The outgoing chief executive of Hargreaves Lansdown has defended his strategy and pushed back against criticisms that the company has become bloated from its co-founder and largest shareholder, Peter Hargreaves.
Hargreaves, a 76-year-old billionaire who owns a fifth of the FTSE 100 group, last month criticised Chris Hill’s signature strategy, a push into wealth management via high-tech financial advice.
He said the funds supermarket he founded in 1981 now had at least 1,000 surplus jobs and should undertake “a huge round of cost-cutting”.
Hill responded on Wednesday by saying the company needed to invest in its tech if it wanted to be efficient in the long run.
He said “prioritising efficiency” was a focus of the new strategy, which has seen the company invest £14mn in the second half of 2022 and yielded £10mn in cost savings.
“Peter is entitled to his own opinion, as all shareholders are,” Hill told the Financial Times. “As you would expect, we engage with all of our shareholders, even more so with Peter who has his own representative on the board.”
Hill, who has steered the group since 2017, is due to step down by November of this year.
The strained relationship between the company founder and its management leaves a difficult legacy for Hill’s successor, Dan Olley, who is currently chief executive of Dunnhumby, the data analytics group behind grocer Tesco’s Clubcard loyalty programme.
Hargreaves has also lamented the company’s share price, which has dropped by a quarter since Hill took over. “The board indulged in completely unnecessary irrelevant programmes, which have distracted the firm from its prime objective. It’s hardly surprising the shares have collapsed,” he told the Financial Times in January.
Hill said on Wednesday that the market has failed to reward the company for substantial customer, asset and revenue growth. “Of course I think the business is undervalued where it sits today. It’s twice the size than it was five years ago,” he said.
Hargreaves declined to comment.
Hill’s defence came as the company reported that operating costs rose 15 per cent in the second half of 2022 and that it continued to pour money into the tech push.
Revenues rose 20 per cent year on year to £350mn, while profit before tax jumped 31 per cent to £198mn, as a 10-fold increase in interest income from customers’ cash outweighed lower trading volume.
Clients flocked to the company’s cash-savings product, which allows customers to compare interest rates from different banks and building societies, and reported record inflows. “With low consumer confidence and low investor confidence, people are really focused on cash,” Hill said.
The improved earnings came despite a 30 per cent fall in net new business and a 10 per cent drop in assets under administration to £127bn. The FTSE 100 group lifted its dividend by 3.6 per cent to 12.70p per share.
One top-ten shareholder was worried by the company’s reliance on interest income: “All trading is down: stockbroking, new business. Interest on money, which is out of their control, is over half the profit.”
