability and capacity of Financial Crime
appropriate teams
frameworks, * Negative impact on confidence in HL * Dedicated Information Security, Anti Money laundering * Time taken to address security vulnerabilities
including and Client Protection teams in place
policies, * Operational delivery of Client Risk Assessment tool
processes, * Diminish the integrity of the financial system * Number of Information Commissioner's Office (ICO)
or * Specialist AML screening team notifiable data protection breaches
technology, * Delivery of enhanced client Sanction controls
to counter * Regulatory intervention
HL being * Formal policies and procedures and a robust, rolling
used risk-based programme of penetration and vulnerability
to further testing in place
financial
crime
by either * Enhanced Sanction control environment
internal
or external
parties * Horizon scanning peer group to understand industry
trends
----------------------------------------------------- ------------------------------------------------------------- -------------------------------------------------------- -----------------------------------------------------------
Data Management
Risk Potential Mitigations Key risk 2022/23
impact indicators activity
--------------------------------------------- -------------------------------------------------------- ------------------------------------------------- ------------------------------------------------------------
Risk that
HL * Loss of sensitive data * Dedicated Chief Information Security Officer, Chi * Data related Risk Events * New Data Risk Management Policy
fails to ef
design Data Officer and Data Protection Officer in place
or * Poor client outcomes (including fraud) * Data reporting issues * Refresh of the suite of data standards supporting the
implement policy
appropriate * Data Governance function
frameworks, * Inefficient processing * Data Privacy Impact Assessment completions
including * Established a cross organisational Data Panel to
policies, * Robust data access controls improve the management and use of data
processes, * Regulatory intervention * Cyber events
or
technology, * Data storage standards * Data Management and Information Security programmes
to manage * Fraud events
data
and data * Monitoring of sensitive data usage
storage
* Data Panel
--------------------------------------------- -------------------------------------------------------- ------------------------------------------------- ------------------------------------------------------------
Product & Proposition
Risk Potential Mitigations Key risk 2022/23
impact indicators activity
----------------------------------- -------------------------------------------------------- -------------------------------------------------- -------------------------------------------------
Risk of
developing/selling/communicating * Poor client outcomes * Colleague communication and training * Client survey results * Delivery against forthcoming Consumer Duty
new products regulations
or maintaining
existing products * Negative reputational impact * Risk and incident monitoring and review * Complaints
that result * Investment in Model Risk capabilities
in poor outcomes
for clients. * Regulatory censorship * Executive Risk Committee and Product Governance * Clients cancelling a new product or service
Committee oversight * Launch FlexInvest
* Corporate and social responsibility programme
* Whistleblowing process
* Fair value assessment
* Robust marketing and financial promotion controls
* Model Risk Management
----------------------------------- -------------------------------------------------------- -------------------------------------------------- -------------------------------------------------
Operational Resilience
Risk Potential Mitigations Key risk 2022/23
impact indicators activity
--------------------------------------------- -------------------------------------------- --------------------------------- ----------------------------------------------------------
Risk that
HL * Poor client outcomes * Business Impact Analysis * System downtime * Enhancements to the End-to-End IT testing platform
fails to
establish
robust * Policy or regulatory breaches * Business Continuity Plans * Process failures * Investment in Operational Resiliency tools and
operational processes
resilience
solutions * Operational inefficiencies or failures * Disaster Recovery Plans * Crisis management response
to * Review and enhancements to crisis management and
support incident management approaches
positive * Reputational damage * Strong Incident Management capability
client
outcomes. * Dedicated Operational Resiliency team and programme
* Regular incident scenario testing
* Scenario based playbooks
* Vulnerability remediation
* Operating Committee oversight
--------------------------------------------- -------------------------------------------- --------------------------------- ----------------------------------------------------------
Employee Relations
Risk Potential Mitigations Key risk 2022/23
impact indicators activity
----------------------------------------------- ------------------------------------------------------------ -------------------------------------- ------------------------------------------------------------
The risk that
HL does not * Operational inefficiency or poor conduct * Effective performance and Talent Management * Colleague retention rates * Breathing Space payment for junior colleagues to help
adapt its employee with cost of living
relation components
to meet the * Poor client outcomes * Regular review of employee reward offering to ensure * Colleague absence monitoring
changing market competitive reward offering * Improvements in 'Health & Wellbeing' support to all
environment colleagues
and the way * Reputational damage * Gender Pay Gap
that HL will * Regular staff surveys and employee forums to
operate as understand morale * People communications through HL Way to support HL
it transforms, * Diversity & Inclusion Values
such as employee
attraction, * People agenda monitored at ExCo and Board
recruitment, * Broadened out our Learning tools
onboarding,
development, * Robust whistleblowing policy and supporting processes
retention as * New mentoring and coaching schemes
well as employment
laws which
leads to * Evolved our Responsible Business Strategy through our
employee/customer/HL ESG Taskforce
detriment.
