Heartland Group Holdings Ltd. · NZX:HGH
Heartland — Heartland New Zealand — H1 2012 Earnings Presentation
28 slides from Heartland's earnings presentation, Feb 16, 2012
Slide 1: Half Year Results to 31 December 2011
Heartland New Zealand Limited Half Year Results to 31 December 2011 16 February 2012 Half Year Results to 31 December 2011 | Page 1 Sean Kam, Chief Financial Officer Craig Stephen, Group Treasurer
Slide 2: Important Notice
Important Notice This presentation has been prepared by Heartland New Zealand Limited (NZX : HNZ) for the purpose of briefings provided by HNZ in relation to its financial statements. The presentation and the briefings constitute summary information only, and you should not rely on them in isolation
Slide 3: Agenda
Agenda • Financial Overview Sean Kam • Treasury and Strategic Update Craig Stephen • Questions 16 February 2012 Half Year Results to 31 December 2011 | Page 3
Slide 4: Financial Overview
Financial Overview Sean Kam 16 February 2012 Half Year Results to 31 December 2011 | Page 4
Slide 5: Explanatory Foreword – IFRS
Explanatory Foreword – IFRS • Heartland was formed through a series of transactions from 5 to 7 January 2011 in relation to the merger of MARAC, CBS Canterbury and Southern Cross Building Society. PGG Wrightson Finance (PWF) was subsequently acquired on 31 August 2011. • IFRS requires the merger to
Slide 6: Financial Half Year Overview
Financial Half Year Overview • Achieved NPAT of $9.8m, compared to forecast NPAT of $9m to $10m • Includes four months’ income and expenses of PWF following acquisition, and fully loaded corporate overheads following separation from PGC • Improved impaired asset expense • $6.2m one‐off deferred tax
Slide 7: Balance Sheet Summary
Balance Sheet Summary • Total assets increased by $262m • Cash holdings reduced as planned 31 Dec 2011 30 Jun 2011 7 Jan 2011 • Net finance receivables (NZ$m) (NZ$m) (NZ$m) increased $368m (mostly Total assets 2,380.5 2,118.0 2,185.3 due to PWF acquisition) Total liabilities 2,020.3 1,821.5 1,891.2
Slide 8: Net Operating Income – Relative Contribution
Net Operating Income – Relative Contribution MARAC 6 months to 6 months to 6 months to 31/12/11 30/06/11 31/12/10 • Retail and Consumer 50 – Retail is low margin business, but provides $45m strategic benefits to the Group through 45 depositor base and branch network – Consumer motor vehicle book con
Slide 9: Net Finance Receivables
Net Finance Receivables Net Finance Receivables • Growth in Business and Rural 2,500 divisions (PWF acquisition $401m) 31 Dec 2011 • Growth in Consumer offset by $2,075m contraction and transfers out of 2,000 30 Jun 2011 Retail $1,707m • Transfers between business units 1,500 979 took place under ne
Slide 10: Business Division
Business Division • Net receivables were $519m at December 2011, up from $476m at June 2011 • Of the $43m increase, over half was net new business growth • Credit growth in the market modest – Rugby World Cup and the election appeared to slow the level of opportunity and enquiry in the market – Howe
Slide 11: Rural Division
Rural Division • PGG Wrightson Finance acquired and successfully integrated • Relationship with PGG Wrightson further enhanced • Slow start, asset growth impacted by seasonal influences, in particular livestock. Anticipate some run‐off of the $30m PWF guaranteed loans over the short term. However, t
Slide 12: Families – Retail and Consumer Division
Families – Retail and Consumer Division Retail and Consumer books managed as one division – customers similar (working middle income) Retail • Strong retail depositor base and branch network are strategic to the Group • Mortgage book continues to be impacted by EQC repayments following the Canterbur
Slide 13: Non‐Core – Property
Non‐Core – Property Property • Non‐core property development lending of MARAC, CBS Canterbury and Southern Cross • Portfolio reduced by $18m at December 2011 compared to June 2011 • Real Estate Credit Limited* (RECL) manages ex‐MARAC portion • Investment properties were acquired as a result of enfor
Slide 14: Operating Expenses
Operating Expenses • Operating expenses increased in the half year compared to the previous six month period as expected – Fully loaded Building Society and listed company costs – PWF cost base taken on following acquisition (four months) – Gradual investment in Rural and Business account managers i
