Underlying Gearing Ratio HY2016 (Period Ending 31/12/2015)
Quote:
Originally Posted by
Snoopy
An update from the previous reporting period, FY2014.
The underlying debt of the company according to the HY2015 statement of financial position is:
$38.666m + $4.109m = $42.775m
To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the problem 'Investment Properties' and the unspecified 'Investments' from that total:
$3,162.169m - ($2,722.443m +$25.831m + $209.544m) = $204.351m
We are then asked to remove the intangible assets from the equation as well:
$204.351m - $49.933m = $154.418m
Now we have the information needed to calculate the underlying company debt net of all their lending activities:
$42.775m/$154.418m= 27.7% < 90%
This compares unfavourably with the comparatuve half year period figure of 13.2%, but favourably with the 40.5% figure from FY2014 date (30th June 2014)
Result: PASS TEST
An update from last years equivalent reporting period, HY2015.
The underlying debt of the company according to the HY2016 statement of financial position is:
$43.377m + $1.095m = $44.472m
To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the problem 'Investment Properties' and the unspecified 'Investments' from that total:
$3,344.498m - ($2,928.621m +$12.439m + $269.769m) = $133.669m
We are then asked to remove the intangible assets from the equation as well:
$133.669m - $54.314m = $79.355m
Now we have the information needed to calculate the underlying company debt net of all their lending activities:
$44.472m/$79.355m= 56.0% < 90%
This compares unfavourably with the comparatuve half year period figure of 27.7%, but favourably with the more recent 58.4% figure from FY2015 date (30th June 2015)
Result: PASS TEST
EBIT to Interest Expense ratio HY2016 (Period ended 31/12/2015)
Quote:
Originally Posted by
Snoopy
Updating for the half year result HY2015. The EBIT figure is not in the financial statements. So I will use 'interest income' as an indicator for EBIT, once I have taken out the selling and administration costs
EBIT (high estimate) = $128.252m-$33.523m= $94.729m
Interest expense is listed as $62.577m.
So (EBIT)/(Interest Expense)= ($94.729m)/($62.577m)= 1.51 > 1.20
Result: PASS TEST, an improvement from the HY2014 (1.42) position. And also an improvement on the position 6 months ago FY2014 (1.44)
Updating for the half year result HY2016. The EBIT figure is not in the financial statements. So I will use 'interest income' as an indicator for EBIT, once I have taken out the selling and administration costs
EBIT (high estimate) = $134.340m-$37.039m= $97.301m
Interest expense is listed as $62.868m.
So (EBIT)/(Interest Expense)= ($97.301m)/($62.869m)= 1.55 > 1.20
Result: PASS TEST, an improvement from the HY2015 (1.51) position. And also an improvement on the full year position as of 6 months ago FY2015 (1.52)
SNOOPY
Equity Ratio HY2016 (period Ended 31/12/2015)
Quote:
Originally Posted by
Snoopy
Updating this number for the half year HY2015
Equity Ratio = (Total Equity)/(Total Assets)
Using numbers from the Heartland HYR2015
= $462.310m/$3162.169m = 14.6%
This is a decrease on the HY2014 position (15.3%). It is also a decrease on the FY2014 position of 6 months ago (15.0%)
Updating this number for the half year HY2016
Equity Ratio = (Total Equity)/(Total Assets)
Using numbers from the Heartland HYR2016
= $485.688m/$3,344.498m = 14.5%
This is a decrease on the HY2015 position (14.6%). But it is also an increase on the FY2015 position of 6 months ago (14.3%). An indication perhaps of a slightly more conservative funding bias, considering company equity supporting company loans?
SNOOPY
Tier 1 and Tier 2 Lending covenants HY2016 (Period Ended 31/12/2015)
Quote:
Originally Posted by
Snoopy
Once again there is no mention of Tier 1 or Tier 2 in the Heartland HY2015 report.
