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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
  -14.00 -0.92% 1,515.50 1,514.00 1,515.00 1,541.50 1,511.00 1,517.50 1,042,699 16:35:08
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Financial 55.1 378.3 66.1 22.9 7,188

Hargreaves Lansdown PLC Half-year Report

01/02/2021 7:00am

UK Regulatory (RNS & others)


Hargreaves Lansdown (LSE:HL.)
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From Jan 2021 to Mar 2021

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TIDMHL.

RNS Number : 4487N

Hargreaves Lansdown PLC

01 February 2021

Hargreaves Lansdown plc

Interim results for the six months ended 31 December 2020

Hargreaves Lansdown plc ("HL" or "the Group") today announces interim results for the six month period ended 31 December 2020.

Highlights

   --    Net new business of GBP3.2 billion. 
   --    Assets under administration up 16% since 31 December 2019 to GBP120.6 billion. 
   --    1,496,000 active clients, an increase of 84,000 since 30 June 2020. 
   --    Profit before tax increase of 10% to GBP188.4 million (H1 2020: GBP171.1m). 
   --    Interim dividend up 6% to 11.9 pence per share (H1 2020: 11.2p) 

Chris Hill, Chief Executive Officer, commented:

"I wish to thank my colleagues for their hard work throughout this incredibly difficult time. Their dedication has delivered a period of very strong growth with record new clients and increased market share against the backdrop of the pandemic and the political uncertainty of the US elections and Brexit.

As our client numbers continue to grow, we are finding that younger people are taking a greater interest in investing for the future, with the average age of our clients continuing to fall. COVID-19 has underpinned the importance of financial resilience and Hargreaves Lansdown is well placed to support clients with their saving and investment needs across their lifetimes."

 
 Financial highlights                     6 months     6 months   Change   Year ended 
                                          ended 31     ended 31        %      30 June 
                                          December     December                  2020 
                                              2020         2019 
                                         (H1 2021)    (H1 2020)             (FY 2020) 
===================================  =============  ===========  =======  =========== 
 Net new business                        GBP3.24bn    GBP2.31bn     +40%     GBP7.7bn 
===================================  =============  ===========  =======  =========== 
 Total assets under administration      GBP120.6bn   GBP105.2bn     +15%   GBP104.0bn 
  (AUA) 
===================================  =============  ===========  =======  =========== 
 Revenue                                 GBP299.5m    GBP257.9m     +16%    GBP550.9m 
===================================  =============  ===========  =======  =========== 
 Underlying profit before                GBP188.4m    GBP171.1m     +10%    GBP339.5m 
  tax* 
===================================  =============  ===========  =======  =========== 
 Profit before tax                       GBP188.4m    GBP171.1m     +10%    GBP378.3m 
===================================  =============  ===========  =======  =========== 
 Diluted earnings per share                  32.1p        29.3p     +10%        65.9p 
===================================  =============  ===========  =======  =========== 
 Interim dividend per share                  11.9p        11.2p      +6%        11.2p 
===================================  =============  ===========  =======  =========== 
 
 
 

*Underlying profit before tax excludes a one-off gain of GBP38.8m on the disposal of Funds Library in the year ended 30 June 2020.

 
 Contacts: 
 Hargreaves Lansdown 
 For media enquiries:                For analyst enquiries: 
 Danny Cox, Head of Communications   James Found, Head of Investor 
                                      Relations 
 +44(0)7989 672071                   +44(0)7970 066634 
 Nick Cosgrove / Caroline Daniel     Philip Johnson, Chief Financial 
                                      Officer 
 Brunswick +44(0)207 404 5959 
 

Analyst presentation

Hargreaves Lansdown will be hosting an analyst presentation at 9.00am on 1 February 2021 following the release of these results for the half year ended 31 December 2020. Attendance is by invitation only. A conference call facility will be in place with the following participant dial-in numbers - UK (toll free) 0800 640 6441, UK (local) 020 3936 2999 and all other locations +44 20 3936 2999. The participant access code is 603745. Slides accompanying the analyst presentation will be available at www.hl.co.uk/investor-relations and an audio recording of the analyst presentation will be available by close of business on the day.

The Interim Results contain forward-looking statements which have been made in good faith based on the information available to us at the time of the approval of this report and should be treated with caution due to the inherent risks and uncertainties, including both economic and business risk factors some of which were set out in the 2020 Annual Report, underlying such forward-looking information.

Unless otherwise stated, all figures below refer to the six months ended 31 December 2020 ("H1 2021"). Comparative figures are for the six months ended 31 December 2019 ("H1 2020"). Certain figures contained in this document, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances the sum of the numbers in a column or a row in tables contained in this document may not conform exactly to the total figure given for that column or row.

LEI Number: 2138008ZCE93ZDSESG90

Chief Executive's Statement

Growth in challenging market conditions

The first half of our financial year, and particularly the second quarter, has been a period of very strong growth in the context of some difficult external conditions. The COVID-19 pandemic presented a significant challenge for all in 2020 and that, alongside political uncertainty around both the US election and the conclusion of the Brexit deal, led to a volatile period for markets in the second half of the year. Throughout this time, we have continued our client-focused strategy, driving growth through the cycle and further deepening the lifelong relationship we have built with clients.

We provide a market leading client experience underpinned by a proposition and service that is built around client need, and it is through this that we continued to engage greater numbers of clients throughout the period, welcoming a record 84,000 net new clients. We have also seen our AUA reach GBP120.6 billion, a 16% increase over the last six months, driven by GBP3.2 billion net new business and the market recovery which contributed GBP13.4 billion.

Investor confidence fluctuated over the period under the influence of the broad uncertainty in markets, falling over the summer but picking up into Q2 and on through to December post the US election and positive news of the COVID-19 vaccine. These trends have led to strong equity trading volumes, up 123% on prior year, driving strong growth in Profit Before Tax, where we have delivered an increase of 10% on prior year at GBP188.4 million.

Whilst consumer sentiment leads to cyclicality of flow, what this period has showed us is that Hargreaves Lansdown and the broader wealth management industry is experiencing structural growth and that our client focused strategy has positioned us to be a key beneficiary of these trends. We recognise the need to work with stakeholders to continue to develop our wealth management platform to ensure we meet the needs of our growing and increasingly diversified client base and have continued to invest through the period to support this. We are focused on driving long term relationships that will build our business sustainably into the future and our investment decisions support this effort.

Market Dynamics

The COVID-19 pandemic has not only reinforced the importance of saving and investing and the need for individuals to be financially resilient but also the need for wealth managers such as Hargreaves Lansdown to support the lifetime savings and investment journey of these individuals. When combined with the increasingly complex savings environment, persistent low interest rates and transfer of responsibility to individuals to manage their financial futures, the opportunity for Hargreaves Lansdown to provide the help and support that people need is very clear.

Over the course of the pandemic, many have found the time and seen the need to prioritise household savings which has enabled and led them to invest for the first time. This event is extending a trend we have seen over several years now where investing has become not just a task for those approaching retirement but is now an important tool for individuals to support themselves across their entire lifetime.

In turn, this change in behaviour is leading to a dynamic shift in the broader investment and wealth market. Younger people are taking a greater interest in investing for the future, recording an increased appetite for investment, and prioritising financial resilience and saving. In 2012, 46% of clients were aged between 55 and 80. That proportion is now 34%. Since 2012, we have seen the average age of new clients decrease from 45 to 37. This was reflected in the first half of this year where 47% of clients joining were in the 30-54 age bracket. Clients in this segment have money, are engaging with saving for the future and want help to put their money to work. By getting clients onto the platform earlier, we are able to support them for longer as they grow their wealth over time, and this enhances the lifetime value opportunity.

We can see that clients, including the recent cohorts we have welcomed during the pandemic, follow consistent growth patterns as they continue to save and invest and make use of their and their household's allowances over time. Therefore, by building a relationship with a client over a lifetime, those who are currently in the 35-44 age group, when they come to represent tomorrow's over 65's, will have an average ISA portfolio that is almost three times as large as what they have today.

Client engagement

Whilst the dynamics of the market may shift, our focus on understanding what these groups of clients want and need in order to help them to save and invest does not. Clients require information that builds their knowledge and confidence and helps them to understand the decisions they have to make to meet their individual needs. They value a simple and intuitive experience that is supported by a range of channels, including mobile apps, website access and over the telephone. With our comprehensive proposition and easy to use digital offering, combined with the extensive expert insight and research we provide to support clients in their investment journey, we can provide this experience.

