UPDATE 1-Hargreaves Lansdown hikes dividend as profits rise

Wed Sep 4, 2013 3:45am EDT

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* Revenue up 22 pct to 292.4 million pounds

* Profit before tax 195.2 million pounds

* Total clients increased 76,000 to 507,000

By Chris Vellacott

LONDON, Sept 4 (Reuters) - Hargreaves Lansdown PLC unveiled a 31 percent increase in its full-year dividend after the investment manager decided it had no need for extra cash to fund future expansion by acquisition.

In an earnings statement for its full year to the end of June published on Wednesday, the firm said it would hike the second interim and special dividends to bring the total for the year to 29.59 pence a share, up from 22.59 pence a year earlier.

Co-founder Peter Hargreaves said management opted to return more money to shareholders after settling on an entirely organic, UK-focused growth strategy, rather than buying up rivals or expanding overseas.

"The fact is we sat down and said, 'do we need this money for acquisitions?' and we don't. The business throws cash off all the time, so we've no great plans to buy anything," Hargreaves told Reuters in an interview.

Hargreaves Lansdown, which is the UK's largest distributor of mutual fund products to retail investors, has benefited from a regulatory shake-up of how financial products are sold, banning commission-based selling.

While smaller competitors have struggled with the increased regulatory costs and the abolition of the commissions on which they depended, Hargreaves Lansdown has thrived, largely on account of its size which has helped it absorb more of the cost.

"We believe there's an awful lot of business in the UK market for us to still try to get hold of. We think what we do is a good business model and we're not thinking of changing it. In the pond we're in, there's enough fish to catch," Hargreaves said.

The firm said net business inflows were up 59 percent to 5.1 billion pounds over the year and the total assets it administers for its clients rose 38 percent to 36.4 billion pounds.

Pretax profits rose 28 percent and revenues grew a little more than a fifth over the year.

The company warned, however, regulatory change would continue "creating challenge and cost." It also cautioned that low interest rates would put pressure on income earned on cash deposits.

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