Heartland announces half year profit of $39.9 million

1

NZX/ASX Release
Heartland announces half year profit of $39.9 million
18 February 2020
Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) achieved a net profit after tax
(NPAT) of $39.9 million for the six months to 31 December 2019 (1H2020), an increase of 20.4%
from the six months to 31 December 2018 (1H2019)
1
.
Highlights for 1H2020
2

• NPAT of $39.9 million, up 20.4% ($6.7 million).
• Gross finance receivables
3
(Receivables) of $4.6 billion, up $177 million (8% annualised
growth)
4
since June 2019.
• Return on equity (ROE) of 11.7%, up 165 basis points (bps).
• Net interest margin (NIM)
5
of 4.72%, flat on the six months to 30 June 2019 (2H2019) and 5
bps down compared to 1H2019.
• Cost to income ratio (CTI) of 46.0%, up 3.5%. After allowing for changes in the accounting
treatment and one-off impacts, the underlying CTI is 43.3%, up 4.3% as a result of significant
investments.
• 32% ($4.3 million) lower impairment expense reflecting significant efforts to enhance
collections processes and discipline.
• 2020 Interim Dividend of 4.5 cents per share (cps), an increase of 1.0 cps from 1H2019.
• Significant progress made on implementing Heartland’s workplan to address improvements
across conduct and culture.
• 47% of employees were aged 35 years and under.
• 35 interns joined Heartland Bank’s Manawa Ako internship programme – 10 more interns
than last year’s intake.
• Heartland Bank awarded Canstar’s 2019 Bank of the Year – Savings and Canstar’s 5-Star
Rating for Outstanding Value Savings Account for its Direct Call Account.
• Australian Reverse Mortgages awarded Money Magazine’s Best Reverse Mortgage 2019.

1
This announcement is based on the 31 December 2019 unaudited interim consolidated financial statements
of Heartland Group Holdings Limited (Heartland). Following a corporate restructure on 31 October 2018,
Heartland Bank Limited (Heartland Bank) became a 100% controlled subsidiary of Heartland, and ownership of
the Australian group of companies (comprising Heartland Australia Holdings Pty Limited and its subsidiaries)
transferred from Heartland Bank to Heartland. As common control has remained the same both before and
after the corporate restructure, management believes that the operations of Heartland from 1 November
2018 are directly comparable to those of Heartland Bank prior to 1 November 2018.
2
All comparative results are based on 31 December 2018 unaudited interim consolidated financial statements
of Heartland Bank and its subsidiaries up to 31 October 2018, and Heartland and its subsidiaries from 1
November 2018 to 31 December 2018 (financial performance), or 30 June 2019 audited full year consolidated
financial statements of Heartland (financial position), unless otherwise noted.
3
Gross finance receivables also includes Reverse Mortgages.
4
Excluding the impact of changes in foreign currency exchange (FX) rates.
5
NIM calculated based on average interest earning assets excluding liquid assets.

2

FINANCIAL POSITION
Receivables increased by $177 million (8% annualised growth)
6
mainly due to growth in Reverse
Mortgages, Business Intermediated, Motor, Harmoney and Open for Business (O4B), offset by
decreases in non-core lending, specifically Business and Rural Relationship.
Total assets increased by $263 million (11% annualised growth), primarily driven by the increase in
net finance receivables. Liquid assets, comprising cash, cash equivalents and investments, increased
$75 million (36% annualised growth) in line with business growth.
Total borrowings
7
increased by $235 million (11% annualised growth).
During the reporting period, net assets increased by $12 million to $687 million. Net tangible assets
(NTA) increased by $12 million to $605 million, resulting in an NTA per share of $1.05 (30 June 2019:
$1.04; 31 December 2018: $1.01).
FINANCIAL PERFORMANCE
Profitability
NPAT was $39.9 million for 1H2020, a $6.7 million (20.4%) increase on 1H2019.
ROE was 11.7%, up 165 bps from 1H2019.
Earnings per share (EPS) was 6.9 cps, up 1.0 cps from 1H2019 as a result of an increase in NPAT.

1H2020 2H2019 1H2019
NOI
8
118.6 103.7 102.1
NPAT 39.9 40.5 33.1
NIM 4.27% 4.29% 4.34%
NIM excl. liquid assets
9
4.72% 4.72% 4.77%
ROE 11.7% 11.0% 10.0%

Income
Total net operating income (NOI) was $118.6 million, an increase of $16.5 million (16%) on 1H2019.
Fair value gains on equity investments and recent accounting standard change in respect of upfront
reverse mortgage fees contributed $2.1 million and $4.4 million respectively to 1H2020 NOI
(correspondingly, mentioned accounting standard change contributed $5.1 million to operating
expenses in 1H2020). Adjusted for this, NOI increased by $10.3 million (10%) compared to 1H2019,
largely due to a $7.2 million (7%) increase in underlying net interest income. Underlying other

6
Excluding the impact of changes in FX rates.
7
Total borrowings includes retail deposits and other borrowings.
8
NOI includes fair value gains/losses on investments.
9
NIM calculated based on average interest earning assets excluding liquid assets.