We focus on understanding and delivering what our clients want and ensure that we have the "distribution", particularly through digital channels of how to get it in front of them in the simple and easy to use ways that they value most. Over H1 our mobile app has seen 57% growth in clients logging in compared to prior year, checking their investments on average 10 times a week. We have supported 6.5m equity trades, 113 million client log-ins and 25 million minutes spent reading our insightful articles. We offer a diversified and extensive service that clients rely on and we are here for them when they need, answering 676,000 calls, responding to 275,000 emails, and seeing over 153m digital visits in H1. All of this engagement helps us to provide the proposition, service and insight that clients need and underpins the strong and differentiated relationship we build with them. This understanding also helps us to ensure that we continue to maintain a market leading client experience for all of our clients, no matter what their demographic or need and enables us to maintain consistently high client retention at around 93.0%.

We understand clients' need for a secure, stable and trusted digital wealth provider. The importance of providing such support has been very well illustrated during COVID-19 where our clients have been interacting with us more than ever. On November 9(th) the very high levels of volume associated with market volatility led to a brief outage of our system. This was managed swiftly by our technical teams with lessons being identified and actions taken forward to avoid future events of this type, and to ensure we are able to maintain our client service over the long term. Our experience here has only reinforced the necessity and benefits of the historical and ongoing investment in our systems and processes to ensure appropriate capacity and upgrades to meet the demands of an ever-growing client base.

Developing client experience

Providing the right products and services, underpinned by a simple and intuitive experience, helps us to build client relationships that last a lifetime. By attracting clients whilst they are building their savings and starting to invest, we have an opportunity to engage them with the right offering, meet their needs as they evolve, and retain them over the long term, creating lifelong value.

Consequently, it is crucial that we continue to invest to improve our offering and to meet clients' needs as they evolve. Over the first half of the financial year we further developed our capabilities in building solutions that will help clients across a number of different life stages. This included launching our Wealth Shortlist, which offers additional tools and greater insight to help clients make their investment decisions. We also delivered significant improvement to our retirement proposition with a new online drawdown application that personalises the experience for the client, educates them on the risks and nudges them towards better outcomes. This has led to a dramatic improvement in straight through applications and has seen an increase from 30% to 50% for clients taking partial drawdown. Clients are only taking the tax-free cash that they need and leaving the rest to grow efficiently in their pension. Alongside this we have developed new investment pathways which launched this month, which have been built with client needs and outcomes at the core.

Meanwhile, we also continue to evolve our Active Savings service, which continues to play a vital role in the savings market where the rates clients can achieve are so important. Active Savings had a record half, generating GBP0.7 billion net new business to reach an AUA of GBP2.9 billion. Despite our expectation of subdued flows due to the market-leading NS&I rates on offer over the summer we saw a strong performance over the second quarter when their rate reductions were announced in late September. At the end of December, we launched our new Cash ISA which should help drive continued momentum over the second half. We look forward to seeing how our clients use this new product to help them diversify their savings in 2021.

We continue to develop and innovate our technology and digital offering. Client interaction with our app continues to grow and we expect this trend to increase in line with the development in our client demographics. We are investing in the development of digital and connected technology to support and evolve our service and client experience. Along with the continued development of our proposition and delivering the right outcomes for clients we are well placed to meet their evolving needs over a lifetime and ensuring that they consolidate their savings with Hargreaves Lansdown over the long term. The scale of our platform allows us to have the capacity to invest in our client proposition to remain a market leader not just for today but for the long term whilst continuing to deliver sustainable and attractive value for our shareholders as well as our clients, the tangible results of which can be seen in the results we have announced today.

Dividend

The Board believes the Group has strong profitability, liquidity and a capital position to execute its strategy without financial constraint and to operate a sustainable and progressive ordinary dividend policy. We remain confident in our business model and the Board has declared a 6% rise in the interim dividend to 11.9 pence per share. The Board remains committed to paying special dividends when sufficient excess cash and capital exist after taking account of the Group's growth, investment and regulatory capital requirements at the time.

Outloo k

I wish to highlight and thank my colleagues for their continued hard work throughout this incredibly difficult time. I continue to be inspired by their dedication to delivering for our clients and the ongoing resilience that they have and continue to demonstrate throughout the COVID-19 pandemic.

We remain excited by the structural growth opportunity in the UK savings and investments market and confident in our ability to deliver sustainable growth through the cycle. The COVID-19 pandemic has underpinned the importance of financial resilience and we are well placed to support clients with their saving and investment needs across their lifetimes.

Whilst events at the end of 2020 provided further stability to the external environment, with the conclusion of the Brexit deal and the completion of the US election, the COVID-19 pandemic and the resulting economic consequences will continue to impact markets and businesses over the remainder of this financial year and beyond. Nonetheless, we remain confident in our ability to continue to help more clients to save and invest, and to support them with achieving their financial goals in the lead up to and beyond the tax year-end.

Trading in January has been similar to other lockdown periods with strong dealing volumes, significant client engagement and robust net new business and net new client numbers. The UK's tax year-end should as ever provide us with a great opportunity to engage with existing and new clients, helping them to make the most of their tax allowances and build up their wealth. Beyond this, things become less certain but we remain committed to our client led strategy and will continue to invest to improve and increasingly personalise the client experience and our proposition.

Chris Hill

Chief Executive Officer

Financial Review

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

 
                        Unaudited      Unaudited         Unaudited 
                      3 months to    3 months to    6 months ended 
                     30 September    31 December       31 December 
                             2020           2020              2020 
                            GBPbn          GBPbn             GBPbn 
=================  ==============  =============  ================ 
Opening AUA                 104.0          106.9             104.0 
Net New Business              0.8            2.4               3.2 
Market growth 
 & other                      2.1           11.3              13.4 
Closing AUA                 106.9          120.6             120.6 
=================  ==============  =============  ================ 
 

Hargreaves Lansdown provides the leading direct wealth management service in the UK. The strength of our brand and diversified offering, by asset class and wrapper, the quality of our customer engagement and service and the strength of our marketing capabilities has allowed us to deliver strong net new customer and net new business growth in the period. These are unprecedented times, but the Group has performed exceptionally through them. The additional scale we have gained in 2020 and our relentless focus on client service positions us well for the structural growth opportunity in the UK savings and investments market.

Net new business for the first half totalled GBP3.2 billion. This was driven by increased client numbers, continued wealth consolidation onto our platform and strong gross inflows particularly in the second quarter. Throughout this period we have been focused on colleague welfare and have remained open for business. As seen in the initial months of COVID-19 we have continued to see strong growth in net new clients, particularly amongst a younger demographic who were particularly engaged with share dealing.

We introduced 84,000 net new clients to our services in the six months to 31 December 2020 (H1 2020: 50,000, or 32,000 excluding direct book acquisitions), growing our active client base by 6% to 1,496,000. During the 2020 calendar year, this is an increase of 222,000 clients. The average age of new clients is consistent with recent periods, albeit greater in scale, and they are behaving similarly to recent equivalent cohorts in terms of growing their AUA on the platform over time. We are encouraged by this and the additional lifetime value they have brought to the Group as a result.

This increased client population underpins future growth as clients add new money to their accounts, particularly through the use of annual tax free allowances in the SIPP and ISA products. Over a period of time, clients also typically consolidate their investments through transfers onto our platform. This growth was supported by our continued high retention rate 92.9% (H1 2020: 93.3%).

Total AUA increased by 16% to GBP120.6 billion as at 31 December 2020 (GBP104.0bn as at 30 June 2020). This was driven by GBP3.2 billion of net new business (H1 2020: GBP2.3bn) plus significant positive stock market movements impacting asset values.