----------------------------------------------- ------------------------------------------------------------ -------------------------------------- ------------------------------------------------------------
Change Management
Risk Potential Mitigations Key risk 2022/23
impact indicators activity
------------------------------- ------------------------------------------------------- ------------------------------------------- ------------------------------------------------------------
The risk
that * Operational inefficiency * Delivery & Change Co-ordination Function * Change envelopes (financial budgets) * Development of Operating plan embedding strategic
HL change priorities
initiatives
are not * Poor client outcomes * Change Delivery Framework & controls * Delivery plans (milestones)
delivered * Embedding of Change Delivery Framework and delivery
in a timely controls and oversight processes
manner or * Reputational damage * Exco and Business Investment Committee oversight
fail
to deliver * Change delivery recruitment in 1LoD
the
required
business * Ongoing Executive and management oversight mechanisms
outcomes; (replacing ABR & QBR bullet)
resulting
in
compromised
delivery.
------------------------------- ------------------------------------------------------- ------------------------------------------- ------------------------------------------------------------
Information Security
Risk Potential Mitigations Key risk 2022/23
impact indicators activity
---------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------- --------------------------------------------------------
The risk that
information * Service disruption or failure * Dedicated Chief information Security Officer in place * Vulnerability management effectiveness * Access control developments including privileged
security access management.
protocols
do not keep * Compromise of sensitive and or corporate data * Organisational remit reporting through SMF24 * Cyber Events
up with good * Platform Security improvements.
practices and
developments * Negative reputational damage * Cyber Security Strategy and Plan * Cyber Threat assessment
resulting in * Cyber threat intelligence and Security monitoring
unauthorised improvements
access, * Impacted client outcomes * Cyber agenda monitored at Exco and Board * Third party governance KRIs
security
breaches * Endpoint Security Improvements
modification * Regulatory censure/fines * Secure by Design regime for all change activities * Colleague security awareness and compliance
or loss
resulting
in the * Cyber Security controls aligned in industry good
potential practice
for customer
detriment,
financial * Security Testing and assurance regime
loss,
damage to
reputation * Supply chain security assurance regime
or regulatory
fines/censure.
* Cyber vulnerability management, monitoring, incident
planning and response
* Scenario testing for Senior Leadership. Formal
scenario selection and assessment for ICARA provision
---------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------- --------------------------------------------------------
Glossary of Alternative Financial Performance Measures
Within the Announcement 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 Definition Why we use this measure Reconciliation
Underlying Underlying cost related This has been amended This measure
Activity costs to stockbroking, financial in the period to provide is the same
services costs and marketing visibility of the costs as the Activity
costs on a transactional that are associated Costs figures
basis related to the volume with both client numbers within note
of activity undertaken and transactional volumes, 1.3 less
by our clients. to allow comparison strategic
from year to year. investment
costs that
fit this
categorisation
of GBP0.1m.
---------------------------------- ------------------------------- ------------------
Dividend per Total dividend payable Dividend per share N/A
share (pence relating to a financial is pertinent information
per share) year divided by the total to shareholders and
number of shares eligible investors and provides
to receive a dividend. them with the ability
Note ordinary shares held to assess the dividend
in the Hargreaves Lansdown yield of Hargreaves
Employee Benefit Trust Lansdown plc shares.
have agreed to waive all
dividends (see note 3.2
to the consolidated financial
statements).
---------------------------------- ------------------------------- ------------------
Underlying Underlying cost related People costs are our Equivalent
People costs to staff, the main driver largest cost category to staff
of cost in our business and our people are costs figure
the key driver of our within note
Business and our strategy. 1.3, less
strategic
investment
costs of
GBP11.3m
---------------------------------- ------------------------------- ------------------
Platform Growth The net value of new assets Provides the most useful N/A
brought onto the platform measure of tracking,
less assets leaving the over time, the element
platform, excluding cash of net new business
placed with Active Savings. that is made up of
assets brought onto
the platform.
---------------------------------- ------------------------------- ------------------
Net movement The net value of assets Separated out from N/A
to Active Savings moving from the HL platform Platform Growth to
to Active Savings highlight the change
in asset mix within
the business and the
retention provided
by Active Savings.
---------------------------------- ------------------------------- ------------------
Active Savings The net value of new cash Provides the most useful N/A
Growth placed with Active Savings. measure of tracking,
over time, the element
of net new business
that is made up of
cash brought into Active
Savings.
---------------------------------- ------------------------------- ------------------
Market growth The underlying market Provides the best measure N/A
and other movement and other retained for highlighting changes
investment income, including in the AUA that are
dividends reinvested on not directly impacted
behalf of clients by client activity.