3

income increased by $3.1 million (83%) compared to 1H2019, primarily due to a stronger Treasury
result.
Heartland’s NIM for 1H2020 was 4.27%, 7 bps down on 1H2019 and 2 bps down on 2H2019.
NIM was primarily impacted by the reduction in interest rates, lending and deposit portfolio mix
changes, and the increased holding of lower yielding cash and investment assets necessary to
support the business activity through the Christmas/New Year period – a period of traditionally
lower deposit flows and volumes. Excluding liquid assets, NIM was 4.72%, 5 bps down on 1H2019
however unchanged from 2H2019.
Expenses
Operating expenses were $54.6 million, an increase of $11.2 million (26%) on 1H2019. The required
accounting standard change in respect of upfront reverse mortgage costs contributed $5.1 million to
1H2020 operating expenses. Adjusted for this, the underlying operating expenses were $6.7 million
(16%) higher compared to 1H2019.
Higher underlying operating expenses were primarily due to a $1.8 million increase in marketing
investment. The marketing spend was driven by the additional activity across both markets to drive
product and brand awareness. Higher underlying operating expenses were also due to a $4.3 million
(19%) increase in staff expenses.
The latter they reflect Heartland’s significant investment in responding to regulatory and compliance
commitments, including increasing the number of full-time equivalent (FTE) employees in relevant
areas. Heartland has also invested in technical expertise in key areas (for example, in its digital and
finance teams) to reduce the reliance on external service providers and enable Heartland to adopt a
more agile delivery model, reflecting the growing maturity of the business and the need to respond
to an increasingly complex operating environment.
As a result, the cost to income ratio increased to 46.0%, compared to 42.5% in 1H2019, while on an
underlying basis this was 43.3% in the current period, compared to 39.0% in 1H2019.
Impairments
Impairment expense decreased by $4.3 million (32%) to $9 million. This reflects continued focus on
improving the collections processes. Furthermore, the new provisioning methodology in accordance
with IFRS9 was further refined following its initial adoption in 1H2019 thus benefiting impairment
expense in the subsequent periods.
Impairment expense as a percentage of average receivables decreased from 0.64% in 1H2019 to 0.40%
in 1H2020.
BUSINESS PERFORMANCE
New Zealand Reverse Mortgages
New Zealand Reverse Mortgages NOI was $13.0 million, an increase of $2.7 million (26%) compared
to 1H2019.

4

New Zealand Reverse Mortgage Receivables increased $26 million (10% annualised growth) to $536
million, driven by an investment in marketing to increase brand awareness and digital channel
enhancements.
Motor
Motor NOI was $30.1 million, an increase of $1.9 million (7%) compared to 1H2019.
Motor Receivables increased $35 million (6% annualised growth) to $1,124 million mainly due to an
increase in the Motor dealer book (car dealerships, brokers and partnerships such as Holden, Kia and
Jaguar/Land Rover).
Harmoney and other personal lending
Harmoney NOI was $8.4 million, an increase of $2.2 million (36%) compared to 1H2019.
Harmoney Receivables increased $30 million (31% annualised growth), with the New Zealand
Harmoney portfolio increasing $7 million (10% annualised growth) to $159 million, while the
Australia Harmoney portfolio increased $22 million (116% annualised growth) to $61 million.
Business
Business lending NOI was $21.9 million, a decrease of $1.4 million (6%) compared to 1H2019.
Business Receivables increased by $24 million (5% annualised growth) to $1,009 million. Heartland
Bank’s growth focus continues to be on Business Intermediated, with Receivables in this portfolio up
$69 million (32% annualised growth) to $494 million. The Business Relationship portfolio, on the
other hand, decreased by $44 million (16% annualised decrease) as a result of the strategic focus on
reducing concentration risk in low margin exposures.
O4B
O4B NOI was $6.6 million, an increase of $2.3 million (54%) compared to 1H2019.
O4B Receivables increased $25 million (37% annualised growth) to $158 million. Ongoing investment
in operational capacity, automation and marketing to increase product awareness are expected to
fuel growth in future periods.
Rural
Rural lending NOI was $15.5 million, a decrease of $0.3 million (2%) compared to 1H2019.
Rural Receivables decreased by $36 million (11% annualised decrease) to $621 million. Rural
Relationship Receivables reduced by $22 million (8% annualised decrease) as optimisation of non-
core Rural Relationship lending to reduce low margin concentration continues. At the same time,
Livestock Receivables decreased by $13 million (22% annualised decrease) to $108 million.
Australia
Australian operations NOI was $16.6 million, an increase of $4.9 million (42%) compared to 1H2019.

5

Australian Reverse Mortgage Receivables increased $79 million (20% annualised growth)
10
to $887
million. Strong growth in the portfolio, driven by investment in marketing, resulted in market share
increasing to 26%
11
, with a similar trend expected to continue in the future.
FUNDING AND LIQUIDITY
Heartland operates a diversified funding base that continues to grow with the business. The
corporate restructure continues to enable new opportunities to expand and diversify funding across
Heartland.
Heartland Bank increased borrowings by $125 million, primarily through deposits which increased by
$80 million (3% growth) to $3.2 billion. Term deposits increased by $101 million (4%) reflecting
Heartland Bank’s competitive interest rates. A specific focus has been on extending the duration of
the term deposits to support effective liquidity management for Heartland Bank. On average,
Heartland Bank retains 88% of all maturing term deposits.
Heartland Bank utilises other funding sources in addition to deposits, including:
• 90-day registered certificate of deposits
• externally rated auto loan warehouse
• money market lines.
Heartland Bank held $429 million of liquid assets, up $47 million (12%) on 30 June 2019. This has
positioned Heartland Bank well in excess of all liquidity ratio requirements imposed by the Reserve
Bank of New Zealand (RBNZ). Liquidity was increased through the end of the December period to
ensure sufficient liquidity over the Christmas/New Year period.
Heartland Australia increased borrowings by $235 million to support business growth. $145 million
of new securitised borrowings, $100 million of which was from a new major bank provider, were
drawn, together with a A$100 million medium-term (2.5-year) note issued in November 2019. This
additional MTN issuance provides funding for growth in the Reverse Mortgage business and for O4B
that was recently launched in Australia, and allowed for the repayment of intercompany funding.
The extension of the duration of funding together with further diversification of funding
programmes remains a strategic focus.
Heartland Group extended its corporate debt facility by 6 months, and reduced its limit from $50
million to $25 million. It remained undrawn at 31 December 2019.
REGULATORY UPDATE
The financial services sector has continued to see considerable regulatory activity and review,
including the Financial Markets Authority (FMA) and RBNZ review of conduct and culture in New
Zealand retail banks (Culture and Conduct Review), the Treasury’s review of the Reserve Bank of
New Zealand Act 1989 and the RBNZ’s review of the capital adequacy framework for registered
banks.

