Strategic report Governance Financial statements Other information OPERATING AND FINANCIAL REVIEW CONTINUED Revenues Operating costs costs. Our guidance remains cost growth aligned with client Year ended Year ended Year ended Year ended growth, mindful of our opportunities and market conditions at the 30 June 2021 30 June 2020 30 June 2021 30 June 2020 time. We believe this will allow us to manage our business as its £m £m £m £m scale increases whilst investing in our offering to capture the Ongoing revenue* 390.5 404.3 Staff costs 119.8 101.2 significant market opportunity available to us. Transactional revenue* 240.5 140.1 Marketing and distribution costs 28.3 23.9 Other revenue – 6.5 Depreciation and amortisation 16.2 13.1 Staff costs remain our largest expense and rose by 18% to Total revenue 631.0 550.9 Activity costs* 35.6 18.4 £119.8 million (2020: £101.2m). Average staff numbers increased by Third party data and technology costs* 22.8 14.8 11% from 1,599 in 2020 to 1,776 in 2021 with the key increases being Other costs 29.4 29.8 within the service functions of the Helpdesk and in Operations, The Group has a business model which prospers by offering 252.1 201.2 driven by the need to support our increased levels of client activity clients a range of attractive asset classes in a range of market Total FSCS levy 13.9 13.7 and contact whilst working in a COVID-19 configuration. environments and as such benefits from a diversified revenue Total operating costs 266.0 214.9 Hargreaves Lansdown is a growing business and higher client stream. The Group’s revenues are largely ongoing in nature, as numbers and associated activity levels will continue to require shown in the table above. The proportion of ongoing revenue has Operating costs increased by 24% to £266.0 million (2020: £214.9m) investment in our servicing functions as we look forward. decreased to 62% (2020: 73%) as the transactional stockbroking to support significantly higher client activity levels, maintain client Technology and efficiency programmes improve our scalability, commission increased significantly versus last year, whilst at the service and invest in the growth opportunities we see ahead for thereby allowing us to invest productivity gains into extending same time the March 2020 reduction in the base rate of interest Hargreaves Lansdown. our proposition and our platform functionality. We believe this impacted ongoing revenue streams. reinvestment cycle underpins our future growth. Over the past four years we have deliberately invested into Ongoing revenue is primarily comprised of platform fees on funds our service, marketing capabilities, technology, scalability and Marketing and distribution costs increased by 18% to £28.3 million and equities, Hargreaves Lansdown fund management fees, efficiency as the Group’s focus on client service is core to our (2020: £23.9m). The impact of COVID-19 and the associated interest on client money and ongoing advisory fees. It fell by 3% to success and necessary to capture the structural growth lockdowns has seen a significant rise among existing retail £390.5 million (2020: £404.3m) driven by lower interest rates earned opportunity in the UK savings and investments market. investors engaging with investments and assessing their own on client money, which more than offset the higher platform fees This investment has been validated in 2021 by record NNB, record financial resilience. In addition, many people, particularly younger and management fees from higher average AUA levels. Ongoing levels of net new clients, increased market shares, attractive client ones, have turned to investing for the first time and those with cash revenues provide greater profit resilience and hence we believe retention rates, the continued development of our product set savings have been transferring to investments given the all-time they are of higher quality than transactional revenues. and growth capabilities and the resilience of our platform low deposit rates available on cash. Transactional revenue is primarily made up of stockbroking through COVID-19. This provided us with a great opportunity to invest in client commission and advisory event-driven fees. This increased by 72% Key drivers of the cost growth were staff costs in order to deal acquisition and to engage with both new and existing clients in to £240.5 million (2020: £140.1m) with a 60% increase in client driven with higher client numbers and activity levels and various activity order to deepen those relationships. This favourable backdrop for equity deal volumes being the key factor. based costs. marketing spend extended into the all-important tax year end Other revenue is derived from the provision of funds data services Our guidance on costs was that they would grow broadly in line with period where the UK tends to see significant activity amongst retail and research to external parties through FundsLibrary, however, the growth in client numbers. Cost growth in 2021 was marginally investors. In addition, February saw the launch of our second brand this business was sold on 28 February 2020 and hence there is no ahead of the 17% growth in clients due to the unusual marketing marketing campaign. revenue for this year. opportunity to acquire new clients and exceptional dealing volume * Definitions are shown in the Glossary of alternative financial performance measures on page 182. 62 Hargreaves Lansdown Report and Financial Statements 2021