https://www.nzherald.co.nz/business/...ectid=12365628
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"It operating expenses rose 24.5 per cent to $106.8m largely due to increased staff expenses after it hired 23 new people during the June quarter."
(Old Operating Expenses) x 1.245 = $106.8m => 'Old Operating Expenses" = $85.8m
Incremental Increase in OE was: $106.8m - $85.8m = $21m. But those 23 new people were only hired during the fouth quarter, so the equivalent annualised increase was: 4 x$21m = $84m. So spread over the 23 new employees, the average amount spent on each new employee was:
$84m / 23 = $3.65m per person
WOW! I certainly chose the wrong profession. Even Jeff must be looking over his shoulder at the pay rates of those 23 new guys and gals. Even allowing for not all of that money going straight to salary, those new people are on a good wicket. Maybe Jeff just employed the whole 'black cap' squad without telling anybody?
Is this really good journalism from the Herald?
SNOOPY
Hey Snoopy, the only plausible explanation is the the N.Z. Herald shed 23 good quality journalists in the same period...which sadly, is probably not far from the truth...
I wrote a few things about why this company's share price performs so badly but lost them when I didnt fire them through and my token got dropped. (I hope someone remembers to pick it up)
Is it tainted by the NZ Finance Company failure era
Is it the poor cash flow Snoopy despairs over
Or is it all smoke and mirrors ?
Lets face it the graph is poo
Attachment 11948
massive resistance at 1.50
though if it could get through that it would be positive and then act as strong support.
sorry I forgot to remove all my indicators , currently having a bit of a play with them....
I don't think it is a fob off Peat. The structure is that Heartland Group Holdings (HGH) are 100% owners of Heartland Bank (HBL). The NZ Govt has directed that banks registered in NZ are not allowed to pay dividends until further notice. So HBL cannot pay a dividend to HGH.
HGH can still pay a dividend by either:
1/ Paying the dividends from the profit of their Australian operations OR
2/ Borrowing to pay a dividend.
Given the non cashflow positive nature of the fast growing REL business, and the fact that they just two days ago HGH announced new beefed up loan facilities, I would guess they plan to do the latter. HBL looks nicely profitable for now. But they aren't allowed to pay out a dividend to HGH by law. And that means there is no way for Heartland shareholders to get cashflow access to HBL's profitability. I see no sop here.
SNOOPY
Your thoughts may still be there Peat. Did you know that Sharetrader periodically automatically saves posts as you are writing them? So if you get logged out, go back to the post you were replying to, hit 'Reply' and an option on the bottom corner of the page should come up. 'Restore Autosaved Content'. Has worked for me in the past.
SNOOPY
Above is my 'base case' Scenario 2b.
I have come to the conclusion during my Scenario Analysis' modelling that it is going to be the reverse mortgage business that drives the profitability of Heartland over the next couple of years. But it does fly under the radar a bit. We shareholders really don't know how it is going until the full and half year announcements.
As announced yesterday, at EOFY2020, the total NZ and Australian Reverse Mortgage Balance was: $560m +$958m = $1,518m. So we are almost at my modelled 'base case' reverse mortgage balance for EOFY2021 a year early.
Below is my 'optimistic' scenario 3
The above scenario is modelling a reverse mortgage portfolio growth rate of: $1,735m/$1,518m = 14.3% over FY2021. Even allowing for slowing portfolio percentage growth as the REL portfolio grows in absolute size, that looks believable when you consider the REL portfolio growth rate over FY2020
$1,518m/ $1,319m = 15.1%
and over FY2019
$1,319m/$1,115m = 18.3%
Switching the new 'base case' to the old 'optimistic' scenario for Reverse Mortgages equates to a boost of NPAT profit of $21m for FY2021, and that is significant. At the same time the old 'base case' becomes the new pessimistic scenario.
I will now need a new 'optimistic' scenario.
