Financial services company Heartland Group reported a record full-year profit on improved lending as it bolstered its balance sheet with a $200 million share placement.
Heartland Group chief executive Jeff Greenslade. Photo: Supplied
The trans-Tasman finance company increased its lending by 23.5 percent to $6.2 billion, while rising interest rates boosted its net interest income by 7 percent, and kept a hold on costs, while reducing its overall costs relative to income.
Key numbers for the year ended June compared to a year ago:
- Net profit $95.1m vs $87.0m
- Net interest income $250.1m vs $233.5m
- Operating expenses $116.7m vs $117.7m
- Net interest margin 4.16% vs 4.35%
- Impaired asset expense $13.8m vs $15.0m
- Final dividend 5.5 cents a share (full year 11 cps unchanged)
Heartland group specialises in on line personal, vehicle, small business, and mortgage lending as well as specialist products such as reverse mortgages and livestock finance.
"The current operating environment continues to present challenges, with heightened geopolitical tensions and rising inflation contributing to increasing cost of living and rapidly rising interest rates," the company said in a presentation.
"While the Receivables portfolio recorded strong growth during the year, impairment expense benefited from an improved book quality as a result of the continued tilt of the portfolio mix towards lower risk assets."
The company's impaired asset expenses were reduced moderately as it scrapped its standby finance reserve of $9.6m when the pandemic hit, which allowed it to claw back $1.6m into its income. However, in a nod to the broader prevailing economic uncertainties it has established what it called an $8m "economic overlay".
Heartland also announced a $200m capital raising - $130m through a share placement with institutional investors and $70m to be offered to current shareholders.
The proceeds of the issue will be used to pay $A158m ($NZ175m) debt taken out when it bought Australian rural finance company StockCo earlier this year, with the balance to be used for future expansion. https://www.rnz.co.nz/news/business/464431/heartland-group-buys-australian-rural-finance-company
The company said it would look at expansion in Australia, possible acquisitions, and was considering getting necessary approvals to take deposits in Australia.