AJ Bell hikes dividend by 26% as interest rate hikes and new customer gains help generate bumper profits
- The firm has recommended a 3.5p per share dividend, a 26% rise on last year
- Pre-tax earnings at the online trading platform increased by 61% to £41.9m
- AJ Bell’s net inflows hit a record £0.9bn despite the cost-of-living crisis
AJ Bell has announced a major dividend increase on the back of a solid expansion in half-year earnings and turnover.
Pre-tax profits at the online trading platform climbed by 61 per cent to £41.9million for the six months ending March, from £75.5million the previous year, while revenue surged by 37 per cent to £103.6million.
Growth was primarily propelled by the Bank of England hiking the UK base rate in stages from 2.25 per cent to 4.25 per cent over the period, which boosted the average interest rate the firm received on consumer cash balances.
Growth: AJ Bell revealed pre-tax profits climbed by 61 per cent to £41.9million for the six months ending March, while revenue surged by 37 per cent to £103.6million
The Manchester-based firm’s total retail customers and assets under management both rose by 7 per cent to 469,929 and £73.8billion, respectively.
Meanwhile, net inflows reached a record £0.9 billion despite the cost-of-living crisis causing a growing number of Britons to withdraw cash from their ISA, pension and investment accounts to support themselves financially.
Thanks to the solid performance, AJ Bell has recommended paying shareholders a 3.5 pence per share interim dividend, a 26 per cent jump on the previous year.
Michael Summersgill, chief executive at AJ Bell, said the results ‘demonstrate the strength of our business model and how our diversified revenue streams enable us to perform well in a range of different market conditions’.
He added that the company was ‘in a good position to benefit’ from the recent increases to pension annual allowances and the abolition of the pension lifetime allowance charge.
Chancellor of the Exchequer Jeremy Hunt said he hoped the measures would lead to more pensioners returning to the workforce when he announced the changes during his budget speech in March.
Summersgill said: ‘We have campaigned for pension simplification for many years and believe these welcome changes will give customers the freedom to invest more in their pensions without having to worry about tax penalties as their investments grow over time.’
During the lockdown period, retail investment firms attracted significant numbers of new and younger customers trying out do-it-yourself investing for the first time.
To capitalise on this trend and fight off significant competition from rivals like Hargreaves Lansdown and Interactive Investor, AJ Bell launched the fee-free share and fund dealing app Dodl.
But the retail investment sector does face significant uncertainty in the coming years, given that higher interest rates are making companies more reluctant to borrow money.
Though AJ Bell anticipates benefiting from a higher average interest rate in the second half of the financial year, it expects revenue margins will be similar to those in the prior six months due to moderating customer cash balances.
AJ Bell shares were 1 per cent higher at 316p on early Thursday afternoon, meaning their value has grown by approximately 23 per cent over the past 12 months.