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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hargreaves Lansdown Plc | LSE:HL. | London | Ordinary Share | GB00B1VZ0M25 | ORD 0.4P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -2.00 | -0.27% | 747.80 | 746.80 | 747.20 | 754.40 | 742.40 | 752.40 | 631,902 | 16:35:18 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Security Brokers & Dealers | 735.1M | 323.8M | 0.6833 | 10.93 | 3.54B |
From Apr 2019 to Apr 2024
TIDMHL.
RNS Number : 2745W
Hargreaves Lansdown PLC
08 February 2017
Hargreaves Lansdown plc
Interim Report and
Condensed Consolidated Financial Statements
6 months ended 31 December 2016
Embargoed: for release at 0700h, 8 February 2017
Interim Management Report
Contents
Hot Features
Premium
Page
Interim Management Report 2-9
Responsibility Statement 10
Independent Review Report to Hargreaves Lansdown
plc 11
Condensed Consolidated Income Statement 12
Condensed Consolidated Statement of Comprehensive
Income 13
Condensed Consolidated Statement of Changes in
Equity 14
Condensed Consolidated Statement of Financial
Position 15
Condensed Consolidated Statement of Cash Flows 16
Notes to the Condensed Consolidated Financial
Statements 17-27
Directors, Company Secretary, Advisers and Shareholder
Information 28
Glossary of Alternative Performance Measures 29
The Interim Management Report contains forward-looking statements which have been made in good faith based on the information available to us at the time of the approval of this report and should be treated with caution due to the inherent risks and uncertainties, including both economic and business risk factors some of which were set out in the 2016 Annual Report, underlying such forward-looking information.
Unless otherwise stated, all figures below refer to the six months ended 31 December 2016 ("H1 2017"). Comparative figures are for the six months ended 31 December 2015 ("H1 2016"). Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances the sum of the numbers in a column or a row in tables contained in this document may not conform exactly to the total figure given for that column or row.
Hargreaves Lansdown plc
Interim results for the six months ended 31 December 2016
Hargreaves Lansdown plc ("HL" or "the Group") today announces interim results for the six month period ended 31 December 2016.
Highlights
-- Net revenue up 16% and profit before tax, up 21% on H1 2016. -- Assets under administration at a record level, up 13% since 30 June 2016 to GBP70.0 billion.
-- Net new business inflows of GBP2.34 billion for the six months (H1 2016: GBP2.77bn), down 22% in Q1 and up 10% in Q2 on an organic basis.*
-- Continued growth in active client numbers, now 876,000, an increase of 40,000 since 30 June 2016 (H1 2016: 47,000 or 40,400 excluding acquired clients).
-- Both client and asset retention remained strong at 94.7% and 93.5% (H1 2016: 94.5% and 93.9% respectively). -- Interim dividend up 10% to 8.60 pence per share (H1 2016: 7.8p)
"The diversified nature of the Hargreaves Lansdown business has enabled us to deliver significant growth in both revenue and profit. Despite macroeconomic uncertainties impacting investor confidence and net new business, clients continue to trust us with their money and benefit from our market-leading investment services. Mobile technology is a key part of our strategy and our new generation of iPhone and Android apps offer opportunities to further enhance our clients' mobile experience"
*Organic basis removes the impact of new business flows acquired from Jupiter and JP Morgan in the prior year comparative.
Ian Gorham
Chief Executive
Financial highlights Unaudited Unaudited Change Audited
6 months 6 months % year
ended 31 ended 31 to 30 June
December December 2016
2016 2015
(H1 2017) (H1 2016) (FY 2016)
=================================== ========== ========== ======= ============
Net revenue* GBP184.8m GBP158.8m +16% GBP326.5m
=================================== ========== ========== ======= ============
Operating profit margin +2.7
(on net revenue) 70.6% 67.9% pts 66.8%
=================================== ========== ========== ======= ============
Profit before tax GBP131.0m GBP108.1m +21% GBP218.9m
=================================== ========== ========== ======= ============
Total assets under administration GBP70.0bn GBP58.8bn +19% GBP61.7bn
=================================== ========== ========== ======= ============
Diluted earnings per share 22.4p 18.3p +22% 37.3p
=================================== ========== ========== ======= ============
Interim dividend per share 8.60p 7.80p +10% 7.80p
=================================== ========== ========== ======= ============
Net business inflows GBP2.34bn GBP2.77bn -16% GBP6.0bn
=================================== ========== ========== ======= ============
* Net revenue is total revenue less commission payable / loyalty bonus (see Glossary of alternative performance measures on page 29).
About us:
Hargreaves Lansdown operates the UK's largest direct to investor investment service administering over GBP70.0 billion of investments in ISA, SIPP and Investment accounts for 876,000 active clients. We have been helping clients choose and manage their investments since 1981 and currently provide self-directed, advisory and third party arrangement services for individuals and corporates. Hargreaves Lansdown has built a respected reputation with clients and the wider investment industry and works tirelessly to maintain and improve the lot of retail investors.
Our success is built around a high quality service tailored to the individual needs of our clients in order to help them make more of their money throughout their lifetime. We ensure our clients have access to information to support them with making their own investment decisions or access to highly skilled advisers should they wish to receive personal advice.
Our aim is to be the UK's number one choice for savings and investments. Knowledgeable and helpful staff, technology and experience enable us to deliver a business model that is highly scalable and has a strong track record of delivering growth and value for our shareholders alike.
We are proud of our success and are committed to delivering continued value in the years ahead to both clients and shareholders.
Contacts:
Hargreaves Lansdown
For media enquiries: For analyst enquiries:
Danny Cox, Head of Communications +44 (0)7989 672071 James Found, Head of Investor Relations +44 (0)117 988 9898
Ian Gorham, Chief Executive Officer Chris Hill, Deputy Chief Executive Officer
Analyst presentation
Hargreaves Lansdown will be hosting an analyst presentation at 9.00am on 8 February 2017 following the release of these results for the half year ended 31 December 2016. Attendance is by invitation only. A conference call facility will be in place with the following participant dial-in numbers - UK 0800 368 0649, UK (local) 020 3059 8125 and all other locations +44 20 3059 8125. A recording of the results presentation will be made available this morning at www.hl.co.uk/investor-relations following the presentation to the analysts.
Chief Executive's Statement
Trading and overview
Hargreaves Lansdown has continued to prosper during the last six months, with continued growth in clients, assets and profits.
Net revenue for the period rose by 16% to GBP184.8 million (H1 2016: GBP158.8m) and profit before tax for the period rose 21% to GBP131.0 million (H1 2016: GBP108.1m). The key contributors to profit growth were sustained significantly elevated equity trading volumes since the 23 June 2016 "Brexit" vote; higher levels of stock markets generating additional revenue from asset based charges; new revenue from new assets and clients; and continued cost control.
Net new business added during the period was GBP2.34 billion, down 16% compared to the equivalent six months last year (H1 2016: GBP2.77bn). The H1 2016 comparative included GBP264m of new business acquired from Jupiter and JP Morgan Asset Management and, after adjusting for this, organic net new business fell by 7%.
Encouragingly, asset gathering in the three months to December 2016 showed improvement over the first quarter, which as previously reported had been down 22% on 2016. The second quarter adjusted for the acquired business, was up 10% compared to the same period last year (unadjusted: 8% lower).
We were also pleased to welcome 40,000 new clients during the period (H1 2016: 47,000 or 40,400 excluding those acquired from Jupiter and JP Morgan). H1 2016 included c.6,600 new clients acquired through the above transactions, and consequently organic client growth remained on a par with last year. Total active clients now stand at 876,000 and total Assets Under Administration now stand at GBP70.0 billion (31 Dec 2015: GBP58.8bn).
The period was unusual in that it encompassed the effects of various political and macroeconomic developments. By far the greatest of these was the UK's vote to leave the European Union on 23 June 2016. The immediate effect has been significantly elevated equity trading levels compared to the prior year which persisted throughout the period. Hargreaves Lansdown saw 1.95 million client driven equity deals in the period, up 51% (H1 2016: 1.29m), with Hargreaves Lansdown's market share increased to 28.0%* (Q4 2015 23.8%). A weak pound has served to boost the value of client assets invested in overseas funds and equities (about 31% of Vantage client assets) and key stock markets have also performed well - the FTSE All Share index ended 10.2% up for the six months at 3873.22 (30 June 2016: 3515.45).
Low investor confidence typically reduces enthusiasm for retail investment. We saw a decline in confidence throughout the period to a low point in November 2016 before a partial recovery after the US Presidential Election. Low investor confidence coupled with higher asset values meant that we saw a higher level of client cash withdrawals during the period. Vantage ISA net new business was GBP0.6 billion (H1 2016: GBP0.7bn) and Fund & Share account net new business was also GBP0.6 billion (H1 2016: GBP0.8bn). New pension freedoms continue to prove attractive to clients and Vantage SIPP net new business was GBP1.1 billion (H1 2016: GBP1.2bn).
Despite the increased cash withdrawals post Brexit, client and asset retention remained steady at 94.7% and 93.5% respectively (H1 2016: 94.5% and 93.9%). Client satisfaction remained high with research indicating a Net Promoter Score(SM) of 53.3% (53.7%(1) in November 2015). Recent data from The Platforum showed Hargreaves Lansdown's market share continues to increase year-on-year and currently stands at 37.8% as at 30 September 2016 (30 September 2015: 35.9%).
Cost control in the period led to profit growth of 21%, in excess of the 16% rise in net revenue.
Continued opportunities for growth
Hargreaves Lansdown remains well positioned for the structural growth opportunities in the UK savings and investments markets. We continue to invest to maintain our market leadership and take advantage where we see opportunity to develop our services for clients.
