AJ Bell shares rise as first-half revenue tops £75m

Shares of Salford-based investment platform AJ Bell rose about 7% on Thursday after it announced results for the six-month period ended March 31, 2022, showing its total customers rose by 35,555 to 418,309, net inflows were £2.8 billion and assets under administration (AUA) edged 2% higher to £74.1 billion.

Revenue rose to £75.5 million from £73.9 million as profit before tax slipped to £26.1 million from £31.6 million.

AJ Bell said revenue and profit margins are expected to increase in the second half as it declared an interim dividend of 2.78p per share, up 13%.

AJ Bell CEO Andy Bell said: “This is a very good result against a significantly more challenging market backdrop to that experienced in the first half of last year, when retail investor engagement and dealing activity was exceptionally high particularly in the direct-to-consumer market.

“The impact of normalised customer dealing activity and lower interest rates compared to the same period last year resulted in a lower revenue margin in this period.

“However, our diversified revenue model positions us well across all market conditions and we are now seeing the positive impact of recent interest rate rises on our revenue margins.

“Our secure and scalable platform has been designed to both facilitate growth and drive operational gearing, enabling us to once again exercise strong control over our operational costs.

“We have also continued to invest in new customer propositions to broaden our reach in both the advised and direct-to-consumer markets.

“In April we launched Dodl by AJ Bell, a new commission-free investing app which we believe will appeal particularly to people who want an easy, low-cost way to get started with investing.

“We plan to follow this with Touch by AJ Bell, a simplified, mobile-led platform proposition for the advised market, which is on track to soft launch later this year.

“As our business grows we are committed to sharing efficiency gains with our customers, whilst continuing to invest in new products and services for them.

“At a time when people are seeking to manage the impact of rising living costs, we have announced a number of reductions to our platform charges across both our advised and direct-to-consumer propositions which will deliver total annualised savings to our customers of around £5 million.

“This follows consistent reductions to the charges on our AJ Bell funds as assets under management have grown.

“The annual charges on the first five multi-asset funds we launched five years ago have nearly halved from 0.50% to 0.31% during that time, again delivering significant savings to customers.

“Our strong financial position and the board’s confidence in the long-term prospects for the business support continuing returns to shareholders alongside ongoing investment in our customer propositions. We remain committed to our stated dividend policy and the board has declared an interim dividend of 2.78 pence per share.

“The long-term structural drivers of growth in the UK investment platform market remain strong with around two-thirds of our estimated £3 trillion target market not yet on a platform.

“We continue to see customers moving onto investment platforms to benefit from increased flexibility and lower costs and we are well positioned to attract an increasing market share with our leading propositions and established brand in both the advised and direct-to-consumer segments.

“Whilst market uncertainty is likely to persist in the short-term, our business model ensures we can continue to invest in our customer propositions whilst delivering strong financial performance and we expect profit before tax for the full year to be at least in line with consensus market expectations.”

In his outlook, Bell added: “The macro-economic environment is uncertain as high inflation in the UK has led to interest rate rises and the growing cost-of-living crisis has been further exacerbated by the ongoing war in Ukraine.

“The rising cost of living is likely to impact investable income across the economy with the savings ratio falling back towards pre-pandemic levels.

“This presents a potential short-term headwind for inflows, particularly in the D2C market and the likelihood of increased administrative expenses.

“Our diversified revenue model provides inflation protection, ensuring we are well-equipped to succeed in different macro-economic conditions.

“A higher interest rate environment will provide a significant benefit, with higher revenue and profit margins expected both in the second half of the financial year and FY23.

In a high-inflation environment where consumers are increasingly looking for low-cost solutions, we are reducing a number of charges across our existing propositions as we look to share our economies of scale with our customers.

“Our existing propositions, complemented by our two new app-based, simplified, low-cost platform propositions, ensure we are well placed to support the next generation of investors and to capitalise on future growth opportunities.”