Income Statement

 
                                Unaudited          Unaudited          Audited 
                           6 months ended     6 months ended          Year to 
                         31 December 2020        31 December     30 June 2020 
                                     GBPm               2019             GBPm 
                                                        GBPm 
====================  ===================  =================  =============== 
Revenue                             299.5              257.9            550.9 
Operating costs                   (112.0)             (89.2)          (214.9) 
Fair value gains on 
 derivatives                          0.6                1.0              1.7 
Finance income                        0.8                1.6              2.8 
Finance costs                       (0.5)              (0.2)            (1.0) 
====================  ===================  =================  =============== 
Underlying profit 
 before tax                         188.4              171.1            339.5 
Gain on disposal                        -                  -             38.8 
====================  ===================  =================  =============== 
Profit before tax                   188.4              171.1            378.3 
Tax                                (36.4)             (31.8)           (65.1) 
====================  ===================  =================  =============== 
Profit after tax                    152.0              139.3            313.2 
====================  ===================  =================  =============== 
 

Revenue

Revenue for the period was up 16% to GBP299.5 million (H1 2020: GBP257.9m), driven by higher average asset levels and higher share dealing volumes. This increase compares to a decline in the average FTSE All Share of 17%, showing the strength of the Group's net new business performance over the past year and diversified revenue stream. This more than offset a fall in interest on client money as the net interest margin was impacted by the emergency cuts in the base rate of interest in March 2020 and the fall in annual management charges on the HL Funds which fell in line with their lower average asset values. In addition, we no longer have the revenue derived from our FundsLibrary business, which was GBP4.8 million in the prior period, as it was sold in February 2020.

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

 
                           6 months ended                 6 months ended               Year ended 30 June 
                          31 December 2020               31 December 2019                     2020 
=================  =============================  =============================  ============================= 
                    Revenue    Average   Revenue   Revenue    Average   Revenue   Revenue    Average   Revenue 
                       GBPm        AUA    margin      GBPm        AUA    margin      GBPm        AUA    margin 
                                 GBPbn       bps                GBPbn       bps                GBPbn       bps 
=================  ========  =========  ========  ========  =========  ========  ========  =========  ======== 
 
 Funds(1)             109.7    54.2(7)        40     109.6    54.6(7)        40     210.6    52.3(7)        40 
 Shares(2)            113.2       39.9        56      45.7       35.0        26     148.5       34.3        43 
 Cash(3)               32.8       13.2        50      46.0       11.2        82      91.1       12.3        74 
 HL Funds(4)           29.4     8.0(7)        73      33.9     9.2(7)        73      63.6     8.7(7)        73 
 Other(5)              14.4     2.5(6)         -      22.7     1.3(6)         -      37.1     1.7(6)         - 
 Double-count(7)          -   (8.0)(7)         -         -   (9.1)(7)         -         -   (8.6)(7)         - 
=================  ========  =========  ========  ========  =========  ========  ========  =========  ======== 
 Total                299.5   109.8(7)         -     257.9   102.2(7)         -     550.9   100.6(7)         - 
=================  ========  =========  ========  ========  =========  ========  ========  =========  ======== 
 

1 Platform fees and renewal commission.

2 Stockbroking commission and equity holding charges.

3 Net interest earned on client money.

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

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

6 Average cash held via Active Savings.

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

Revenue on Funds increased marginally to GBP109.7m (H1 2020: GBP109.6m) despite the average AUA falling slightly. Funds remain our largest client asset class at 49% of average AUA (H1 2020: 53%), and the revenue margin earned in the period was in line with our expectations at 40bps (H1 2020: 40bps). Revenue margins on Funds have been broadly stable following the completion of the Retail Distribution Review and we continue to expect them to remain at similar levels over the remainder of the financial year. Funds AUA at the end of the period was GBP59.2 billion (31 December 2019: GBP55.9bn) due to increased market levels towards the end of the period.

Revenue on Shares increased by 148% to GBP113.2m (H1 2020: GBP45.7m) and the revenue margin of 56bps (H1 2020: 26bps) was ahead of the upper end of our expected range. This margin is primarily a result of the ratio of dealing volumes to AUA, and in the period deal volumes have grown 123% whereas the average Shares AUA has grown by 14%. Hargreaves Lansdown is the leading retail stockbroking business in the UK, with a 40.3% share (source: Compeer Limited XO Quarterly Benchmarking Report Q3 2020). This has enabled us to benefit from the growth in share trading across the industry in 2020, amongst both new and existing clients. This trend goes back to December 2019 post the General Election result and which picked up further in light of the COVID-19 pandemic and the associated market falls and lockdown periods. Our guidance for the full year is 45 bps to 60 bps. Whether such elevated dealing volumes continue once lockdowns end, and life returns more to normal is difficult to say. Our focus, however, on engaging with clients, helping to build their financial knowledge and confidence, the breadth of shares available and the ease to invest via our platform may well see a higher base level of dealing volumes than pre COVID-19. Shares AUA at the end of the period was GBP45.9 billion (31 December 2019: GBP36.5bn).

Revenue on Cash decreased by 29% to GBP32.8m (H1 2020: GBP46.0m) as increased AUA levels were more than offset with a decrease in the net interest margin to 50bps (H1 2020: 82bps). Our communicated expectations at the start of the year were that margins would be within a 40bps to 50bps range for the year. We also highlighted that the margin would fall across the year as the impact of the March 2020 emergency base rate reductions take greater effect. Initially, following the emergency base rate cuts, term rates offered by the banks held up well but in more recent months they have fallen significantly. As a result, guidance for the full year is now in the range of 34bps to 40bps. Given the duration of our term deposits, which can be up to a maximum of 13 months, the impact of falling term deposit rates will be felt more in the year to 30 June 2022. Assuming there are no further rate changes, our initial guidance for that year is 10bps to 15bps. Cash AUA at the end of the period was GBP12.5 billion (31 December 2019: GBP11.1bn).

HL Funds consist of ten Multi-Manager funds, on which the management fee is 75bps per annum, and three Select equity funds, on which the management fee is 60bps. Revenue from HL Funds has fallen by 13% this year to GBP29.4m (H1 2020: GBP33.9m) due to the average funds under management being 13% lower as a result of market falls and modest net outflows. The fees are collected on a daily basis whereas the Group calculates average AUM on a month end basis, resulting in a headline margin for the period of 73bps (H1 2020: 73bps). Earlier this month we issued the annual Value for Money report on our own fund range. In the report we announced the decision to lower the annual management charge on some of our Multi-Manager funds and introduce further price reductions linked to economies of scale. These price changes are expected to take effect in the last quarter of our financial year. Based on the current fund values, the annualised current loss of revenue is estimated at GBP3.5 million and hence the margin for this year is now expected to be in the range of 70bps to 74bps and in the following year, where there will be a full-year impact, we anticipate the margin will be in the range of 66bps to 70bps. Please note that the platform fees on these assets are included in the Funds line and hence total average AUA of GBP109.8 billion (H1 2020: GBP102.2bn) excludes HL Funds AUM to avoid double-counting. HL Funds AUM at the end of the period was GBP8.5 billion (31 December 2019: GBP9.4bn).

Other revenues are made up of advisory fees, Active Savings and ancillary services such as annuity broking, distribution of VCTs and the Hargreaves Lansdown Currency and Market Services. These revenues are primarily transactional and not impacted by market growth. They declined by 37% in the period mainly because of the disposal of FundsLibrary, our data services provider, which made up GBP4.8 million of the revenue in the comparative period. In addition, advice fees were lower as COVID-19 made it more difficult to engage with existing and prospective new clients. Assets held within Active Savings on the platform and the related revenue are not yet broken out into a separate category in the table above. As highlighted previously we believe it is strategically imperative to capture the scale advantage of being a first mover. Consequently, our focus remains on growing AUA at present. Our chosen route for achieving this in the current low interest rate environment is via reducing our revenue margins to ensure the rates offered on Active Savings are highly competitive. This will attract the new clients and assets into the service that we need to capitalise on the opportunity. As at 31 December 2020 the AUA was GBP2.9 billion (31 December 2019: GBP1.6bn).

 
                                Unaudited          Unaudited          Audited 
                           6 months ended     6 months ended          Year to 
                              31 December        31 December     30 June 2020 
                                     2020               2019             GBPm 
                                     GBPm               GBPm 
======================  =================  =================  =============== 
Recurring revenue                   193.8              209.9            404.3 
Transactional revenue               105.7               43.2            140.1 
Other revenue                           -                4.8              6.5 
Total revenue                       299.5              257.9            550.9 
======================  =================  =================  =============== 
 

The Group's revenues are largely recurring in nature, as shown in the table above. The proportion of recurring revenues has decreased to 65% in the period (H1 2020: 81%) as the transactional stockbroking commission increased significantly versus last year. Recurring revenue is primarily comprised of platform fees on funds and equities, Hargreaves Lansdown fund management fees, interest on client money and ongoing advisory fees. This fell by 8% to GBP193.8 million (H1 2020: GBP209.9m) driven by lower interest rates earned on client money, which more than offset the higher platform fees and management fees from higher average AUA levels. Recurring revenues provide greater profit resilience and hence we believe they are of higher quality than non-recurring revenues.

