Heartland Bank Limited (Heartland) achieved a net profit after tax (NPAT) of $31.1m for the half year ended 31 December 2017.
This is up $2.0m or seven per cent from $29.1m NPAT from the previous corresponding reporting period. Earnings per share for the six months ended 31 December 2017 was 6 cents per share, consistent with the 2017 financial year.
There was strong growth in receivables of 13 per cent to $3.8b during the reporting period. Total assets increased by $273.0m due to the increase in net finance receivables and an increase in cash and cash equivalents.
Major movements during the reporting period included:
- Household net receivables increased $165.7m excluding foreign currency translation gains, with reverse mortgages, motor vehicle loans and personal loans (including Harmoney) increasing $82.4m, $62.0m and $24.8m respectively, and residential mortgages reducing by $3.5m.
- Net receivables for the Business and Rural divisions increased $46.0m and $1.2m respectively.
- Cash and cash equivalents and investments increased by $35.8m.
- Borrowings increased by $203.7m reflecting the movement in total assets.
- Share capital increased by $66.7m as a result of the $59m Rights Issue together with shares issued as part of the Dividend Reinvestment Plan.
During the reporting period, Net Assets increased by $71.7m to $641.3m. Net Tangible Assets (NTA) increased by $72.8m to $563.3m. On a per share basis, NTA was $1.01 at 31 December 2017 compared to $0.95 at 30 June 2017 and $0.91 at 31 December 2016.
Net Operating Income (NOI) was $93.9m, up $10.9m (13%) compared to the previous corresponding reporting period. The increase in NOI was primarily attributable to the increased level of receivables.
Performance of core divisions
Net operating income was $50.3m, an increase of $4.8m (10%) from the previous corresponding reporting period. During the six months, net receivables for the Household division increased by $190.0m to $2.1b.
Net operating income from the Consumer division (which includes motor vehicle loans, personal loans and lending through the Harmoney platform) increased $1.1m (4%) from the previous corresponding reporting period to $31.5m. Consumer net receivables grew $86.8m (19% annualised) to $1.0b during the current reporting period.
The strong growth in net receivables was not reflected in net operating income due to a large proportion of the new business coming from lower risk, lower margin loans.
Motor vehicle net receivables continued to grow strongly, increasing by $62.0m (15% annualised) to $886.3m as at 31 December 2017.
Strong growth in personal lending was also achieved with net receivables for personal loans and Harmoney increasing by $24.8m (52% annualised) to $119.6m as at 31 December 2017.
Net operating income was $26.3m, an increase of $3.2m (14%) from the previous corresponding reporting period. The increase in net operating income was driven by growth in net receivables, which increased by $46.0m (9% annualised) to $1.0b as at 31 December 2017. This growth was achieved through continued focus on the small business market, extending our reach through intermediaries and Heartland’s Open for Business online origination platform which is dedicated to supporting the working capital needs of SME owners and which grew by 45%.
Net Operating Income was $16.3m, an increase of $2.4m (17%) from the previous corresponding reporting period that was also driven by receivables growth. Net receivables for the Rural division increased by $1.2m (0.4% annualised) to $676.6m during the current reporting period following a strong period of growth in the preceding six months.
The focus for the last six months was a continuation of Heartland’s two-pronged strategy: To use technology and partnerships with intermediaries to help it to reach more customers; and continue to offer “best or only” products in the markets in which it operates (i.e. through products the major banks don’t offer or products where it can offer better features).
Heartland has made excellent progress to-date, having launched a number of digital platforms including the Open for Business online origination platform, which grew by 45% in the last six months. The focus for the remaining six months of FY18 is to continue to grow Open for Business, increase lending through peer-to-peer lender, Harmoney and launch a mobile app for depositors, which is the first part of its end-to-end, fully automated online deposit platform.
Heartland has a successful reverse mortgage business in Australia, Heartland Seniors Finance, which continues to grow strongly. Off the back of this success, Heartland is exploring opportunities to expand its product offering in Australia, including further development of its relationship with Spotcap, an innovative lender for small and medium-sized businesses, and launching Open for Business to serve the Australian SME market. Heartland is also accessing the Australian personal lending market through Harmoney.
The directors of Heartland have resolved to pay an interim dividend of 3.5 cents per share. The interim dividend will be paid on 3 April 2018 to shareholders on the company’s register as at 5.00pm on 16 March 2018 (Record Date) and will be fully imputed. The Dividend Reinvestment Plan (DRP) will apply to the interim dividend with a 2.5% discount3 . Participation is entirely optional.
Underlying asset growth is expected to continue, with strong Household, Business and Rural volumes projected through execution of Heartland’s strategy, in particular the expansion of customer reach through digital and intermediary channels, and expansion in Australia.
Heartland expects its NPAT for the year ending 30 June 2018 to be at the upper end of its previously advised range of $65.0m to $68.0m.