Existing services
Clients enjoy significant discounts when investing in funds through Hargreaves Lansdown. The average annual management charge for a fund on our Wealth 150 list is 0.62%. This remains significantly lower than the standard average retail price for the same Wealth 150 funds of 0.75%.
The company benefited from net new flows of GBP481 million into our HL Multi Manager Funds, up 30% on the same period last year (H1 2016: GBP369m). Our new HL Select Shares fund raised GBP168m and the value of assets in our Portfolio+ simple
1 Net Promoter, NPS, and the NPS-related emoticons are registered service marks, and Net Promoter Score and Net Promoter System are service marks, of Bain & Company, Inc., Satmetrix Systems, Inc. and Fred Reichheld.
investing service now stands at GBP459m (30 June 2016: 311m). Our ten HL Multi Manager Funds plus the HL Select Shares fund now hold combined assets of GBP7.5 billion (30 June 2016: GBP6.3bn, 31 Dec 2015: GBP5.9bn).
Our Corporate Vantage service welcomed 17 new live schemes (H1 2016: 32 schemes), with total members now at 75,000 holding GBP2.2 billion (H1 2016: GBP1.5bn) in assets and contributing GBP254 million in annual contributions (H1 2016: GBP218m).
We experienced another period of significant growth in our digital presence and we continue to develop our ability to target and convert prospective clients across our digital platforms. Our website and apps were visited 66.7 million times, up 39% on the same period last year.
New initiatives
HL Savings, our new cash deposit service supported by a marketplace lending (peer to peer) capability remains a priority initiative. An internal proof of concept of the deposit service commenced in January 2017, successfully testing the underlying technology, feasibility and banking partner participation. However significant development work remains before the service will be ready to launch to clients at a level of excellence consistent with our Vantage offering. Our current expectation is HL Savings will not be ready to launch to clients until at least October 2017.
Following the success of our fund launches we continue to review our fund management portfolio, given the demand amongst clients for Hargeaves Lansdown's asset management services. We expect to launch further funds in 2017 including the HL Select UK Income Shares fund. This strategy will continue until we are satisfied demand for funds from clients is materially covered across sectors, without creating sub-scale funds.
With mobile technology forming a key part of our strategy, our project to launch a new generation of enhanced HL iPhone and Android apps resulted in the launch of a suite of new apps on 1 February 2017 which were well received with over 160,000 initial downloads and updates in the first few days. We will now focus improvements based on feedback. Whilst our previous mobile apps won awards, we believe advances in technology offer an opportunity to further enhance our clients' mobile experience and the new apps encapsulate these opportunities in their capabilities and presentation.
Regulation
The changes we announced on 15 January 2014 and implemented on 1 March 2014 addressing the requirements of the Retail Distribution Review (RDR) have now been successfully in place for approaching three years. We do not see any further work required in this area.
On 18 November 2016 the FCA published its interim findings of its asset management market study. Hargreaves Lansdown welcomes the work to improve competition, transparency and reduce costs for investors. The study recognises investors benefit from scale and the work of intermediaries in negotiating lower charges, such as Hargreaves Lansdown Wealth 150+ list achieving a c20% reduction in fund charges compared to the standard pricing. We have evaluated the review's recommendations and proposals and will be responding to the consultation before the 20 February 2017 deadline. The final report and proposed amendments are expected to be published in Q2 2017 after which there will be a period for implementation. At this stage we do not expect the study to have a material impact on trading results.
Outlook
Many of our charges are based on levels of client assets with 77% of our net income now coming from recurring sources (H1 2016: 80%). The level of our earnings has a direct relationship with the value of the investments within our administration. Therefore the level of world stock markets can have an effect on profits outside of our control.
Hargreaves Lansdown also earns revenue from dealing charges and the period since the "Brexit" vote has seen elevated levels of dealing by clients. The extent to which this elevated dealing level is a short term effect or a newly sustainable level is unknown, however, elevated levels of trading continue with no sign of material reduction six months on from the Brexit vote.
The net revenue margin on cash fell to 0.51% (H1 2016: 0.55%) as a result of the reduction in the base rate of interest in August 2016. The impact of this rate reduction takes time to flow through and impact our margin given that the majority of clients SIPP money is placed on term deposits. As these deposits mature they are typically placed back out again on term at a lower rate of interest and consequently we will see a decline in the margin in the second half of our year. Overall the Directors now expect the interest margin to be in the range of 0.40% to 0.50% for the 2017 financial year.
The second half of our trading year is consistently the stronger half for new business, including as it does the tax year-end, which acts as a natural incentive for clients to use tax allowances. Given the geopolitical backdrop, levels of new business will be influenced by evolving investor confidence and stock market levels. As usual the second half of the year will be impacted by the Financial Services Compensation Scheme levy which for last year resulted in a final charge of GBP5.2 million.
Dividend
Hargreaves Lansdown continues to demonstrate strong growth in both profit, assets and clients whilst retaining the capacity to continually deliver new initiatives. Given profit growth and the confidence that we have in our business model, in accordance with our dividend policy the Directors have therefore recommended a 10% rise in the interim dividend to 8.60 pence per share. This reflects the Group's long-term earnings opportunity and excellent cash flow potential.
Board changes
In line with our succession planning, on 25th January 2017 the Board of Hargreaves Lansdown announced the appointment of Philip Johnson as Chief Financial Officer ("CFO"), subject to regulatory approvals. Philip will be joining the Company on 20 February 2017.
Philip is an experienced Chartered Accountant and financial services CFO. Philip was previously CFO of Jupiter Fund Management plc for seven years and prior to that Group Finance Director of M&G Limited for over five years. Philip qualified as a chartered accountant with Coopers & Lybrand (now PricewaterhouseCoopers LLP).
We are also pleased to confirm that Chris Hill, Deputy Chief Executive and Chief Financial Officer, will be appointed as Chief Executive Officer ("CEO"), and, in line with our plans for an orderly handover, I will step down from the Company's Board and as CEO following today's Interim Results, subject to regulatory approvals. I will remain an employee of the Company until 30 September 2017. I would like to thank our clients, staff, shareholders and many supporters for their help and assistance during this successful period for Hargreaves Lansdown and I wish the company every success for the future.
Ian Gorham
Chief Executive
* Provisional stockbroking data from Compeer Limited XO Quarterly Benchmarking Report Quarter 4 2016 and final
Compeer Limited XO Quarterly Benchmarking Report Q4 2015.
Financial Review
Assets Under Administration (AUA) and new business inflows
During the period the total value of AUA increased by 13% to a record GBP70.0 billion. The Group achieved net new business inflows of GBP2.34 billion (H1 2016: GBP2.77bn), and a positive impact of stock market growth and other factors of GBP6.0 billion (H1 2016: GBP0.9 bn). Total assets under administration can be broken down as follows:
31 December 31 December 30 June
2016 2015 2016
GBP'billion GBP'billion GBP'billion
------------------------------------- ------------- ------------- -------------
Vantage Assets Under Administration
(AUA) 66.7 55.9 58.7
------------------------------------- ------------- ------------- -------------
Assets Under Administration and
Management (AUM)
------------------------------------- ------------- ------------- -------------
Portfolio Management Service (PMS) 3.2 2.9 2.9
------------------------------------- ------------- ------------- -------------
Multi-Manager funds held outside
of PMS 4.4 3.3 3.6
------------------------------------- ------------- ------------- -------------
AUM Total 7.6 6.2 6.5
------------------------------------- ------------- ------------- -------------
Less: Multi-Manager funds (AUM)
included in Vantage AUA (4.3) (3.3) (3.5)
------------------------------------- ------------- ------------- -------------
Total Assets Under Administration 70.0 58.8 61.7
------------------------------------- ------------- ------------- -------------
Net new business in the Vantage ISA, SIPP and other Vantage nominee accounts was GBP0.6 billion, GBP1.1 billion and GBP0.6 billion respectively (H1 2016: GBP0.7bn, GBP1.2bn, GBP0.8bn). New business was as a result of 40,000 net new Vantage clients combined with new subscriptions and transfer business from existing clients.
As highlighted in the first quarter trading update, Vantage net new business of GBP1.11 billion was down 22% compared to the prior year record first quarter, which was boosted by the new pension freedoms and transfers of Child Trust Funds into Junior ISAs. In the second quarter Vantage net new business of GBP1.21 billion was down 9% versus GBP1.33 billion in the prior year. The prior year however, included GBP0.22 billion of new business acquired from Jupiter and JP Morgan Asset Management. Stripping this out would give an increase in net new business of 9% in the second quarter.
As at 31 December 2016, the value of assets within the Vantage ISA was GBP26.0 billion (30 June 2016: GBP23.0bn), Vantage SIPP assets were GBP22.2 billion (30 June 2016: GBP19.3bn) and Vantage Fund and Share accounts held GBP18.5 billion (30 June 2016: GBP16.5bn). Client and asset retention ratios remained high at 94.7% and 93.5% respectively for the period (H1 2016: 94.5% and 93.9%).
The composition of Vantage assets at 31 December 2016 was 10.9% cash (30 June 2016: 11.6%), 55.1% investment funds (30 June 2016: 54.3%) and 34.0% stocks, shares and other (30 June 2016: 34.1%).
Assets invested via the Portfolio+ service, launched in May 2015, grew 123% to GBP459 million (H1 2016: GBP206m).
