January 31, 2020 / 7:31 AM / 18 days ago

Hargreaves Lansdown new asset growth slows after Woodford

LONDON (Reuters) - A slowdown in net new business growth overshadowed an increase in half-year profits for British investment platform Hargreaves Lansdown (HRGV.L), sending its shares lower on Friday.

Hargreaves has faced a tough year after funds run by independent investment manager Neil Woodford and long championed by the company were suspended after a liquidity squeeze that ultimately sank his firm.

While total assets rose 3.3% in the three months to end-December on the back of net inflows of client cash and market gains, helping underpin a rise in half-year profits, net new business of 2.3 billion pounds ($3.02 billion) slowed from the prior year and lagged some analyst estimates.

“The financial results are good, and ahead of our and consensus expectations, but we think there are negative signs on the new business front,” said Jefferies analyst Julian Roberts in a note to clients.

“The increase in AUA which drove revenue growth was largely down to market movements and acquisitions, with organic growth weak,” he added, referring to assets under administration.

At 0809 GMT, shares in Hargreaves were the worst-performing on the FTSE 100 .FTSE, down 5.3%.

Hargreaves Chief Executive Chris Hill said investor sentiment had picked up in recent weeks, boding well for the outlook, a sentiment shared by Peel Hunt analyst Stuart Duncan.

“We continue to see good value given the dominant market position,” he said in a note to clients, flagging an ‘add’ recommendation.

Assets under administration were 105.2 billion pounds ($138.27 billion), up from 101.8 billion at end-September, the company said in a statement, while pretax profit was 171.1 million pounds, up from 153.4 million in the year-earlier period.

The demise of Woodford’s firm has gripped the UK fund industry since his multi-billion-pound Equity Income fund was suspended in June, particularly as Hargreaves had championed the manager until the last minute.

In an attempt to placate irked investors, Hargreaves executives waived their full-year bonuses and also management fees charged to clients trapped in the fund, a move which the company said on Friday had cost it 2.3 million pounds.

The administrators of the Woodford fund said on Tuesday that investors would get their first pay out this week, and Hill said all its clients had now received that money.

As part of efforts to restore investor confidence, Hargreaves said it planned to overhaul its Wealth 50 best-buy list, which many retail clients use to help pick investments.

“This will include adding more detail, greater transparency and a new structure to our research notes, for those clients who want a deeper level of information, and new functionality on our platform to help those who want to follow a more independent path,” Hill said.

Reporting by Simon Jessop; Editing by Rachel Armstrong, Kirsten Donovan

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