Heartland Group Holdings Ltd. · NZX:HGH
Heartland — FY2020 Earnings Presentation
33 slides from Heartland's earnings presentation, Sep 17, 2020
Slide 1: 2020 Annual Results
2020 Annual Results 17 September 2020
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,
Slide 3: FY2020 highlights
FY2020 highlights
Slide 4: Financial performance
Financial performance Net operating income Net profit after tax1 Gross finance receivables2 +13.2% vs FY2019 -2.2% vs FY2019 +4.9% vs FY20193 $235.3m $72.0m $4.623b $78.9m (+7.2%) excluding the economic overlay 1. Including the impact of $9.6m pre-tax economic overlay due to COVID-19; excluding the
Slide 5: Strategic highlights
Strategic highlights • Heartland is established as a digitally-led financial services group, ‘a financial technology company (fintech) with a bank licence’. • In May, Fitch Ratings affirmed Heartland’s Long-Term Issuer Default Ratings and Outlooks (one of only two Australasian banks to have no reduc
Slide 6: COVID-19 response
COVID-19 response • Contacted customers potentially vulnerable to the pandemic to determine support required – particularly Consumer, SME and Business customers. • Consumers representing $143 million of loans took up offers of support. • SME and Business customers representing $510 million of loans
Slide 7: Financial results
Financial results
Slide 8: Growth in profitability
Growth in profitability 6.9 39.03 40.5 32.1 36.4 33.1 39.9 31.1 FY18 FY19 FY20 H1 H2 COVID-19 Overlay 2 2 1. All figures in NZ$m. 2. Post-tax impact of $9.6m economic overlay due to COVID-19. 3. 2H2020 NPAT in NZ$m excluding the impact of $9.6m pre-tax economic overlay due to COVID-19. 8
Slide 9: Growth in receivables
Growth in receivables 16% 2% 17% 11% 3% 30% 10% 8% 5% 18% 1. The graph shows year-to-date (YTD) movement in Receivables by individual portfolio excluding the FX impact. 2. All figures in NZ$m. 9
Slide 10: Key performance measures
Key performance measures 45.4% 4.61% 4.61% 44.5% 4.59% 41.6% 4.46% 4.46% 41.9% 4.42% 40.9% 4.33% 4.33% 39.9% FY17 FY18 FY19 FY20 Reported CTI Underlying CTI FY17 FY18 FY19 FY20 Total NIM NIM excl. Liquid Assets 2% 1.80% 1.84% 1.72% 1.87% 100 0.65% 2% 87.0 80 73.9 75.6 0.58% 64.2 60 0.49% 1% 0.45% 0.
Slide 11: Shareholder return
Shareholder return 11.6% ROE 11.4% 11.1% 11.1% • Adjusted ROE (excluding economic overlay) of 10.5% 11.4% (up 31 bps vs FY2019)1. • Earnings per share (EPS) (including the economic overlay) of 12.5 cps, down 0.5 cps FY17 FY18 FY19 FY20 compared to FY2019. Excluding the economic Adjusted Reported ove
Slide 12: Economic overlay and impairments
Economic overlay and impairments • Excluding the COVID-19 Overlay, impairment expense as a percentage of average receivables decreased from 0.49% in FY2019 to 0.44% in FY2020. This reflects improving quality and improved collections processes. • Heartland was one of only two Australasian financial i
Slide 13: Divisional summary
Divisional summary
Slide 14: Australia Reverse Mortgages
Australia Australia Reverse Mortgages • Net operating income increased 51.0% to $34.3 million. • Receivables increased 18%1 to $958 million. • Strong growth in the portfolio, driven by investment in marketing, resulted in market share increasing to 26%, with a similar trend expected to continue in t
Slide 15: NZ Reverse Mortgages
NZ Reverse Mortgages • Net operating income increased 12.7% to $23.5 million. • Receivables increased 10% to $560 million. As at 30 June 2020 • Growth in NZ Reverse Mortgages driven by an investment in marketing to increase brand awareness, and digital channel enhancements. $560m +10% growth since J
Slide 16: Open for Business (O4B)
Open for Business (O4B) • Net operating income increased 53.7% to $14.7 million. • Receivables increased 16% to $155 million. • Ongoing investment in operational As at 30 June 2020 capacity, automation and marketing to increase product awareness is expected to fuel recovery to pre-COVID-19 levels an
Slide 17: Business Intermediated
Business Intermediated • Net operating income increased 24.3% to $21.9 million. • Receivables increased 17% to $499 million. • Business Intermediated remains an area As at 30 June 2020 of growth for Heartland Bank. • The Business Intermediated portfolio is the provision of business finance through $
Slide 18: Motor Finance
Motor Finance • Net operating income increased 6.2% to $60.6 million. • Receivables increased 3% to $1,126 million. • New lending held up strongly in Q4, however higher As at 30 June 2020 levels of repayments resulted in a largely flat volume growth in 2H2020. • New lending during COVID-19 lockdown
