Hargreaves Lansdown will face questions about its backing for Neil Woodford’s stricken flagship fund when the investment group reports its annual results on Thursday.
The company has been in the spotlight for continuing to recommend Woodford’s equity income fund until he blocked withdrawals on 3 June. The suspension of the fund affected more than 290,000 Hargreaves customers, about a quarter of the company’s investors, with savings likely to be trapped for six months.
Hargreaves will report results after a bad week for Woodford, the former star fund manager and favourite of retail investors. The equity income fund’s administrator said it would probably take until early December for the fund to reopen as Woodford disposes of difficult-to-sell stakes.
Woodford was also revealed to have sold more than half his shares in a separate publicly traded fund whose board is considering sacking him as the asset manager.
Chris Hill, Hargreaves’s chief executive, issued an apology to his customers a few days after the fund’s suspension. “We all share their disappointment and frustration,” he said. Hill has also offered to forgo a bonus of as much as £2.1m until the matter is resolved and has waived Hargreaves’s fees for Woodford investors.
Hargreaves’s results will be the first time the company has commented about the impact of the Woodford affair on its business and reputation. Hill has answered written questions from the Treasury committee but these concentrated on his company’s dealings with Woodford and how it decides which funds to recommend.
For the year to the end of June, analysts expect pre-tax profit to rise almost 5% to £306.8m on revenue up 8% to £484m. Those figures cover less than a month of the fallout from the Woodford situation.
Gurjit Kambo, an analyst at JP Morgan Cazenove, said in a note to clients that customer deposits of funds into Hargreaves were likely to be affected by the Woodford debacle.
“With investors in Woodford’s equity income fund still gated, and the relationship between Woodford funds and Hargreaves Lansdown under increased scrutiny, we have reduced our inflow estimates,” Kambo said. He cut his estimates for new funds for 2020 to £5bn from £7.9bn and to £5.5bn from £9bn the year after.
Other analysts, such as the team at Deutsche Bank, have argued that the shares have fallen enough to take account of the dent to Hargreaves’s reputation from the Woodford saga.
Hargreaves shares peaked at £24.47 in mid-May and then plunged by a quarter over the next month to as low as £18.59. The shares have since staged a partial recovery and fell 3.3% to £20.43 on Friday.
Woodford blocked withdrawals from the equity income fund because he was unable to sell assets quickly enough to meet investors’ demand for their money back. The value of the fund has fallen from more than £10bn at its peak to £3.5bn because of withdrawals and poor performance.