10
Excluding the impact of changes in FX rates.
11
Based on APRA ADI Property Exposure and Heartland Seniors Finance data as at 30 September 2019.

6

Heartland is committed to continuous improvement in all areas identified by the FMA and RBNZ in
their Culture and Conduct Review, and has been working through the implementation of its
workplan to address improvements across the organisation. This has contributed to the increase in
operating expenses as Heartland invests in resources to deliver on regulatory and customer
expectations.
Specifically, this has included the establishment of a Customer Care team focused on obtaining
customer feedback and ensuring a good customer experience is delivered across Heartland’s
products and services.
Following a period of consultation, in December the RBNZ announced its final decision on the
revised Capital Framework for Registered Banks in New Zealand (the Framework). The revised
Framework requires Heartland Bank, as a standardised registered bank, to increase its Total Capital
ratio to 16% over a seven-year transitional period commencing July 2020. The revised Framework is
not expected to impact Heartland Bank's capital ratio requirements until 2022 when minimum
regulatory capital requirements increase from 8% to 9%, therefore not having a material impact on
Heartland Bank. Heartland Bank’s Total Capital ratio was 12.9% as at 31 December 2019.
STRATEGIC PRIORITIES
Heartland’s activity comprises three areas of strategic focus: New Zealand, Australia and Digital.
New Zealand
Product optimisation and distribution
Heartland Bank’s focus remains on delivering best or only products to depositors and borrowers
through continued growth in niche markets.
Heartland Group’s corporate restructure, its investment in digital distribution capability and its
increased emphasis on customer experience, also provide Heartland Bank with an opportunity to
broaden its focus beyond providing ‘best or only’ products, and to challenge and disrupt banks and
financial technology companies by finding ways to deliver banking products more cost effectively
and with less friction for customers. For example:
• Heartland Bank differentiates its small business lending offering from others in the market
by providing a fast and simple digital application process with decisioning
• development of Open for Commercial, Heartland Bank’s online portal for Business
Intermediated customers, enables intermediaries to complete plant and equipment loan
applications online on behalf of their clients – this has since been launched
• the Heartland Mobile App allows Deposits customers greater self-service access to
Heartland Bank’s products and to managing their accounts
• the online calculator and application form for Heartland Bank’s reverse mortgage product
allows customers to determine how much they might be able to drawdown, before
completing an application in their own time online.
Investment in marketing activity for New Zealand Reverse Mortgages took place in 1H2020 in order
to raise product and brand awareness. There has been an increase in lead volumes during this time.

7

Results of the marketing activity, through a combination of digital and offline channels, will continue
to be monitored and optimised. Investment in TV and radio marketing activity to promote this
product and its benefits will continue in the second half of FY2020.
In July 2019, a new television campaign for O4B was launched to help achieve increased reach and
awareness of the small business lending platform. Together with the increased marketing activity
through other channels, this has resulted in a significant uplift in visits to the O4B website. There has
been an uplift in application and drawdown volumes in 1H2020 (compared to 1H2019). Heartland
will continue to monitor activity and refine its advertising placements, creatives and media to raise
brand awareness, reach its targeted audience and appeal to that audience.
In FY2019, Heartland Bank recognised an opportunity in the millennial market to deliver a savings
product with features that appeal to that particular generation. The YouChoose savings account
(with an optional overdraft) was subsequently launched, and Heartland Bank has since been using
digital channels to reach the millennial market and seek their feedback on the product to enable
continued product optimisation and enhancements.
Partnerships
Heartland Bank successfully entered into a partnership with Kia Motors to provide motor vehicle
finance. Kia customers now have access to vehicle finance under Heartland Bank’s Kia Finance label.
Heartland Bank and Turners Automotive Group entered into a distribution agreement to provide
insurance products under Turners Automotive Group’s DPL Insurance ‘Autosure’ brand. Heartland
Bank’s insurance products were previously provided by MARAC Insurance Limited, a subsidiary of
Heartland Bank. By partnering with Autosure, a specialist, market-leading insurance provider in New
Zealand, Heartland Bank can maintain its focus on customer outcomes and be confident that
customers have access to a broader range of consumer insurance policies to meet their needs. The
agreement came into effect in January 2020 – existing MARAC Insurance customer policies are
unaffected.
Customer outcomes
A dedicated Customer Care team was formed in Ashburton to support customers in both New
Zealand and Australia, and a Customer Experience and Insights team created to support Heartland’s
products and services across the Group. Both teams have been established to ensure good customer
experiences and outcomes are delivered across Heartland.
Australia
Reverse Mortgages
Heartland remains the primary originator of reverse mortgages in Australia. In addition, Heartland’s
market share continued to grow to 26%
12
in September 2019, up from 24%
13
in March 2019.

