Heartland Group Holdings Ltd. · NZX:HGH
Heartland — Heartland New Zealand — FY2013 Earnings Presentation
26 slides from Heartland's earnings presentation, August 2013
Slide 1: Full Year Results to 30 June 2013
Full Year Results to 30 June 2013 Jeff Greenslade Full Year Results to 30 June 2013 | Page 1 Simon Owen
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: Agenda
Agenda • Introduction Jeff Greenslade • Financial overview Simon Owen • Looking forward Jeff Greenslade • Questions Full Year Results to 30 June 2013 | Page 3
Slide 4: Introduction
Introduction Achievements 1. Bank registration 2. Dividend policy set, interim dividend paid 3. Final dividend announced 4. Investment grade credit rating affirmed 5. Implementation of new strategy for non-core property 6. RECL agreement terminated 7. Board strengthened Key Priorities 1. Focus shift
Slide 5: Financial Overview
Financial Overview Simon Owen Full Year Results to 30 June 2013 | Page 5
Slide 6: Financial Year Overview
Financial Year Overview 14% increase in Net Interest Margin • Achieved NPAT of $6.9m 12 months to 12 months to Jun 2012 Jun 2013 • Prior year included one-off tax Net interest income (NZ$m) 83.6 (NZ$m) 95.5 credits of $9.6m Net other income 11.8 11.8 Net operating income * 95.4 107.3 • NPBT $9.4m vs
Slide 7: Net Profit Before Tax
Net Profit Before Tax Adjusted NPBT shows continued improvement • NPBT fall year on year $m Net Profit Before Tax ($m) • Adjustment for one off 40.0 Non-Core Property for like 35.0 33.7 on like 30.0 6.3 • Interest margin big driver 25.0 in growth 20.3 20.0 • Expect continued growth 18.0 15.0 in NPBT
Slide 8: Net Profit Before Tax - Bridge
Net Profit Before Tax - Bridge Breakdown of component parts NPBT $m 2013 v 2012 ($m) 40.0 1.5 33.7 35.0 12.0 0.1 0.0 30.0 25.0 20.3 20.0 15.0 18.0 9.4 10.0 6.3 5.0 0.0 NPBT Net Operating Operating Impaired asset Equity Adjusted NPBT Change in RECL NPBT 30/6/12 Income expenses expense & fair earnings
Slide 9: Operational Efficiency
Operational Efficiency 60 Net Operating Income and Operating Expenses ($m) 55 We remain on track 50 45 $m • Some variability due to 40 35 integration, bank registration 30 and expense timing 25 2H11 1H12 2H12 1H13 2H13 • Track shows right direction Axis Title • Increase in costs due to RECL Operatin
Slide 10: Balance Sheet Summary
Balance Sheet Summary Core receivables growing • Total assets up as more liquid assets held • Net finance receivables fell by 2,500 Net Finance Receivables 120 Net Operating Income $68m $107m 5 • Core divisions net receivables up $2,078m 100 3 $2,010m $95m 2,000 105 49 6 $76m pa $1,707m 479 457 80 3
Slide 11: Net Finance Receivables - Bridge
Net Finance Receivables - Bridge Improving portfolio mix Receivables Movement $000 12 Months ended 30 June 2013 2,150 9 1 2,100 2,078 89 2,050 23 2,010 2,000 56 88 1,950 1,900 1,850 1,800 1,750 Receivables Retail Consumer Business Rural - core Rural - PWF Non Core Receivables 30/6/2012 Guaranteed Pr
Slide 12: Asset Quality Trends
Asset Quality Trends Trend improvement in underlying asset quality • Asset quality Heartland Asset Quality $m improving overall 200 187 180 • Non-Core Property 160 140 139 140 Impaired Assets ($m) remains driver of 120 122 118 102 65 99 elevated 100 67 52 27 80 impairment levels 60 76 43 51 38 • Pro
Slide 13: Funding & Liquidity
Funding & Liquidity Strong liquidity position • Improving liquidity mix • Strong positive cash flows from asset base • Staggered maturity profile – no concentrations Full Year Results to 30 June 2013 | Page 13
Slide 14: Cost of Funds
Cost of Funds Cost of funds continue to track lower Retail Deposits to Loan Ratio Solid retail deposit growth and lower cost of funds 95.0% driven by: 90.0% • Lower wholesale curve 85.0% • Rate alignment with Bank peers 80.0% • Changing funding mix (increased retail, reduced wholesale) 75.0% 70.0% •
Slide 15: Cost of Funds
Cost of Funds Cost of funds continue to track lower Full Year Results to 30 June 2013 | Page 15
Slide 16: Looking Forward
Looking Forward Jeff Greenslade Full Year Results to 30 June 2013 | Page 16
Slide 17: Demonstrating Our Difference
Demonstrating Our Difference Focusing firmly on the future We want to be known as New Zealand’s specialist bank. We are dedicated to the drivers of prosperity and productivity: Household, Farming and Business Sectors. Our size, agility and ability give us the flexibility and speed to identify niche
Slide 18: "HERO" Product Growth
“HERO” Product Growth Our strong bias is towards the productive sector and the development of a range of products that support essential needs of productive New Zealanders. "HERO" Product growth for Period Ended 0-$115m 30 June 2013 70.78% 59.69% 13.80% 10.35% 9.64% Motor Livestock Invoice Business
Slide 19: Operational Performance
Operational Performance The pathway from FY13 to FY14 Key Drivers: NPAT 2013A v 2014F ($m) • Cost of Funds – ongoing trend • Product Mix – improving • Lending Volume – challenging $34m - $37m • Costs – final phase of synergies • Impairments – “normalisation” $7m ` NPAT 30/6/13 Net Operating Income O
Slide 20: Non-Core Property Strategy
Non-Core Property Strategy Realisation strategy on track • The Non-Core Property portfolio has been split into three buckets: - Performing: loans or assets that are performing and will continue to be held - Acceleration: loans and assets to be exited within a 12-18 month timeline - Extend: loans tha
Slide 21: Realisation of Non-Core Property
Realisation of Non-Core Property Good progress being made • Portfolio segregated and running off • Portfolio reduced by $53m at June 2013 compared to June 2012 • Investment properties were acquired as a result of enforcement to improve security position • Market is improving, assets to be realised o
Slide 22: Supporting Local
Supporting Local The pathway from FY13 to FY14 We are a bank that engages locally and supports the communities in which we operate. Through the Heartland Trust, we proudly sponsor a wide variety of groups and organisations that fulfil a valuable role within the areas in which they operate - just lik
Slide 23: Other Matters
Other Matters 1. Changes to Board composition 2. Final dividend Full Year Results to 30 June 2013 | Page 23
Slide 24: Governance
Governance Separation of boards – 27 August 2013 HBL HNZ Bruce Irvine (Chair) Geoff Ricketts (Chair) Geoff Ricketts Graham Kennedy Graham Kennedy Jeff Greenslade (CEO) Jeff Greenslade (CEO) Gary Leech Nicola Greer Chris Mace John Harvey Greg Tomlinson Michael Jonas (Executive Director) Richard Wilks
Slide 25: Dividend
Dividend 2.5c per share final dividend Heartland will determine dividends (both interim and Special 1.5c final) based on its net profit after tax, subject to maintaining a prudent level of capital for its Interim 2.0c needs. Heartland’s capital needs will vary from time to Final 2.5c time, depending
Slide 26: Questions
Questions Full Year Results to 30 June 2013 | Page 26