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The billionaire co-founder of Hargreaves Lansdown, the investing platform facing a takeover offer from private equity, has blamed former management for presiding over “a shambles” that halved the share price.
Peter Hargreaves, who is also the largest shareholder in the retail investing business, told the Financial Times that the company’s shares had come under pressure as profits have taken a hit.
“When I ran [Hargreaves Lansdown], it always improved its profit by more than 10 per cent,” he said. “If the profits are going up, the rate at which they’re increasing has a huge effect on the share price. A change from double-digit growth in profit to a reduction in profit is huge.”
During the tenure of Chris Hill, chief executive from 2017 to last August, the shares rose to a high of £24 in 2019, before tumbling to £8. Profit before tax fell by 8 per cent to £182.5mn in the six months to the end of December compared with a year earlier.
The co-founder’s comments come shortly after Hargreaves Lansdown’s board rejected a bid from a group of private equity firms led by CVC Capital Partners — an offer that valued the company at £4.67bn. The approach, which emerged last week, boosted shares in the Bristol-based business above £10.
Hargreaves also blamed escalating costs for the company’s share price weakness in recent years. “The non-productive parts of the business mushroomed: marketing, HR,” he said. “[Management] didn’t know what they were doing, they hadn’t got a grasp on what was needed on the technology side. They had a lot of consultants who didn’t know what they were doing, either.”
Staff costs increased almost 200 per cent between 2013 and 2023, while revenues were up only up 93 per cent in the same period, according to FT calculations. Hargreaves Lansdown was ejected from the FTSE 100 at the end of last year for the first time since 2011. The company said in early 2022 it would spend £175mn over five years to upgrade technology and improve its efficiency.
Dan Olley, who took over as chief executive last year, has already reviewed technology spending and ditched some of the projects that were aimed at supporting its ability to give advice digitally. The share price has risen since the company’s quarterly results a month ago.
“Hargreaves Lansdown was never about advice; it was about giving great information,” said Hargreaves. “They lost sight of what they were supposed to be doing.”
The company oversees £150bn in customer assets and has 1.8mn customers. It has faced growing competition from rivals including AJ Bell and Interactive Investor.
Last week, CVC Capital Partners, Nordic Capital, and Platinum Ivy, a wholly-owned subsidiary of the Abu Dhabi Investment Authority, confirmed that they were “considering a possible offer”, having made their most recent approach at the end of April.
The board of Hargreaves Lansdown said in response that it had “unanimously rejected” the proposal, noting that it “substantially undervalues” the business and its prospects.
Hargreaves Lansdown declined to comment. Hill could not be reached for comment.