Transactional revenue is primarily made up of stockbroking commission and advisory event-driven fees. This increased by 145% to GBP105.7 million (H1 2020: GBP43.2m) with a 162% increase in client driven equity dealing volumes being the key driver.

Other revenue was derived from the provision of funds data services and research to external parties through FundsLibrary, however, this business was sold on 28 February 2020 and hence there is no revenue for this period.

Operating costs

 
                                     Unaudited          Unaudited        Audited 
                                6 months ended     6 months ended     Year ended 
                                   31 December        31 December        30 June 
                                          2020               2019           2020 
                                          GBPm               GBPm           GBPm 
===========================  =================  =================  ============= 
Staff costs                               55.5               50.5          101.2 
Marketing and distribution 
 costs                                    10.5                6.0           23.9 
Depreciation, amortisation 
 & financial costs                         9.5                8.4           17.6 
Other costs                               36.1               22.6           58.5 
---------------------------  -----------------  -----------------  ------------- 
                                         111.6               87.5          201.2 
Total FSCS levy                            0.4                1.7           13.7 
===========================  =================  =================  ============= 
Total operating costs                    112.0               89.2          214.9 
===========================  =================  =================  ============= 
 

Operating costs increased by 27% to GBP111.6 million (H1 2020: GBP87.5m) to support higher client activity levels, maintain client service and invest in the significant growth opportunities we see ahead for Hargreaves Lansdown. Focusing on these areas and controlling costs elsewhere has resulted in costs before the FSCS levy being slightly below their H2 2020 equivalent.

Over the past three years we have deliberately invested into our service, marketing capabilities, technology, scalability and efficiency as the Group's focus on client service is core to our success and necessary to capture the structural growth opportunity in the UK savings and investments market. This investment has been validated across the 2020 calendar year by record NNB, record levels of net new clients, increased market shares, attractive client retention rates, the continued development of our product set and growth capabilities and the resilience of our platform through COVID-19.

Key drivers of the cost growth were marketing and distribution. These rose by GBP4.5 million this period as we capitalised on the opportunity to accelerate new client acquisition. At current revenue margins and activity levels, the GBP8.6 billion of NNB we have added across 2020 is equivalent to circa GBP46 million of future annual revenues.

Activity based costs also rose by GBP6.5 million. These are primarily dealing costs linked to the additional GBP67 million of Shares revenue and debit card fees linked to elevated levels of cash paid onto the platform.

Looking forward we would anticipate that costs will grow broadly in line with the growth of client numbers. Cost growth in 2020 was marginally ahead of this due to the unusual marketing opportunity to acquire new clients and exceptional dealing volume costs.

Staff costs rose by 10% to GBP55.5 million (H1 2020: GBP50.5m). This was predominantly within the service functions of helpdesk and operations, driven by the need to support our increased levels of client activity and contact whilst working in a COVID-19 configuration. Average staff numbers increased by 6% from 1,588 in H1 20 to 1,691 in H1.

Marketing and distribution costs rose by 75% to GBP10.5 million (H1 2020: GBP6.0m). This was due to enhanced levels of new client acquisition and higher levels of engagement with our existing client base, key to their ongoing net new business contributions and client retention. As usual, we expect marketing activity to increase in the second half and through the tax year-end, including a brand marketing campaign as per last year.

Depreciation, amortisation and financial costs increased by GBP1.1 million as a result of higher capital spend in recent years, primarily on our core in-house IT systems, hardware and software for increased employee numbers and the Active Savings platform.

Total capitalised expenditure in the period was GBP7.9 million (H1 2020: GBP4.7m). The majority of this expenditure was for cyclical replacement of IT hardware, the continued project to enhance the capacity and capability of our key administration systems and the ongoing development of Active Savings.

Other costs rose by GBP13.5 million to GBP36.1 million (H1 2020: GBP22.6m). The key drivers of this were increased dealing costs of GBP5.6 million relating to the record dealing volumes and computer maintenance driven by higher employee numbers and enabling so many employees to work from home throughout the period.

The Financial Services Compensation Scheme (FSCS) levy is typically charged in the second half of the year so ordinarily there is no charge in the first half, however, in November 2020 an interim levy of GBP0.4 million was charged by the FSCS. By comparison, in the prior year, there was an interim levy of GBP1.5 million and an additional charge of GBP0.2 million relating to an under accrual of the previous year's levy. The FSCS is the compensation fund of last resort for customers of authorised financial services firms. All authorised firms are required to contribute to the running of the scheme and the levy reflects the cost of compensation payments paid by the industry in proportion to the amount of each participant's relevant eligible income. As usual, the second half of the year will be impacted by the FSCS levy, which for last year resulted in a final net charge of GBP13.7 million.

Profit before tax

Hargreaves Lansdown's success is built around delivering high service standards, efficiently dealing with ever growing volumes of business and investing in further growth opportunities. This investment is key to driving future growth and ensuring we have a scalable operating platform which we believe will be to the benefit of both clients and shareholders across the market cycle. As a result, the Group has grown profit before tax by 10% to GBP188.4 million (H1 2020: GBP171.1m).

Tax

The effective tax rate for the period was 19.3% (H1 2020: 18.6%), in line with the standard rate of UK corporation tax. The Group's tax strategy is published on our website at http://www.hl.co.uk

Earnings per share

 
                                      Unaudited         Unaudited         Audited 
                                       6 months    6 months ended         Year to 
                                          ended       31 December    30 June 2020 
                                    31 December              2019            GBPm 
                                           2020              GBPm 
                                           GBPm 
================================  =============  ================  ============== 
 Operating profit                         188.1             169.7           337.7 
 Finance income                             0.8               1.6             2.8 
 Finance costs                            (0.5)             (0.2)           (1.0) 
================================  =============  ================  ============== 
 Underlying profit before 
  tax                                     188.4             171.1           339.5 
 Gain on disposal                             -                 -            38.8 
 Profit before tax                        188.4             171.1           378.3 
 Tax                                     (36.4)            (31.8)          (65.1) 
================================  =============  ================  ============== 
 Profit after tax                         152.0             139.3           313.2 
================================  =============  ================  ============== 
 Weighted average number 
  of shares for the calculation 
  of diluted EPS                          474.5             475.6           474.8 
================================  =============  ================  ============== 
 Diluted EPS (pence per 
  share)                                   32.1              29.3            65.9 
 Underlying diluted EPS 
  (pence per share)                        32.1              29.3            57.8 
================================  =============  ================  ============== 
 

Diluted EPS increased by 9% from 29.3 pence to 32.1 pence, reflecting the Group's positive trading performance. The Group's basic EPS was 32.1 pence, compared with 29.3 pence in H1 2020.

Capital and liquidity management

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

The Group seeks to maintain a strong net cash position and a robust balance sheet with sufficient capital and liquidity to fund ongoing trading and future growth, in line with our strategy of offering a lifelong, secure home for people's savings and investments. The Group has a high conversion rate of operating profits to cash and its net cash position at 31 December 2020 was GBP390.7 million (H1 2020: GBP317.6 million) as cash generated through trading offset the payments of the 2020 final and special dividends. This includes cash on longer-term deposit and is before funding the 2021 interim dividend of GBP56.4 million

.

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

Total attributable shareholders' equity, as at 31 December 2020, made up of share capital, share premium, retained earnings and other reserves increased to GBP500.7 million (H1 2020: GBP442.5 million) as continued profitability more than offset dividend payments. Included within shareholders' equity are distributable reserves of GBP500.7 million (H1 2020: GBP441.0 million).

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

Dividend

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

Given the Group's dividend policy, the Board has declared an increased interim dividend of 11.9 pence per share (H1 2020: 11.2 pence per share). The interim dividend will be paid on 8 March 2021 to all shareholders on the register at 12 February 2021.