The value of assets managed by Hargreaves Lansdown within its own range of funds and its Portfolio Management Service (PMS) increased by 23% to GBP7.6 billion (H1 2016: GBP6.2bn). Since the prior year period we have launched two new HL Multi-Manager Funds; a Strategic Assets fund launched in February 2016 and a High Income fund launched in April 2016. In addition we launched the HL Select UK Share Fund in December 2016. By 31 December 2016 these three funds held a combined GBP758 million. Although PMS assets increased from GBP2.9 billion to GBP3.2 billion across the period this was almost entirely driven by market growth in the HL Multi-Manager Funds. Net new business was GBP22 million in the period (H1 2016: GBP34m). PMS remains a core service but the gathering of new assets and clients remains behind expectations. A review of the service continues with a view to improving lead flows and the quality of the offering for clients.
Net revenue by division
Net Revenue by division: Unaudited Unaudited
6 months ended 6 months ended
31 December 31 December
2016 2015
GBP'million GBP'million % increase/decrease
--------------------------- ---------------- ---------------- --------------------
Vantage 140.2 119.3 +18%
--------------------------- ---------------- ---------------- --------------------
Discretionary and Managed 33.3 29.1 +14%
--------------------------- ---------------- ---------------- --------------------
Third Party & Other
Services 11.3 10.4 +9%
--------------------------- ---------------- ---------------- --------------------
Total Net Revenue 184.8 158.8 +16%
--------------------------- ---------------- ---------------- --------------------
Vantage
Net revenue increased by 18% driven by a 19% growth in AUA and a 51% increase in stockbroking revenues. Revenue from funds grew from GBP74.3 million to GBP80.6 million with a previously communicated reduction in the revenue margin from 0.45% to 0.42% as a consequence of the sunset clause from 1 April 2016 onwards for which more detail is given below.
Interest on client money grew from GBP13.9 million to GBP18.5 million with the impact of higher cash balances more than offsetting the impact of a margin reduction from 0.55% to 0.51% in the period.
Stockbroking commission grew by 51% from GBP18.6 million to GBP28.0 million driven by volumes which increased significantly post the Brexit vote and have remained strong throughout the period. There were 2.38 million equity deals in the period compared to 1.65 million in H1 2016. Of these 1.94 million were client driven deals (H1 2016: 1.28m) and 0.43 million were automated deals such as dividend reinvestment and regular savings (H1 2016: 0.37m).
Net revenue margin earned on AUA held on the Vantage platform in the first half of the year was 0.41% (H1 2016: 0.42%). The decrease has been driven by a fall in the cash margin following the Bank of England base rate reduction in August combined with a reduction in the margin on funds since the sunset clause of 1 April 2016. From this point, in accordance with the Retail Distribution Review, any renewal commission received from fund management groups could no longer be retained and instead was passed entirely to clients. These decreases were partly offset by an increase in the revenue margin on other assets primarily because of increased stockbroking trades.
Discretionary and managed
Revenue for the division grew 14% with higher management fees driven by growth in assets held within the Multi-Manager Funds from GBP5.9 billion to GBP7.5 billion.
Third party and other
The Third party and other services division saw a 9% increase in revenue from GBP10.4 million to GBP11.3 million. Revenues from Funds Library increased by GBP0.8 million and Hargreaves Lansdown Currency and Markets (Contracts for Difference, spread betting and currency services) increased by GBP0.4 million. These were partly offset by a GBP0.6 million reduction in third party corporate and personal pension business driven by the continued fall in personal annuity volumes following the March 2014 pension reforms and reduction in third party commission on corporate schemes following changes post the Retail Distribution Review.
Financial performance
Unaudited Unaudited Audited
6 months 6 months Year
ended ended
31 December 31 December to
2016 2015 30 June
(H1 2017) (H1 2016) 2016
(FY 2016)
% movement GBP'million GBP'million GBP'million
Revenue -8% 184.9 200.7 388.3
Commission payable /
loyalty bonus -100% (0.1) (41.9) (61.8)
------------- ------------- -----------------
Net revenue +16% 184.8 158.8 326.5
Other operating costs +7% (54.7) (51.0) (102.7)
FSCS levy 0.3 - (5.5)
Operating profit +21% 130.5 107.8 218.3
Non-operating income +67% 0.5 0.3 0.6
Profit before taxation +21% 131.0 108.1 218.9
Taxation +16% (24.6) (21.2) (41.6)
------------- ------------- -----------------
Profit after taxation +22% 106.4 86.9 177.3
------------- ------------- -----------------
As highlighted previously, renewal commission on funds and the related client loyalty bonuses ceased from April 2016 as stipulated under the rules of the Retail Distribution Review (known as "the Sunset Clause"). This led to the reduction in revenue and the loyalty bonus payable as shown above.
Total net revenue for the six months to 31 December 2016 rose 16% driven by the increase in AUA and higher stockbroking revenues. Recurring revenue streams are dependent on asset valuations and hence with AUA growing from GBP58.8 billion to a record GBP70.0 billion over the last 12 months, we have benefitted from our continued asset gathering and strong client retention. Client reaction post the EU referendum and US Presidential Election have driven higher stockbroking volumes throughout the period.
Net revenue margin earned on AUA showed a slight decline from 0.42% in H1 2016 to 0.41% in line with our expectations. From 6 April 2016 the sole revenue earned from funds held by clients has been the tiered platform fee. Looking forwards we anticipate the overall Vantage revenue margin to remain at c0.42% per annum.
Investment funds on average represented 55% of Vantage AUA. Revenue margin on these funds fell slightly, in line with our expectations to 0.42% (H1: 2016 0.45%).
Shares on average represented 34% of Vantage AUA. Revenue margin on shares and other stock is made up of management fees applied to shares held in the ISA and SIPP, as well as stockbroking commissions on equity deals. Revenue margin increased to 0.33% (H1 2016: 0.27%) as client driven equity deals (excluding automated deals such as dividend reinvestments and regular savings deals) rose 52% to 1.94 million deals.
Cash on average represented 11% of Vantage AUA. The net revenue margin on client cash balances was 0.51% (H1 2016: 0.55%). The reduction is primarily due to the Bank of England base rate reduction in August 2016. For the current financial year we previously guided the cash revenue margin to be in the range of 0.35% to 0.45% for the year. We are currently above that range but anticipate a reduction in the second half as SIPP client money that matures is likely to be placed back on term deposit at a lower rate following the August rate reduction. Assuming no changes to the Bank of England base rate we now anticipate the cash interest margin for the financial year 2017 will be in the range of 0.40% and 0.50%.
GBP141.9 million of net revenue is recurring in nature (H1 2016: GBP126.5m). In the period this represented 77% of revenue (H1 2016: 80%). Recurring revenue stream comprised platform fees of GBP80.6m, (H1 2016: GBP68.5m), renewal commissions net of loyalty bonuses paid to clients of GBP2.8m, (H1 2016: GBP9.6m), management fees of GBP40.0m, (H1 2016: GBP34.6m) and interest on client money of GBP18.6m, (H1 2016: GBP13.9m).
Operating costs
Operating costs comprise the following:
Unaudited Unaudited
6 months ended 6 months ended
31 December 31 December
2016 2015 Increase/decrease
GBP'million GBP'million %
Staff costs 31.9 30.3 +5%
Marketing and distribution
costs 5.8 5.5 +5%
Office running costs 1.8 2.3 -22%
Depreciation, amortisation
and financial costs 3.3 2.8 +18%
Other costs 11.9 10.1 +18%
---------------------------- ---------------- ---------------- ------------------
54.7 51.0 +7%
FSCS levy (0.3) -
---------------------------- ---------------- ---------------- ------------------
Operating costs 54.4 51.0 +7%
---------------------------- ---------------- ---------------- ------------------
Staff costs
Staff costs increased by 5% on the comparative half year, after the capitalisation of GBP1.2 million (H1 2016: GBP0.4m) of Hargreaves Lansdown Savings and other IT developments.
The number of staff employed on a full-time basis (including Directors) at 31 December 2016 was 1,012 and the average number of staff during the period was 970 (H1 2016: 964). The increase in staff numbers is in line with our strategic plans and our commitment to delivering a high level of service to our growing client base which will see us maintain our position as the UK's leading direct to client investment platform. Of particular note are increased staff numbers in HL Savings where we continue to develop a digital cash deposit service and a Peer to Peer platform and in web marketing roles. Other drivers of the increase are inflation and an increase to the staff bonus accrual.
Marketing and distribution
Group marketing and distribution spend increased 5% primarily driven by an increase in use of digital marketing opportunities as we reduce spend on traditional paper based marketing.
Office running costs
Office running costs made up of rent, rates and utility costs fell by GBP0.5 million driven entirely by rebates received on previous year's rates charges.
Depreciation, amortisation and financial costs
Depreciation, amortisation and financial costs increased by GBP0.5 million primarily as a result of increased capital spend on essential hardware and software as well as an increase in bank processing costs.
Other costs
Other costs rose by GBP1.8 million, with the main increase relating to dealing costs which rose by GBP0.9 million on the back of the 44% increase in total equity dealing volumes (including regular savings and income reinvestment deals) in the period. The balance of the increase is attributed to data costs of GBP0.4 million, increased IT maintenance of GBP0.3 million and irrecoverable VAT of GBP0.2m.
Taxation
The charge for taxation in the income statement increased from GBP21.2 million to GBP24.6 million resulting in an effective tax rate of 18.8% (H1 2016: 19.6%). The standard UK corporation tax has been 20% throughout the period. An adjustment in respect of increased capital allowances and employee share acquisition relief in the period, however, reduced the effective corporation tax rate below the standard 19.75% to 18.8%. In total, taxation of GBP0.3 million has also been charged to equity relating to share-based payments.
