Buffett Point 4a/ FY2016: Net Profit Margin history
What we are looking for here is the ability to raise margins at above the rate of inflation over some time period longer than two years back to back.
Financial Year |
Net Sustainable Profit (A) |
Gross Interest Revenue (B) |
Net Profit margin (A)/(B) |
2012 |
$26.606m + 0.72($5.642m + $3.900m) =$30.476m |
$205.142m |
14.9% |
2013 |
$6.912m + 0.72($22.527m+ $5.101m)= $26.804m |
$206.349m |
13.0% |
2014 |
$36.039m |
$210.297m |
17.2% |
2015 |
$48.163m - 0.72(0.588m) = $47.743m |
$260.488m |
18.3% |
2016 |
$54.164m - 0.72(1.136m) = $53.346m |
$265.475m |
20.1% |
Result: Pass Test
SNOOPY
Buffett Point 4b/ FY2016: Gross Interest Margin history
What we are looking for here is the ability to raise margins at above the rate of inflation over some time period longer than two years back to back.
Financial Year |
Interest Income (A) |
Interest Expense (B) |
EOFY Finance Receivables (C) |
Gross Interest margin [(A)-(B)]/(C)] |
2012 |
$205.142m |
$121.502m |
$2,078.276m |
4.02% |
2013 |
$206.349m |
$110.895m |
$2,010.376m |
4.75% |
2014 |
$210.297m |
$101.221m |
$2,607.393m |
4.18% |
2015 |
$260.488m |
$126.041m |
$2,862.070m |
4.70% |
2016 |
$265.475m |
$118.815m |
$3,118.957m |
4.70% |
Result: Pass Test
When examining most companies profitability I like to look at the 'Net Profit Margin', as I have done in "Buffet Point 4a". Being a bank, the 'goods sold' are really money. So I thought that maybe looking at the gross interest margin was more relevant? To some extent it doesn't matter as both tests earn a 'pass' mark for Heartland.
What is interesting is that the 'Net Profit Margin' looks to be improving faster then the 'Gross Interest Margin.' 'Net Profit' takes into account head office and branch costs and advertising expenses. "Gross Interest Expense' does not. The fact that the 'Net Profit Margin' is improving faster then the 'Gross Interest Margin' is an indicator suggests to me that 'successful control of costs' is very much part of Heartland's success in this area.
SNOOPY