12
Based on APRA ADI Property Exposure and Heartland Seniors Finance data as at 30 September 2019.
13
Based on APRA ADI Property Exposure and Heartland Seniors Finance data as at 31 March 2019.

8

With a focus on product simplicity and increased importance placed on customer experience and
continued improvement and ease of use for the website and application, Heartland expects to see
continued growth in its Australian Reverse Mortgage business.
Heartland has seen Australian Reverse Mortgage leads increase in the past six months due to
increased marketing activity, and expects to continue to see results from this activity through the
remainder of FY2020.
O4B
The Heartland Group corporate restructure undertaken in 2018 has provided Heartland with the
opportunity to launch existing products in other markets. Heartland’s small business lending
platform O4B is an example of this, which was launched in Australia in November. The launch was
accompanied by light digital marketing activity while the platform is piloted to ensure the product
was set up and operating well. Increased marketing activity will begin in the second half of FY2020 to
raise awareness of the product and drive leads.
Funding
Heartland’s Australian funding strategy is to source funding that provides:
• capacity – enabling continued growth in line with the business
• diversity – avoiding concentration risk from a range of sources and type
• longevity – is reliable, sustainable and matches duration of the assets being funded
• efficiency – minimises the use of, and enhances the return on capital deployed in the
business.
Heartland continues to execute that strategy, having completed the following during the six months
to 31 December 2019:
• a new A$250 million committed reverse mortgage funding facility with a major Australian
financial institution, with A$100 million drawn to date
• a second issuance from its A$ medium-term note programme, A$100 million of 2.5-year
notes to a key Australian institutional fixed income investor.
Work on diversification and new funding opportunities continues.
Digital
Digital services, platforms and processes remains a core focus of Heartland’s overall strategy –
particularly to achieve Heartland’s key digital strategy objectives:
• to make products available to customers online or via an app, providing simple, frictionless
and fast on-boarding and processing
• to achieve low cost reach to the broadest target market, through online and mobile access
and highly automated processes
• to broaden the reach of products across other markets by using existing platforms and
capabilities, a benefit that arises from the corporate restructure

9

• to enable customer self-service and flexibility to apply for and manage their Heartland
products when they want
• to respond to and adapt Heartland’s customer experience to meet the expectation of
customers to be able to use any device
• to provide opportunities to challenge other banks and financial technology companies by
identifying alternative ways to deliver banking products more cost effectively and with less
friction for customers.
In 1H2020, digital achievements have been centred around customer facing developments, back
office automation and efficiency features, improved staff engagement tools to contribute to culture
and better customer outcomes, together with extending Heartland’s best or only products to
alternate markets.
Customer facing highlights
• Heartland Bank’s O4B product was launched in Australia with a website and online
application now available for Australians to access small business finance.
• Improvements to the Heartland Mobile App continue, including from customer feedback.
• Australian Reverse Mortgage customers can now apply for their reverse mortgage online
and receive an indication of approval.
• New Zealand Reverse Mortgage customers can now calculate online how much they may be
able to borrow, before they begin their reverse mortgage application.
Automation and efficiency highlights
• Robotics process automation has been rolled out across multiple processes, reducing
manual interventions.
• The integration of DocuSign has automated the signing process for loan documents.
• Through the use of APIs, the time required to complete the fulfilment process of Australian
Reverse Mortgage applications has reduced, improving customer experience.
• YouChoose customers can now make purchases online with the integration of Online
EFTPOS.
• Development of an online platform to allow Business Intermediated customers to receive
automated decisions for their online loan applications – this has since been launched.
• Document management tool rolled out internally to reduce paper usage.
INTERIM DIVIDEND
Heartland is pleased to declare a fully imputed 2020 interim dividend of 4.5 cps, an increase of 1.0
cps from 1H2019. The resulting gross dividend yield was 8.3%
14
. The dividend reflects the continued
consistent performance of Heartland Bank and Heartland’s Australian business.

14
Total fully imputed dividends for 2H19 (final) and 1H20 (interim) divided by the closing share price as at 14
February 2020 of $1.84.

10

Heartland has a Dividend Reinvestment Plan (DRP), giving eligible shareholders the opportunity to
reinvest some or all of their dividend payments into new ordinary shares. The DRP will apply to the
interim dividend with a 2.0% discount
15
.
The DRP offer document and participation form is available on our shareholder website at:
https://shareholders.heartland.co.nz/shareholder-resources/dividends.
LOOKING FORWARD
Asset growth from Heartland’s core lending activities is expected to continue in the second half of
FY2020, particularly in Australia and New Zealand reverse mortgages and small business lending.
Investment will continue, specifically in marketing, to continue building awareness of reverse
mortgages (in Australia and New Zealand) and O4B, as well as in new areas of opportunity. Some of
these costs are anticipated to be one-off and will contribute to growth beyond FY2020.
Further diversification of funding is expected, particularly in Australia to support growth.
Looking ahead to the rest of FY2020, Heartland will continue its focus on evaluating its overall
Environment, Social and Governance (ESG) strategy and the ways in which it can continue to reduce
its environmental impact.
The underlying balance sheet growth supports a result in line with the original NPAT forecast in the
range of $77 million to $80 million.

