Hargreaves Lansdown results miss forecasts, hit by higher costs
By Simon Jessop
LONDON (Reuters) - British retail investment services firm Hargreaves Lansdown reported forecast-lagging first-half results on Wednesday, hit by higher business development costs and a lower operating margin, sending its share price lower.
The group, best known for offering retail investors access to funds through its online platform, is developing new services including peer-to-peer lending and HL Savings, its planned cash deposit service.
Higher staff and other costs associated with developing those services combined with a lower average margin from clients using its Vantage investing platform meant earnings, profit and dividend all fell short of forecasts.
Net revenue in the six months was up 10 percent on the same period the previous year at 158.8 million pounds ($228.5 million), which was 1 percent behind consensus estimates, said analysts at Bernstein, while pretax profit of 108.1 million pounds was a 3 percent miss.
The operating profit margin slipped to 67.9 percent from 70.7 percent a year ago, while the interim dividend, up 7 percent at 7.8 pence per share, also lagged the consensus forecast, for 8.1 pence.
"Overall this is a poor set of numbers with a miss on earnings and dividend due to lower margin and higher costs," said Bernstein analyst Edward Houghton in a note to clients, even though the results beat his more pessimistic forecasts.
Bernstein predicted earnings per share forecasts would be reduced as a result of the higher than expected staff costs, flagging an 'underperform' rating on the shares and 1,200 pence price target.
The shares were down 3.7 percent at 1,268 pence, the biggest fall amongst stocks in the FTSE 100 <.PL.FTSE>.
Hargreaves said HL Savings remained on track for an autumn launch and it thought it could deliver the service without being required to get a banking licence.
While earnings lagged, Hargreaves nevertheless still saw strong demand from investors to access its services - even as market volatility hit stock index returns during the period.
The strong demand from retail investors was driven in large part by UK finance minister George Osborne's changes to pensions and savings rules which came in last year, giving investors more choice about where and how they can save for retirement.
The company's net new business inflows for the six months ended Dec. 31 were up 23 percent on a year ago at 2.77 billion pounds, it said, driving total assets under administration up 7 percent to a record 58.8 billion pounds.
($1 = 0.6951 pounds)
(Reporting by Simon Jessop; editing by Carolyn Cohn, Greg Mahlich)
