Heartland Group Holdings Ltd. · NZX:HGH
Heartland — H1 FY2019 Earnings Presentation
30 slides from Heartland's earnings presentation, February 2019
Slide 1: Heartland Group Holdings Limited 2019 Interim Results
Heartland Group Holdings Limited 2019 Interim Results 6 months to 31 December 2018 Heartland Group 2019 Interim Results | Page 1
Slide 2: Important notice
Important notice This presentation has been prepared by Heartland Group Holdings Limited (NZX/ASX : HGH) (the Company or Heartland) for the purpose of briefings in relation to its financial statements. The presentation and the briefing (together the Presentation) contain summary information only, an
Slide 3: 2019 Interim Results – Highlights
2019 Interim Results – Highlights Australia reverse mortgage • Corporate restructure successfully completed on 31 October 2018 growth of and Heartland Group Holdings (HGH) listing on NZX and ASX on 1 24.9%1 November 2018 Open for • Gross finance receivables $4.2b – 11.9% annualised growth excl. FX1
Slide 4: 2019 Interim Results – December 2018
2019 Interim Results – 31 December 2018 Net operating income Net profit after tax Gross finance receivables 6 months to 31 Dec 2018 6 months to 31 Dec 2018 As at 31 Dec 2018 $102.1m $33.1m $4.2b 8.7% 6.5% 11.9% (excl. FX1) from 6 months to 31 Dec 2017 from 6 months to 31 Dec 2017 Annualised growth f
Slide 5: Strong growth in Gross Finance Receivables
Strong growth in Gross Finance Receivables ↓34.2% ↑44.3% ↑56.2% ↓20.0% ↓4.5% ↑16.3% ↑44.3% ↑10.7% ↑25.5% • The graph shows annualised growth in Gross Finance Receivables excluding the impact of changes in foreign currency exchange rates (FX), which is shown separately. • Australia includes Reverse M
Slide 6: Growth in profitability
Growth in profitability • Operating expenses one off items include corporate restructure and ASX listing costs ($0.9 million) and adverse impact of foreign currency movements ($1.2 million). • Impairment expenses – new IFRS9 impact is the result of the new IFRS9 standard which requires providing for
Slide 7: Operating expenses
Operating expenses • Operating expense ratio 42.5% - 40bps lower than previous corresponding period • Operating expenses one off items include corporate restructure and ASX listing costs of $0.9 million and adverse impact of foreign currency movements of $1.2 million • Excluding one off items, opera
Slide 8: Market leading NIM maintained
Market leading NIM maintained 4.41% • Gross interest yield = Interest Income divided by Average Interest Bearing Assets • Cost of funds = Interest Expense divided by Average Interest Bearing Liabilities • Net Interest Margin (NIM) = (Interest Income – Interest Expense) divided by Average Interest Be
Slide 9: Impairments impacted by IFRS9
Impairments impacted by IFRS9 IFRS9 adoption • Impairment expense $13.3m (up $2.9m, 27.6% from previous corresponding reporting period) • Impairment expense ratio1 increased to 0.64% – up from 0.58% for the year to 30 June 2018 • $2.2 million of the increase is a result of the new IFRS9 methodology,
Slide 10: FY19 profitability and outlook
FY19 profitability and outlook • One-off costs and the impact of IFRS9 have caused some pressure on earnings • The lower end of guidance remains achievable, however it would come at the expense of further investment in growth • An updated range of $73 million to $75 million is now considered prudent
Slide 11: Strategic update
Strategic update Photo credit: Chris Williams
Slide 12: Heartland Group – threefold strategic focus
Heartland Group – threefold strategic focus Australia Digital Platform New Zealand Reverse Mortgages Services Banking Total estimated market of Five core lending activities : approximately A$6bn Open for Business (O4B) Reverse Mortgages, Motor, SME, Livestock, Harmoney Long term funding Mobile app A
Slide 13: Strategic update
Strategic update • To support growth in Australia, Heartland continues to diversify sources of funding and to fund growth with more capital efficiency: – Favourable population demographics – Heartland is the largest specialist in the market, currently enjoying the highest rate of growth – Increased
Slide 14: Regulatory update
Regulatory update ASIC Review of Reverse Mortgage Lending (August 2018) • Thorough and balanced, highlighting growing need for equity release product • Report finds that reverse mortgages help older Australian achieve their immediate financial objectives and that customers are satisfied • The report
Slide 15: Regulatory update continued:
