Hargreaves Lansdown's bumper dividend disappoints

Hargreaves Lansdown rewarded shareholders with a bumper special dividend as the pensions and investments provider topped 1m active clients for the year, though annual numbers came in slightly short of expectations.

Total assets under administration grew 16% to £91.6bn over the 12 months to 30 June, up from £88.8bn in the final quarter, as a record £7.6bn of net new business inflows was augmented by £5.9m of market growth of the assets. It would have been even higher had not one of the company's founders withdrawn £1.1bn of his shares from the platform.

On net revenue that rose 16% to £447.5m, profit before tax grew 10% to £292.4m, short of the £295.3m that City analysts expected, as operating costs increased 25% to support higher client activity levels and management's increased investment to support what they see as "significant structural growth opportunity" in the UK savings and investments market, as well as a 16% increase in marketing spend. Earnings per share rose 11% to 49.6p, which was below the consensus forecast of 50.36p.

As well as an ordinary dividend hiked 11% to 32.2p per share another special dividend will be paid to shareholders of 7.8p to take the total up to 40p, up 38% on the payout a year ago, when the company was unable to pay out a special dividend as it was required by the Financial Conduct Authority to increase its regulatory capital. The 2018 payout ratio was 82% left the total dividend slightly short of the 41.9p average forecast by analysts.

The number of HL's active clients increased by 137,000 in the year to 1.09m, 16% more than last year, with chief executive Chris Hill saying that many of them transferring from other platforms. Market share rose by 1.3% to 39.1% and share of the execution only stockbroking market was up 1.7% to 31.3%.

"Brexit is on the horizon and the prevailing political and economic turbulence is having an effect on investor confidence," said Hill. "However, we believe that continuing to place our clients at the centre of what we do and establishing a lifelong relationship with them will enable us to continue to build share in a growing market.

"Our expertise and client service are rightly respected, and I believe the strength and scale of our business means we can continue to develop our offering to the benefit of all our stakeholders in the future."

HL shares fell 2% to 2,075p in early trading.