Heartland announces half year NPAT of $47.5 million

Tuesday 22nd February 2022

Heartland announces net profit after tax of $47.5 million for the six months ended 31 December 2021

Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) achieved a net profit after tax (NPAT) of $47.5 million for the six-month period ended 31 December 2021 (1H2022), an increase of $3.4 million (7.8%) compared with the six-month period ended 31 December 2020 (1H2021). On an underlying basis (which excludes the impacts of one-offs), 1H2022 NPAT was $47.1 million, an increase of $3.8 million (8.8%) compared with 1H2021 underlying NPAT.

The first half performance included a pleasing annualised rate of growth in lending (13.9%). It also demonstrated the benefits of ongoing digitalisation, with a reduction in the cost-to-income (CTI) ratio.

Impairments were up on 1H2021 (19 basis points (bps)) due to COVID-19 related extensions that occurred in 1H2021. This was largely successful as reflected in the ‘business as usual’ reported rate of 33 bps for 1H2022, which is below the six months to 30 June 2021 (2H2021) (43 bps contributing to the full year outcome of 31 bps) and the financial year ended 30 June 2020 (FY2020) (65 bps).

The introduction of changes to the New Zealand Credit Contracts and Consumer Finance Act 2003 and the Credit Contracts and Consumer Finance Regulations 2004 (CCCFA) slowed growth in Motor and online Home Loans in January and February 2022. This has the potential to impact on the growth rate for the remainder of the six-month period ending 30 June 2022 (2H2022). This is being partially offset by growth in other areas, especially Reverse Mortgages in Australia and New Zealand, and no material reduction in anticipated full year growth is expected.

Highlights for 1H2022

‒ NPAT of $47.5 million, up 7.8% ($3.4 million). Underlying NPAT of $47.1 million, up 8.8% ($3.8 million) on 1H2021 underlying NPAT.

‒ One-off items had a $0.5 million net impact on NPAT, consisting of $1.1 million of one-off net gains and $0.9 million of one-off expenses.

‒ Gross finance receivables of $5.4 billion, up 13.9% ($339.4 million).

‒ Return on equity of 12.2%, up 7 bps.

‒ Net interest margin of 4.30%, up 3 bps.

‒ Net operating income of $130.7 million, up 4.3%.

‒ CTI ratio of 43.8%, down 5.0 percentage points (pps). Underlying cost to income ratio of 43.1%, down 2.7 pps.

‒ Impairment expense as a percentage of average receivables increased from 0.19% in 1H2021 to 0.33% in 1H2022.

‒ 1H2022 interim dividend of 5.5 cents per share (cps), an increase of 1.5 cps from 1H2021.

‒ Earnings per share of 8.1 cps, up 0.5 cps.

‒ Progress in digitalisation and continuous integration of product applications and platforms has provided faster processes and the ability to offer market-leading rates across New Zealand and Australia.

‒ Heartland Bank Limited (Heartland Bank) was awarded Canstar Savings Bank of the Year 2021 (for the fourth consecutive year), and 5-Star Ratings for Outstanding Value for its Direct Call and YouChoose accounts.

‒ Australian Reverse Mortgages received two Excellence Awards at the Australia Mortgage Awards 2021 (Non-Bank of the Year and Most Effective Digital Strategy – Lender), and won a 5-Star Lender Award in Your Mortgage’s Mortgage of the Year Awards 2021.

‒ New Zealand Reverse Mortgages awarded Consumer Trusted Accreditation (for the fifth consecutive year).

See the attachments to this release, including the 1H2022 Results Release for further information.

- Ends -

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