Strategic report Governance Financial statements Other information OPERATING AND FINANCIAL REVIEW CONTINUED Our increased focus on digital marketing has been key in winning This more than offset a fall in interest on client money as the net interest margin was impacted by the emergency cuts in the base rate of new, and engaging with existing clients, ensuring we become interest in March 2020. In addition, we no longer have the revenue derived from our FundsLibrary business, which was £4.8 million in the integral to their lives in terms of saving and investing for the future. prior period, as it was sold in February 2020. Total AUA increased by 30% to £135.5 billion as at 30 June 2021 The table below breaks down revenue, average AUA and margins earned across the main asset classes which our clients hold with us. (£104.0bn as at 30 June 2020). This was driven by £8.7 billion of NNB plus positive market movement of £22.8 billion. Year ended Year ended 30 June 2021 30 June 2020 Financial performance Average Revenue Average Revenue Income statement Revenue AUA margin Revenue AUA margin £m £bn bps £m £bn bps Year ended Year ended Funds1 232.9 58.5 7 40 210.6 52.37 40 30 June 2021 30 June 2020 £m £m Shares2 258.0 45.1 57 148.5 34.3 43 Cash3 50.7 13.0 39 91.1 12.3 74 Revenue 631.0 550.9 HL Funds4 60.7 8.47 72 63.6 8.77 73 Operating costs (266.0) (214.9) Other5 28.7 2.86 37.1 6 Fair value gains on derivatives 0.6 1.7 – 1.7 – Double-count7 – (8.3)7 – – (8.6)7 – Finance income 1.4 2.8 Finance costs (1.0) (1.0) Total 631.0 119.57 550.9 100.6 7 – – Underlying profit before tax* 366.0 339.5 1 Platform fees and renewal commission. Gain on disposal (see Note 4.1) – 38.8 2 Stockbroking commission and equity holding charges. Profit before tax 366.0 378.3 3 Net interest earned on client money. Tax (69.7) (65.1) 4 Annual management charge on HL Funds, i.e. excluding the platform fee, which is included in revenueon funds. 5 Advisory fees, FundsLibrary revenues, Active Savings and ancillary services (e.g. annuity broking, distribution of VCTs and Hargreaves Lansdown Currency and Market Services). Profit after tax 296.3 313.2 6 Average cash held via Active Savings. 7 HL Funds AUM included in Funds AUA for platform fee and in HL Funds for annual management charge. Total average AUA excludes HL Fund AUM to avoid double-counting. Underlying profit before tax, excluding the one-off gain from the Revenue on Funds increased by 11% to £232.9 million (2020: Since the completion of RDR in 2014 revenue margin on funds have sale of FundsLibrary in 2020, rose 8% to £366.0 million. This £210.6m) due to higher AUA from a combination of net new broadly been stable. In May 2021 however, we implemented a increase was driven by revenue growth linked to the increase in business and market growth. Funds remain our largest client asset reduction in platform administration fees for our advised Portfolio AUA on our platform through NNB and market growth along with class at 49% of average AUA (2020: 52%), and the revenue margin Management Service clients and looking forward we now expect record share dealing volumes across the year. Including the £38.8 earned on these this year was in line with our expectations at the funds revenue margin to be slightly lower in the range of million gain on disposal in the 2020 result, profit before tax fell 3%. 40bps (2020: 40bps). The majority of the drop in the proportion 38.5bps to 39.5bps. Funds AUA at the end of 2021 was £66.6 billion Revenue of average AUA was due to a switch from Funds to Cash in the (2020: £51.7bn). Revenue for the year was £631.0 million, up 15% (2020: £550.9m), early stages of the pandemic, in common with the wider asset driven by higher average asset levels and record share dealing management market. Through the course of 2021, however, volumes for the year. This increase compares to a decrease in we have seen consistent volumes of Fund purchases especially the average FTSE All Share of 2.4%, showing the strength of the after Vaccine Monday. Group’s net new business performance over the past year and diversified revenue stream. * Definition is shown in the Glossary of alternative financial performance measures on page 182. 60 Hargreaves Lansdown Report and Financial Statements 2021