A steady Reverse Mortgage market means the receivable book will grow by about 6.7% per year. I am going to add to this an extra 10% increment (for a total of 16.7%) to model continuing growth in the reverse mortgage portfolio going forwards, This is a similar growth rate to what actually occurred over FY2019.
Reverse Mortgage Balance at EOFY2019: $1,318.8m
Reverse Mortgage Balance at EOFY2021: $1,318.8m x 1.167 x 1.167 = $1,796.0m
Incremental Receivable Gain EOFY2019 to EOFY2021: $1,796.0m - $1,318.8m = $477.2m
Incremental Profit Gain from EOFY2019 to EOFY2021 (using average ROE multiple from AGM 2019 Presentation p16): 0.13 x $477.2m = $62.0m
Reverse Mortgage Balance at EOFY2022: $1,318.8m x 1.167 x 1.167 x 1.167 = $2,096.0m
Incremental Receivable Gain EOFY2019 to EOFY2022: $2,096.0m - $1,318.8m = $777.2m
Incremental Profit Gain from EOFY2019 to EOFY2022 (using average ROE multiple from AGM 2019 Presentation p16): 0.13 x $777.2m = $101.0m
SNOOPY
yeh Snoops, I hear what you're saying but the bank could make a loan to its holding company at no interest etc....
I am not a highly paid merchant banker but would've thought this regulatory cash flow issue from bank subsidiary to holding co could easily be circumvented.
Its funny tho I dont actually want dividends that much, but I dont like to be misled either. Despite being a holder I do have a grudge against this company which might be ameliorated if the share price got back up to $2. haha
And thanks for the tech advice on retrieving lost posts, I will try it next time because there WILL be a next time.
Some nice news...
https://www.scoop.co.nz/stories/BU20...-customers.htm
Indeed and compliments the Glenfiddich 18 year old that will certainly do it..Its been a good week.
The average growth rate in the 'motor receivables' portfolio between FY2013 and FY2018 was 11% (November 2018 investor day presentation p45). By end of FY2018 Heartland accounted for 7.3% of dealer to public sales (p47). Management sees a real growth opportunity here. So I have pumped up my pre-Covid-19 base figure by 11%:
$1,124m x 1.11 = $1,248m
The Motor vehicle finance book totalled $1,089m at EOFY2019, and rose to $1,124m at EOHY2020 before topping out at $1.126m (+3.4% for the year ) at EOFY2020. I was predicting no Holden sales for FY2021, yet there are still some Holden badged American products (and rebadged Asian built Isuzu utes sold as Colorado) hanging around the dealerships. Holden have told us sales will cease by calendar year 2021. So the new vehicle downturn is certainly coming for Heartland. The other mainstream new vehicle brand that Heartland fund vehicle purchases for is Kia. Year to date to the end of August 2020 they rank second in sales only to Toyota. So Kia is definitely a brand on the rise, with their top sellers being the Sportage (medium size) and Seltos (small) SUVs (source www.mia.org.nz).Quote:
A 10% reduction in sales equates to $75m. Again using a reference ROE of 15% from the FY2019 AGM presentation.
FY2021/2022: -$75m x 0.15 = -$11.3m
Because I am modelling finance deals with a three year life, this annual loss compounds.
I am reworking my estimated Holden:Kia:JLR sales split from FY2019 of 45:45:10, to 20:50:5 for FY2021. That represents a forecast sales decline of 25%. A 25% decline from the EOHY2020 sales figures, assuming new vehicles represented $500m of a total of $1,248m of all modelled vehicle receivables balances, represents a sales decline in dollar terms of:
$500m x 0.25 = $125m
Motor vehicle finance has traditionally had some of the best margins at Heartland. Heartland's AGM FY2019 presentation had an ROE north of 15%. In recessionary times I am going to stick to the 15% figure. This means the earnings that Heartland will miss out on due to plunging new car finance deals will be around:
0.15 x $125m = $19m
Of course the annual hit won't be this much, as finance typically has a three year cycle. Existing finance deals signed over FY2019 and FY2020 will continue on previously arranged terms. So the FY2021 hit will be about 1/3 of the life of contract total, about $6.3m.
