Hargreaves Lansdown: Company performance analysis

There have been several insider transactions in 2024, with the vast majority being share purchases. This tends to suggest that the company is in good health and that valuation metrics are not stretched.

• Richard Hebdon – Non-Executive, Director
  Options exercised and fully sold – 6,587 shares
• Richard Hebdon Non-Executive, Director
  Options exercised and partly sold – 14,978 shares
• Darren Pope – Non-Executive, Director
  buy 18,696 shares
• Alison Platt – Chairman, Director
  buy 18,696 shares
• Adrian John Reginald Collins – Non-Executive, Director
  buy 6,400 shares
• Amy Stirling – Chief Financial Officer
  buy 6,764 shares
• Dan Olley – Chief Executive Officer
  buy 7,242 shares

Assets Under Administration (AUA) has followed a positive trajectory over the past five years, rising to £155.3 billion on 30 June 2024 – a company record and significantly above its peers. This positive trajectory reflects the business’s ongoing ability to attract new clients and encourage new deposits, as well as the appreciation of existing assets.

Number of users vs previous year and quarter.

Hargreaves Lansdown had 1.882 million clients at the end of the quarter ending 30 June 2024. Net new clients rose by 24,000 during the quarter, and total clients are up from 1.804 million at the end of FY2023. While client numbers are still growing, it’s worth noting that its closest peer, AJ Bell, has been growing faster.

Monthly active users (MAU) vs previous year and quarter.

Share dealing volumes hit 838,000 per month during the last quarter – three months to 30 June 2024 – exceeding the average monthly volume in all quarters of 2023. This figure is up from a 2023 nadir of 634,000 in the three months to 30 September.

Average revenue per user (ARPU) vs previous year and quarter.

Average Revenue Per User (ARPU) rose in 2023, partially reflecting higher returns on customer cash deposits. The APRU for the quarter ending 31 March 2024 is approximately £107.48. This can be projected to an annualised figure of £429.92. The ARPU in 2023 was approximately £407.51 based on the total revenue of £735.1 million and the reported customer numbers of 1,804,000 at the end of the period.

Revenue vs previous year vs consensus estimates.

Revenue generation has improved over the last four years, reaching £735.1 million in the 12 months to 30 June 2023 – this was up from £583 million for the financial year ending 30 June 2022. This was largely driven by improving margins on customer cash deposits.

The total revenue for the trailing 12 months (TTM to 31 March 2024) is £764.9 million, and according to data from FactSet, revenue is expected to reach £758.7 million for the financial year ending 30 June 2024.

Earnings per share (EPS) vs previous year vs consensus estimates.

In the financial ending 30 June 2023, Hargreaves reported underlying diluted earnings per share of 74.3p and for the financial year ending 30 June 2022, 50.4p. According to data from FactSet, EPS is expected to fall to 67.93p for the financial year ending 30 June 2024. Falling earnings reflect increased corporation tax as well as higher people costs and technology spending.

Revenue breakdown

Revenue generation can be broken down by funds, shares, and cash – these are the three main areas of revenue generation.

• In the year ending 30 June 2023, Hargreaves Lansdown generated £236.4 million from funds – down from £254.5 million in 2022 – from £60.7 billion of AUA. Funds AUA stood at £65.3 billion in 2022.
• In the year ending 30 June 2023, Hargreaves Lansdown generated £147.7 million from shares – down from £194.9 million in 2022 – from £48.8 billion of AUA. Shares AUA stood at £52.3 billion in 2022.
• In the year ending 30 June 2023, Hargreaves Lansdown generated £268.7 million from cash – down from £50 million in 2022 – from £14 billion of AUA. Shares AUA stood at £13.6 billion in 2022.

Revenue margin breakdown

Revenue on cash has surged due to higher interest rates, allowing Hargreaves Lansdown to earn more money by lending clients’ deposits out to the market. The revenue margin on cash surged to 192 basis points in 2023, compared with 37 in 2022. The revenue margin on funds was 39 basis points in 2023, equal to 2022. The revenue margin on shares was 30 basis points in 2023, compared with 37 in 2022.

Gross margin vs previous year and quarter vs consensus estimates.

The gross profit margin is an indicator of gross profitability, reflecting the percentage of revenue that exceeds the cost of goods sold (COGS) – in this case, underlying costs. The gross profit margin was 57.2% in 2023, up from 51.2% in 2022. In H1 of 2024, the gross profit margin stood at 56.7%.

Operating margin vs previous year and quarter vs consensus estimates.

The operating margin is a measure of profitability calculated by dividing operating income by sales. According to data from FactSet, the operating margin was 52.29% in 2023, 46.48% in 2022, and 58.11% in 2021.

Free cash flow vs previous year vs consensus estimates.

Hargreaves Lansdown reported free cash flow of £223.6 million for 2023. This was up from £244.8 million in 2022 and £292.1 million in 2021, according to data from FactSet. Free cash flow is expected to come in at £335.3 million in 2024.

Net debt/cash vs previous year vs previous quarter.

Hargreaves Lansdown has a strong financial position, with a net cash position of £503.3 million on 30 June 2023, according to data from the company. This was up £508 million at the end of FY2022.

Analysts’ price targets and ratings including commentary.

Based on 14 analysts offering 12-month price targets for Hargreaves Lansdown in the last 3 months. The average price target is 975.23p with a high forecast of 1,342p and a low forecast of 671p.