Slide 15: Net Finance Receivables by Division
Net Finance Receivables by Division 31 Dec 2011 30 June 2011 $2,075m $1,707m $76m, 4% $466m, 23% $979m, 47% $476m, 28% $1,002m, 59% $519m, 25% $153m, 9% $111m, 5% Retail & Cons umer Non‐Core Property Bus ines s Rura l Excludes operating lease vehicles and investment properties 16 February 2012 Half
Slide 16: Net Finance Receivables by Geography
Net Finance Receivables by Geography 31 Dec 2011 30 June 2011 $2,075m $1,707m $156m, 9% $418m, 20% $511m, 25% $522m, 31% $528m, 31% $101m, 5% $582m, 28% $104m, 6% $463m, 22% $397m, 23% Auckland Wellington Rest of North Island Canterbury Rest of South Island Excludes operating lease vehicles and inve
Slide 17: Asset Quality Trends
Asset Quality Trends • Arrears and impaired assets remain at elevated levels due to non‐core legacy property development assets • Will reduce as a percentage as core lending grows • Investment property acquired as security position improved through enforcement • Ex‐MARAC book managed under RECL cont
Slide 18: Impairment Charge
Impairment Charge • Half year to 31 December 2011 was $3.8m compared to $7.2m for the six month period ended 30 June 2011 • Benefit of RECL contract continues • Improvement in core Retail and Consumer books A minus B A B 6 months to 6 months to 12 months to 6 months to Dec 2011 Jun 2011 Jun 2011 Dec
Slide 19: Forecast Update
Forecast Update • Heartland previously advised it expected its net profit after tax for the full year to be in the range of $20m to $22m • Economic conditions remain challenging and lending volumes to date are lower than expected • Therefore, this forecast is dependent on the Rural division (which w
Slide 20: Treasury and Strategic Update
Treasury and Strategic Update Craig Stephen 16 February 2012 Half Year Results to 31 December 2011 | Page 20
Slide 21: Diversified Funding
Diversified Funding Retail funding is the core of Heartland Building Society’s funding base Funding Diversity by Source Funding Diversity by Geography 10.87% 16.54% Auckland 7.52% Wellington Rest of North Island Canterbury 40.91% Rest of South Island 24.16% 16 February 2012 Half Year Results to 31 D
Slide 22: Loyal, Stable Deposit Base
Loyal, Stable Deposit Base Strong reinvestment rate and depositor loyalty • Deposit book is stable at $1.67bn as at 31 December 2011 • Strong new fund flows and new customer growth • Reflects underlying support for the Heartland vision Liquidity and Reinvestment New Fund Flows and Total Deposits 100
Slide 23: Liquidity Position
Liquidity Position • Liquidity of $480m at 31 December 2011 Funding and Liquidity – Made up of $120m cash, $150m 2,200 40% committed undrawn bank 2,000 1,800 35% facilities, $210m unutilised 1,600 30% Total Deposits ($m) securitisation facilities 1,400 1,200 25% 20% 1,000 – Represents 29% of total r
Slide 24: Cost of Funds
Cost of Funds • Cost of Funds continues to track lower • Focus on liquidity Total Deposits and Cost of Funds 2,200 8.00% 2,000 7.50% 1,800 1,600 7.00% 1,400 6.50% 1,200 $m 6.00% 1,000 800 5.50% 600 5.00% 400 4.50% 200 4.00% Total Deposits Cost of Funds 16 February 2012 Half Year Results to 31 Decemb
Slide 25: Investment Grade Credit Rating
Investment Grade Credit Rating • Investment grade rating affirmed by S&P on 6 December 2011 • Outlook revised from ‘Negative’ to ‘Stable’ on 6 December 2011 • Improved transparency in the key rating drivers Category Heartland TSB Kiwibank Co‐op Bank SACP BBB‐ (stable) BBB+ (stable) AA‐ (stable) BBB‐
Slide 26: Milestones
Milestones Timing 1. Investment grade credit rating 9 5 January 2011 2. Merger 9 7 January 2011 3. Parent company NZSX listing 9 1 February 2011 4. In specie distribution of HNZ 9 30 May 2011 5. Rebrand (Parent, Business and Rural) 9 1 June 2011 6. HNZ NZX50 inclusion 9 20 June 2011 9 7. Inaugural p
Slide 27: Strategic and Operational Initiatives
Strategic and Operational Initiatives • Drivers of Financial Performance 1. Asset Growth & Mix Economic conditions, credit demand and switching into relatively higher margin products 2. Improving Margin Lending rates (lift ROA) Lower Cost of Funds – average versus marginal 3. Costs Leveraging fixed
Slide 28: Questions
Questions 16 February 2012 Half Year Results to 31 December 2011 | Page 28
Heartland New Zealand — H1 2012 Earnings Presentation on 6ix