Heartland Group Holdings Ltd. · NZX:HGH
Heartland — Heartland New Zealand — H1 FY2014 Earnings Presentation
28 slides from Heartland's earnings presentation, February 2014
Slide 1: Half Year Results to 31 December 2013
Half Year Results to 31 December 2013 Jeff Greenslade Simon Owen Annual Meeting 1 November 2013 | Page 1
Slide 2: Important Notice
Important Notice This presentation has been prepared by Heartland New Zealand Limited (Heartland) (NZX: HNZ) for the purpose of briefings provided by HNZ in relation to its financial statements. The presentation and the briefing constitute summary information only, and you should not rely on them in
Slide 3: We stay in our family
vow DO WE STAY IN OUR FAMILY.
Slide 4: Agenda
Agenda • Introduction • Financial Overview • Home Equity Release Acquisition Overview • Acquisition Fits Heartland’s Strategy • Questions Annual Meeting 1 November 2013 | Page 4 Half Year Results to 31 December 2013 | Page 4
Slide 5: Introduction
Introduction Annual Meeting 1 November 2013 | Page 5
Slide 6: Heartland's Progress to Date
Heartland’s Progress to Date Heartland has made significant progress restructuring the existing business and is now poised for growth Merger successfully completed Investment grade credit rating achieved Bank licence obtained Costs normalising Consistent growth in earnings Asset rebalanc
Slide 7: Effect of Balance Sheet Changes
Effect of Balance Sheet Changes Strategic changes to Heartland’s balance sheet composition have resulted in increased EPS and ROE 30 June 2011 30 June 20121 30 June 2013 30 June 2014 (forecast)4 Total Net Receivables7 Total Net Receivables7 Total Net Receivables7 Total Net Receivables7 - $1.7b - $2.
Slide 8: Significant Reduction in Non-Core Property
Significant Reduction in Non-Core Property Heartland continues to significantly reduce its non-core property holdings 30 June 2013 31 December 2013 30 June 2014 (Forecast)1 Total Property Book2 - $122.3m Total Property Book1 - $99.2m Total Property Book1 - $67.9m 1Based on conditional contracts 2Exc
Slide 9: Implementing Acquisitive Growth Strategy
Implementing Acquisitive Growth Strategy Heartland has established a specialist team for strategic growth, new product assessment and development • The team is headed by Michael Jonas, recently appointed as Head of Strategic and Product Development and includes: • Andrew Dixson (Senior Manager – Str
Slide 10: Financial Overview
Financial Overview Annual Meeting 1 November 2013 | Page 10
Slide 11: Financial Half Year Overview
Financial Half Year Overview 56% increase in NPAT • Achieved NPAT of $16.7m 6 months to 6 months to 12 months to Dec 2013 Dec 2012 Jun 2013 • Increase in NPAT of $6m or 56% (NZ$m) (NZ$m) (NZ$m) • NOI increase of $7m or 13% Net interest income 52.4 46.8 95.5 Net other income 6.7 5.3 11.9 • Impairment
Slide 12: Net Profit Before Tax
Net Profit Before Tax Adjusted NPBT shows continued improvement • Adjustment for one off Non-Core Net Profit Before Tax ($m) Property expense for like on like 25.0 23.2 • Interest margin big driver in growth 20.0 18.8 • Continued trend improvement • To continue trend will need 15.0 14.8 14.9 growth
Slide 13: Net Profit Before Tax - Bridge
Net Profit Before Tax - Bridge Breakdown of component parts NPBT NPBT 1H14 v 1H13 ($m) 1H14 v 2H13 ($m) 25.0 25.0 0.1 23.4 0.3 1.0 23.4 0.5 3.8 7.1 0.1 20.0 1.9 20.0 18.9 15.0 14.9 15.0 10.0 10.0 5.0 5.0 0.0 0.0 NPBT Net Operating Operating Impaired asset Equity NPBT Adjusted NPBT Net Operating Oper
Slide 14: Operational Efficiency
Operational Efficiency Continued trend improvement Net Operating Income and Operating Expenses ($m) 65 in cost to income ratio 60 55 • Ratio lower as NOI continues to grow 50 $m 45 • Cost to income ratio now at 55% 40 • Track shows right direction – nearing 35 peers 30 • Some variability half on hal
Slide 15: Balance Sheet Summary