Slide 19: Harmoney and other personal lending
Harmoney and other personal lending • Net operating income increased 13.3% to $21.4 million. • Harmoney Receivables increased 4.6%1 to $199 million. • Both New Zealand and Australian portfolios contracted As at 30 June 2020 in 2H2020 as a result of slowdown in new lending following the COVID-19 outb
Slide 20: Livestock Finance
Livestock Finance • Net operating income increased 12.1% to $6.6 million. • Receivables decreased 5% to $115 million. • Growth in Livestock Finance was impacted As at 30 June 2020 by the effects of drought and COVID-19 on the rural sector across New Zealand. $115m -5% decrease since June 2020 20
Slide 21: Relationship
Relationship • Net operating income decreased 10.2% to $48.9 million. • Receivables decreased 10% to $986 million. • Receivables continued to decrease in the Business and Rural Relationship portfolios as a As at 30 June 2020 result of the strategic focus on reducing concentration risk in low margin
Slide 22: Funding
Funding New Zealand • Heartland Bank increased borrowings by $131.8 million (3.8%). • Deposits grew $100.5 million (3.2%) in Q4 as a result of promotional activity and continued market-leading rates. • Heartland Bank increased total liquidity by $205 million (39%). • Heartland Bank holds liquidity w
Slide 23: Strategic update
Strategic update
Slide 24: Core strategic objectives
Core strategic objectives New Zealand Australia Digital Acquire scale in NZ Expand in Australia Digitalise everything Heartland does • Differentiated low-cost • Needs-based usage of operating model. Reverse Mortgages • Continuing to digitalise • Exploring opportunities for expected to continue. dist
Slide 25: Customers and culture
Customers and culture Diversity Works NZ Heartland Bank became 50 Māori and Pasifika Employed 23 FTE Diversity Awards an accredited students participated in between March-June to finalist for Cultural Living Wage employer the Manawa Ako support customers Celebration internship through COVID-19 Heart
Slide 26: Regulatory update
Regulatory update • Some delays in place for regulatory change timeframes due to COVID-19. • A significant volume of regulatory change continues, including: • proposed Financial Markets (Conduct of Institutions) Amendment Bill (Conduct Bill) • Phase 2 of the review of the Reserve Bank of New Zealand
Slide 27: FY2021 outlook
FY2021 outlook Supporting customers Continued growth in Reverse Mortgage through digital Motor, Business and growth supported by platforms and Reverse Mortgages long-term funding products structure Further developing Focus on reducing NPAT for FY2021 in and embedding the environmental the range of $
Slide 28: Appendices
Appendices
Slide 29: Appendix – Financial position
Appendix – Financial position 30 June 30 June $m 2020 2019 Movement ($m) Movement (%) Liquid Assets 544 417 127 30.5% Net Finance Receivables 4,584 4,350 234 5.4% Other Assets 190 162 28 17.2% TOTAL ASSETS 5,318 4,929 389 7.9% Retail Deposits 3,264 3,154 111 3.5% Other Borrowings 1,268 1,058 210 19.
Slide 30: Appendix – Financial performance
Appendix – Financial performance $m W FY2020 FY2019 Change ($) Change (%) Net Operating Income1 235.3 208.0 27.3 13.2% Operating Expenses (106.8) (85.8) 21.0 24.5% Impairment Expense (29.4) (20.7) 8.7 42.3% Profit Before Tax 99.1 101.5 (2.4) (2.3%) Tax Expense (27.2) (27.9) (0.7) (2.6%) Net Profit A
Slide 31: Appendix – Reconciliation of Reported with Adjusted Results
Appendix – Reconciliation of Reported with Adjusted Results $m FY2020 $m FY2020 Reported NPAT 72.0 Reported impairment expense 29.4 Add: Less: Impact of COVID-19 Covid-19 economic overlay (pre-tax) (9.6) economic overlay (post-tax) 6.9 Adjusted impairment expense 19.8 Adjusted NPAT 78.9 Weighted ave
Slide 32: Appendix – Reconciliation of Reported with Underlying Results
Appendix – Reconciliation of Reported with Underlying Results $m FY2020 FY2019 Reported NOI 235.3 208.0 Less: Upfront Reverse Mortgage fees (2.8) - Underlying NOI 232.5 208.0 Reported OPEX 106.8 85.8 Less: Upfront Reverse Mortgage costs (3.3) - Corporate restructure costs - (3.1) Underlying OPEX 103
Slide 33: Thank you
Thank you For Heartland’s FY2020 Annual Results announcement, please see shareholders.heartland.co.nz
Heartland Group Holdings — FY2020 Earnings Presentation on 6ix