Heartland Group Holdings Ltd. · NZX:HGH
Heartland — FY2019 Earnings Presentation
33 slides from Heartland's earnings presentation, Aug 15, 2019
Slide 1: 2019 Annual Results
2019 Annual Results 15 August 2019
Slide 2: Important notice
Important notice o 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. o The presentation and the briefing (together the Presentation) contain summary information only,
Slide 3: FY2019 Highlights
FY2019 Highlights HEARTLAND 3 — croup ——
Slide 4: 2019 Financial Highlights
2019 Financial Highlights o Gross finance receivables (Receivables) increased 10.5% to $4.4b (excl. FX(1)). o Net profit after tax (NPAT) increased 9.0% to $73.6m. o Final dividend increased 1.0 cents per share (cps) to 6.5cps, taking total dividends for FY2019 to 10.0cps. Receivables ($m) NPAT ($m)
Slide 5: Business and Strategic Highlights
Business and Strategic Highlights Business o Receivables growth • Australian reverse mortgages up 24.0%. • New Zealand reverse mortgages up 11.4%. • Open for Business up 48.2%. • Business Intermediated up 31.4%. • Motor up 13.3%. • Harmoney and other personal lending up 32.9% (excl. Retail mortgages
Slide 6: Customer and Culture Highlights
Customer and Culture Highlights Customer o Uptake of the Heartland Mobile App continues to rise, increasing by 72% since January 2019. o 2 Canstar Savings product awards, and 1 money magazine reverse mortgage product award. o Work plan submitted to the FMA and RBNZ in response to the recent Conduct
Slide 7: Financial Results
Financial Results HEARTLAND 7 — croup ——
Slide 8: Growth in Profitability
Growth in Profitability FY2018 v FY2019 NPAT ($m) 1.1 1. Included in FY2018 lease, fee and other income, were one-off gains of $4.8m on sale of property, and $0.6m on sale of the invoice finance business. 2. One-off items (net of tax) include corporate restructure and ASX listing costs of $1.8 milli
Slide 9: Growth in Receivables
Growth in Receivables FY2018 v FY2019 Receivables ($m) 1. The graph shows growth in Receivables, excluding the impact of changes in foreign currency exchange rates (FX) of $34.5m and IFRS9 adjustments of ($2.0m) which are shown separately. 9 2. There was a $54.7m transfer from AU Reverse Mortgages t
Slide 10: Key Performance Measures
Key Performance Measures Net Interest Margin Operating Expense Ratio 4.34% 4.50% 4.46% 4.42% 4.33% 2.18% Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Heartland's ratio KPMG FIPS Quarterly Results - major banks average Non Performing Loans Ratio Impairment Expense Ratio(1) 10 1. Impairment expense ratio is cal
Slide 11: IFRS9
IFRS9 Impairment o New accounting standard IFRS9 came into effect on 1 July 2018. o Requires impairments to be provided for on an expected loss basis at the date of loan origination, not just those loans that are past due or impaired. o Excluding the impact of IFRS9 adoption, the impairment expense
Slide 12: Shareholder Return
Shareholder Return o Return on equity 11.1% (11.7% excluding one-off costs and 12.2% for H2 FY2019). o Earnings per share 13.0cps (14.4cps for H2 FY2019). o Final dividend declared 6.5cps, up 1.0cps on FY2018 and takes total dividends for FY2019 to 10.0cps (11% growth). o The dividend reflects consi
Slide 13: Divisional summary
Divisional summary HEARTLAND 13 — croup ——
Slide 14: NZ Reverse Mortgages
NZ Reverse Mortgages o Receivables increased 11.4% to $561.2m. o Net Operating Income increased 13.3% to $20.9m. NZ Reverse o Increased brand awareness and digital distribution Mortgages through marketing activity. As at 30 June 2019 $561.2m 11.4% growth From FY2018 14
Slide 15: Business
Business o Total Receivables increased 3.5% to $1,118.2m. o Net Operating Income increased 5.0% to $55.9m. Business o Core Business Intermediated Receivables increased As at 30 June 2019 31.4% to $425.4m. o Non-Core Business Relationship lending reduced $1,118.2m $107.0m as part of a managed reducti
Slide 16: Motor
Motor o Receivables increased 13.3% to $1,088.6m. o Net Operating Income increased 8.0% to $57.1m. Motor o Continued focus on broadening intermediary As at 30 June 2019 relationships. $1,088.6m o New and used vehicle sales reduced in H2 FY2019 by 6% and 8% respectively. 13.3% growth From FY2018 o Ne
Slide 17: Rural
Rural o Total Receivables decreased 0.6% to $656.4m. o Net Operating Income decreased 1.9% to $31.7m. Rural o Livestock Receivables increased 18.8% in the year to As at 30 June 2019 $121.6m. o Non-Core Rural Relationship Receivables decreased 4.2% $656.4m to $534.8m as part of a managed reduction in