Directors Responsibility Statement

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

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

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

The Directors of Hargreaves Lansdown plc are listed on page 26 of the Interim Report and Condensed Consolidated Financial Statements 6 months ended 31 December 2020.

By order of the Board:

Philip Johnson

Chief Financial Officer

31 January 2021

Independent review report of Hargreaves Lansdown plc

Report on the consolidated interim financial statements

Our conclusion

We have reviewed Hargreaves Lansdown plc's consolidated interim financial statements (the "interim financial statements") in the Interim results for the six months ended 31 December 2020 of Hargreaves Lansdown plc for the 6 month period ended 31 December 2020 (the "period"). 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 2020; 

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

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

The interim financial statements included in the Interim results for the six months ended 31 December 2020 of Hargreaves Lansdown plc have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

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

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Interim results for the six months ended 31 December 2020, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Interim results for the six months ended 31 December 2020 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 results for the six months ended 31 December 2020 based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

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

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

We have read the other information contained in the Interim results for the six months ended 31 December 2020 and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

Section 1: Results for the period

Condensed Consolidated Income Statement

for the period ended 31 December 2020

 
                                           Unaudited    Unaudited      Audited 
                                            6 months     6 months         Year 
                                            ended 31     ended 31           to 
                                            December     December      30 June 
                                                2020         2019         2020 
                                   Note         GBPm         GBPm         GBPm 
 
Revenue                            1.1         299.5        257.9        550.9 
Fair value gains on 
 derivatives                                     0.6          1.0          1.7 
Operating costs                    1.3       (112.0)       (89.2)      (214.9) 
 
 
Operating profit                               188.1        169.7        337.7 
 
Finance income                                   0.8          1.6          2.8 
Finance costs                      1.5         (0.5)        (0.2)        (1.0) 
Other gains                        1.4             -            -         38.8 
 
 
Profit before tax                              188.4        171.1        378.3 
 
Tax                                1.6        (36.4)       (31.8)       (65.1) 
 
 
  Profit for the period                        152.0        139.3        313.2 
 
 
Attributable to: 
Owners of the parent                           152.2        139.2        313.1 
Non-controlling interest                       (0.2)          0.1          0.1 
 
 
                                               152.0        139.3        313.2 
 
 
Earnings per share 
 (pence) 
 Basic earnings per 
 share                             1.7          32.1         29.3       66.1 
Diluted earnings per 
 share                                          32.1         29.3       65.9 
Underlying basic earnings 
 per share                                      32.1         29.3       57.9 
Underlying diluted 
 earnings per share                             32.1         29.3       57.8 
 
 
  The results relate entirely to continuing operations. 
 
  After the balance sheet date, the Directors declared an 
  ordinary interim dividend of 11.9 pence per share payable 
  on 8 March 2021 to shareholders on the register at 12 February 
  2021. 
 

Condensed Consolidated Statement of Comprehensive Income

for the period ended 31 December 2020

 
                                                     Unaudited      Unaudited    Audited 
                                                      6 months       6 months       Year 
                                                         ended          ended         to 
                                                   31 December    31 December    30 June 
                                                          2020           2019       2020 
 
                                                          GBPm           GBPm       GBPm 
 
           Profit for the period                         152.0          139.3      313.2 
 
           Total comprehensive income for the 
            financial period                             152.0          139.3      313.2 
 
 
           Attributable to: 
           Owners of the parent                          152.2          139.2      313.1 
           Non-controlling interest                      (0.2)            0.1        0.1 
 
 
                                                         152.0          139.3      313.2 
 
 

Notes to the Condensed Consolidated Statement of Comprehensive Income

for the period ended 31 December 2020

   1.1     Revenue 

Revenue represents fees receivable from financial services provided to clients, net interest income on client money and management fees charged to clients. It relates to services provided in the UK and is stated net of value added tax.

The largest source of revenue for the Group encompasses ongoing revenue, which includes platform fees, fund management fees, interest on client money and ongoing advisory fees.

The second largest source is revenue earned at the point of sale on individual transactions and is primarily made up of stockbroking commission and advisory event-driven fees. The price is determined in relation to the specific transaction type and are frequently flat fees.

Other revenue was made up entirely of the provision of funds data services and research to external parties through FundsLibrary, which is no longer part of the Group - see note 2.5 for further details.

 
                                Unaudited      Unaudited   Audited 
                                 6 months       6 months      Year 
                                 ended 31          ended        to 
                                 December    31 December   30 June 
                                     2020           2019      2020 
 
           Revenue                   GBPm           GBPm      GBPm 
 
 
 Platform fees                      124.0          121.5     234.4 
 Fund management fees                29.4           33.9      63.6 
 Ongoing adviser fees                 4.5            5.5      10.2 
 Interest earned on client 
  money                              33.4           46.3      91.2 
 Renewal commission                   2.5            2.7       4.9 
 
 Stockbroking commission            101.1           34.7     127.3 
 Advisory event driven fees           2.3            5.9       8.6 
 Other transactional income           2.3            2.6       4.2 
 
 Other revenue                          -            4.8       6.5 
------------------------------  ---------  -------------  -------- 
           Revenue                  299.5          257.9     550.9 
 
 
   1.2       Segment information 

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

It is the view of the Board and of the Executive Committee that there is only one segment, being the Group - a direct-to-investor investment service administering investments in ISA, SIPP and Fund & Share accounts, providing services for individuals and corporates. Given that only one segment exists, no additional information is presented in relation to it, as it is disclosed throughout these financial statements.

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

   1.3       Operating costs 
 
                                          Unaudited      Unaudited   Audited 
                                           6 months       6 months      Year 
                                           ended 31          ended        to 
                                           December    31 December   30 June 
                                               2020           2019      2020 
 
           Operating costs                     GBPm           GBPm      GBPm 
 
           Depreciation                         4.3            4.2       8.4 
           Amortisation                         3.1            2.6       5.2 
           Marketing and distribution 
            costs                              10.6            6.0      23.9 
Operating lease payables                        0.3            0.1       0.1 
Office running costs - excluding 
 operating lease payables                       0.8            1.7       4.3 
           FSCS costs                           0.4            1.7      13.7 
           Dealing costs                        9.9            4.4      12.8 
           Other costs                         27.1           18.0      45.3 
           Staff costs                         55.5           50.5     101.2 
 
           Operating costs                    112.0           89.2     214.9 
 
 

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

 
                             1.4 Other gains 
                                               Unaudited     Unaudited 
                                                6 months      6 months   Audited 
                                                ended 31      ended 31   Year to 
                                                December      December   30 June 
                                                    2020          2019      2020 
 
                                                    GBPm          GBPm      GBPm 
 
 Gain on disposal of subsidiary                        -             -      38.8 
 ---------------------------------------       ---------  ------------  -------- 
                                                       -             -      38.8 
 
 
 
 
 
                       1.5 Finance costs 
                                           Unaudited     Unaudited 
                                            6 months      6 months   Audited 
                                            ended 31      ended 31   Year to 
                                            December      December   30 June 
                                                2020          2019      2020 
 
                                                GBPm          GBPm      GBPm 
 
 Commitment fees                                 0.2           0.2       0.3 
 Interest incurred on lease 
  payables                                       0.3             -       0.7 
 -----------------------------------       ---------  ------------  -------- 
 
                                                 0.5           0.2       1.0 
 
 
 
 
 
                             1.6 Tax 
                                                     Unaudited     Unaudited   Audited 
                                                      6 months      6 months      Year 
                                                      ended 31      ended 31        to 
                                                      December      December   30 June 
                                                          2020          2019      2020 
 
                                                          GBPm          GBPm      GBPm 
 
 
        The tax charge for the period is based on the prevailing 
        standard rate of tax for the year to 30 June 2021 of 
        19.0% (30 June 2020: 19.0%). 
 Current tax - on profits for 
  the period                                              36.2          32.1      64.9 
 Current tax - adjustments in respect 
  of prior years                                         (0.1)             -       0.3 
 Deferred tax                                              0.2         (0.3)       0.4 
 Deferred tax - adjustments in respect 
  of prior years                                           0.1             -     (0.5) 
 
 
                                                          36.4          31.8      65.1 
 
 
 
 
 

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            ended           to 
                                                   31 December      31 December      30 June 
                                                          2020             2019         2020 
 
                                                          GBPm             GBPm         GBPm 
 
Deferred tax relating to share-based 
 payments                                                  0.4              0.1          0.7 
Current tax relating to share-based 
 payments                                                (0.4)            (0.3)        (0.9) 
 
 
                                                             -            (0.2)        (0.2) 
 
 
 
 
   1.7        Earnings per share (EPS) 

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in free issue during the period, including ordinary shares held in the EBT reserve which have vested unconditionally with employees.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding by assuming the conversion of all dilutive potential ordinary shares.