– Ends –

For further information, please contact:
Jeff Greenslade Cherise Barrie
Chief Executive Officer Chief Financial Officer
M 021 563 593 M 027 503 6119

For investor enquiries, please contact: For media enquiries, please contact:
Andrew Dixson Nicola Foley
Head of Corporate Finance Senior Communications Manager
M 021 263 2666 M 027 345 6809

15
That is, the strike price under the DRP will be 98.0% of the volume weighted average sale price of Heartland
shares over the five trading days following the Record Date. For the full details of the DRP and the Strike Price
calculation, refer to Heartland Group Holdings Limited DRP offer document dated 10 December 2018.

---

Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 17 October 2019


Results for announcement to the market
Name of issuer Heartland Group Holdings Limited
Reporting Period 6 months to 31 December 2019
Previous Reporting Period 6 months to 31 December 2018
Currency NZD
Amount (000s) Percentage change
Revenue from continuing
operations
$118,634 16.2%
Total Revenue $118,634 16.2%
Net profit/(loss) from
continuing operations
$39,865 20.4%
Total net profit/(loss) $39,865 20.4%
Interim/Final Dividend
Amount per Quoted Equity
Security
$0.04500000
Imputed amount per Quoted
Equity Security
$0.01750000
Record Date 26/02/2020
Dividend Payment Date 11/03/2020
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.05 $1.01
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Please refer to the 31 December 2019 unaudited interim
consolidated financial statements of Heartland Group Holdings
Limited that accompany this announcement for a further
explanation of these figures.
Authority for this announcement
Name of person

authorised
to make this announcement
Michael Drumm
Contact person for this
announcement
Michael Drumm
Contact phone number 09 927 9136
Contact email address Michael.Drumm@Heartland.co.nz
Date of release through MAP

18/02/2020

Unaudited financial statements accompany this announcement.

---

Distribution Notice

Updated as at 18 December 2019




Please note: all cash amounts in this form should be provided to 8 decimal places

Section 1: Issuer information
Name of issuer Heartland Group Holdings Limited
Financial product name/description Ordinary Shares
NZX ticker code HGH
ISIN (If unknown, check on NZX
website)
NZHGHE0007S9
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year Quarterly
Half Year X Special
DRP applies X
Record date 26/02/2020
Ex-Date (one business day before the
Record Date)
25/02/2020
Payment date (and allotment date for
DRP)
11/03/2020
Total monies associated with the
distribution
1

$25,986,063.87
Source of distribution (for example,
retained earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$0.06250000
Gross taxable amount
3
$0.06250000
Total cash distribution
4
$0.04500000
Excluded amount (applicable to listed
PIEs)
NIL
Supplementary distribution amount $0.00794118
Section 3: Imputation credits and Resident Withholding Tax
5

Is the distribution imputed Fully imputed – YES
Partial imputation

1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of
Resident Withholding Tax (RWT).
3
“Gross taxable amount” is the gross distribution minus any excluded income.
4
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RWT.
This should include any excluded amounts, where applicable to listed PIEs.
5
The imputation credits plus the RWT amount is 33% of the gross taxable amount for the purposes of this form. If the distribution is
fully imputed the imputation credits will be 28% of the gross taxable amount with remaining 5% being RWT. This does not constitute
advice as to whether or not RWT needs to be withheld.

No imputation
If fully or partially imputed, please
state imputation rate as % applied
6

28%
Imputation tax credits per financial
product
$0.01750000
Resident Withholding Tax per
financial product
$0.00312500
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any)
2.0%
Start date and end date for
determining market price for DRP
27/02/2020 04/03/2020
Date strike price to be announced (if
not available at this time)
05/03/2020
Specify source of financial products to
be issued under DRP programme
(new issue or to be bought on market)
New issue
DRP strike price per financial product
$

Last date to submit a participation
notice for this distribution in
accordance with DRP participation
terms
27/02/2020, 5:00pm (NZT)
Section 5: Authority for this announcement
Name of person

authorised to make
this announcement
Michael Drumm
Contact person for this
announcement
Michael Drumm
Contact phone number 09 927 9136
Contact email address Michael.Drumm@Heartland.co.nz
Date of release through MAP

18/02/2020





6
Calculated as (imputation credits/gross taxable amount) x 100. Fully imputed dividends will be 28% as a % rate applied.

---

r
2020 Half Year
Results
18 February 2020

Important Notice
oThis announcement is based on the 31 December 2019 unaudited interim consolidated financial
statements of Heartland Group Holdings Limited (Heartland).
oFollowing a corporate restructure on 31 October 2018, Heartland Bank Limited (Heartland Bank) became
a 100% controlled subsidiary of Heartland, and ownership of the Australian group of companies
(comprising Heartland Australia Holdings Pty Limited and its subsidiaries) transferred from Heartland Bank
to Heartland.
oAs common control has remained the same both before and after the corporate restructure, management
believes that the operations of Heartland from 1 November 2018 are directly comparable to those of
Heartland Bank prior to 1 November 2018.
oAll comparative results for Heartland are based on 31 December 2018 unaudited interim consolidated
financial statements of Heartland Bank and its subsidiaries up to 31 October 2018, and Heartland and its
subsidiaries from 1 November 2018 to 31 December 2018 (financial performance), or 30 June 2019
audited full year consolidated financial statements of Heartland (financial position), unless otherwise
noted.
2

3
1H2020
Highlights

Financial Performance
4
1.Net operating income includes fair value gains/losses on investments.
2.Gross finance receivables includes Reverse Mortgages.
3.Excluding the impact of changes in foreign currency exchange (FX) rates.
3
2
1

