New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Heartland Group Holdings / Equity Bottom-Up

<h2>Heartland Group Holdings (HGH) 1H22 Result - First Take</h2>
HGH’s 1H22 result was below our expectations with underlying 1H22 NPAT of NZ$47.1m vs our forecast NZ$49.5m
The business has stated that the introduction of the new CCCFA responsible lending regulations has slightly impacted lending volumes over the period and this may more materially impact the second half of the year.
FY22 NPAT guidance was unchanged at NZ$93m to NZ$96m (Forsyth Barr currently NZ$94m, consensus NZ$95m)
Key areas of interest
<ul>
<li>Underlying NPAT of NZ$47.1m was below our forecast NZ$49.5m driven by a miss at the net interest income level of NZ$124m vs our forecast NZ$133m</li>
<li>This was despite reported total receivables of NZ$5.4bn ahead of our NZ$5.2bn suggesting downward pressure on yield.</li>
<li>The miss at net interest income was partially offset by an improved cost to income ratio of 43.8% vs our forecast 44.7%</li>
<li>HGH’s FY21 impairment expense ratio of 0.33% was in line with our forecast of 0.34%</li>
<li>The company’s interim dividend of 5.5cps was ahead of our forecast 4.5cps</li>
<li>Divisionally, HGH’s motor division saw receivables of NZ$1,350m below our NZ$1,371m and personal loan receivables of NZ$87m, -35% below our forecast NZ$132m</li>
<li>This was offset by greater receivables in the Australian reverse mortgage division of +1.3% and +4.5% vs our forecasts in New Zealand reverse mortgages</li>
<li>HGH’s COVID-related economic overlay of NZ9.6m remains unutilised</li>
<li>Outlook: HGH has reiterated its FY22 NPAT guidance to be NZ$93m-96m against our current estimate of NZ$94m (consensus NZ$95m).</li>
</ul>
Our view
We see the introduction and impacts of the new CCCFA regulations as one of a number of likely headwinds for the business during FY22, with downside risk to current consensus numbers. With rising rates, the risker consumers in HGH’s loan book may also experience a rising degree of financial distress which may put additional pressure on HGH’s impairment expense ratio going forward. Key points to look for in the call (details below) 1) impact of rising rates on cost of funding and impairments, 2) broader implications across the portfolio from the CCCFA lending regulation, and 3) rising wage inflation across the industry.
Results table
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/258/630/original/image_63810405881645492363803.png?1645492364" class="editor-image img-responsive" data-smartkarma-image-id="258630"></figure>
Analyst call 10.30&nbsp;NZT: by registration:&nbsp;<a href="mailto:shareholders@heartland.co.nz" target="_blank" rel="noopener">shareholders@heartland.co.nz</a>
Live webcast:&nbsp;<a href="https://event.webcasts.com/viewer/event.jsp?ei=1530561&amp;tp_key=49a9ebc41a" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://event.webcasts.com/viewer/event.jsp?ei%3D1530561%26tp_key%3D49a9ebc41a&amp;source=gmail&amp;ust=1645577274296000&amp;usg=AOvVaw2a_sF0frE13GePoHFkl97T" rel="noopener">Heartland FY22 Half Year Results - 1530561 (webcasts.com)</a>
Dial in numbers below.
<table class="table table-striped">
<thead>
<tr>
<td style="width: 270.4px; height: 30px;">
Location
</td>
<td style="width: 228.9px; height: 30px;">
Phone type
</td>
<td style="width: 226.7px; height: 30px;">
Phone number
</td>
</tr>
</thead>
<tbody>
<tr>
<td style="width: 270.4px; height: 29px;">
Australia
</td>
<td style="width: 228.9px; height: 29px;">
Tollfree/Freephone
</td>
<td style="width: 226.7px; height: 29px;">
1 800 590 693
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 29px;">
Australia, Brisbane
</td>
<td style="width: 228.9px; height: 29px;">
Local
</td>
<td style="width: 226.7px; height: 29px;">
+61 (0)7 3105 0937
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 29px;">
Australia, Melbourne
</td>
<td style="width: 228.9px; height: 29px;">
Local
</td>
<td style="width: 226.7px; height: 29px;">
+61 (0)3 8317 0929
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 29px;">
Australia, Sydney
</td>
<td style="width: 228.9px; height: 29px;">
Local
</td>
<td style="width: 226.7px; height: 29px;">
+61 (0)2 7250 5438
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 29px;">
Hong Kong, Hong Kong
</td>
<td style="width: 228.9px; height: 29px;">
Local
</td>
<td style="width: 226.7px; height: 29px;">
+852 3008 1533
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 29px;">
New Zealand
</td>
<td style="width: 228.9px; height: 29px;">
Tollfree/Freephone
</td>
<td style="width: 226.7px; height: 29px;">
0800 423 972
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 29px;">
New Zealand, Auckland
</td>
<td style="width: 228.9px; height: 29px;">
Local
</td>
<td style="width: 226.7px; height: 29px;">
+64 (0)9 9133 624
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 29px;">
Singapore, Singapore
</td>
<td style="width: 228.9px; height: 29px;">
Local
</td>
<td style="width: 226.7px; height: 29px;">
+65 6703 6913
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 29px;">
United Kingdom
</td>
<td style="width: 228.9px; height: 29px;">
Tollfree/Freephone
</td>
<td style="width: 226.7px; height: 29px;">
0800 358 6374
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 29px;">
United Kingdom, Local
</td>
<td style="width: 228.9px; height: 29px;">
Local
</td>
<td style="width: 226.7px; height: 29px;">
+44 (0)330 336 9104
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 29px;">
United States, Los Angeles
</td>
<td style="width: 228.9px; height: 29px;">
Local
</td>
<td style="width: 226.7px; height: 29px;">
+1 323-794-2558
</td>
</tr>
<tr>
<td style="width: 270.4px; height: 30px;">
United States/Canada
</td>
<td style="width: 228.9px; height: 30px;">
Tollfree/Freephone
</td>
<td style="width: 226.7px; height: 30px;">
800-289-0459
</td>
</tr>
</tbody>
</table>