The weighted average number of anti-dilutive share options and awards excluded from the calculation of diluted earnings per share was nil as at 31 December 2020 (nil at 31 December 2019 and nil at 30 June 2020).

 
                                         Unaudited  Unaudited 
                                          6 months   6 months    Audited 
                                          ended 31   ended 31    Year to 
                                          December   December    30 June 
                                              2020       2019       2020 
 
Earnings (all from continuing                 GBPm       GBPm       GBPm 
 operations) 
Earnings for the purposes of 
 basic and diluted EPS being net 
 profit attributable to equity 
 holders of the parent Company               152.2      139.2      313.1 
 
 
 
 
 
Number of shares                             Number       Number       Number 
Weighted average number of ordinary 
 shares 
 
 Weighted average number of shares 
 held by HL EBT                         474,318,625  474,318,625  474,318,625 
 
                                          (528,413)    (122,231)    (527,322) 
Weighted average number of share 
 options held in relation to shares 
 held by HL EBT which have vested 
 unconditionally with employees               7,868      369,192       44,555 
--------------------------------------  -----------  -----------  ----------- 
 
  Weighted average number of shares 
  for the purposes of basic EPS         473,798,080  474,565,586  473,835,858 
 
Weighted average number of dilutive 
 share options held in relation 
 to shares held by HL EBT that 
 have not vested unconditionally 
 with employees                             671,254    1,002,809      989,475 
 
 
  Weighted average number of shares 
  for the purpose of diluted EPS        474,469,334  475,568,395  474,825,333 
--------------------------------------  -----------  -----------  ----------- 
 
Earnings per share                            Pence        Pence        Pence 
Basic EPS                                      32.1         29.3         66.1 
Diluted EPS                                    32.1         29.3         65.9 
Underlying basic EPS(1)                        32.1         29.3         57.9 
Underlying diluted EPS(1)                      32.1         29.3         57.8 
 
 

Underlying earnings are defined as the net profit attributable to equity holders of the parent company allowing for deduction of one-off items. For the year ended 30 June 2020 the one-off items deducted are the gains on disposal of Funds Library and the related costs.

Section 2: Assets & Liabilities

Condensed Consolidated Statement of Financial Position

for the period ended 31 December 2020

 
                                            Unaudited  Unaudited  Audited 
                                                at 31      at 31    at 30 
                                             December   December     June 
                                                 2020       2019     2020 
 
                                      Note       GBPm       GBPm     GBPm 
ASSETS: 
Non-current assets 
Goodwill                                          1.3        1.3      1.3 
Other intangible assets                2.1       31.8       22.9     28.0 
Property, plant and equipment          2.1       29.5       34.0     33.2 
Deferred tax assets                               2.5        3.8      3.1 
 
 
                                                 65.1       62.0     65.6 
 
 
Current assets 
Trade and other receivables            2.3    1,094.3      795.2    973.2 
Cash and cash equivalents              2.4      281.9      184.8    235.9 
Investments                            2.2        1.0        0.9      0.6 
Derivative financial instruments                  0.1        0.1      0.1 
Current tax assets                                0.3          -      0.7 
Assets classified as held for sale     2.5          -       13.9        - 
 
 
                                              1,377.6      994.9  1,210.5 
 
 
Total assets                                  1,442.7    1,056.9  1,276.1 
 
 
 
LIABILITIES: 
Current liabilities 
Trade and other payables               2.6      924.7      588.8    696.7 
Derivative financial instruments                  0.1          -      0.1 
Current tax liabilities                             -        0.1        - 
Liabilities associated with assets 
 classified as held for sale           2.5          -        2.9        - 
 
 
                                                924.8      591.8    696.8 
 
 
Net current assets                              452.8      403.1    513.7 
 
 
Non-current liabilities 
Provisions                                        0.8        0.7      0.8 
Non-current liabilities                             -          -      1.0 
Lease liabilities                                16.4       21.9     19.9 
 
 
Total liabilities                               942.0      614.4    718.5 
 
 
Net assets                                      500.7      442.5    557.6 
 
 
 
EQUITY: 
Share capital                          3.1        1.9        1.9      1.9 
Shares held by Employee Benefit 
 Trust                                          (6.2)      (5.0)    (6.3) 
EBT reserve                                     (3.1)      (0.1)    (1.9) 
Retained earnings                               509.0      444.2    564.6 
 
 
Total equity, attributable to the 
 owners of the parent                           501.6      441.0    558.3 
 
Non-controlling interest                        (0.9)        1.5    (0.7) 
 
Total equity                                    500.7      442.5    557.6 
 
 

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

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

Section 2: Assets & Liabilities

Notes to the Condensed Consolidated Statement of Financial Position

for the period ended 31 December 2020

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

Capital expenditure

During the six months ended 31 December 2020, the Group acquired fixtures, fittings, plant, equipment and software assets and internally generated intangibles with a cost of GBP7.9 million (H1 2020: GBP4.7million, year to 30 June 2020: GBP15.6 million).

   2.2        Investments 
 
                                                                            Audited 
                                            Unaudited         Unaudited          at 
                                       at 31 December    at 31 December     30 June 
                                                 2020              2019        2020 
 
                                                 GBPm              GBPm        GBPm 
 
At beginning of period                            0.6               1.1         1.1 
Sales                                               -             (0.2)       (0.5) 
Purchases                                         0.4                 -           - 
 
 
           At end of period                       1.0               0.9         0.6 
 
 
           Comprising: 
Current asset investment - UK 
 listed securities valued at quoted 
 market price                                     1.0               0.9       0.6 
 
 

GBP0.9 million (31 December 2019: GBP0.9 million, 30 June 2020: GBP0.6 million) of investments are classified as held at fair value through profit and loss. These investments are all level 1 financial instruments in line with the fair value hierarchy under IFRS 7 and there have been no transfers between levels in the period.

   2.3        Trade and other receivables 
 
                         Unaudited   Unaudited   Audited 
                             at 31       at 31        at 
                          December    December   30 June 
                              2020        2019      2020 
 
                              GBPm        GBPm      GBPm 
 
Financial assets: 
Trade receivables            915.2       578.0     663.8 
Term deposits                110.0       135.0     230.0 
Other receivables              3.7         4.4       2.6 
Accrued income                55.5        69.6      64.6 
 
 
                           1,084.4       787.0     961.0 
Non-financial assets: 
Prepayments                    9.9         8.2      12.2 
 
 
                           1,094.3       795.2     973.2 
 
 

Trade and other receivables are measured at initial recognition at amortised cost in accordance with IFRS 9. Assessment has been made of the expected credit loss in relation to debtors, as required under IFRS 9, this measure requires assessment of the past default experience for debtors, grouped by type and with reference to available information both historic and forward-looking. No credit losses are expected in relation to these matters.

In accordance with market practice, certain balances with clients, Stock Exchange member firms and other counterparties totalling GBP898.6 million (31 December 2019: GBP529.1 million, 30 June 2020: GBP640.2 million) are included in trade receivables. These balances are presented net where there is a legal right of offset and the ability and intention to settle net . The gross amount of trade receivables is GBP1,139.4 million and the gross amount of offset in the balance sheet with trade payables is GBP213.6 million. Other than counterparty balances trade receivables primarily consist of fees and amounts owed by clients. There are no balances where there is a legal right of offset but not a right of offset in accordance with accounting standards, and no collateral has been posted for the balances that have been offset.

   2.4        Cash and cash equivalents 
 
                                    Unaudited   Unaudited    Audited 
                                        at 31       at 31         at 
                                     December    December    30 June 
                                         2020        2019       2020 
 
                                         GBPm        GBPm       GBPm 
Group cash and cash equivalent 
 balances                               280.7       182.6      232.8 
Restricted cash - balances held 
 by Hargreaves Lansdown EBT               1.2         2.2        3.1 
 
 
                                        281.9       184.8      235.9 
 
 

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

Included within "Assets classified as held for sale" as at 31 December 2019 were cash and cash equivalents totalling GBP11.4m, these are classified in the same way as the cash and cash equivalents of the Group. See note 2.5 for further details.