Strategy
oContinued focus on business simplification and growing core portfolios where
best or only.
oLaunch of Heartland’s digital small business lending platform Open for
Business (O4B) in Australia.
oLeveraging corporate restructure, existing platforms and capabilities to
broaden the reach of Heartland’s best or only products across other markets.
oFurther diversification and expansion of Australian funding.
5

oIncreased focus on customer experience, demonstrated through the introduction of a
dedicated Customer Experience team and continual digital improvements.
oProduct feature enhancements to meet customer needs, e.g. YouChoose and Australian
Reverse Mortgages.
oContinued rollout of automation and paperless initiatives to reduce print volumes, e.g.
DocuSign and the rollout of a document management tool.
oContinued focus on increased compliance and regulation requirements, including:
•increase in FTE and strengthened technical expertise
•focus on activity-based results
•launch of Heartland’s refreshed mātāpono (values).
o47% of employees were aged 35 years and under.
oContinuation of Heartland’s Manawa Ako internship programme, attracting 35 young Māori
and Pacifica students this year.
Customers
Customers and Culture
6
Culture

7
Financial
Results

Growth in Profitability
8
1.All figures in NZ$m.
+6%
+20%
+9%

Growth in Receivables
9
1.The graph shows year-to-date (YTD) movement in Receivables by individual portfolio excluding the FX impact.
2.All figures in NZ$m.
+9%
+4%

0.58%
0.64%
0.49%
0.40%
Jun 18Dec 18Jun 19Dec 19
Impairment Expense Ratio
73.86
70.93
75.58
82.30
1.84%
1.68%
1.72%
1.80%
Ju n 18Dec 18Ju n 19Dec 19
Non Performing LoansNon Performing Loans Ratio
Key Performance Measures
10
Impairment Expense Ratio
3
Non Performing Loans (NPL) Ratio
Net Interest Margin (NIM)
1
Cost to Income (CTI) Ratio
2
1.NIM is calculated as full year (for June periods) or annualised half year (for December periods) net interest income/average interest earning assets.
2.Underlying CTI excludes impacts of the required accounting standard change and one-off impacts.
3.Impairment expense ratio is calculated as impairment expense/average gross finance receivables.

Shareholder Return
11
1.Total fully imputed dividends for 2H19 (final) and 1H20 (interim) divided by the closing share price as at 14 February 2020 of $1.84.
oEarnings per share (EPS) of 6.9 cps, up
1.0 cps compared to 1H19.
oInterim dividend of 4.5 cps, up 1.0 cps
from 1H19.
oInterim dividend reflects consistent
performance, with return on equity
(ROE) increasing 165 bps since
December 2018 to 11.7%.
oResulting gross dividend yield of 8.3%
1
.
10.38%
10.05%
10.08%
11.70%
Jun 18Dec 18Jun 19Dec 19
ROE
3.5 3.5 3.5 3.5
4.5
5.0
5.5 5.5
6.5
FY16FY17FY18FY19FY20
Dividend per share (cps)
Interim DividendFinal Dividend

12
Divisional
Summary

O4B
oO4B portfolio increased $25m since June 2019 to
$158m (37% annualised growth).
oNet Operating Income of $6.6m is 53.9% up on 1H19.
oSupported more than 800 small Kiwi businesses with
$48 million of new financing in 1H2020 to achieve
their business goals and grow the New Zealand
economy.
oO4B launched in Australia.
oInvestment in marketing to increase product
awareness, and operational capacity for the next
growth phase.
13
O4B
$158m
As at 31 December 2019
+37%
annualised growth since June 2019

AU Reverse Mortgages
14
AU Reverse
Mortgages
$887m
As at 31 December 2019
+20%
annualised growth since June 2019
1
1.Excluding the FX impact.
2.Based on APRA ADI Property Exposure and Heartland Seniors Finance data as at 31 March 2019.
3.Based on APRA ADI Property Exposure and Heartland Seniors Finance data as at 30 September 2019.
oReceivables increased $79m since June 2019 to $887m
(20% annualised growth)
1
.
oNet Operating Income of $16.6m is 41.6% up on 1H19.
oAnother 800 families helped live a more comfortable
retirement.
oHeartland remains the leading originator of reverse
mortgages in Australia with market share increasing
from 24%
2
to 26%
3
, and similar trend expected in the
future.
oContinued enhancements to digital channel and
investment in marketing to increase product and
brand awareness.

NZ Reverse Mortgages
oReceivables increased $26m since June 2019 to $536m
(10% annualised growth).
oNet Operating Income of $13.0m is 26.4% up on 1H19.
oAnother 400 Kiwi families helped live a more
comfortable retirement.
oContinued enhancements to digital channel and
investment in marketing to increase product and
brand awareness.
15
NZ Reverse
Mortgages
$536m
As at 31 December 2019
+10%
annualised growth since June 2019

Business Intermediated
oReceivables increased $69m since June 2019 to $494m
(32% annualised growth).
oNet Operating Income of $10.1m is 27.7% up on 1H19.
oSupported more than 1,100 businesses with over $172
million of new financing in 1H2020 to purchase
equipment and machinery through intermediary
partners.
oStrong growth driven by market share gains through
continued expansion and strengthening of partnerships
with distributors and vendors of plant equipment,
including Hino, Isuzu and Mainfreight.
16
Business
Intermediated
$494m
As at 31 December 2019
+32%
annualised growth since June 2019

