HGH - Heartland Group Holdings

[winner69]

Ok. In response to some PMs I will concede and say I am wrong and been unfair of my critical assessment of recent heartland performance.

Yes, Jeff and his team are doing their darnedest in making as much money as possible. The guys are really at it and their efforts will result in a full year NPAT of say $47m. Maybe a fraction more.

That's a fantastic result compared to the $36m made last year.

To align my financial model to HNZ forecast I have had to wind back growth expectations, reduced the NIM I was using to less than last year, increased bad debts but keep the cost of doing business much the same. HER seems to be doing better than I expected so left my assumptions about that the same. . So my forecast slightly above $47m now.

The worry is that H2 earnings will be the same as The first half. That still has me stuffed but a worrying sign that growth has stopped - and maybe earnings are starting to decline as the fourth quarter earnings are going to be less than the third quarter.

I don't think I'll bother to even try to forecast FY16 until after the full year announcement and hearing what Jeff says. Hope this half is just a blip on the long term growth path.

So all honky dory, esp if HNZ if is as roger says might now just be a yield play

[winner69]

Heartland guidance pre Seniors acquisition was $34m to $37m for FY14 - eps of 8.8-9.5 cents at the time.

This year NPAT say $47m - eps 10.0 cents.

If one assumes that even without Seniors acquisition FY15 would be better than FY14 than FY15 eps would probably have been in excess of 10 cents (up from the 8.8-9.5 cents FY14 expectations with the final number somewhere in the middle ).

The forecast FY15 eps of 10 cents of course includes the Seniors acquisition (which has made a positive contribution to HNZ earnings this year)

The Seniors acquisition was touted as being eps accretive. Doesn't look like it to me ...I am still to be convinced.

[winner69]

Looks like $47.0m NPAT our lot this year, maybe a fraction more

That's 10.2% ROE (on average equity but just 10.0% if rounded up on year end equity)

Bit higher than FY14 but seems a less (a lot less?) than what was implied from presentations last year

Priority FY15 was a "Focus on improving ROE" .......seem to have stopped improving over the last half year

[ziggy415]

Looks very much a Holden promotion,;'On selected models",so I would take that as the same as a Noel Leeming or Harvey Norman, no deposit 3 years interest free promotion, where the retailer pays the interest in the free interest period.
Otherwise why would HNZ bother?

Is this a way to get motor trade finance to the table or maybe weaken there hold over vehicle finance....or send a message that hnz will go in direct opposition to mtf

[percy]

Is this a way to get motor trade finance to the table or maybe weaken there hold over vehicle finance....or send a message that hnz will go in direct opposition to mtf

No.
It is not a promotion for Heartland to attract customers.
It is simply a promotion to move unsold Holden vehicles,by Holden dealers.
The interest on the interest free period will be paid by Holden Dealers.
Marac, part of Heartland,has been financing motor vehicles for over 55 years.Their records will give them a fair change of working out what the default rates will be.Just remember bankers do not give anything away.Even I-finance charge you a fee to refund any over payment you make.!
One must always remember the definition of a banker. "A banker is a man who lends you an umbrella when the sun is shining,and wants it back when it starts raining."
Heartland is run by bankers.They will be mindful of having the books watched carefully by the rating agency, and The Reserve Bank,so will not be putting a lot at risk.
Now back to Motor Trade Finance,MTF.Well a year ago I would have thought HNZ would have taken them over in the next few months.
They had a good sniff,but the court case liability, together with MTF not being interested in being taken over by HNZ,meant nothing has happened. Today I am still of the view MTF will be taken over,but I don't know whether the acquirer will be HNZ or TNR.
I am well positioned owning both HNZ and TNR..!!!

[percy]

New channels.
Heartland said they would open new channels.They are certainly doing this with I-finance and Harmoney.
As with any new business there will be success and failures.The directors will have viewed management's proposals,and set boundaries.
I expect Hearland will build on their successes and cut their losses.With not a "huge" amount at risk it is positive that HNZ are exploring these new channels.
REL.It would appear to be a great business with excellent margins and security,that is not expanding as quickly as we [or management]expected.Hopefully new channels and more promotion will be successful.It may be a sleeper,but long term I think the prospects are greatly improved by Australasia's rapidly growing "property rich,cash poor" aging population.

[winner69]

New channels.
Heartland said they would open new channels.They are certainly doing this with I-finance and Harmoney.
As with any new business there will be success and failures.The directors will have viewed management's proposals,and set boundaries.
I expect Hearland will build on their successes and cut their losses.With not a "huge" amount at risk it is positive that HNZ are exploring these new channels.
REL.It would appear to be a great business with excellent margins and security,that is not expanding as quickly as we [or management]expected.Hopefully new channels and more promotion will be successful.It may be a sleeper,but long term I think the prospects are greatly improved by Australasia's rapidly growing "property rich,cash poor" aging population.

I think you may be underestimating the contribution that HER is already making to Heartlands profitability.

The difference between the Banks profit as disclosed to RBNZ and HNZ profit is said to HER. For the last quarters that amounts to $5.2m and looking lie $7.5m for the full year.

But some additional HER lending is also included in the Banks numbers as well - suggesting that HER profit is in excess of $7.5m. How much more?

You mention 'excellent margins" in the HER business but I wouldn't be surprised if HER margins are lower than what they make on other business.

That TV ad seems to prompted more than expected enquiry from interested oldies and they are more than confident about converting these to real loans. Give praise and its amazing what underlings will tell you.

Seniors cost $87m so $8m odd profit first full year a good return.

So even if HER contributes only $8m this year (apparently $1m last year) then the old HNZ business has grown from $35m NPAT to $40m. Not too bad and makes sense. Pity Seniors not really eps accretive.

[percy]

I think you may be underestimating the contribution that HER is already making to Heartlands profitability.

The difference between the Banks profit as disclosed to RBNZ and HNZ profit is said to HER. For the last quarters that amounts to $5.2m and looking lie $7.5m for the full year.

But some additional HER lending is also included in the Banks numbers as well - suggesting that HER profit is in excess of $7.5m. How much more?

You mention 'excellent margins" in the HER business but I wouldn't be surprised if HER margins are lower than what they make on other business.

That TV ad seems to prompted more than expected enquiry from interested oldies and they are more than confident about converting these to real loans. Give praise and its amazing what underlings will tell you.

Seniors cost $87m so $8m odd profit first full year a good return.

So even if HER contributes only $8m this year (apparently $1m last year) then the old HNZ business has grown from $35m NPAT to $40m. Not too bad and makes sense. Pity Seniors not really eps accretive.

Thanks for your very interesting post.
Yes the HER is better than I thought.
You are right HNZ make lot better margins in their other forms of lending.I did not state it,but I meant the HER lending is more profitable than normal mortgage lending.

[K1W1G0LD]

Fascinating that W69 seems to have inherited Snoopy's mantle..................makes more sense too!!

[belted galloway]

Talking of opening new channels:

http://www.seek.co.nz/job/28707041?pos=7&type=standard

"Involve supporting the development and advancement of Heartland’s capabilities with a particular focus on Maori Banking products."

"Provide guidance on cultural protocols and there will be some face to face customer interaction as part of a team, to promote Maori Banking products."

Seems like a rather unusual path to go down.


Also, there seems to be a significant marketing push for Ifinance. I've heard extensive radio coverage across a range of stations.