HGH - Heartland Group Holdings

[Beagle]

As Snowie says H2 profits will be flat if not down if $80m npat remains guidance

C’mon Jeff, get real or you’ll end up like the Blis man in losing credibility

Maybe the timing of the inevitiable profit upgrade is related to the LTI scheme or something

Full year guidance is for $77 - $80m which does seem strange for a growing bank with $39.9m already booked at the half year. Clearly they think second half is going to be $37.1m - $40.1m but at the bottom end of that range implies a 37.1m / 39.9m = 0.93, up to 7% reduction in 2H profit compared to 1H profit and best case profit is flat ? What are we to make of this ? Maybe they think a recession could be just around the corner like the BNZ do ? https://www.nzherald.co.nz/business/...ectid=12309233

[winner69]

It's a strange old fence you're sitting on there Winner. Your comments have been a bob each way through the day.

Great result but not amazing in real terms

The story is still good

Only wish companies would be more forthright / honest with shareholders re guidance instead of playing games

[winner69]

Full year guidance is for $77 - $80m which does seem strange for a growing bank with $39.9m already booked at the half year. Clearly they think second half is going to be $37.1m - $40.1m but at the bottom end of that range implies a 37.1m / 39.9m = 0.93, up to 7% reduction in second half profit and best case profit is flat for 2H compared to 1H.

What are we to make of this ?

Huge amount of marketing spend and investment in the future ...jeff says will ‘contribute to growth beyond FY2020’

If that makes sense it sort of says they’re going to spend about $6m to $10m extra ...bloody heck

[jonu]

Battle lines drawn @ 1.90. Let's see if they go at it.

[Beagle]

Huge amount of marketing spend and investment in the future ...jeff says will ‘contribute to growth beyond FY2020’

If that makes sense it sort of says they’re going to spend about $6m to $10m extra ...bloody heck

You could be forgiven for thinking he's just trying to boost his bonus...Hope his best laid plans don't come unstuck with a recession.

[winner69]

Something weird going on.

FY19 release said the $73.6m reported F19 NPAT was actually $77.1m if you excluded the one off ‘Corporate Restructure and ASX’ (all clearly displayed in a table on page 3 http://nzx-prod-s7fsd7f98s.s3-websit...193/305400.pdf )

So continuing to say F20 NPAT is going to be $77m to $80m means in reality F20 is a pretty poor year .....only 3%/4% earnings growth at best

Not very good is it.

[jonu]

You could be forgiven for thinking he's just trying to boost his bonus...Hope his best laid plans don't come unstuck with a recession.

Virtually all companies best laid plans in that scenario Beagle. I'm becoming convinced you're looking to accumulate at the lowest level possible.

[Snoopy]

Well, looks like diversification really works.

Anyway - pretty happy about the numbers.

NPAT of $39.9 million, up 20.4% ($6.7 million).
Gross finance receivables (Receivables) of $4.6 billion, up $177 million (8% annualised growth) since June 2019.

Did you shareholders look at the cashflow statement? Profit may have been $39.865m. But operating cashflow for the same period was 'minus' $59.655m. So around $20m of cash lost over the last six month! Granted this is better than the net $45m of negative operating cashflow over the comparative half year last year. But look at the comparative dollars used to pay tax half year on half year.

HY2019: $1,944m + $0.381m = $2.325m (c.f. 28% tax on half year profit = $9.272m)
HY2018: $9.624 + $4.630m = $14.254m (c.f. 28% tax on half year profit = $11.162m)

Tax is always a timing issue. But it does look like the normalised current half year tax actually paid was around $7.0m light, and last year was $3m too heavy.

I see the payment to suppliers and employees was down by $10m too - another timing issue? That doesn't seem sustainable for a growing company. So add in both of these correction factors ( A sum of -$20m, which changes Operating Cashflow for FY2019 to -$80m) and underlying operating cashflow does not seem to have improved. This isn't surprising because one of the core growth areas, reverse mortgages are strongly cashflow negative while the business is being grown. This does suggest that more cash from some source to fund this negative operating cashflow growth is required.

Fortunately Heartland has found this cash with a net $103,167m raised in subordinated notes last November 2019. But this will not be the last cash raised by Heartland, that is for sure. IMO more money will need to be raised over the next six months and we still haven't got over the problem of borrowing medium term capital to finance longer term loans. Let's hope Jeff is still working on this. But it is disappointing that nothing more as regards matching long term funding to long term loans has been announced.

On a positive note It is good to see the 'collectively impaired asst expense' down so much, by $4m. That means the small guys are getting better at paying their loans back right?

Did anybody notice - interim dividend up to 4.5 cents (from 3.5 cents)! Not bad ...

Looks like Heartland will be borrowing to pay that dividend.

SNOOPY

[Beagle]

Virtually all companies best laid plans in that scenario Beagle. I'm becoming convinced you're looking to accumulate at the lowest level possible.

LOL... Like nobody else does that. Better enlist the helpful commentary of the other Beagle...oh wait, he just has

[winner69]

From June19 to Dec19 Heartland Equity (Book Value) up $12m. (Book Value never goes up much from period to period because so much of the profits are paid out as dividends)

Market cap since June19 up $150m

That’s some market rerating ...the market just loves Heartland