Heartland Group Holdings (HGH) 1H22 Result - First Take
HGH’s 1H22 result was below our expectations with underlying 1H22 NPAT of NZ$47.1m vs our forecast NZ$49.5m
The business has stated that the introduction of the new CCCFA responsible lending regulations has slightly impacted lending volumes over the period and this may more materially impact the second half of the year.
FY22 NPAT guidance was unchanged at NZ$93m to NZ$96m (Forsyth Barr currently NZ$94m, consensus NZ$95m)
Key areas of interest

Underlying NPAT of NZ$47.1m was below our forecast NZ$49.5m driven by a miss at the net interest income level of NZ$124m vs our forecast NZ$133m
This was despite reported total receivables of NZ$5.4bn ahead of our NZ$5.2bn suggesting downward pressure on yield.
The miss at net interest income was partially offset by an improved cost to income ratio of 43.8% vs our forecast 44.7%
HGH’s FY21 impairment expense ratio of 0.33% was in line with our forecast of 0.34%
The company’s interim dividend of 5.5cps was ahead of our forecast 4.5cps
Divisionally, HGH’s motor division saw receivables of NZ$1,350m below our NZ$1,371m and personal loan receivables of NZ$87m, -35% below our forecast NZ$132m
This was offset by greater receivables in the Australian reverse mortgage division of +1.3% and +4.5% vs our forecasts in New Zealand reverse mortgages
HGH’s COVID-related economic overlay of NZ9.6m remains unutilised
Outlook: HGH has reiterated its FY22 NPAT guidance to be NZ$93m-96m against our current estimate of NZ$94m (consensus NZ$95m).

Our view
We see the introduction and impacts of the new CCCFA regulations as one of a number of likely headwinds for the business during FY22, with downside risk to current consensus numbers. With rising rates, the risker consumers in HGH’s loan book may also experience a rising degree of financial distress which may put additional pressure on HGH’s impairment expense ratio going forward. Key points to look for in the call (details below) 1) impact of rising rates on cost of funding and impairments, 2) broader implications across the portfolio from the CCCFA lending regulation, and 3) rising wage inflation across the industry.
Results table

Analyst call 10.30&nbsp;NZT: by registration:&nbsp;shareholders@heartland.co.nz
Live webcast:&nbsp;Heartland FY22 Half Year Results - 1530561 (webcasts.com)
Dial in numbers below.




Location


Phone type


Phone number






Australia


Tollfree/Freephone


1 800 590 693




Australia, Brisbane


Local


+61 (0)7 3105 0937




Australia, Melbourne


Local


+61 (0)3 8317 0929




Australia, Sydney


Local


+61 (0)2 7250 5438




Hong Kong, Hong Kong


Local


+852 3008 1533




New Zealand


Tollfree/Freephone


0800 423 972




New Zealand, Auckland


Local


+64 (0)9 9133 624




Singapore, Singapore


Local


+65 6703 6913




United Kingdom


Tollfree/Freephone


0800 358 6374




United Kingdom, Local


Local


+44 (0)330 336 9104




United States, Los Angeles


Local


+1 323-794-2558




United States/Canada


Tollfree/Freephone


800-289-0459





Heartland Group Holdings (HGH): 1H22 Result - First Take