Balance Sheet Summary Transformation on track • Total assets declined by $12m • Net finance receivables reduced by $104m Net Operating Income • Retail and non-core property back $95m Net Finance Receivables 70 as we look to exit $2,045m • Consumer and Business up $22m and $9m 2,000 88 $2,010m 49 $1,
Slide 16: Asset Quality Trends
Asset Quality Trends Trend improvement in underlying asset quality • Asset quality Heartland Asset Quality $m improving overall • Non-Core Property 200 187 180 remains driver of 160 elevated impairment Impaired Assets ($m) 140 140 139 levels 120 122 118 65 99 • Core business 100 67 77 80 52 27 impai
Slide 17: Cost of Funds
Cost of Funds Cost of funds continue to track lower Solid retail deposit growth and lower cost of funds driven by: • Rate alignment with Bank peers • Changing funding mix (increased retail, reduced wholesale) Annual Meeting 1 November 2013 | Page 17 Half Year Results to 31 December 2013 | Page 17
Slide 18: Home Equity Release Acquisition Overview
Home Equity Release Acquisition Overview Annual Meeting 1 November 2013 | Page 18
Slide 19: Acquisition Summary
Acquisition Summary Heartland New Zealand Limited (Heartland) will acquire the Sentinel New Zealand (Sentinel) and Australian Seniors Finance 1 (ASF) businesses, with combined assets of approximately NZ$760m 1 from Seniors Money International Ltd. (SMI), (including their respective home equity relea
Slide 20: Home Equity Release Loans Overview
Home Equity Release Loans Overview HER loans allow seniors to borrow against the equity in their homes • Borrower must be of a minimum age (Sentinel and ASF require borrows to be 60+), live in his/her own home, and have equity in it • The borrower will never have to repay more than the value of the
Slide 21: Sentinel and ASF Summary
Sentinel and ASF Summary Sentinel is the leading HER loan provider in New Zealand, while ASF is the largest non-bank provider in Australia • Sentinel is the number one Home Equity Release (HER) mortgage provider in New Zealand with approximately 80% market share1 • ASF is the largest non-bank HER lo
Slide 22: Acquisition Fits with Heartland's Strategy
Acquisition Fits with Heartland’s Strategy Annual Meeting 1 November 2013 | Page 22
Slide 23: Acquisition Fits Heartland's Objectives
Acquisition Fits Heartland’s Objectives Heartland’s Strategic Objectives Sentinel / Australian Seniors Finance (ASF) Strategic Fit 1. Low contestability, specialist Reverse mortgages occupy a specialist sector products Sentinel and ASF are Australasia’s only specialist provider of HER products (
Slide 24: Acquisition Fits Heartland's Objectives
Acquisition Fits Heartland’s Objectives Heartland’s Strategic Objectives Sentinel / Australian Seniors Finance (ASF) Strategic Fit 4. Leverage existing relationships / Sentinel/ASF have existing strong networks of distribution relationships in infrastructure both jurisdictions Strong existing co
Slide 25: Acquisition Fits Heartland's Objectives
Acquisition Fits Heartland’s Objectives Heartland’s Strategic Objectives Sentinel / Australian Seniors Finance (ASF) Strategic Fit 5. Compelling sector fundamentals New Zealand and Australia’s older population is projected to grow rapidly A significant portion of their wealth is accumulated in t
Slide 26: Acquisition Fits Heartland's Objectives
Acquisition Fits Heartland’s Objectives Heartland’s Strategic Objectives Sentinel / Australian Seniors Finance (ASF) Strategic Fit 6. Sustainable earnings and growth Sentinel / ASF have predictable and sustainable earnings Opportunity to grow that earnings stream with new origination Step incr
Slide 27: Questions
Questions Annual Meeting 1 November 2013 | Page 27 Half Year Results to 31 December 2013 | Page 27
Slide 28: We stay in our family
vow DO WE STAY IN OUR FAMILY.
Heartland New Zealand — H1 FY2014 Earnings Presentation on 6ix