Motor Finance
oReceivables increased $35m since June 2019 to
$1,124m (6% annualised growth).
oNet Operating Income of $30.1m is 6.8% up on 1H19.
oGrowth continued in spite of market slowdown.
oMore than 12,000 customers supported in purchasing
a new car during 1H2020.
oLaunch of new white label finance product in
partnership with Kia Motors New Zealand.
oFurther expanding and strengthening strategic
distributor partnerships, and continued focus on
broadening intermediary relationships.
17
Motor Finance
$1,124m
As at 31 December 2019
+6%
annualised growth since June 2019

Other Personal Lending
oNew Zealand Harmoney portfolio continues to grow
steadily, increasing $7m since June 2019 to $159m
(10% annualised growth).
oStrong growth in Australian Harmoney portfolio to
$61m, up $22m since June 2019 (116% annualised
growth).
oNet Operating Income of $11.0m is 16.3% up on 1H19.
18
Harmoney and
Harmoney and other
personal lending
$234m
As at 31 December 2019
+27%
annualised growth since June 2019

Livestock
oLivestock portfolio increased $16m to $108m since
December 2018 (17% annual growth)
1
.
oNet Operating Income of $3.4m is 20.2% up on 1H19.
oMore than 900 existing customers supported with
finance to purchase and trade livestock without having
to mortgage their farm.
19
Livestock
As at 31 December 2019
+17%
growth since December 2018
1
1.Comparison against 31 December 2018 better reflects portfolio performance due to its seasonal profile.
$108m

-12%
Relationship
oReceivables decreased $66m since June 2019 to
$1,028m (12% annualised decrease).
oNet Operating Income of $23.3m is 16.7% down on
1H19.
oContinued managed reduction of low margin
concentration in non-core Business and Rural
Relationship portfolios.
20
Relationship
As at 31 December 2019
annualised decrease since June 2019
1.Relationship includes non-core Business Relationship and Rural Relationship portfolios.
$1,028m

Funding
oHeartland operates a diversified funding base that continues to grow with the business,
with focus on matching asset duration, increasing leverage and improving capital
efficiency.
oHeartland Bank utilises deposits and other funding sources as required:
•90-day registered certificate of deposits
•externally rated auto loan warehouse
•money market lines.
oDeposits increased $80m since June 2019 to $3,234m (5% annualised growth) due to
strong growth in Term Deposit book of $101m (9% annualised growth).
o1,567 new savings accounts opened during 1H2020, bringing the total number of
customers helped reach their savings goals faster to more than 24,000.
oStrong performance in the deposit book is supported by Heartland’s competitive and
flexible deposit product offering, providing a competitive strength amidst a highly
competitive market, and resulting in a high retention rate of 88%.
21

Funding Continued
oOptimisation of the Heartland Mobile App to enable a better
user experience.
oAwarded Canstar’s Bank of the Year –Savings Awards (second
year running).
oAwarded Canstar’s 5-Star Rating for Outstanding Value
Savings Account for the Direct Call Account (fourth year
running).
oProduct enhancements made to YouChoose to allow savings
without an overdraft.
22

23
Strategic
Update

New Zealand Banking
oAchieving sustainable growth and performance underpinned by customer success through
providing best or only products.
oReduced concentration risk on low margin Business and Rural portfolios.
oFocus on building new, and further strengthening and broadening existing strategic Business
Intermediated and Motor Finance relationships and partnerships.
oUsing better, more cost efficient channels to challenge and disrupt banks and financial
technology companies.
24

Australia
oContinued growth in Australian Reverse Mortgages distributed through broker and
direct channels, with an increased focus on direct channels.
oFunding diversification work continues, with A$100m of new funding obtained in
November 2019 via an MTN issuance.
oA new securitisation facility with a new major bank provider secured.
oBroadening Heartland’s offering in Australia where opportunities exist, for example,
the launch of O4B in Australia in 1H2020.
25

Digital
oDeveloping digital services, platforms and processes to enable the provision of
high-quality customer outcomes, superior customer experiences and seamless
access to products and services. Including through:
•free online calculator of potential lending amount now available for New
Zealand Reverse Mortgage customers
•online application now available for Australian Reverse Mortgage customers
•small business lending platform O4B launched in Australia
•implementation of DocuSign allowing for automation of the loan documents
signing process
•Online EFTPOS for YouChoose customers for online purchases
•automated decisioning available for Business Intermediated customers.
26

Regulatory Update
FMA and RBNZ review of conduct and culture in New Zealand retail banks
1
oThe review found no conduct and culture issues of material concern but urged banks to strengthen
management of conduct risks.
oThe findings are consistent with Heartland’s constant internal focus on positive customer outcomes and
the values of Mahi Tika.
oOn 29 March 2019, Heartland submitted a workplan addressing the findings, and progress has been made
on implementation.
RBNZ capital review
oIn December 2019, the RBNZ announced the final outcome of the review of the capital adequacy
framework for locally incorporated banks.
oThe revised framework requires Heartland Bank to increase its Total Capital ratio to 16% over a seven-year
transitional period commencing July 2020.
oThe changes will not impact Heartland Bank until 2022 when minimum regulatory capital requirements
increase from 8% to 9%, therefore not having a material impact on Heartland Bank.
oHeartland Bank’s Total Capital ratio was 12.9% as at 31 December 2019.
27
1.“Bank Conduct and Culture –Findings from an FMA and RBNZ review of conduct and culture in New Zealand retail banks” report, dated November 2018
and published by the FMA and RBNZ.

