Oh no I didn't.
Go read it again.
Best Wishes
Paper Tiger
Hint: 'two broad portfolios'
Printable View
If you look at page 21 of the shareholder presentation, Heartland were planning to reduce their $107m non-core profit portfolio by 7% by the time July 2014 rolls around. So if come the end of August 10% has already been removed from the books this is good progress. However, there really isn't enough information in this announcement to know if Heartland's non-core property sales are going to plan or not.
1/ Did they on sell the properties at book value or at a discount, or a premium?
2/ Were the properties sold Category 6, 7, 8 or 9? Why is that important? Because there would be pressure from management to get the non core property sell down done, and show progress. Human nature would suggest that to fulfill this the low hanging fruit would. be on sold first. So just because they are ahead of their sell down target now, does not mean they will continue to track in front of their targets.
But let's say the value of outstanding properties on the books is now $90m.
$90m/388m = 23cps
That is still quite a large potential write down still hanging over the shares which at 30th June had an NTA 0f 85c
SNOOPY
FY2012 Report Total Loans by Geographic Region (Note 32iii)
Auckland: $548.451m
Wellington: $101.791m
Rest of NI: $480.287m
Canterbury: $583.848m
Rest of SI: $363.899m
FY2013 Result Filing, FY2012 Comparative figures (Note 36b)
Auckland: $653.517m
Wellington: $120.469m
Rest of NI: $482.342m
Canterbury: $584.086m
Rest of SI: $365.112m
Difference
Auckland: $105.066m
Wellington: $18.678m
Rest of NI: $2.055m
Canterbury: $0.238m
Rest of SI: $1.213m
The difference I would suggest are the loans bought back after the Real Estate Credit Limited (RECL) debt buyback deal. (from Note 36e: For the year ended 30th June 2013, the benefit of the RECL agreement was included in and the analysis of risk gradings and the classification of individually impaired assets")
SNOOPY
Now the second half of the year on year 'reporting' comparison. The 'individually impaired assets'.
From table 32aii on the FY2012 annual report: The credit impairment provision for individually impaired assets
----
Opening $68.537m
Additions $40.376m
Deletions ($53.939)m
Assumed on acquisition $1.871m
Closing gross individually impaired assets $56.825m.
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Now we have ostensibly the same information as reprised in the FY2013 report for FY2012 (table 37c)
----
Opening $68.537m
Additions $40.376m
Deletions ($39.323)m
Assumed on acquisition $1.871m
Write Offs ($14.636)m
Closing gross individually impaired assets $56.825m.
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As you can see the tables are the same with the exception that with the benefit of one years hindsight $14.636m of what were deleted assets have actually been written off.
SNOOPY
Attachment 4826
Fig 1. From the Heartland New Zealand 2012 Full Year Report
Best Wishes
Paper Tiger
As this thread seems to be highlighting finding information in company accounts, even those who are not trying to hide something, is a difficult task.
It requires that you read the entire accounts and hunt around for what you are looking for.
That the accountants change the format from year to year does not help.
This is primarily because because accounting is easy, anybody who can do basic maths in their head can do it. (You need to be able to this stuff mentally so that when your calculator tells you that 2 X 3 = 5, you assume that you pressed a wrong button instead of believing it).
So in order to justify working for actual money they feel the need to obfuscate the whole business.
But we can beat them and understand if we put the effort in.
Best Wishes
Paper Tiger
Disc: I know several accountants and they are all nice people who hopefully will never read this post.
There is no accounting for the stupidty of some people, that is accounted for by the fact that all of us are different , but by all accounts you would think we would learn from our mistakes. There I hope that clears that all up , it certainly helped me.
The hunt to pin down those more doubtful loans on the books continues. In the FY2013 accounts the retrospective comparative figure for concentration of credit risk by industry sector adds to $2.197billion (note 36c).
Now if we go back to the FY2012 report this same figure is listed in 32bii, but here it only adds to $2.078b. Is the difference due to those retrospectively reabsorbed RECL loans?
From the YE2013 results the industry breakdown of receivables is as follows: (note 36c again)
------
Agriculture $530.440m
Forestry & Fishing $35.698m
Mining $14.325m
Manufacturing $56.304m
Finance & Insurance $134.630m
Wholesale Trade $38.669m
Retail Trade $144.608m
Households $678.508m
Property & Business Services $297.944m
Transport & Storage $57.709m
Other Services $189.208m
(Total $2,078.276m)
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Now what will happen when we try to extract ostensibly the same figures from the FY2012 report? The full year report for FY2012 as listed under note 32c has different (more) categories. Nevertheless I will try to align those numbers with the FY2013 headings as listed above
------
Agriculture $382.578m
Forestry & Fishing $1.615m + $0.551m = $2.166m
Mining $16.022m
Manufacturing $71.432m +$4.479m = $75.911m
Finance & Insurance $27.013m +$3.157m= $30.170m
Wholesale Trade $42.257m
Retail Trade $117.100m
Households $838.492m
Property & Business Services $195.143m +$154.435m+ $10.016m= $359.594m
Transport & Storage $88.210m
Other Services $44.368m + $28.627m +$23.661m +$12.847m + $16.273m= $125.776m
(Total $2,078.276m)
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I am sure I have put some of those reclassified loans into the wrong box, although when classifying loans 'wrong' may be a a matter of opinion. As PT says, it is very frustrating when reporting standards are changed for seemingly no reason from year to year. I however, am always suspicious when I see this, as I wonder what he company hoped to hide by doing so!