Dividend
The Board has declared an interim dividend of 8.60 pence per share (H1 2016: 7.8p). The interim dividend will be paid on 30 March 2017 to all shareholders on the register at 10 March 2017. This amounts to a total interim dividend of GBP40.7 million.
An arrangement exists under which the Hargreaves Lansdown Employee Benefit Trusts (the "EBTs") have agreed to waive all dividends. As at 31 December 2016 the EBTs held 1,540,551 shares.
During the period the Board became aware of a technical issue in respect of a number of historic dividends paid by the Company. Details are included in Note 11 to the condensed consolidated financial statements. A circular will be sent to shareholders shortly and will be available on the Company's website at www.hl.co.uk/investor-relations.
Capital expenditure
Capital expenditure totalled GBP5.0 million for the six months ended 31 December 2016 (H1 2016: GBP3.3m). Replacement of office equipment and hardware ensuring the capacity and the security of the IT infrastructure amounted to GBP1.7 million (H1 2016: GBP2.2m). GBP2.1 million was spent on computer software (H1 2016: GBP0.7m) and capitalisation of other intangibles was GBP1.2 million (H1 2016: GBP0.4m).
Other intangibles are primarily internally generated, being IT development on an upgrade of the core IT platform for the business GBP0.4 million (H1 2016: GBP0.4m) and development of a new IT platform for a digital cash deposit service GBP0.8 million (H1 2016: GBPnil).
Liquidity and capital resources
The group maintains a robust balance sheet which is free from debt, has a healthy ratio of current assets to current liabilities and retains a capital base over and above the regulatory capital adequacy requirements. In addition to being attractive to clients, this provides both resilience and flexibility. The Group is highly cash generative and the cash conversion ratio measured by the operating cash flows as a percentage of operating profits remained high at 100% in H1 2017 compared to 93% in H1 2016.
Group cash balances excluding restricted cash totalled GBP189.8 million at the end of the period (H1 2016: GBP165.7m). The only significant cash outflow from profits has been the final and special dividends totalling GBP123.8 million paid during September 2016 (H1 2016: GBP121.4m).
Capital is defined as the total of share capital, share premium, retained earnings and other reserves. As at 31 December it was GBP236.4 million (H1 2016: GBP214.7m) and this capital is managed via the net assets to which it relates. The Group has four subsidiary companies authorised and regulated by the Financial Conduct Authority. These firms have capital resources at a level which satisfies both their regulatory capital requirements and their working capital requirements and, as a group, we maintain a robust balance sheet retaining a capital base over and above regulatory capital requirements. Further disclosures are published in the Pillar 3 document on the Group's website at www.hl.co.uk.
Related party transactions
Except for the transaction disclosed in Note 19 to the financial statements no other related party transactions have taken place that materially affect the financial position or performance of the Group and there have been no material changes to the related party transactions described in the last Annual Report and Accounts.
Principal risks and uncertainties
The principal risks and uncertainties which could impact the Group were detailed on pages 36 to 39 of the Group's Annual Report and Financial Statements 2016, a copy of which is available on the Group's website www.hl.co.uk. The key risks and uncertainties have not changed and are highlighted in Note 6 to the financial statements. These are not expected to change in the second half of the 2017 financial year, and they are regularly reviewed by the Board.
Responsibility Statement
The directors confirm that to the best of their knowledge:
a) the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation as a whole as required by Disclosure and Transparency Rules (DTR) 4.2.4R;
b) the interim management report includes a fair review of the information required by DTR 4.2.7R - "indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year"; and
c) the interim management report includes a fair review of the information required by DTR4.2.8R - "disclosure of related party transactions and changes therein".
A list of current directors is shown on page 28.
On behalf of the Board
Ian Gorham
Chief Executive
7 February 2017
Independent Review Report to Hargreaves Lansdown plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Hargreaves Lansdown plc's condensed consolidated financial statements (the "interim financial statements") in the interim report and condensed consolidated financial statements of Hargreaves Lansdown plc for the 6 month period ended 31 December 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated statement of financial position as at 31 December 2016;
-- the condensed consolidated income statement and condensed consolidated statement of comprehensive income for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; -- the condensed consolidated statement of cash flows for the period then ended; and -- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report and condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the condensed consolidated interim financial statements and the review
Our responsibilities and those of the directors
The interim report and condensed consolidated financial statements, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report and condensed consolidated financial statements in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the interim report and condensed consolidated financial statements based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of condensed consolidated financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim report and condensed consolidated financial statements and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
7 February 2017
a) The maintenance and integrity of the Hargreaves Lansdown plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdiction.
Condensed Consolidated Income Statement
for the period ended 31 December 2016
Unaudited Unaudited
6 months 6 months Audited
ended ended Year to
31 December 31 December 30 June
2016 2015 2016
Note GBP'000 GBP'000 GBP'000
Revenue 8 184,899 200,742 388,333
Commission payable (66) (41,941) (61,797)
------------------------- ---- ------------ ------------ --------
Net revenue 184,833 158,801 326,536
Staff costs (31,851) (30,308) (60,217)
Other operating costs (22,793) (20,652) (42,575)
FSCS refund/(costs)** 291 - (5,494)
------------------------- ---- ------------ ------------ --------
Operating profit 130,480 107,841 218,250
Investment revenue 9 443 269 629
Other gains and losses 55 - -
------------------------- ---- ------------ ------------ --------
Profit before tax 130,978 108,110 218,879
Tax 10 (24,628) (21,214) (41,623)
------------------------- ---- ------------ ------------ --------
Profit for the period 106,350 86,896 177,256
------------------------- ---- ------------ ------------ --------
Attributable to:
Owners of the parent 106,072 86,711 176,895
Non-controlling interest 278 185 361
------------------------- ---- ------------ ------------ --------
106,350 86,896 177,256
Earnings per share
(pence)
Basic earnings per
share 12 22.4 18.3 37.4
Diluted earnings per
share 22.4 18.3 37.3
--------------------- ---- ---- ----
** FSCS costs are those relating to the running of and the
levies issued under the Financial Services Compensation
Scheme.
The results relate entirely to continuing operations.
After the balance sheet date, the directors declared an
ordinary interim dividend of 8.60 pence per share payable
on 30 March 2017 to shareholders on the register at 10 March
2017.
Condensed Consolidated Statement of Comprehensive Income
for the period ended 31 December 2016
Unaudited Unaudited
6 months 6 months Audited
ended 31 ended 31 Year to
December December 30 June
2016 2015 2016
GBP'000 GBP'000 GBP'000
Profit for the period 106,350 86,896 177,256
------------------------------------ --------- --------- --------
Total comprehensive income for the
financial period 106,350 86,896 177,256
------------------------------------ --------- --------- --------
Attributable to:
Owners of the parent 106,072 86,711 176,895
Non-controlling interest 278 185 361
------------------------------------ --------- --------- --------
106,350 86,896 177,256
----------------------------------- --------- --------- --------
Condensed Consolidated Statement of Changes in Equity
for the period
ended
31 December ------------------------------ Attributable
2016 to the owners of the parent ------------------------------
Shares
Share Capital held
Share premium redemption by EBT EBT Retained Non-controlling Total
capital account reserve reserve reserve earnings Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2015 1,897 8 12 (13,018) 12,704 234,963 236,566 501 237,067
Total
comprehensive
income - - - - - 86,711 86,711 185 86,896
Employee
Benefit Trust:
Shares sold
during
the period - - - 8,272 - - 8,272 - 8,272
Shares - - - - - - - - -
acquired in
the period
EBT share sale - - - - (747) - (747) - (747)
Employee share
option
scheme:
Share-based
payments
expense - - - - - 1,124 1,124 - 1,124
Current tax
effect
of
share-based
payments - - - - - 2,446 2,446 - 2,446
Deferred tax
effect
of
share-based
payments - - - - - 1,015 1,015 - 1,015
Dividend paid
(note
11) - - - - - (121,365) (121,365) - (121,365)
At 31 December
2015 1,897 8 12 (4,746) 11,957 204,894 214,022 686 214,708
At 1 July 2016 1,897 8 12 (14,850) 11,999 254,632 253,698 466 254,164
Total
comprehensive
income - - - - - 106,072 106,072 278 106,350
Employee
Benefit Trust:
Shares sold
during
the period - - - 4,134 - - 4,134 - 4,134
Shares
acquired in
the period - - - (2,908) - - (2,908) - (2,908)
EBT share sale - - - - (2,522) - (2,522) - (2,522)
Reserve
transfer on
exercise of
share options - - - - 1,010 (1,010) - - -
Employee share
option
scheme:
Share-based
payments
expense - - - - - 1,345 1,345 3 1,348
Current tax
effect
of
share-based
payments - - - - - 183 183 - 183
Deferred tax
effect
of
share-based
payments - - - - - (459) (459) - (459)
Dividend paid
(note
11) - - - - - (123,846) (123,846) - (123,846)
At 31 December
2016 1,897 8 12 (13,624) 10,487 236,917 235,697 747 236,444
--------------- -------- -------- ----------- --------- -------- ---------- ---------- ---------------- ----------
The share premium account represents the difference between the issue price and the nominal value of shares issued.
The capital redemption reserve relates to the repurchase and cancellation of the Company's own shares.
The shares held by Employee Benefit Trust ("the EBT") reserve represents the cost of shares in Hargreaves Lansdown plc purchased in the market and held by the Hargreaves Lansdown plc Employee Benefit Trust to satisfy options under the Group's share option schemes.