The 'best case' scenario is that all capital is Tier 1, which is almost certainly correct. $2,657.084m of loans are outstanding. 20% of that figure is:
0.2 x $2,657.084m = $531.4m
Heartland has total equity of $462.310m which is still below the 20% of loan target no matter what the tier classification of the loans.
Result: FAIL TEST
PS I do note that while other posters have protested at my 20% of equity to back up the loan measuring stick in the past, it is not too far away from the 17% which by implication is judged acceptable by management under the watchful eye of Reserve Bank chairman Graeme Wheeler. The reserve bank further qualifies their views that a company of Heartlands credit rating still has a 1 in 30 chance of going broke in any year. I prefer to think in business cycles and 30 years will contain around five of those. So you could restate the Reserve Bank's view as saying that HNZ has a one in five chance of going broke at the bottom of the business cycle. For me that investment risk is too high. So I am sticking to my 20% equity requirement, even if the Reserve Bank will settle for less.
Tier 1 or Tier 2 capital adequacy is noted under section 19A (Capital Ratios) in the Heartland HY2016 report.
$2,928.621m of loans are outstanding. 20% of that figure is:
0.2 x $2,928.621m = $585.7m
Heartland has total equity of $485.688m. But from note 19A, only $427.084m is Tier 1 capital. The difference is because intangible assets, deferred tax assets, hedging reserve effects and defined benefit superannuation fund assets on the books must be adjusted for.
On top of the Tier 1 assets, there is a subordinated bond of $1.455m
Nevertheless, however the total tier capital is added together, it is still below the "20% of loan" target no matter what the tier classification of capital buffering any potential problems with the loans.
Result: FAIL TEST
PS I do note that while other posters have protested at my 20% of equity to back up the loan measuring stick in the past, it is not too far away from the 17% which by implication is judged acceptable by management under the watchful eye of Reserve Bank chairman Graeme Wheeler.
Using current period Tier 1 capital and loan book figures:
$427.084m/$2,928.621m = 14.6%
So it seems Heartland's position has deteriorated significantly, compared to when it qualified as a bank.
The reserve bank further qualifies their views that a company of Heartlands credit rating still has a 1 in 30 chance of going broke in any year. I prefer to think in business cycles and 30 years will contain around five of those. So you could restate the Reserve Bank's view as saying that HNZ has a one in five chance of going broke at the bottom of the business cycle. For me that investment risk is too high. So I am sticking to my 20% equity requirement, even if the Reserve Bank will settle for less.
SNOOPY
Not long off a few planes
Quote:
Originally Posted by
Snoopy
...PS I do note that while other posters have protested at my 20% of equity to back up the loan measuring stick in the past, it is not too far away from the 17% which by implication is judged acceptable by management under the watchful eye of Reserve Bank chairman Graeme Wheeler. ...
Indulge me and explain the above please, I believe that I have no knowledge of this; though I do have jet-lag.
Best Wishes
Paper Tiger
Bad Debts HY2016 (Period Ending 31/12/2015)
Quote:
Originally Posted by
Snoopy
In the table on page 4 the 'impaired asset expense' has increased to $5.1m (HY2015, ended 31st December 2014) up from from $3.3m in the corresponding prior period (HY2014) and $5.9m in the full year to 30th June 2014. By simple subtraction the bad debt expense for the period 1st January 2014 to 30th June 2014 ( 2HY2014 ) was $5.9m - $5.1m = $0.8m.
Under Note 4 of HY2016 the 'impaired asset expense' has increased to $5.610m (HY2016, ended 31st December 2015) up from from $5.102m in the corresponding prior period (HY2015). Bad debts for the full year to 30th June 2015 (FY2015) added to $12.105m. By simple subtraction the bad debt expense for the period 1st January 2015 to 30th June 2015 ( 2HY2015 ) was $12.105m - $5.102m = $7.003m.
This means that what we are seeing is 20% fall in bad debts declared over the six months to December 2015, compared to the immediately preceeding 6 month period.
SNOOPY