Slide 18: Harmoney and other personal lending
Harmoney and other personal lending o NZ Harmoney Receivables increased 40.0% to $149.7m. o AU Harmoney Receivables increased 52.0% to $39.8m (excl. FX). Harmoney and other personal lending As at 30 June 2019 o Other Personal Lending reduced 24.1% to $16.8m. o Net Operating Income increased 6.8% to
Slide 19: Deposits
Deposits o Deposits increased 9.4% to $3,153.7m. o Heartland Mobile App downloads increased by 72% from January 2019. o Awarded Canstar’s Bank of the Year – Savings Awards (second year running). o Awarded Canstar’s 5-Star Rating for Outstanding Value Savings Account for the Direct Call Account (four
Slide 20: Strategic update
Strategic update HEARTLAND 20 — croup ——
Slide 21: New Zealand Banking
New Zealand Banking o Delivering best or only products to depositors and borrowers through continued growth in niche markets: • Reverse Mortgages – supporting people to live a more comfortable retirement by releasing equity from their homes. • Motor Finance – helping New Zealanders to purchase safer
Slide 22: Australia
Australia o Heartland is the leading originator of reverse mortgages in Australia. o Market share grew to 24.0%(1), and is expected to continue to grow. o Receivables increased 24.0% to $757.6m. Australian Reverse Mortgages o Net Operating Income increased 10.7% to $22.7m. As at 30 June 2019 o TVC l
Slide 23: Digital
Digital Vision o A Financial Technology group with a bank licence, not a conventional bank. Digital Strategy o High-quality customer outcomes depend on providing superior customer experiences through delivery of simple and fast access to products and services. Key Objectives o Ensure our products ar
Slide 24: Open for Business
Open for Business o Receivables increased 48.2% to $133.3m. o Net Operating Income increased 85.3% to $9.6m. Open for Business o Investment in awareness and processing capacity As at 30 June 2019 required for next phase of growth. $133.3m 48.2% growth excl. FX From FY2018 24
Slide 25: Regulatory update
Regulatory update FMA and RBNZ review of conduct and culture in New Zealand retail banks(1) o The review found no conduct and culture issues of material concern but urged banks to strengthen management of conduct risks. o On 29 March 2019, Heartland submitted a workplan addressing the findings. o Th
Slide 26: Capital
Capital o Focus remains on improved return on equity through capital efficiency while ensuring Heartland Bank’s capital needs are supported. o Heartland Bank would require approximately $60m of additional regulatory capital(1) ($12m p.a. over the 5 year transition period) were the proposed RBNZ capi
Slide 27: Strategic Outlook
Strategic Outlook o High-quality customer outcomes. o Continued stability and growth in Core Banking activities. o Growth in Australia. o Continued shift to fast and simple on-boarding and processing under a ‘Digital’ strategy. o Capital efficiency and improved return on equity. 27
Slide 28: FY2020 Outlook
FY2020 Outlook o Continued asset growth in core lending, particularly reverse mortgages in New Zealand and Australia, and O4B. o Managed reduction of low margin Business and Rural Relationship lending to reduce concentration risk. o Increased costs associated with investment in: • Awareness for O4B
Slide 29: Appendices
Appendices HEARTLAND 29 — croup ——
Slide 30: Appendix – Financial Position
Appendix – Financial Position o Receivables increased 10.5%, excluding the impact of FX, resulting in reported growth of 9.7%. o Retail deposits increased 9.4% to $3,153.7m. 30
Slide 31: Appendix – Impact of one-off items
Appendix – Impact of one-off items o One-off items include post-tax impact of: • Corporate restructure and ASX listing costs of $1.8m. • Adverse impact of foreign currency movements of $0.9m. • Tier 2 break fees of $0.8m. Reported Impact Excl. Impact Net profit after tax $73.6m $3.5m $77.1m Net inte
Slide 32: Appendix – H1 FY2019 v H2 FY2019
Appendix – H1 FY2019 v H2 FY2019 H1 FY2019 H2 FY2019 FY 2019 Net operating income $102.1m $103.7m $205.8m Operating expenses $43.4m $42.2m $85.6m Impaired asset expense $13.3m $7.4m $20.7m Tax expense $12.4m $15.5m $27.9m Net profit after tax $33.1m $40.5m $73.6m Net interest margin 4.36% 4.30% 4.33
Slide 33: Thank you
Thank you HEARTLAND GROUP
Heartland Group Holdings — FY2019 Earnings Presentation on 6ix