The EBT reserve represents the cumulative gain on disposal of investments held by the Hargreaves Lansdown EBT. The reserve is not distributable by the Company as the assets and liabilities of the EBT are subject to management by the Trustees in accordance with the EBT trust deed.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. Non-controlling interests consist of the minority's proportion of the net fair value of the assets and liabilities acquired at the date of the original business combination and the non-controlling interest's change in equity since that date. The non-controlling interest represents a 22% shareholding in Library Information Services Limited and a 7.5% shareholding in Hargreaves Lansdown Savings Limited, both subsidiaries of the Company.
Condensed Consolidated Statement of Financial Position
as at 31 December 2016
Audited
Unaudited Unaudited at 30
at 31 December at 31 December June
2016 2015 2016
Note GBP'000 GBP'000 GBP'000
ASSETS:
Non-current assets
Goodwill 1,333 1,333 1,333
Other intangible assets 9,270 4,946 7,050
Property, plant and equipment 10,903 12,506 10,987
Deferred tax assets 3,362 6,833 2,775
--------------------------------- ---- --------------- --------------- --------
24,868 25,618 22,145
-------------------------------- ---- --------------- --------------- --------
Current assets
Trade and other receivables 14 353,744 308,233 617,013
Cash and cash equivalents 15 192,738 181,716 211,393
Investments 13 1,818 727 994
Current tax assets - - 33
--------------------------------- ---- --------------- --------------- --------
548,300 490,676 829,433
-------------------------------- ---- --------------- --------------- --------
Total assets 573,168 516,294 851,578
--------------------------------- ---- --------------- --------------- --------
LIABILITIES:
Current liabilities
Trade and other payables 16 314,123 282,876 581,685
Current tax liabilities 22,113 18,478 15,242
--------------------------------- ---- --------------- --------------- --------
336,236 301,354 596,927
-------------------------------- ---- --------------- --------------- --------
Net current assets 212,064 189,322 232,506
--------------------------------- ---- --------------- --------------- --------
Non-current liabilities
Provisions 488 232 487
--------------------------------- ---- --------------- --------------- --------
Total liabilities 336,724 301,586 597,414
--------------------------------- ---- --------------- --------------- --------
Net assets 236,444 214,708 254,164
--------------------------------- ---- --------------- --------------- --------
EQUITY:
Share capital 17 1,897 1,897 1,897
Share premium account 8 8 8
Capital redemption reserve 12 12 12
Shares held by Employee Benefit
Trust reserve (13,624) (4,746) (14,850)
EBT reserve 10,487 11,957 11,999 Retained earnings 236,917 204,894 254,632 --------------------------------- ---- --------------- --------------- -------- Total equity, attributable to the owners of the parent 235,697 214,022 253,698 Non-controlling interest 747 686 466 --------------------------------- ---- --------------- --------------- -------- Total equity 236,444 214,708 254,164 --------------------------------- ---- --------------- --------------- --------
The condensed consolidated financial statements on pages 12 to 29 of Hargreaves Lansdown plc, registered number 02122142, were approved by the board of directors on 7 February 2017, signed on its behalf and authorised for issue by:
Ian Gorham
Chief Executive
Condensed Consolidated Statement of Cash Flows
for the period ended 31 December 2016
Unaudited Unaudited
6 months 6 months Audited
ended ended Year to
31 December 31 December 30 June
2016 2015 2016
Note GBP'000 GBP'000 GBP'000
Net cash from operating activities
Cash generated from operations 18 130,369 100,546 205,360
Income tax paid (18,585) (18,850) (40,766)
-------------------------------------- ---- ------------ ------------ ---------
Net cash generated from operating
activities 111,784 81,696 164,594
-------------------------------------- ---- ------------ ------------ ---------
Investing activities
Interest received 440 242 458
Dividends received from investments 3 27 171
Proceeds on disposal of investments - 182 -
Purchase of property, plant
and equipment (1,717) (2,242) (2,534)
Purchase of intangible assets (3,273) (1,101) (4,114)
Purchase of available-for-sale
investments (824) - (85)
-------------------------------------- ---- ------------ ------------ ---------
Net cash used in investing activities (5,371) (2,892) (6,104)
-------------------------------------- ---- ------------ ------------ ---------
Financing activities
Purchase of own shares in EBT (2,908) - (15,927)
Proceeds on sale of own shares
in EBT 1,611 7,524 10,655
Proceeds from the sale of an
investment in a subsidiary 75 - -
Dividends paid to owners of
the parent (123,846) (121,365) (158,182)
Dividends paid to non-controlling
interests - - (396)
-------------------------------------- ---- ------------ ------------ ---------
Net cash used in financing activities (125,068) (113,841) (163,850)
-------------------------------------- ---- ------------ ------------ ---------
Net (decrease) in cash and cash
equivalents (18,655) (35,037) (5,360)
Cash and cash equivalents at
beginning of period 211,393 216,753 216,753
-------------------------------------- ---- ------------ ------------ ---------
Cash and cash equivalents at
end of period 15 192,738 181,716 211,393
-------------------------------------- ---- ------------ ------------ ---------
Notes to the Condensed Consolidated Financial Statements
1. Basis of preparation
The consolidated Interim Financial Statements of Hargreaves Lansdown plc for the six months to 31 December 2016 have been prepared using accounting policies in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and in accordance with the International Accounting Standard (IAS) 34 Interim Financial Reporting and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority. The Interim Financial Statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments, and are presented in pounds sterling which is the currency of the primary economic environment in which the Group operates.
The financial information contained in these Interim Financial Statements does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. However, the information has been reviewed by the company's auditor, PricewaterhouseCoopers LLP, and their report appears earlier in this document. The financial information for the year ended 30 June 2016 has been derived from the audited financial statements of Hargreaves Lansdown plc for that year, which have been reported on by PricewaterhouseCoopers LLP and delivered to the Registrar of Companies. Copies are available on-line at www.hl.co.uk. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by the way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.
The same accounting policies, methods of computation and presentation have been followed in the preparation of the Interim Financial Statements for the six months ended 31 December 2016 as were applied in the Audited Annual Financial Statements for the year ended 30 June 2016.
Going concern
Throughout the period, the Group was debt free, has continued to generate significant cash and has considerable financial resources enabling it to meet its day-to-day working capital requirements.
The Directors have considered the resilience of the Group, taking account of its current financial position, the principal risks facing the business in severe but reasonable scenarios and the effectiveness of any mitigating actions. As a consequence, the Directors believe that the Group is well placed to manage its business risks in the context of the current economic outlook and have adequate financial resources to continue in operational existence for a period of at least 12 months from the date of approval of these interim financial statements. They therefore continue to adopt the going concern basis in preparing the consolidated interim financial statements.
2. Seasonality of operations
A high proportion of the Group's revenue is derived from the value of assets under administration or management in either the Vantage Service or the Portfolio Management Service (PMS). The values of these assets are influenced predominantly by new business volumes, the stock market and client withdrawals. Of these factors, new business within Vantage tends to be seasonal with greater inflows in the second half of the financial year between January and June. This can be attributed to the timing of the UK tax year-end and the fact that many individuals review their investments around this time. The receipt of new business into PMS is less seasonal than this as a result of being distributed through our Financial Advisers. In this instance, the inflow of business is also influenced by the timing of when advisers meet with clients.
As new business only accounts for a small proportion of asset values and because of other revenue streams and market effects, overall Group net revenue is less seasonal than new business inflows. In the year ended 30 June 2016 51% of revenue was earned during the second half of the year (2015: 51%).
3. Segment information
The Group is organised into three business segments, namely the Vantage division, the Discretionary/Managed division and the Third Party/Other Services division. This is based upon the Group's internal organisation and management structure and is the primary way in which the Chief Operating Decision Maker (CODM) is provided with financial information. The CODM has been identified as the Board Executive Directors.
The 'Vantage' division represents all activities relating to our direct to private investor platform.
The 'Discretionary/Managed' division is focused on the provision of managed services such as our Portfolio Management Service (PMS) and range of Multi-Manager funds.
The 'Third Party/Other Services' division includes activities relating to the broking of third party investments and pensions, certificated share dealing and other niche services such as currency, CFDs and spread betting. In this division, clients' investments are not administered within the Group. In addition this division includes the costs related to Hargreaves Lansdown Savings Limited ("HLS") in establishing its digital cash deposit service and P2P platform. To date no revenue has been generated by HLS.
The 'Group' segment contains items that are shared by the Group as a whole and cannot be reasonably allocated to other operating segments.
Segment expenses are those that are directly attributable to a segment together with the relevant portion of other expenses that can reasonably be allocated to the segment. Gains or losses on the disposal of available-for-sale investments, investment income, interest payable and tax are not allocated by segment.
Segment assets and liabilities include items that are directly attributable to a segment plus an allocation on a reasonable basis of shared items. Corporate assets and liabilities are not included in business segments and are
3. Segment information (continued)
thus unallocated. At 31 December 2016 and 2015, these comprise cash and cash equivalents, short-term investments, tax-related and other assets or liabilities.
Consolidation adjustments relate to the elimination of inter-segment revenues at arm's length prices, balances and investments in Group subsidiaries required on consolidation.
PMS platform is provided for Vantage products hence platform fees charged by PMS is included under the Vantage segment.
