Heartland Group Holdings Ltd. · NZX:HGH
Heartland — Heartland New Zealand — FY2015 Earnings Presentation
27 slides from Heartland's earnings presentation, Jun 30, 2015
Slide 1: Full Year Results to 30 June 2015
Full Year Results to 30 June 2015 Jeff Greenslade Simon Owen Chris Flood Annual Meeting 1 November 2013 | Page 1
Slide 2: Important Notice
Important Notice This presentation has been prepared by Heartland New Zealand Limited (Heartland) for the purpose of briefings provided by Heartland in relation to its financial statements. The presentation and the briefing constitute summary information only, and you should not rely on them in isol
Slide 3: Agenda
Agenda • Introduction • Financial overview • Business Overview • Looking Forward • Questions Annual Full YearMeeting Results to1 30 November 2013 June 2015 | Page | Page 3 3
Slide 4: Introduction
Introduction Annual Full YearMeeting Results to1 30 November 2013 June 2015 | Page | Page 4 4
Slide 5: Full Year Highlights
Full Year Highlights • Increase in profitability (up 34% from prior year NPAT) • Strong asset growth in core assets • Return on equity of 10.4% • Credit rating upgrade for Heartland Bank to BBB (outlook stable) • Wider penetration into consumer markets (Harmoney and personal loan product) • Normalis
Slide 6: Financial Overview
Financial Overview Annual Full YearMeeting Results to1 30 November 2013 June 2015 | Page | Page 6 6
Slide 7: Financial Full Year Overview
Financial Full Year Overview Strong profitability growth 12 months to 12 months to June 2015 June 2014 Change • Achieved NPAT of $48.2m (NZ$m) (NZ$m) % Net interest income 134.4 109.1 23% Net other income 10.5 13.5 -22% • Increase in NPAT of $12m or 34% Net operating income * 144.9 122.6 18% • NOI i
Slide 8: Net Profit Before Tax
Net Profit Before Tax Adjusted NPBT shows continued improvement • Continued trend improvement • Adjustment for one-off Non-Core Property expense in 2013, for like on like • Interest margin big driver in growth • Reverse Mortgage acquisition and core asset growth now contributing Annual Full YearMeet
Slide 9: Net Profit Before Tax - Bridge
Net Profit Before Tax - Bridge Breakdown of component parts * *includes decrease in fair value of investment properties Annual Full YearMeeting Results to1 30 November 2013 June 2015 | Page | Page 9 9
Slide 10: Operational Efficiency
Operational Efficiency Continuing improvement in cost to income ratio • Ratio lower as NOI continues to grow faster than costs • Annual cost to income ratio now 47% Annual Full YearMeeting Results to1 30 November 2013 June 2015 | Page | Page 10 10
Slide 11: Net Operating Income
Net Operating Income NOI driving profitability • NOI up 18% • Households is biggest earning division • Reverse Mortgage acquisition in April 2014 and core asset growth drives big increase • COF big historical driver Annual Full YearMeeting Results to1 30 November 2013 June 2015 | Page | Page 11 11
Slide 12: Balance Sheet Summary
Balance Sheet Summary Growth in receivables • Total assets increased by $342m (or $321m excluding Reverse Mortgages) • Net finance receivables increased by $255m or 10% • Households 55% of receivables • Bank capital ratio reduced to 12.9% from 14.4% 30 Jun 2014 30 Jun 2015 (NZ$m) (NZ$m) Total assets
Slide 13: Net Finance Receivables Bridge
Net Finance Receivables Bridge Portfolio mix improvements Annual Full YearMeeting Results to1 30 November 2013 June 2015 | Page | Page 13 13
Slide 14: Asset Quality Trends
Asset Quality Trends Trend improvement in underlying asset quality • Asset quality is sound • Non-Core Property continues to reduce • Supporting dairy exposures (see later slide) • Other asset quality expected to be consistent in year ahead 30-Jun-11 30-Jun-12 30-Jun-13 30-Jun-14 30-Jun-15 Net Finan
Slide 15: Cost of Funds – Heartland Bank
Cost of Funds – Heartland Bank Cost of funds continue to track lower • Strong growth in deposit book to match asset growth • Margins paid v peers, in term deposit book were higher to facilitate growth (have reduced after balance date) Annual Full YearMeeting Results to1 30 November 2013 June 2015 |
Slide 16: Optimising Bank Capital
Optimising Bank Capital • Heartland Bank capital ratios have reduced, largely due to asset growth Heartland Bank 2014 2015 • Total Capital ratio will reduce, but Total Capital 14.4% 12.9% expected to remain above 12.5% • Heartland Bank intends to issue a Tier 2 Tier 1 Capital 14.3% 12.8% capital ins
Slide 17: Dividend
Dividend History of dividend growth • Fully imputed final dividend of 4.5 5 Dividends cents per share 4 CENTS • An increase in dividend payment of 3 25% from prior year 2 1 • Payment ratio has been around 70% 0 for last two years 2013 2014 2015 Special Interim Final Annual Full YearMeeting Results t
Slide 18: Business Overview
Business Overview Annual Full YearMeeting Results to1 30 November 2013 June 2015 | Page | Page 18 18
Slide 19: Core Business Divisions
Core Business Divisions Business Rural Households • Net operating income of • Net operating income of • Net operating income of $42.0m $24.0m $75.7m • 18% growth in net receivables • 19% growth in net receivables • Launch of new personal loan product targeting customers • Growth driven by: • Early s
Slide 20: Dairy Exposure
Dairy Exposure Dairy Exposure • Net exposure = $218m • 40.6% of total Rural exposure • 7.6% of total Heartland exposure Security • Average LVR = 61% (vs average LVR of 46% for total Rural book) • Comprises livestock and first mortgages over land Loan Size • Average loan size = $244k • 9 exposures gr
Slide 21: Credit Exposure by Geographic Region
Credit Exposure by Geographic Region • Heartland’s credit exposure is New Zealand / Australia Credit Exposure by Geographic Region evenly weighted between NZ urban centres vs. NZ provincial 14% • NZ urban (Auckland, Wellington, 26% Auckland Christchurch and Dunedin) Wellington collectively make up 4
Slide 22: Looking Forward
Looking Forward Annual Full YearMeeting Results to1 30 November 2013 June 2015 | Page | Page 22 22
Slide 23: Looking Forward
Looking Forward Consumer • Expect underlying asset growth in Motor Vehicle book to continue • Focus on growing market share in personal lending, both through our personal loan product and lending through Harmoney’s online platform Reverse Mortgages • New lending in July 2015 for Reverse Mortgages in
Slide 24: Looking Forward
Looking Forward SMEs / Consumer • Online lending has grown rapidly in popularity in the US and UK in recent years for both SME and consumer • Lending Club and Prosper (both US P2P lenders) collectively achieved CAGR of 129% for originations between 2009 and 2014 • In 2014, UK P2P business lending vo
Slide 25: Looking Forward
Looking Forward Rural • Expect asset growth at a lower rate than FY15 • Expect a continuation of lower than historical higher milk pay-out levels, followed by a slow recovery – will lead to increase in farmers making operating losses • Heartland is well positioned to support its dairy customers in t
Slide 26: Looking Forward
Looking Forward Acquisition strategy • Acquisitions continue to form part of Heartland’s growth strategy • Recent opportunities viewed as overpriced and offering outdated technology • Will continue to pursue acquisition opportunities that meet our criteria and offer distribution benefits and/or inno
Slide 27: Questions
Questions Annual Full YearMeeting Results to1 30 November 2013 June 2015 | Page | Page 27 27