At 31 December 2020 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 GBP7,114 million (31 December 2019: GBP5,634 million, 30 June 2020 GBP7,506 million). In addition there were cash balances held on behalf of clients not governed by the client money rules of GBP7,836 million (31 December 2019: GBP6,600 million, 30 June 2020: GBP6,254.0 million), which includes monies held in SIPP Trust and in accordance with the Payment Services Regulations 2017. The client retains the beneficial interest in both these deposits and cash accounts and accordingly they are not included in the balance sheet of the Group.

   2.5        Assets classified as held for sale 

In the prior year the Group entered into an arrangement to sell FundsLibrary Ltd. As at 31 December 2019, the Group was committed to the sale of the subsidiary and as such the assets and liabilities of FundsLibrary Ltd were classified as held for sale and are shown separately in the Consolidated Statement of Financial Position. The assets and liabilities of the subsidiary were as shown below:

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

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

The disposal of the subsidiary lead to a gain of GBP38.8m for the Group - further details are available in the Group's annual report.

   2.6        Trade and other payables 
 
                                   Unaudited   Unaudited   Audited 
                                       at 31       at 31        at 
                                    December    December   30 June 
                                        2020        2019      2020 
 
                                        GBPm        GBPm      GBPm 
 
Financial liabilities: 
Trade payables                         877.4       548.8     637.1 
Current lease liabilities                3.7           -       3.3 
Accruals                                19.7        10.6      22.3 
Other payables                          18.5        23.1      26.3 
 
 
 
                                       919.3       582.5     689.0 
 
Non-financial liabilities: 
Deferred income                          0.2         0.2       0.4 
Social security and other taxes          5.2         5.2       7.3 
Short term provisions                      -         0.9         - 
 
 
                                       924.7       588.8     696.7 
 
 

In accordance with market practice, certain balances with clients, Stock Exchange member firms and other counterparties totalling GBP 846.1 million (31 December 2019: GBP531.1 million, 30 June 2020: GBP634.8 million) are included in trade payables. As stated in note 2.3, where we have a legal right of offset and the ability and intention to settle net, trade payable balances have been presented net.

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

Contingencies

The Group operates in a highly regulated environment and, in the ordinary course of business, has provided information to various authorities as part of informal and formal requests and enquiries. In addition the Group may receive complaints or claims in relation to its services from time to time. There are inherent uncertainties in the outcome of such matters and it is not practicable to estimate the financial impact, if any, on the Group's results or net assets at the period end.

Section 3: Equity

Condensed Consolidated Statement of Changes in Equity

for the period ended 31 December 2020

 
 
                                           Shares 
                                  Share      held        EBT    Retained             Non-controlling     Total 
                                capital    by EBT    reserve    earnings     Total          interest    equity 
 
                                   GBPm      GBPm       GBPm        GBPm      GBPm              GBPm      GBPm 
 
 At 1 July 2019                     1.9     (3.4)        1.5       457.9     457.9               1.4     459.3 
 Impact of change in 
  accounting policy                   -         -          -       (4.1)     (4.1)                 -     (4.1) 
 Revised balance as 
  at 1 July 2019                    1.9     (3.4)        1.5       453.8     453.8               1.4     455.2 
 
 Total comprehensive 
  income                              -         -          -       139.2     139.2               0.1     139.3 
 
 Employee Benefit Trust: 
 Shares sold during 
  the period                          -       3.8          -           -       3.8                 -       3.8 
 Shares acquired in 
  the period                          -     (5.4)          -           -     (5.4)                 -     (5.4) 
 Loss on HL EBT share 
  sale                                -         -      (2.4)           -     (2.4)                 -     (2.4) 
 Reserve transfer on 
  exercise of share options           -         -        0.8       (0.8)         -                 -         - 
 
 Employee share option 
  scheme: 
 Share-based payments 
  expense                             -         -          -         2.0       2.0                 -       2.0 
 Current tax effect 
  of share-based payments             -         -          -         0.3       0.3                 -       0.3 
 Deferred tax effect 
  of share-based payments             -         -          -       (0.1)     (0.1)                 -     (0.1) 
 
 Dividend paid (note 
  3.2)                                -         -          -     (150.2)   (150.2)                 -   (150.2) 
----------------------------  ---------  --------  ---------  ----------  --------  ----------------  -------- 
 
 At 31 December 2019                1.9     (5.0)      (0.1)       444.2     441.0               1.5     442.5 
 
 
 At 1 July 2020                     1.9     (6.3)      (1.9)       564.6     558.3             (0.7)     557.6 
 
 Total comprehensive 
  income                              -         -          -       152.2     152.2             (0.2)     152.0 
 
 Employee Benefit Trust: 
 Shares sold during 
  the period                          -       6.1          -           -       6.1                 -       6.1 
 Shares acquired in 
  the period                          -     (6.0)          -           -     (6.0)                 -     (6.0) 
 Loss on HL EBT share 
  sale                                -         -      (4.2)           -     (4.2)                 -     (4.2) 
 Reserve transfer on 
  exercise of share options           -         -        3.0       (3.0)         -                 -         - 
 
 Employee share option 
  scheme: 
 Share-based payments 
  expense                             -         -          -         2.3       2.3                 -       2.3 
 Current tax effect 
  of share-based payments             -         -          -         0.4       0.4                 -       0.4 
 Deferred tax effect 
  of share-based payments             -         -          -       (0.4)     (0.4)                 -     (0.4) 
 
 Dividend paid (note 
  3.2)                                -         -          -     (207.1)   (207.1)                 -   (207.1) 
 
 
 At 31 December 2020                1.9     (6.2)      (3.1)       509.0     501.6             (0.9)     500.7 
 
 

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

The shares held by the Employee Benefit Trust ("the EBT") reserve represents the cost of shares in Hargreaves Lansdown plc purchased in the market and held by the Hargreaves Lansdown plc EBT to satisfy options under the Group's share option schemes.

The EBT reserve represents the cumulative loss 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 7.5% shareholding in Hargreaves Lansdown Savings Limited and in the prior year included a 22% shareholding in Funds Library Limited, both subsidiaries of the Company.

Section 3: Equity

Notes to the Condensed Consolidated Statement of Changes in Equity

for the period ended 31 December 2020

 
 3.1 Share capital                                                                        Audited 
                                                     Unaudited             Unaudited           at 
                                                at 31 December        at 31 December      30 June 
                                                          2020                  2019         2020 
 
                                                          GBPm                  GBPm         GBPm 
      Issued and fully paid: 
 Ordinary shares of 0.4p                                   1.9                   1.9          1.9 
 
 
 
                                                        Shares                Shares       Shares 
      Issued and fully paid: 
 Number of ordinary shares of 0.4p                 474,318,625           474,318,625  474,318,625 
 
 
 
 

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

   3.2           Dividends paid 
 
                                    Unaudited   Unaudited    Audited 
                                        at 31       at 31         at 
                                     December    December    30 June 
                                         2020        2019       2020 
 
                                         GBPm        GBPm       GBPm 
 
  Amounts recognised as distributions to equity holders 
   in the period: 
  2020 Final dividend of 26.3p 
   per share (2019 - 23.4p)             124.7       110.9      110.9 
  2020 Special Dividend of 8.3p 
   per share (2019 - 8.3p)               82.4        39.3       39.3 
  2020 First interim dividend of 
   11.2p per share                          -           -       53.1 
 
  Total                                 207.1       150.2      203.3 
 
 

The Hargreaves Lansdown Employee Benefit Trust, which held the following number of ordinary shares in Hargreaves Lansdown plc at the date shown, has agreed to waive all dividends.