I am guessing the FY2022 impact will be more or less the same at $6.3m, but unfortunately the financing effect from FY2021 is cumulative into FY2022 for a total effect of $12.6m.
Used vehicle sales for the whole NZ second hand market are down 6% for the calendar year.
https://autotalk.co.nz/news/the-boun...trong-recovery
However, I am still expecting used car sales to weaken further over FY2021 so I am sticking to my previous modelling framework.
SNOOPY
Heartland review aimed at boosting value
Jenny Ruth
Fri, 18 Sep 2020
Heartland Group Holdings chief executive Jeff Greenslade wouldn't be drawn on whether management's review of the company is likely to lead to a break-up of the group.
"It's incumbent upon businesses every now and again when you see where our share price has been to ask is there something that needs to be done to get a better recognition of value," Greenslade told BusinessDesk.
He acknowledged the announcement of such a review is often an euphemism for selling assets.
"I understand what you're saying. We need to decide to what extent it's a problem and then look at the solutions."
It may simply be a messaging issue, he said. "It's something we've got to look at … a range of options and that could be it." Or it may require a restructuring, he said.
In Heartland's annual results announcement, the company said its current share price "may not appropriately reflect the underlying nature of its business," so the board has asked management how to optimise value.
The shares rose as much as 9 cents, or 7.6 percent, to $1.28 after the announcement before ending the day at $1.26.
It's true Heartland's share price has suffered through the coronavirus crisis, troughing at 89 cents in March and still down 27 percent from a year ago.
Better than others
But that's still better than three of the big four Australian-owned banks have fared – the worst affected is Westpac, down nearly 44 percent from a year ago, while Commonwealth Bank of Australia, which owns ASB Bank, is the only one to have performed better but is still down 20 percent from a year ago.
Greenslade said that was a fair point "but within our business make-up, we have a lot of activities that they don't have."
Heartland specialises in niche areas where it faces little to no competition, such as reverse mortgages, motor finance and increasingly in digital lending products.
Heartland has also been backing away from relationship-based banking, where a business or farmer has a direct relationship with a bank officer looking after the gamut of their banking needs, because the major banks have been encroaching on that area and driving down margins.
Heartland has much fatter margins than the mainstream banks and they have held steady at 4.33 percent at a time when the four major Australian-owned banks and Kiwibank have reported steep margin declines.
Kiwibank's net interest margin shrank 19 basis points to 1.94 percent in the year ended June, while ASB Bank's contracted 12 points to 2.11 percent. The other three majors have Sept. 30 balance dates.
Greenslade argued Heartland's specialist positioning should "justify different and potentially better valuations."
No scandals
Heartland hasn't suffered the reputational and regulatory issues that have been dogging the Australian banks for several years now in the wake of Australia's royal commission into financial services.
Those scandals included money laundering, mis-selling products, charging fees for services that weren't delivered and, in Westpac's case, facilitating child exploitation in the Philippines.
Heartland's results were certainly strong and it is forecasting a profit increase of as much as 18 percent for the current year.
Net profit fell 2.2 percent to $72 million for the year ended June because of a $9.6 million charge against profit to cover potential covid-19-related credit losses.
And the company is forecasting net profit for its 2021 financial year will rise to between $83 million and $85 million.
The results also highlighted the very juicy yield available from Heartland's shares - at Wednesday's closing price of $1.19, the dividend yield was 8.2 percent.
The best return Heartland is offering on its own term deposits is 1.85 percent for three years and, by way of comparison, ANZ Bank is offering 1.3 percent for three years.
And the high yield comes at a time when the Reserve Bank has forbidden NZ banks from paying dividends. Heartland is able to get around this because its Australian reverse mortgage business sits outside the NZ banking group where all the rest of its operations reside.