Vantage Discretionary Third Group Consolidation Consolidated
and Managed Party/ Adjustment
Other
Services
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6 months ended 31
December 2016
Revenue from external
customers 140,252 33,290 11,357 - - 184,899
Commission payable (5) (28) (33) - - (66)
Total segment net
revenue 140,247 33,262 11,324 - - 184,833
---------- -------------- ---------- --------- -------------- -------------
Depreciation and
amortisation (2,227) (202) (407) - - (2,836)
Investment revenue - - - 443 - 443
Other gains - - - 55 - 55
Reportable segment
profit before tax 100,862 27,241 3,101 (226) - 130,978
---------- -------------- ---------- --------- -------------- -------------
Reportable segment
assets 345,244 31,731 4,057 223,970 (31,834) 573,168
Reportable segment
liabilities (296,180) (29,281) (493) (42,604) 31,834 (336,724)
---------- -------------- ---------- --------- -------------- -------------
Net segment assets 49,064 2,450 3,564 181,366 - 236,444
---------- -------------- ---------- --------- -------------- -------------
6 months ended 31
December 2015
Revenue from external
customers 161,135 29,197 10,410 - - 200,742
Commission payable (41,878) (27) (36) - - (41,941)
Total segment net
revenue 119,257 29,170 10,374 - - 158,801
---------- -------------- ---------- --------- -------------- -------------
Depreciation and
amortisation (1,984) (185) (326) - - (2,495)
Investment revenue - - - 269 - 269
Reportable segment
profit before tax 81,494 22,924 4,092 (400) - 108,110
---------- -------------- ---------- --------- -------------- -------------
Reportable segment
assets 294,377 18,948 12,143 211,010 (20,184) 516,294
Reportable segment
liabilities (265,877) (18,550) (356) (36,987) 20,184 (301,586)
---------- -------------- ---------- --------- -------------- -------------
Net segment assets 28,500 398 11,787 174,023 - 214,708
---------- -------------- ---------- --------- -------------- -------------
Information about products/services
The Group's operating segments are business units that provide different products and services. The breakdown of revenue from external customers for each type of service is therefore the same as the segmental analysis above.
Information about geographical area
All business activities are located within the UK.
Information about major customers
The Group does not rely on any individual customer.
4. Material events after interim period-end
After the interim balance sheet date, an ordinary interim dividend of 8.60 pence per share (H1 2016: interim dividend 7.80p) amounting to a total dividend of GBP40.7 million (2016: GBP36.9m) was declared by the plc Directors. These financial statements do not reflect this dividend payable.
There have been no other material events after the end of the interim period.
5. Changes in capital expenditure and capital commitments since the last annual balance sheet date
Capital expenditure
During the six months ended 31 December 2016, the Group acquired fixtures, fittings, plant, equipment and software assets and internally generated intangibles with a cost of GBP5.0 million (H1 2016: GBP3.3m, year to 30 June 2016: GBP6.6m).
Capital commitment
At the balance sheet date, the Group had capital commitments of GBP0.5 million relating to property, plant and equipment (31 December 2015: GBP0.8m, 30 June 2016: GBP1.1m).
6. Principal risks and uncertainties
The principal risks and uncertainties which could impact the Group for the remainder of the financial year are those detailed on pages 36 to 39 of the Group's Annual Report and Financial Statements 2016, a copy of which is available on the Group's website www.hl.co.uk. These remain the principal risks and uncertainties for the second half of this financial year and beyond; the key ones of which are listed below and they are regularly considered by the Board.
Operational risks
-- Cybercrime, fraud or security breaches in respect of the Group's information, data, software or information technology systems.
-- Business continuity event. -- Changing markets and increased competition.
Financial risks
-- Risk of a decline in earnings due to a decline in interest rates or regulatory changes affecting interest income.
-- Fluctuations in the capital markets adversely affecting trading activity and /or the value of the Group's assets under administration.
The Group is exposed to interest rate risk, the risk of sustaining losses from adverse movements in interest bearing assets. These assets comprise cash and cash equivalents. At 31 December 2016 the value of such assets on the Group balance sheet was GBP193 million (at 31 December 2015: GBP182m). A 50bps (0.5%) move in interest rates, in isolation, would therefore, not have a material direct impact on the Group balance sheet or results. This exposure is continually monitored to ensure that the Group is maximizing its interest earning potential within accepted liquidity and credit constraints. The Group has no external borrowings and as such is not exposed to interest rate or refinancing risk on borrowings.
As a source of revenue is based on the value of client cash under administration, the Group also has an indirect exposure to interest rate risk on cash balances held for clients. These balances are disclosed in Note 15 and are not on the Group balance sheet.
7. Staff numbers
Unaudited Unaudited
6 months 6 months Audited
ended ended Year to
31 December 31 December 30 June
2016 2015 2016
No. No. No.
Average number of employees of the
Group
(including executive directors) 970 964 969
------------------------------------ ------------ ------------ ---------
8. Revenue
Revenue represents platform and management fees charged to clients, transactional costs in relation to stockbroking and interest income on client money. It relates to services provided in the UK and is stated net of value added tax. An analysis of the Group's revenue is as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended 31 ended to
December 31 December 30 June
2016 2015 2016
Revenue from services GBP'000 GBP'000 GBP'000
Recurring income 141,992 168,416 317,089
Transactional income 39,166 29,453 65,035
Other income 3,741 2,873 6,209
------------------------ --------- ------------- --------
Total revenue 184,899 200,742 388,333
------------------------ --------- ------------- --------
Recurring income principally comprises GBP2.9 million of renewal income (H1 2016: GBP51.5m 2016: GBP76.9m), GBP13.7 million of management fees relating to the PMS Service and Vantage SIPP and ISA accounts (H1 2016: GBP13.1m, 2016: GBP25.5m), GBP26.3 million of management fees relating to the Hargreaves Lansdown Multi-Manager Funds (H1 2016: GBP21.4m, 2016: GBP44.1m), GBP80.6 million of platform fees (H1 2016: GBP68.5m, 2016: GBP139.4m) and GBP18.6 million of interest income on client money (H1 2016: GBP13.9m, 2015: GBP31.2m).
Transactional income comprises GBP30.2 million of commission earned from stockbroking transactions (H1 2016: GBP20.4m, 2016: GBP46.8m), adviser charges of GBP4.9 million (H1 2016: GBP5.4m, 2016: GBP10.5m) and other income of GBP4.1 million (H1 2016: GBP3.7m, 2016: GBP7.7m).
Other income represents the amount of fees receivable from the provision of funds data services and research through Library Information Services Ltd to external parties.
Following the implementation of the Retail Distribution Review ("RDR") on 1 March 2014, total revenue earned from investment funds held by clients significantly increased as a new platform fee was introduced. At the same time commission income was being received from the fund management groups on funds purchased by clients before the RDR implementation date. Where we still received commission on these pre RDR or "legacy funds" the vast majority was passed back to our clients in the form of a significantly higher loyalty bonus which was shown within commission payable in the income statement. From 1 April 2016 any renewal income received from fund management groups relating to legacy funds was passed back entirely to the client. This commission was therefore no longer recorded as a revenue and the loyalty payment to clients was no longer recorded as a cost. In order to aid comparability across this transitional period the measure of net revenue is felt to be more meaningful and hence has been used in assessing the financial performance and is shown in the income statement. Net revenue is measured as revenue less commission payable.
9. Investment revenues
Unaudited Unaudited Audited
6 months 6 months Year
ended 31 ended 31 to
December December 30 June
2016 2015 2016
GBP'000 GBP'000 GBP'000
Interest on bank deposits 440 242 458
Dividends from equity investment 3 27 171
---------------------------------- --------- ------------ --------
443 269 629
--------------------------------- --------- ------------ --------
10. Tax
Unaudited Unaudited Audited
6 months 6 months Year
ended 31 ended 31 to
December December 30 June
2016 2015 2016
GBP'000 GBP'000 GBP'000
The tax charge for the period is based on the prevailing
effective standard rate of tax for the year to 30 June
2017 of 19.75% (30 June 2016: 20%).
Current tax - on profits for
the period 25,478 21,269 40,771
Current tax - adjustments
in respect of prior years 197 (356) (536)
Deferred tax (1,047) 72 231
Deferred tax - adjustments
in respect of prior years - 229 1,157
-------------------------------- --------- ------------ --------
24,628 21,214 41,623
-------------------------------- --------- ------------ --------
In addition to the amount charged to the income statement, certain tax amounts have been charged / (credited) directly to equity as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended 31 ended to
December 31 December 30 June
2016 2015 2016
GBP'000 GBP'000 GBP'000
Deferred tax relating to share-based
payments 459 (1,015) 1,955
Current tax relating to share-based
payments (183) (2,446) (3,122)
--------------------------------------- ---------- ------------- ---------
276 (3,461) (1,167)
--------------------------------------- ---------- ------------- ---------
11. Dividends paid
Audited
Unaudited Unaudited Year
6 months 6 months to
ended ended 30
31 December 31 December June
2016 2015 2016
GBP'000 GBP'000 GBP'000
Amounts recognised as distributions to equity holders
in the period:
2016 Special dividend of 9.90p 46,797 - -
per share
2016 Second interim dividend of 77,049 - -
16.30p per share
2016 First interim dividend of
7.80p per share - - 36,817
2015 Second interim dividend of
14.30p per share - 67,515 67,515
2015 Special dividend of 11.40p
per share - 53,850 53,850
--------------------------------- ------------- ------------- ---------
Total 123,846 121,365 158,182
--------------------------------- ------------- ------------- ---------
The Hargreaves Lansdown Employee Benefit Trust (the "EBT"), which held the following number of ordinary shares in Hargreaves Lansdown plc at the date shown, has agreed to waive all dividends.
Audited
Unaudited Unaudited Year
6 months 6 months to
ended ended 30
31 December 31 December June
2016 2015 2016
Number of shares held by the
Hargreaves Lansdown Employee Benefit
Trust (HL EBT) 1,540,551 1,098,096 1,724,330
Representing % of called-up share
capital 0.32% 0.23% 0.36%
--------------------------------------- ------------- ------------- ----------
Breach of Companies Acts requirements in respect of historic dividend payments - circular to shareholders
The Board has become aware of a technical issue in respect of the payment of a number of historic dividends paid by the Company.
