UPDATE: Heartland shares gain as annual profit lifts 9% on lending growth
(Adds share movement to lead and updates price in 4th paragraph, includes profit guidance in 9th paragraph)
By Jenny Ruth
Aug. 15 (BusinessDesk) - Heartland Group was the only stock to gain on the S&P/NZX50 Index after it lifted annual net profit 9 percent amid growth in its reverse mortgages, motor and business lending divisions.
Net profit for the 12 months ended June 30 rose to $73.6 million from $67.5 million the previous year.
Lending growth overall rose 10.7 percent, or by 424.8 million, before foreign exchange adjustments with Australian reverse mortgages rising 24 percent, or by $163 million, New Zealand reverse mortgages up 11.4 percent, or by $52 million, and motor lending up 13.3 percent, or by $127.6 million.
Heartland shares recovered to be 2 cents higher at $1.64, the only stock in the benchmark index to gain today, with the NZX50 down 1.3 percent in afternoon trading. The firm's shares fell as low as $1.60 and are up 3 percent from a year ago compared with the NZX50’s 21 percent gain.
Heartland's return on equity was unchanged from the 2018 financial year at 11.1 percent but rose from 10.3 percent in the first half to 12.2 percent in the second half.
Net interest margin eased to 4.33 percent from 4.42 percent, reflecting the strong growth in lower margin reverse mortgages.
The company, which includes the New Zealand registered Heartland Bank and its separate Australian reverse mortgage business, says its strategic focus remains on niche markets where it aims to deliver either best or only products to depositors and borrowers.
Heartland will pay a final dividend of 6.5 cents per share, up 1 cent on the previous year’s final dividend, taking the annual payout to 10 cents. The record date is Aug. 23 with payment due on Sept. 6.
The company says it expects continued asset growth this year, particularly in Australian and New Zealand reverse mortgages and small business lending while it continues a managed reduction in business and rural relationship lending.
Heartland is guiding for net profit for the year ending June, 2020 to be between $77-80 million.
While business intermediated lending grew 31.4 percent, or by $101.7 million in the year just gone but business relationship receivables fell by 16.1 percent, or $107 million, and rural relationship receivables fell 4.2 percent, or $23.4 million.