That allowed Heartland to pay a fully imputed 2.5 cents per share final dividend, taking the annual payout to 7 cents, although the RBNZ's restrictions meant that was down from 10 cents the previous year.
the company said its current share price "may not appropriately reflect the underlying nature of its business," so the board has asked management how to optimise value.
Love it!
Hgh down to 1.30 on Feb 2019..fear of capital raising but nothing happened. It crashed to 90c in March..because covid. People were also scared this time will be a capital raising....nothing again!
Current result showed HGH is one of the best Nz listed companies...thier performance is undoubtedly. Thanks to excellent management.
Master Beagle....your favorite broker still put HGH a fair value of $.151
HGH travelling a lot better than I expected....quite possibly the understatement of the week from me lol
"Harmoney & Other Consumer Lending" had an OK year over FY2020 (p19 FY2020 presentation, PR2020) with the loan portfolio up 2% to $211m compared to FY2019. I am unclear as to exactly what has happened here. From the information in the link below:
https://www.interest.co.nz/news/1067...gging-consumer
Harmoney are now a much smaller business. (Loan Book down from $367m to just $129m). Heartland own just 11.85% of Harmoney. (source NZ Companies Register below)
https://app.companiesoffice.govt.nz/...2BBiKNrJq6AAAA
But 'ownership' and 'providing capital with which to make loans' are two different things, And I think Heartland do both of those things for Harmoney.
In direct contradiction to the 'interest.co.nz' Harmoney results reference above, p19 of PR2020 shows "Harmoney receivables increasing to $199m." Who can explain that discrepency? Whatever the explanation, it certainly sounds like the Harmoney loan book is being incorporated into the Heartland loan book. But the reason for doing that is another mystery in itself (question posed below). Despite the slightly bullish tone on p19 of the AR2020 presentation, I don't see sufficient information to override my (previously stated in the quoted bubble) bearish outlook for this sector.
The FY2020 presentation for Heartland, from pages 14 to 21 inclusive, gives the full whereabouts of Heartland's loan book:
1/ Australia,
2/ NZ Reverse Mortgages,
3/ Open for Business (O4B),
4/ Business Intermediated,
5/ Motor Finance,
6/ Harmoney & Other Personal Lending,
7/ Livestock Funding, and
8/ Relationship.
All of these categories come to a grand total of $4,610m in receivables. For comparison, if we go to the FY2020 accounts and add up the receivables on the balance sheet, I get $4,584m. There is a small difference of $26m between these two comparable totals, but I judge this not to be material (even though I can't explain it). So it does definitely appear as if Harmoney loans are listed in the 'Finance Receivables' in the Heartland balance sheet. However, a word search for Harmoney in the FY2020 accounts comes up blank. So I am not clear where Harmoney fits into the Heartland 'Finance Receivables'. One possibility: If I look in the Segmented Analysis of the AR2020 p98, we see the 'Other Personal' category having $214.759m in assets. This is similar to the $211m in assets figure listed on p19 of PR2020 for 'Harmoney and Other Consumer Lending' (again I can't explain the small difference).
I thought I might find Harmoney under note 11 'Investments' (AR2020 p106) under the equity sub header. But if Harmoney was an 'investment' based on the just 11.85% shareholding that Heartland held, then why have the Harmoney receivables -apparently - been consolidated inside the Heartland receivables? I don't follow how Harmoney has been treated in the Heartland accounts. So if anyone can unscramble it for me I will be all ears.
Heartland has created an 'overlay', in effect an extra bad debt buffer, to allow for as yet unspecified expected negative downstream effects of Covid-19. The bulk of Heartland’s $9.6m pre-tax overlay has been apportioned to the Consumer and SME portfolios. We can take from this that if problems do emerge over FY2021, then this 'Consumer' section of the loan book is more than likely where a hit will be felt.
Despite the slightly bullish tone on p19 of the AR2020 presentation (PR2020), I don't see sufficient information to override my (previously stated in the quoted bubble) bearish outlook for this sector.
SNOOPY