 
                                          Unaudited   Unaudited    Audited 
                                              at 31       at 31         at 
                                           December    December    30 June 
                                               2020        2019       2020 
 
 Number of shares held by the 
  Hargreaves Lansdown Employee Benefit 
  Trust                                     576,691     447,134    571,856 
 Representing % of called-up share 
  capital                                     0.12%       0.09%      0.12% 
 
 
 

Section 4

Condensed Consolidated Statement of Cash Flows

as at 31 December 2020

 
                                                                       Audited 
                                              Unaudited   Unaudited         at 
                                                  at 31       at 31    30 June 
                                               December    December       2020 
                                                   2020        2019 
 
                                       Note        GBPm        GBPm       GBPm 
 
 Net cash from operating activities 
 Profit for the period after 
  tax                                             152.0       139.3      313.2 
 Adjustments for: 
 Income tax expense                                36.4        31.8       65.1 
 Gain on disposal of subsidiary                       -           -     (38.8) 
 Depreciation of plant and 
  equipment                                         4.3         4.2        8.4 
 Amortisation of intangible 
  assets                                            3.1         2.6        5.2 
 Share-based payment expense                        2.4         2.1        3.6 
 Interest on lease liabilities                      0.3           -        0.7 
 Gain on termination of lease                     (0.3)           -          - 
 Increase in provisions                               -           -        0.1 
 
 
 Operating cash flows before 
  movements in working capital                    198.2       180.0      357.5 
 (Increase)/decrease in receivables             (241.1)     (128.1)    (209.6) 
 (Decrease)/increase in payables                  226.5       104.3      208.9 
 Increase in derivative liabilities                   -           -        0.1 
 
 
 Cash generated from operations                   183.6       156.2      356.9 
 Income tax paid                                 (35.3)      (58.8)     (91.5) 
 
 
 Net cash generated from operating 
  activities                                      148.3        97.4      265.4 
 
 
 Investing activities 
 Decrease/(increase) in term 
  deposits                                          120        80.0     (15.0) 
 (Purchase of) / Proceeds on 
  disposal of investments                         (0.4)         0.2        0.5 
 Purchase of property, plant 
  and equipment                                   (1.3)       (2.1)      (5.8) 
 Purchase of intangible assets                    (6.6)       (2.6)     (10.1) 
 Proceeds on disposal of subsidiary                   -           -       38.2 
 
 
 Net cash from / (used in) 
  investing activities                            111.7        75.5        7.8 
 
 
 Financing activities 
  Purchase of own shares in 
   EBT                                            (6.0)       (5.4)     (14.8) 
 Proceeds on sale of own shares 
  in EBT                                            1.9         1.4        5.8 
 Dividends paid to owners of 
  the parent                                    (207.1)     (150.2)    (203.3) 
 Payments of principal in relation 
  to lease liabilities                            (2.7)       (1.8)      (4.3) 
 Interest paid on lease liabilities               (0.3)           -          - 
 
 
 Net cash used in financing 
  activities                                    (214.0)     (156.0)    (216.6) 
 
 
 
  Net increase in cash and cash 
   equivalents                                     46.0        16.9       56.6 
  Cash and cash equivalents 
   at beginning of period                         235.9       179.3      179.3 
 
 
 Cash and cash equivalents 
  of Group at end of period                       281.9       196.2      235.9 
 Cash held as part of assets                          -      (11.4)          - 
  classified as held for sale 
  at end of period 
------------------------------------  -----  ----------  ----------  --------- 
 Cash and cash equivalents 
  at end of period                      2.4       281.9       184.8      235.9 
 
 
 

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

Section 5

Other Notes

as at 31 December 2020

   5.1        Basis of preparation 

The consolidated Interim Financial Statements of Hargreaves Lansdown plc for the six months to 31 December 2020 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 2020 has been derived from the audited financial statements of Hargreaves Lansdown plc for that year, which have been reported on by PricewaterhouseCoopers LLP and delivered to the Registrar of Companies. Copies are available online at www.hl.co.uk . The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by the way of emphasis without qualifying the report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

Going concern

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

The Directors have considered the resilience of the Group, taking account of its current financial position, the principal risks facing the business in severe but plausible 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 has 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.

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 2020 as were applied in the Audited Annual Financial Statements for the year ended 30 June 2020.

Seasonality of operations

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

Revenues are not considered to be seasonal, with approximately 51% of revenues being earned in the second half of the financial year, based on previous financial years. The Group revenue is, however, sensitive to the impact of net new business inflows during a particular period. Although a Brexit deal has been reached there is still some uncertainty as to the economic consequences of leaving the EU, which combined with the ongoing impact of COVID-19 could have a detrimental effect on client confidence and net new business. If this were to happen there could be a subsequent impact on revenues over the coming months.

   5.2       Material events after interim period-end 

After the interim balance sheet date, an ordinary interim dividend of 11.9 pence per share (H1 2020: interim dividend 11.2 pence) amounting to a total dividend of GBP56.4 million (2020: GBP53.1 million) was declared by the plc Directors. These financial statements do not reflect this dividend payable.

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

   5.3        Principal risks and uncertainties 

The principal risks and uncertainties which could impact the Group for the remainder of the financial year are those detailed on pages 25 to 29 of the Group's Annual Report and Financial Statements 2020, 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. 
   5.3        Principal risks and uncertainties (continued) 

Financial risks

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

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

The Group is exposed to interest rate risk, the risk of sustaining losses from adverse movements in interest bearing assets. These assets comprise cash, cash equivalents and term deposits. At 31 December 2020 the value of such assets on the Group balance sheet was GBP391.9 million (at 31 December 2019: GBP331.2 million). A 50bps (0.5%) move in interest rates, in isolation, would therefore, not have a material direct impact on the Group balance sheet or results. This exposure is continually monitored to ensure that the Group is maximising its interest earning potential within accepted liquidity and credit constraints. The Group has no external borrowings and as such is not exposed to interest rate or refinancing risk on borrowings.

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

   5.4        Related party transactions 

The Company has a related party relationship with its Directors and members of the Executive Committee (the "key management personnel"). There were no material changes to the related party transactions during the financial period; transactions are consistent in nature with the disclosure in note 5.6 to the 2020 Annual Report.

   5.5        Financial instruments' fair value disclosure 

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

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       other than    on observable 
                                          similar          Level 1           market 
                                      instruments           inputs             data 
                                             GBPm             GBPm                     GBPm 
 Unaudited at 31 December 
  2020 
 Financial assets at fair 
  value through profit or 
  loss                                        1.0                -                -     1.0 
 Derivative financial assets                    -              0.1                -     0.1 
 Derivative financial liabilities               -            (0.1)                -   (0.1) 
----------------------------------  -------------  ---------------  ---------------  ------ 
                                              1.0                -                -     1.0 
----------------------------------  -------------  ---------------  ---------------  ------ 
 
 Unaudited at 31 December 
  2019 
 Financial assets at fair 
  value through profit or 
  loss                                        0.9                -                -     0.9 
 Derivative financial assets                    -              0.1                -     0.1 
 Derivative financial liabilities               -                -                -       - 
----------------------------------  -------------  ---------------  ---------------  ------ 
                                              0.9              0.1                -     1.0 
----------------------------------  -------------  ---------------  ---------------  ------ 
 
 Audited at 30 June 2020 
 Financial assets at fair 
  value through profit or 
  loss                                        0.5                -                -     0.5 
 Derivative financial assets                    -              0.1                -     0.1 
 Derivative financial liabilities               -            (0.1)                -   (0.1) 
----------------------------------  -------------  ---------------  ---------------  ------ 
                                              0.5                -                -     0.5 
----------------------------------  -------------  ---------------  ---------------  ------ 
 

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

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

Glossary of Alternative Performance Measures

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

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

General Information

EXECUTIVE DIRECTORS

Chris Hill

Philip Johnson

NON-EXECUTIVE DIRECTORS

Deanna Oppenheimer

Andrea Blance

Adrian Collins

Moni Mannings

Dan Olley

Roger Perkin

John Troiano

COMPANY Secretary

Alison Zobel

INDEPENDENT AUDITOR

PricewaterhouseCoopers LLP, London

BROKERS

Barclays

Numis Securities Limited

REGISTRARS

Equiniti Limited

Registered Office

One College Square South

Anchor Road

Bristol

BS1 5HL

Registered number

02122142

WEBSITE

www.hl.co.uk

DIVIDEND CALENDAR

 
                     First dividend 
                          (interim) 
 Ex-dividend date*      11 February 
                               2021 
 Record date**          12 February 
                               2021 
 Payment date          8 March 2021 
 

* 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.

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