SNOOPY
So. So. True PT..
Hence my long time drive for an Expenditure Tax.. Not Income Tax..
Income Tax has been added to and subtracted from for years and years..
At last I am able to say... Thinking in the controlling places is changing.. Yes !!.. headway is being made..
Everybody spends.. Even a beggar !!..
Snoopy and the Temple of the Doom?
You have $50M5 of impairments of which $41M5 is Corporate Property [FY2013 37(e)] you quest is complete.
The difference of approx $120m does fit well with the size of the RECL stuff at EOY, but this is a pure co-incidence!
36(a) from this years accounts gives the game away:
Attachment 4827
Fig 2 From the Heartland New Zealand 2013 Full Year Financial Statements.
So whereas in the 2012 Accounts, credit risk exposure covers only Finance receivables this has been extended to all financial assets including cash in banks, bonds etc.
The only question is why were these not included last year, after all they do have some risk attached to them?
You are not going to get anywhere with this approach, honestly.
Let me also say here that HNZ is the largest single investment I ever had in a publicly listed company and as such I have been through these accounts very carefully, if there is something dodgy I want to know about it, quick.
I am happy with the risk/reward ratio they provide, and I am hoping for good long term capital appreciation and dividends.
However this is not a recommendation to invest, or not, without doing your own research.
Best Wishes
Paper Tiger
Let me also say here that HNZ is the largest single investment I ever had in a publicly listed company and as such I have been through these accounts very carefully, if there is something dodgy I want to know about it, quick.
Is HNZ your largest holding tiger?
I have just reread Heartland profit announcement Percy, and remembered your 12th May post 1724 (quoted above).
"There was a $76.1m increase in the “core” business net finance receivables (Rural, Business and Consumer channels). However, due to a reduction in non-core assets of legacy Property and Retail Mortgages, net finance receivables reduced in total by $67.9m (from $2.1bn at 30 June 2012 to $2.0bn at 30 June 2013)." (my bold emphasis)
I knew that HNZ were quitting legacy property assets, but it had escaped me that they were quitting retail mortgages as well. But I guess your post suggesting retail mortgages were being passed on to Kiwibank with a finders fee is consistent with this. My previous impression was that Heartland were trying to get better balance in their loan book by going after seasonal financing, loaning more to business etc. I hadn't appreciated there was an active plan to exit retail mortgages. Is this still your understanding of Heartland's current outlook?
SNOOPY
Retail mortgages not a HERO product ..not niche enough
My interest in Heartland is quite different. I have been a PGW shareholder, and as a consequence PGW finance shareholder, from as long ago as when they sold their 'first' finance division to Rabobank. Realising their mistake PGW created a new finance division which they then gave away to Heartland. As part of that gifting PGW took up a modest holding in Heartland shares. This then went south in value until the rebound over the last year that saw PGW sell out of Heartland at a modest profit.
This means that as of last week, or thereabouts, this is the first time I haven't had a direct or indirect interest in rural sector financing for a long time. My question then is should I perhaps sell some of my holding in existing 'finance' company, Turner's Auctions, and put that money into Heartland? One argument for that is that Heartland are trading near net asset backing and some see that as a good springboard from which Heartland can trade on higher price to NTA ratios as enjoyed by other finance companies and banks (the glass half full argument). The glass half empty argument is that Heartland are already performing at the level of other financial companies, and the relatively high NTA value that the company trades at is because some of those assets are overvalued on the books. Hence my fascination with digging into the quality of Heartland assets that are on the books.
For those who came in late, I hope this gives some context to my postings on Heartland.
SNOOPY
That $41.512m of corporate property provision for impairment that is the large part of the sum of the grand total of $50.491m of the overall provision for impairment is management's assessment at balance sheet time of then current risks based on the then current state of the market.
$15.961m of that total figure can be read, from note 37d, as the provision for collectively impaired assets from the 'Judgement Portfolio' and $34.771m can be read, from note 37c as the impairment from the individually impaired asset portfolio. Those two figures add to $50.732m which is close enough to the previously declared total in 37e for me ($50.491m, note 37e).
For the 'Judgement Assets' the provisions are based on the assigned grade of the loan and done to a formula (except for grade 9 that for those loans are individually assessed). For individually assessed loans the classification process looks to be more 'yay' or 'nay'. My point in all this is that these impairments are variables. They may be captured at balance sheet time but an investor should not regard these figures as 'cast in stone'.
SNOOPY