The Company has always filed its statutory annual accounts on time in accordance with the requirements of the Companies Act 2006 (and before that, the Companies Act 1985) (the "Acts"), and at all times had sufficient profits and other distributable reserves to justify the payment of dividends.
However, the Company has not satisfied certain procedural requirements of the Acts before paying certain of the dividends in the years since the Company's IPO (the "Relevant Distributions"). These procedural requirements relate to the failure to file interim accounts at Companies House which justified the payment of interim dividends or the payment of final dividends before the circulation to members of the audited accounts of the Company in respect of the relevant financial year.
The Company has been advised that, as a consequence of the above distributions being made otherwise than in accordance with the Acts, it may have claims against past and present shareholders who were recipients of the Relevant Distributions and against those persons who were directors of the Company at the time of the Relevant Distributions.
The Company wishes to put all potentially affected parties so far as possible in the position in which they were always intended to be had the Relevant Distributions been made in accordance with the procedural requirements of the Acts.
Accordingly, the Company intends to convene a general meeting at which a resolution will be proposed, which will, if passed, give the Board authority to enter into deeds of release to discharge these parties from any obligation to repay any amount to the Company in connection with the Relevant Distributions.
The entry by the Company into the Shareholders' Deed of Release constitutes a related party transaction (as defined in the Listing Rules). This is because Peter Hargreaves and Stephen Lansdown, who each hold more than 10% of the Company's voting rights and are therefore deemed to be related parties under the Listing Rules, will be released from any liability to repay any amounts of the Relevant Distributions received by them, in the same manner as other shareholders. In addition, the entry by the Company into the Directors' Deed of Release will also constitute a related party transaction with respect to the Directors. Therefore, the resolution to be proposed will also seek the specific approval of the Company's shareholders for the entry into each of the Shareholders' Deed of Release and the Directors' Deed of Release as a related party transaction, in accordance with the requirements of the Listing Rules.
The proposed ratification of the Relevant Distributions, and the entry by the Company into the Shareholders' Deed of Release and Directors' Deed of Release will not have any effect on the Company's financial position.
A circular to shareholders to convene the general meeting and giving more information about the Relevant Distributions will be sent to shareholders shortly.
12. Earnings per share (EPS)
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in free issue during the period, including ordinary shares held in the EBT reserve which have vested unconditionally with employees.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding by assuming the conversion of all dilutive potential ordinary shares.
The weighted average number of anti-dilutive share options and awards excluded from the calculation of diluted earnings per share was 1,807,900 as at 31 December 2016 (283,152 at 31 December 2015 and 1,285,073 at 30 June 2016).
Unaudited Unaudited
6 months 6 months Audited
ended ended Year to
31 December 31 December 30 June
2016 2015 2016
Earnings (all from continuing operations) GBP'000 GBP'000 GBP'000
Earnings for the purposes of basic
and diluted EPS being net profit
attributable to equity holders
of the parent Company 106,072 86,711 176,895
----------------------------------------------- ------------ ------------ ---------
Number of shares Number Number Number
Weighted average number of ordinary
shares
Weighted average number of shares
held by HL EBT 474,318,625 474,318,625 474,318,62525
(1,594,886) (2,015,387) (1,976,360)
Weighted average number of share
options held by HL EBT which
have vested unconditionally
with employees 893,358 720,836 559,604,
----------------------------------------- ----------- ----------- -------------
Weighted average number of shares
for the purposes of basic EPS 473,617,097 473,024,074 472,901,869
Weighted average number of dilutive
share options held by HL EBT
which have not vested unconditionally
with employees 731,379 1,581,090 1,818,222
Weighted average number of shares
for the purpose of diluted EPS 474,348,476 474,605,164 474,720,091
----------------------------------------- ----------- ----------- -------------
Earnings per share Pence Pence Pence
Basic EPS 22.4 18.3 37.4
Diluted EPS 22.4 18.3 37.3
----------------------------------------- ----------- ----------- -------------
13. Investments
Unaudited Unaudited
6 months 6 months Audited
ended 31 ended 31 Year to
December December 30 June
2016 2015 2016
GBP'000 GBP'000 GBP'000
At beginning of period 994 909 909
Sales - (182) -
Purchases 824 - 85
--------------------------------------------- --------- ---------- ----------
At end of period 1,818 727 994
--------------------------------------------- --------- ---------- ----------
Comprising:
Current asset investment - UK
listed securities valued at quoted
market price 1,554 463 730
Current asset investment - Unlisted
securities valued at cost 264 264 264
--------------------------------------------- --------- ---------- --------
GBP1,554,000 (31 December 2015: GBP463,000, 30 June 2016: GBP730,000) of investments are classified as held at fair value through profit and loss and GBP264,000 (31 December 2015: GBP264,000, 30 June 2016: GBP264,000) are classified as available-for-sale. Available-for-sale investments have been included at fair value where a fair value can be reliably calculated, with the revaluation gains and losses reflected in the investment revaluation reserve as shown in the Condensed Consolidated Statement of Changes in Equity, until sale when the cumulative gain or loss is transferred to the income statement. If a fair value cannot be reliably calculated by reference to a quoted market price or other method of valuation, available-for-sale investments are included at cost, with a fair value adjustment recognised upon disposal of the investment.
14. Trade and other receivables
Unaudited Unaudited
6 months 6 months Audited
ended ended Year to
31 December 31 December 30 June
2016 2015 2016
GBP'000 GBP'000 GBP'000
Financial assets:
Trade receivables 301,527 271,035 576,402
Other receivables 1,507 899 559
----------------------- ------------ ------------- --------
303,034 271,934 576,961
Non-financial assets:
Accrued income 46,053 32,616 33,546
Prepayments 4,657 3,683 6,506
----------------------- ------------ ------------- --------
353,744 308,233 617,013
---------------------- ------------ ------------- --------
Trade and other receivables are measured at initial recognition at fair value. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. In accordance with market practice, certain balances with clients, Stock Exchange member firms and other counterparties totalling GBP291.2 million (31 December 2015: GBP252.5m, 30 June 2016: GBP560.9m) 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 GBP349.9 million and the gross amount of offset in the balance sheet with trade payables is GBP58.7 million. Other than counterparty balances trade receivables primarily consist of fees and amounts owed by clients. There are no balances where there is a legal right of offset but not a right of offset in accordance with accounting standards, and no collateral has been posted for the balances that have been offset.
15. Cash and cash equivalents
Unaudited Unaudited
6 months 6 months Audited
ended ended Year to
31 December 31 December 30 June
2016 2015 2016
GBP'000 GBP'000 GBP'000
Restricted cash - balances held
by Hargreaves Lansdown EBT 2,895 15,985 3,184
Group cash and cash equivalent
balances 189,843 165,731 208,209
--------------------------------- ------------ ------------- --------
192,738 181,716 211,393
-------------------------------- ------------ ------------- --------
Cash and cash equivalents comprise cash on hand and demand deposits held by the Group that are readily convertible to a known amount of cash. The carrying amount of these assets is approximately equal to their fair value.
At 31 December 2016 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 GBP7,423 million (31 December 2015: GBP5,125m, 30 June 2016 GBP6,953m). In addition there were currency service cash accounts held on behalf of clients not governed by the client money rules of GBP35 million (31 December 2015: GBP7m, 30 June 2016 GBP18m). The client retains the beneficial interest in both these deposits and cash accounts and accordingly they are not included in the balance sheet of the Group.
16. Trade and other payables
Unaudited Unaudited
6 months 6 months Audited
ended ended Year to
31 December 31 December 30 June
2016 2015 2016
GBP'000 GBP'000 GBP'000
Financial liabilities:
Trade payables 286,042 251,414 556,754
Social security and other taxes 3,844 5,290 7,404
Other payables 15,148 19,191 3,888
--------------------------------- ------------ ------------- --------
305,034 275,895 568,046
Non-financial liabilities:
Accruals 8,780 6,748 13,369
Deferred income 309 233 270
--------------------------------- ------------ ------------- --------
314,123 282,876 581,685
-------------------------------- ------------ ------------- --------
In accordance with market practice, certain balances with clients, Stock Exchange member firms and other counterparties totalling GBP286.0 million (31 December 2015: GBP250.0m, 30 June 2016: GBP555.5m) are included in trade payables. As stated in Note 14, where we have a legal right of offset and the ability and intention to settle net, trade payable balances have been presented net. The gross amount of trade payables is GBP344.7 million and the gross amount offset in the balance sheet with trade receivables is GBP58.7 million. 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.
Other payables principally comprise amounts owed to clients as a loyalty bonus and to staff as a bonus. Accruals and deferred income principally comprise amounts outstanding for trade purchases and revenue received but not yet earned on group pension schemes where an ongoing service is still being provided.
17. Share capital
Unaudited Unaudited
6 months 6 months Audited
ended 31 ended 31 Year to
December December 30 June
2016 2015 2016
GBP'000 GBP'000 GBP'000
Issued and fully paid:
Ordinary shares of 0.4p 1,897 1,897 1,897
----------------------------------- ----------- -------------- -----------
Shares Shares Shares
Issued and fully paid:
Number of ordinary shares of 0.4p 474,318,625 474,318,625 474,318,625
----------------------------------- ----------- -------------- -----------
The Company has one class of ordinary shares which carry no right to fixed income.
