Shares in Hargreaves Lansdown came in for a drubbing amid worries that its wealthy baby-boomer customers will soon be looking to move their money away from the group’s investing platform.
Only last month Hargreaves was boasting that a record 1.7 million customers now use its platform to invest their savings.
Analysts at Jefferies note that the group has a “large and growing customer base” but fear it is not recruiting enough younger people to make up for the older — and wealthier — ones they believe are taking their money elsewhere.
“The central point is that Hargreaves’ profits are concentrated among its older clients, who are either approaching a point where they need advice, drawing down on their assets, or in some cases dying,” wrote Julian Roberts, a financials analyst at Jefferies.
“As the children of the 1960s approach retirement, they are likely to move from being natural clients of Hargreaves to needing advice and therefore leaving the platform in growing numbers,” Roberts added. Given his feeling that the company’s “longer-term growth prospects have dimmed”, the analyst downgraded Hargreaves to “underperform”.
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That sent Hargreaves’ shares 25p, or 2.3 per cent, lower to £10.48, which is still some way above the 820p Jefferies thinks they are worth.
One of Hargreaves’ rivals, AJ Bell, also struggled yesterday. This time it was analysts at Barclays who sparked the decline: they think AJ Bell shares are “expensive” compared with peers and repeated their “underperform” rating on the stock, which slipped 18p, or 5.6 per cent, to 303½p.
AJ Bell was among those weighing on the FTSE 250, London’s second tier, which snapped its three-day winning streak as it dropped 150.06 points, or 0.7 per cent, to 21,006.56.
However, the blue-chips on the FTSE 100 rose for the fourth day in a row, boosted by the latest rise in commodity prices. Not since last June has the Footsie been on a longer winning run. The index struck a three-week high as it climbed 37.66 points, or 0.5 per cent, to 7,442.39, with its miners and oilers once again doing the heavy lifting.
The price of a barrel of Brent crude rose above $114 for the first time in nearly two weeks, while other commodities, such as aluminium, also got more expensive.
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Shares in BP, the oil giant, flowed 14½p, or 4.1 per cent, up to 375p, and Shell, its fellow supermajor, added 78¾p, or 4.1 per cent, to £20.21. Tullow Oil was the big winner — up 4¾p, or 9.9 per cent, to 52½p.
Among the miners, Anglo American put on 225½p, or 6.1 per cent, to close at £39.10. It benefited from a 4 per cent rise in aluminium prices as Australia banned exports of alumina — a key ingredient needed to make the metal — to Russia.
Because of its greater bias towards natural resources stocks, the FTSE 100 has recovered all its year-to-date losses and yesterday was up 0.8 per cent since the start of the year.
Elsewhere, Inspired, the Aim-listed energy consultant, declined 1½p, or 9.1 per cent, to 15p, after warning that it could take a £3 million hit to its earnings this year due to the crisis at Gazprom, the Russian energy group.
About 5 per cent of Inspired’s revenues come from customers who take their energy from Gazprom. Inspired’s worry is that Gazprom stops trading and its customers take their business elsewhere — although bosses are hopeful the company would be able to find them other providers, which would “help mitigate the revenue at risk”.
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Ted Baker back in fashion
Ted Baker shareholders should only accept a takeover bid “well north” of the 130p that the stock jumped to after news of a potential buyout broke late last week.
Sycamore Partners, the US private equity group, outed itself as a possible bidder for the British fashion brand on Friday. It is yet to table an offer but confirmed it was thinking of doing so.
The market has been trying to work out what Sycamore would have to offer to tempt the board, and investors. The shares rallied by up to 19 per cent yesterday before closing 7.6 per cent up at 124½p, suggesting it was the minimum that any would-be buyers need to match.
However, analysts within Canaccord Genuity’s Quest division ran the numbers on a 130p-a-share bid through their algorithms and decided that it would not be enough.
A 130p bid, which would value the firm at £240 million, triggered six out of 11 “red lights” on Quest’s system, “which tells us the offer is particularly unattractive”.
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They added: “[A bid of 130p] would appear to be opportunistic by materially undervaluing future recovery in operating performance and cashflow generation.”
Only one “well north of 130p” should be considered.
Wall Street report
Gloom settled early on New York’s indices as Jerome Powell, head of the Fed, hinted that there would be more aggressive interest rate rises to come this year. The Dow Jones industrial average fell 201.94 points, or 0.6 per cent, to 34,552.99.