---------------------------------- ------------------------------- ------------------
Net interest Revenue from cash divided Provides the most comparable N/A
margin (bps) by the average value of means of tracking,
cash under administration, over time, the margin
net of interest received earned on the cash
by clients under administration
after considering the
amount received by
clients
---------------------------------- ------------------------------- ------------------
Revenue margin Total revenue divided Provides the most comparable N/A
(bps) by the average value of means of tracking,
assets under administration over time, the margin
which includes the Portfolio earned on the assets
Management Services assets under administration
under management held and is used by management
in funds on which a platform to assess business
fee is charged. performance.
---------------------------------- ------------------------------- ------------------
Revenue margin Revenue from cash (net Provides a means of N/A
from cash (bps) interest earned on the tracking, over time,
value of client money the margin earned on
held on the platform divided cash held by our clients.
by the average value of
assets under administration
held as client money).
---------------------------------- ------------------------------- ------------------
Revenue margin Revenue derived from funds Provides the most comparable N/A
from funds held by clients (platform means of tracking,
(bps) fees, initial commission over time, the margin
less loyalty bonus) divided earned on funds held
by the average value of by our clients.
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 margin Management fees derived Provides a means of N/A
from HL Funds from HL Funds (but excluding tracking, over time,
(bps) the platform fee) divided the margin earned on
by the average value of HL Funds.
assets held in the HL
Funds.
---------------------------------- ------------------------------- ------------------
Revenue margin Revenue from shares (stockbroking Provides a means of N/A
from shares commissions, management tracking, over time,
(bps) fees where shares are the margin earned on
held in a SIPP or ISA, shares held by our
less the cost of dealing clients.
errors) divided by the
average value of assets
under administration held
as shares.
---------------------------------- ------------------------------- ------------------
Strategic investments The total Cost (excluding Costs relating to the See page
costs capitalisation), of the planning and commencement 9
(Including Strategic Investment Programme of the digital technology
dual running including staff and professional strategy and core growth
costs) fees relating to the planning, initiatives, which
commencement and dual include staff costs,
running of the digital professional fees and
technology strategy, strategic technology costs, that
growth initiatives and are considered separately
the cost of expanding to reflect the impact
associated compliance, on the results of the
infrastructure and support Group.
functions.
---------------------------------- ------------------------------- ------------------
Underlying Underlying support costs Provides an assessment The measure
Support costs includes costs previously of our other costs. is the same
known as legal and professional as Support
fees and office running costs, within
costs, including operating note 1.3,
lease rentals. Also included less strategic
in underlying support investment
costs are depreciation costs of
of owned plant and equipment, GBP1.6m
amortisation of other
intangible assets and
impairment.
---------------------------------- ------------------------------- ------------------
Underlying Costs associated with Provides a means of The sum
Technology the use of third-party understanding the impact of Depreciation,
costs software and data feeds that increasing or Amortisation,
used in the performance changing our proposition Impairment,
of daily business. has on our costs. Operating
lease rentals
payable
and Support
costs per
note 1.3,
less strategic
investment
costs of
GBP22.7m
---------------------------------- ------------------------------- ------------------
Underlying Underlying profit after The calculation of N/A
basic earnings tax divided by the weighted basic earnings per
per share average number of ordinary share using statutory
shares for the purposes profit after tax adjusted
of basic EPS. for those costs that
are related specifically
to our strategic investments.
---------------------------------- ------------------------------- ------------------
Underlying Operating costs less strategic Provides relevant information Operating
costs investment costs (including on the year-on-year costs per
dual running costs). cost of the underlying note 1.3
business as we go through less GBP36.1m
a period of significant strategic
strategic investment. investment
costs
---------------------------------- ------------------------------- ------------------
Underlying Underlying profit after The calculation of N/A
diluted earnings tax divided by the weighted diluted earnings per
per share average number of ordinary share using statutory
shares for the purposes profit after tax adjusted
of diluted EPS. for those costs that
are related specifically
to our strategic investments.
---------------------------------- ------------------------------- ------------------
Underlying Profit after tax attributable Profit after tax includes Profit after
profit after to equity holders of the costs that are part tax per
tax parent company excluding of strategic planning the Statement
Strategic investment costs and development. This of Comprehensive
(including dual running measure helps to provide income after
costs). clarity between the adding back
profit of the business strategic
from period to period investment
when those costs are costs and
not considered. This adjusting
is important as we for a tax
go through a period shield effect,
of significant strategic as shown
investment. on page
6
---------------------------------- ------------------------------- ------------------
Underlying Profit before tax excluding Provides the best measure Profit before
profit before Strategic investment costs for comparison of profit tax per
tax (including dual running before tax of the underlying the Statement
costs). business performance of Comprehensive
as we go through a income after
period of significant adding back
strategic investment. strategic
investment
costs as
shown on
page 6
---------------------------------- ------------------------------- ------------------
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END
FR NKFBBKBKBCCD
(END) Dow Jones Newswires
September 19, 2023 02:00 ET (06:00 GMT)
Hargreaves Lansdown (LSE:HL.)
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Hargreaves Lansdown (LSE:HL.)
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