18. Notes to the consolidated cash flow statement
Unaudited Unaudited
6 months 6 months Audited
ended 31 ended 31 Year to
December December 30 June
2016 2015 2016
GBP'000 GBP'000 GBP'000
Profit for the period after
tax 106,350 86,896 177,256
Adjustments for:
Investment revenues (443) (269) (629)
Income tax expense 24,628 21,214 41,623
Depreciation of plant and
equipment 1,783 1,726 3,537
Amortisation of intangible
assets 1,053 769 1,678
(Profit) on disposal (55) - -
Share-based payment expense 1,348 1,124 2,525
Increase in provisions - - 255
------------------------------------ -------------- -------------- ---------
Operating cash flows before
movements in working capital 134,664 111,460 226,245
Decrease/(increase) in receivables 263,268 103,472 (205,308)
(Decrease)/increase in payables (267,563) (114,386) 184,423
Cash generated from operations 130,369 100,546 205,360
------------------------------------ -------------- -------------- ---------
19. Related party transactions
The Company has a related party relationship with its directors and members of the Executive Committee (the "key management personnel"). Apart from the transaction disclosed below there were no material changes to the related party transactions during the financial period; transactions are consistent in nature with the disclosure in Note 27 to the 2016 Annual Report.
On 12 October 2016, the Company sold 7.5% of the ordinary share capital it held in its subsidiary undertaking Hargreaves Lansdown Savings Limited (HLS). The shares were sold to Stuart Louden, the Group Savings Director and currently the only other shareholder, who is an employee of Hargreaves Lansdown Asset Management Limited. The price paid per share was GBP1,000. As there is no readily available market for these shares the Directors had to assess a valuation based on the risks and rewards of the parties involved given the uncertainty of establishing a new start up entity and its future potential. As a result HLS was valued at GBP1 million and the directors of the Company therefore, deemed GBP1,000 per share to be a fair price in the circumstances. The total amount paid was GBP75,000 and this was settled immediately in cash. Following the share sale the Company now holds 92.5% of the ordinary share capital in HLS and Stuart Louden holds 7.5%. The transaction was completed in order to provide incentive to Stuart Louden to successfully develop the business of HLS into a profitable company. In addition the Company has granted Stuart Louden an option to purchase a further 2.5% of the ordinary share capital at a price of GBP500,000. This purchase option may be exercised at any time prior to 31 August 2021 provided that at the time of exercise Stuart Louden is an employee of a Hargreaves Lansdown Group Company and he has not at any time given notice to terminate such employment.
20. Financial instruments' fair value disclosure
The fair values of the Group's financial assets and liabilities are not materially different from their carrying values. Market values have been used to determine the fair value of available-for-sale financial assets where there is a quoted market price. Investments in equity instruments which do not have a quoted market price in an active market or whose fair value cannot be reliably measured are measured at cost. There have been no transfers of assets or liabilities between levels of the fair value hierarchy and there are no non-recurring fair value measurements.
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which fair value is observable:
Level Level 2 Level Total
1 Directly 3
Quoted observable Inputs
prices market inputs not based
for similar other than on observable
instruments Level 1 market
inputs data
GBP'000 GBP'000 GBP'000
Unaudited at 31 December
2016
Financial assets at fair
value through profit or
loss 1,554 - - 1,554
Available-for-sale financial -
assets - - -
------------------------------ ------------- --------------- --------------- --------
1,554 - - 1,554
------------------------------ ------------- --------------- --------------- --------
Unaudited at 31 December
2015
Financial assets at fair
value through profit or
loss 463 - - 463
Available-for-sale financial -
assets - - -
------------------------------ ------------- --------------- --------------- --------
463 - - 463
------------------------------ ------------- --------------- --------------- --------
Audited at 30 June 2016
Financial assets at fair
value through profit or
loss 730 - - 730
Available-for-sale financial -
assets - - -
------------------------------ ------------- --------------- --------------- --------
730 - - 730
------------------------------ ------------- --------------- --------------- --------
Directors, Company Secretary, Advisers and Shareholder Information
EXECUTIVE DIRECTORS
Ian Gorham
Christopher Hill
NON-EXECUTIVE DIRECTORS
Chris Barling
Mike Evans
Shirley Garrood
Jayne Styles
Stephen Robertson
COMPANY Secretary
Judy Matthews
INDEPENT AUDITOR
PricewaterhouseCoopers LLP, London
SOLICITORS
Osborne Clarke LLP, Bristol
PRINCIPAL BANKERS
Lloyds Bank plc, Bristol
BROKERS
Barclays
Numis Securities Limited
REGISTRARS
Equiniti Limited
Registered Office
1 College Square South
Anchor Road
Bristol
BS1 5HL
Registered number
02122142
WEBSITE
www.hl.co.uk
DIVID CALAR 2016/17
First dividend
(interim)
Ex-dividend date* 9 March 2017
Record date** 10 March 2017
Payment date 30 March 2017
* Shares bought on or after the ex-dividend date will not qualify for the dividend.
** Shareholders must be on the Hargreaves Lansdown plc share register on this date to receive the dividend.
Glossary of Alternative Performance Measures
Within the Interim Report and Condensed Financial Statements various Alternative Financial Performance Measures are referred to, which are non-GAAP (Generally Accepted Accounting Practice) measures. They are used in order to provide a better understanding of the performance of the Group and the table below states those which have been used, how they have been calculated and why they have been used.
Measure Calculation Why we use this measure
-------------------- -------------------------------------- ---------------------------------------------
Cash conversion The operating cash flows Provides a measure of the efficiency
ratio (%) for the year divided by with which profits are converted into
the operating profits for cash.
the period.
-------------------- -------------------------------------- ---------------------------------------------
Dividend Total dividend payable Dividend per share is pertinent information
per share relating to a financial to shareholders and investors and provides
(pence year divided by the total them with the ability to assess the
per share) number of shares eligible dividend yield of the Hargreaves Lansdown
to receive a dividend. plc shares.
Note ordinary shares held
in the Hargreaves Lansdown
Employee Benefit Trust
have agreed to waive all
dividends.
-------------------- -------------------------------------- ---------------------------------------------
Operating The costs per the Income In light of the transitional period
Costs Statement excluding commission relating to the Retail Distribution
payable (i.e. the aggregate Review (see Net Revenue below) and
of staff costs, other operating the impact this had on commission payable
costs and FSCS costs). in the form of loyalty bonuses, this
measure of Operating Costs provides
a more useful comparative measure over
time.
-------------------- -------------------------------------- ---------------------------------------------
Organic Represents new business This has been used to better compare
new business other than that which has the net new business on a like-for-like
been acquired in deals basis.
to acquire books of business
from Asset Management groups.
-------------------- -------------------------------------- ---------------------------------------------
Net new Represents subscriptions, Provides a measure of tracking the
business cash receipts, cash and success of gathering assets on to the
inflows stock transfers in less platform over time.
cash withdrawals, cash
and stock transfers out.
-------------------- -------------------------------------- ---------------------------------------------
Net revenue Total revenue less commission Because of the changes brought about
(GBP) payments which are primarily to the client charging structure by
loyalty bonuses paid to the Retail Distribution Review ("RDR")
(See Income Vantage clients. there was a transitional period (from
Statement 1 March 2014 to 1 April 2016). From
on page 1 March 2014 revenue was increased
13 for as Hargreaves Lansdown earned both
the reconciliation a new platform fee from clients and
of net the existing renewal commission from
revenue) the Fund Management Groups based on
the value of funds held by clients.
At the same time the loyalty bonus
paid to clients was significantly increased
on the pre-RDR funds to largely mitigate
the impact of the new platform fee.
In order to aid comparability during
the period of transition to 1 April
2016 the net revenue measure became
the most useful comparative measure
of revenue as it better reflected the
underlying income relating to funds
held by clients.
-------------------- -------------------------------------- ---------------------------------------------
Percentage The total value of renewal Provides a measure of the quality of
of recurring commission (after deducting our earnings. We believe recurring
net revenue loyalty bonuses), platform revenue provides greater profit resilience
(%) fees, management fees and and hence it is of higher quality.
interest earned on client
money divided by the total
net revenue.
-------------------- -------------------------------------- ---------------------------------------------
Vantage Total Vantage net revenue Provides the most comparable means
net revenue divided by the average of tracking, over time, the margin
margin value of assets under administration earned on the assets under administration
(%) which includes the Portfolio and is used by management to assess
Management Services assets business performance.
under management held in
funds on which a platform
fee is charged.
-------------------- -------------------------------------- ---------------------------------------------
Vantage Net revenue from cash (net Provides a means of tracking, over
net revenue interest earned on the time, the margin earned on cash held
margin value of client money held by our clients.
from cash on the Vantage platform
(%) divided by the average
value of assets under administration
held as client money.
-------------------- -------------------------------------- ---------------------------------------------
Vantage Net revenue derived from Provides the most comparable means
net revenue funds held by clients (platform of tracking, over time, the margin
margin fees, initial commission earned on funds held by our clients.
from funds less loyalty bonus) divided
(%) by the average value of
assets under administration
held as funds, which includes
the Portfolio Management
Services assets under management
held in funds on which
a platform fee is charged.
-------------------- -------------------------------------- ---------------------------------------------
Vantage Net revenue from shares Provides a means of tracking, over
net revenue (stockbroking commissions, time, the margin earned on shares held
margin management fees where shares by our clients.
from shares are held in a SIPP or ISA,
(%) less the cost of dealing
errors) divided by the
average value of assets
under administration held
as shares.
-------------------- -------------------------------------- ---------------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DDLFBDLFBBBK
(END) Dow Jones Newswires
February 08, 2017 02:00 ET (07:00 GMT)
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