The Hargreaves Lansdown share price shed 11.3% yesterday after the company told investors the huge growth rate fuelled by a boom in online investment over the Covid-19 pandemic is slowing. The UK’s biggest investment platform by market share has, like many of its competitors, been a beneficiary of economic changes over the pandemic period.
More time spent at home, and presumably savings made on commuting and not being able to spend on holidays, bars, restaurants etc., encouraged many to start investing for the first time or to step up efforts to put money aside. But that welcome boost to Hargreaves and other online investment and trading platforms has faded with the end of lockdown restrictions across the UK.
The company’s chief executive Chris Hill yesterday told shareholders a notable “slowdown in dealing volumes and client activity versus the elevated levels this time last year”, has been apparent. Investors, already concerned about sliding profit margins in the face of increased sector competition, pressed the panic button to send the investment platform’s valuation down over 11% to £7.08 billion.
Including yesterday’s losses, the Hargreaves Landsdown share price has slid 16.45% over the past 12 months and is now down just under 0.5% for the calendar year. The Bristol-based company was founded in 1981 by namesakes Peter Hargreaves and Stephen Lansdown from a bedroom. The pair capitalised on the advent of the internet age to grow the company into the UK’s market leading retail investment platform. The company has been listed on the London Stock Exchange since 2007.
The warning over slowed growth came as Hargreave’s reported its first half results to the end of June. There were also plenty of positives, such as a record 233,000 new account holders attracted over the first 6 months of the year, adding almost £9 billion to capital under management.
Many of the new customers represent younger demographics and should be with the company for many years with 83% of new clients under the age of 55. Equity trading volumes over the first half of the year were also up 54% and the platform now boasts 1.6 million active customers.
Total assets under administration also benefited from a strong stock market to rise 30% to £135.5 billion and revenues gained 15% to £631 million. However, pre-tax profits were down 3% to £366 million because those of the previous year benefitted from the sale of the company’s Funds Library business.
Shore Capital analysts released an investment note in which they explained results falling short of their expectations was due to a combination retail stock trading levels dropping off in May and June and cutting prices for its portfolio management service to fend of competition.
The analysts were also cautious on the business’s outlook for the rest of the year, writing:
“The impact of Covid on individuals, businesses and the economy still provides an uncertain backdrop to the current year. As we have eased out of lockdown and entered the summer months, we have seen a slowdown in dealing volumes and client activity versus the elevated levels this time last year, which is also normal for this time of year and in line with management expectations.”
Despite a drop off in growth, Hargreaves is convinced its now larger customer base and assets under management will spur future growth as the value of new portfolios established by younger investors, whose median age has dropped from 58 to 46 since 2007, will grow. Hill commented:
“The pandemic has accelerated two trends that were already evident to us: a permanent shift to digital and a change in the demographic mix. We are seeing younger clients show an interest in — and willingness to learn about — investing, prioritising financial resilience and saving.”