Regulatory update continued: RBNZ Capital Review consultation paper (December 2018): • The capital review is at consultation stage only with many details to be clarified and RBNZ yet to have made any final decisions. • If the proposal was to be implemented in its current form, Heartland would be req
Slide 16: Divisional summary
Divisional summary Photo credit: Chris Williams
Slide 17: Australia $755.5m
Australia • Australian Reverse Mortgages gross finance receivables $733.3m 24.9% annualised growth excl. FX Australia – Gross Finance Receivables • Australia Spotcap small business gross finance receivables $22.2m As at 31 December 2018 • 45.4% annualised growth excl. FX Australia Net Operating Inco
Slide 18: Digital
Digital • Open for Business grew strongly with gross receivables increasing 56.2% to $115.4 million • Increased investment required to raise awareness and reach to a market estimated to be $5bn1 • Outside specialist capital being considered • 10% Depositors now on App • 30% Australian Reverse Mortga
Slide 19: New Zealand reverse mortgages $481.5m
New Zealand reverse mortgages • NZ Reverse Mortgage gross finance receivables increased $24.6m in the six months to 31 Dec 2018 to $481.5m, 10.7% annualised growth • NZ Reverse Mortgage Net Operating Income increased 16.2% to $10.3m • Increased brand awareness and digital distribution • We have assi
Slide 20: Business $1,093.8m
Business • Business gross finance receivables increased $32.4m in the six months to 31 Dec 2018 to $1,093.8m (6.1% annualised growth) • Business Net Operating Income increased 5.7% to $27.6m • Intermediated continue to grow strongly with 44.3% annualised growth • Business relationship lending decrea
Slide 21: Motor $1,039.9m
Motor • Motor gross finance receivables increased $79.0m in the six months to 31 Dec 2018 to $1,039.9m (16.3% annualised growth) • Motor Net Operating Income increased 8.9% to $28.2m • Increased partnership with intermediaries offers customers vehicle finance at point of sale Motor – Gross Finance R
Slide 22: Harmoney and other personal lending $188.6m
Harmoney and other personal lending • Harmoney and other personal lending gross finance receivables increased $34.7m in the six months to 31 Dec 2018 to $188.6m (annualised growth 44.3%, excl. FX) Harmoney and other personal lending – • NZ Harmoney and other personal lending increased 37.7% Gross Fi
Slide 23: Rural $645.5m
Rural • Rural gross receivables decreased 4.5% (annualised decrease in gross receivables) • Reduction in lending through Rural Relationship and Livestock Direct, but a small increase in Open for Livestock lending. • We continue to manage down large Rural Relationship lending to reduce concentration
Slide 24: Balance sheet and Capital
Balance sheet and Capital Photo credit: Chris Williams
Slide 25: Balance Sheet
Balance Sheet 31 Dec 2018 30 June 2018 Movement Annualised Summary Balance Sheet ($m) ($m) ($m) Growth (%) Gross finance receivables 4,226.2 4,017.4 208.7 10.3% Provisions for impairment and fair (58.9) (32.5) (26.3) 160.6% value adjustment Net finance receivables 4,167.3 3,984.9 182.4 9.1% Other as
Slide 26: Movement in Equity
Movement in Equity $m Heartland Bank Limited as at 30 June 2018 664.2 Profit for the 6 months to December 2018 33.1 Dividends paid (30.8) Dividend reinvestment plan 8.6 IFRS 9 Adjustment (18.2) Movement in reserves (2.8) Heartland Group Holdings Limited as at 31 December 2018 654.2 Heartland Group 2
Slide 27: Asset growth and funding growth
Asset growth and funding growth • Asset growth funded by 12.1% annualised growth in borrowings • 9.0% annualised growth in New Zealand gross finance receivables funded by 7.3% annualised growth in retail deposits • 16.7% annualised growth in Australia gross finance receivables funded by increased wh
Slide 28: Capital
Capital • Heartland Group equity ratio was 13.91%1 as at 31 December 2018. • Heartland Bank Tier 1 and Total regulatory capital ratio was 13.25% as at 31 December 2018. • Following repayment of the Tier 2 capital as part of the corporate restructure in October 2018, Heartland Bank no longer has any
Slide 29: Return to shareholders
Return to shareholders • Interim dividend declared 3.5cps • Heartland Group Return on Equity 10.3% (annualised) • Heartland Group earnings per share for 6 months to 31 Dec 2018 was 5.9cps Heartland Group 2019 Interim Results | Page 29
Slide 30: Thank you
Thank you Any questions? Heartland Group 2019 Interim Results | Page 30
Heartland Group Holdings — H1 FY2019 Earnings Presentation on 6ix