Underlying Gearing Ratio HY2015 (Period Ending 31/12/2014)
Quote:
Originally Posted by
Snoopy
An update from the previous reporting period, FY2013.
The underlying debt of the company according to the HY2014 statement of financial position is: $32.612m
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:
$2,492.090m - ($1,905.850m +$61.481m + $255.427m) = $269.332m
We are then asked to remove the intangible assets from the equation as well:
$269.332m - $22.891m = $246.441m
Now we have the information needed to calculate the underlying company debt net of all their lending activities:
$32.612m/$246.441m= 13.2% < 90%
Result: PASS TEST
This means the position has improved usefully over the latest half year.
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
SNOOPY
EBIT to Interest Expense ratio HY2015 (Period ended 31/12/2014)
Quote:
Originally Posted by
Snoopy
Results are out for HY2014 so time to update.
Updating for the half year result HY2014. 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) = $100.500m-$32.417m= $68.083m
Interest expense is listed as $48.114m.
So (EBIT)/(Interest Expense)= ($68.083)/($48.114)= 1.42 > 1.20
Result: PASS TEST, a significant improvement from the FY2013 position. Perhaps that drop in interest being paid to debenture holders as a result of becoming a bank is starting to come through?
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)
SNOOPY
Equity Ratio HY2015 (period Ended 31/12/2014)
Quote:
Originally Posted by
Snoopy
Updating this number for the half year HY2014
Equity Ratio = (Total Equity)/(Total Assets)
Using numbers from the Heartland HYR2014
= $382.510m/$2492.090m = 15.3%
This is an improvement on the FY2013 position. It does not include any effect from the just announced reverse mortgage acquisitions. Nevertheless the underlying loan book continues to shrink away, albeit by a miniscule 0.5%.
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%)
SNOOPY
Tier 1 and Tier 2 Lending covenants HY2015 (Period Ended 31/12/2014)
Quote:
Originally Posted by
Snoopy
Once again there is no mention of Tier 1 or Tier 2 in the Heartland HY2014 report.
The 'best case' scenario is that all loans are Tier 1. $2,076.968m of loans are outstanding. 20% of that figure is:
0.2 x $2,076.968m = $415.4m
Heartland has total equity of $382.5m 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.
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.
SNOOPY
Bad Debts HY2015 (Period Ending 31/12/2014)
Quote:
Originally Posted by
Snoopy
New tactics for the HY2014 report. The word 'impairment' isn't even mentioned in the text, which is I suppose another way to make any impaired loans go away.
In the table on page 4 there is at least a nod to 'impaired asset expense' down to $3.3m (HY2014, ended 31st December 2013) from $5.3m in the corresponding prior period (HY2013) and $5.9m in the full year to 30th June 2014. By simple subtraction the bad debt expense for the period 1st January 2013 to 30th June 2013 ( 2HY2013 ) was $22.5m - $5.3m = $17.2m.
'Impaired Asset Expense' is code for having lost all hope. Almost no chance of getting the money back. 'Restructured' and 'past due loans' do not fall under that category. So comparisom with the previous comparable period are - deliberately? - difficult to make.
In the table on page 4 the 'impaired asset expense' has increased to $5.102m (HY2015, ended 31st December 2014) up from from $3.325m in the corresponding prior period (HY2014) and $5.895m in the full year to 30th June 2014 (FY2014). By simple subtraction the bad debt expense for the period 1st January 2014 to 30th June 2014 ( 2HY2014 ) was $5.895m - $5.102m = $0.793m.
In formation of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 12 from IRHY2015
Bad debts are outlined as follows:
At least 90 days past due $30.652m
Individually impaired $25.984m
Restructured assets $4.012m
Allowance for impairment ($19.870)m
PV of Future Losses Adjustment ($6.919)m
Total Stressed Loans (impairments deducted) $33.469m
Gross Financial Receivables $2,749.232m
Total Finance Receivables $2,722.443m
Stressed Loan Percentage (impairment removed)= $33.469 m/ $2,722.443m = 1.59%
SNOOPY