2H2020 Outlook
oAsset growth in core lending, particularly reverse mortgages in New Zealand and Australia,
and O4B.
oContinued investment in:
•increasing brand and product awareness in both markets, particularly for O4B and
Reverse Mortgages
•increasing operational capacity to support opportunities and growth in core strategic
areas
•meeting regulatory and compliance commitments
•Innovation and new growth opportunities.
oHeartland expects net profit after tax for the full FY2020 to be in the range of $77 million to
$80 million, in line with the earlier guidance.
28

29
Appendices

Appendix –Financial Position
30
$m
31 Dec
2019
30 June
2019
Movement
($m)
Movement
(%)
Liquid Assets4924177517.9%
Net Finance Receivables4,521 4,350171 3.9%
Other Assets177 162 159.0%
TOTAL ASSETS5,190 4,929 260 5.3%
Retail Deposits3,234 3,15480 2.5%
Other Borrowings1,210 1,055 155 14.7%
Other Liabilities 59 45 14 30.2%
Equity688 676 12 1.7%
TOTAL EQUITY & LIABILITIES5,190 4,929 260 5.3%

Appendix –Financial Performance
31
$m1H20201H2019Change ($)Change (%)
Net Operating Income
1
118.6102.116.516.2%
Operating Expenses
(54.6)(43.4)11.225.9%
Impairment Expense
(9.0)(13.3)(4.3)(32.1%)
Profit Before Tax
55.045.59.521.0%
Tax Expense
(15.1)(12.4)2.822.6%
Net Profit After Tax
39.933.16.720.4%
Net Interest Margin
4.27%4.34%(7 bps)
Cost to Income Ratio
46.0%42.5%3.5%
Return on Equity
11.7%10.0%165 bps
Earnings per Share
6.9 cps5.9 cps1.0 cps
1.Net operating income includes fair value gains/losses on investments.

Thank you
32

---

Financial
Statements
For the 6 months ended 31 December 2019

1
Contents
GENERAL INFORMATION .....................................................................................................................................................................................2
DIRECTORS .........................................................................................................................................................................................................2
AUDITOR ............................................................................................................................................................................................................2
DIRECTORS' STATEMENTS ...................................................................................................................................................................................2
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME ............................................................................ 3
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY ..................................................................................... 4
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION .................................................................................... 6
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS ................................................................................................. 7
NOTES TO THE INTERIM FINANCIAL STATEMENTS .......................................................................................................... 9
1 Financial statements preparation ..............................................................................................................................................................9
PERFORMANCE ............................................................................................................................................................ 11
2 Segmental analysis ................................................................................................................................................................................. 11
3 Net interest income ................................................................................................................................................................................ 13
4 Operating expenses ................................................................................................................................................................................ 13
5 Impaired asset expense .......................................................................................................................................................................... 14
6 Earnings per share .................................................................................................................................................................................. 14
FINANCIAL POSITION ................................................................................................................................................... 15
7 Finance Receivables ................................................................................................................................................................................ 15
8 Borrowings ............................................................................................................................................................................................. 19
9 Share capital and dividends .................................................................................................................................................................... 20
10 Related party transactions and balances ................................................................................................................................................. 21
11 Fair value ................................................................................................................................................................................................ 22
RISK MANAGEMENT .................................................................................................................................................... 24
12 Enterprise risk management program ..................................................................................................................................................... 24
13 Credit risk exposure ................................................................................................................................................................................ 24
14 Liquidity risk ........................................................................................................................................................................................... 26
15 Interest rate risk ..................................................................................................................................................................................... 27
Other Disclosures ......................................................................................................................................................... 28
16 Structured entities .................................................................................................................................................................................. 28
17 Insurance business, securitisation, funds management, other fiduciary activities .................................................................................... 29
18 Contingent liabilities and commitments .................................................................................................................................................. 29
19 Events after the reporting date ............................................................................................................................................................... 29
Independent Auditors Review Report........................................................................................................................... 31

2

GENERAL INFORMATION
Heartland Group Holdings Limited (HGH or the Company) is incorporated in New Zealand and registered under the Companies Act
1993. The shares in HGH are listed on the New Zealand exchange (NZX) main board and the Australian Securities exchange (ASX)
under a foreign exempt listing.
The Company's address for service is Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland.
DIRECTORS
As at the date this Interim Financial Statements was signed, the Directors of the Group are:
Geoffrey T Ricketts (Chair) – Independent Non-Executive Director
Gregory R Tomlinson (Deputy Chair) – Non-Executive Director
Jeffrey K Greenslade – Executive Director and Group Chief Executive Officer
Sir Christopher R Mace – Independent Non-Executive Director
Ellen F Comerford – Independent Non-Executive Director
AUDITOR
KPMG
KPMG Centre
18 Viaduct Harbour Avenue
Auckland
DIRECTORS' STATEMENTS
This Consolidated Interim Financial Report for HGH and its subsidiaries (together the Group) is dated 17 February 2020 and has been
signed by all the Directors.





G T Ricketts (Chair) G R Tomlinson (Deputy Chair)




J K Greenslade Sir C R Mace




E F Comerford

3
CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31 December 2019


Unaudited Unaudited Audited
6 months to 6 months to 12 months to
$000's
NOTE
December 2019 December 2018 June 2019


Interest income
3
172,536 166,260 334,330
Interest expense
3
67,353 68,238 136,747
Net interest income

105,183 98,022 197,583

Operating lease income

2,910 2,871 5,262
Operating lease expenses

1,962 1,801 3,427
Net operating lease income

948 1,070 1,835

Lending and credit fee income

6,827 1,444 3,117
Other income

3,579 1,575 3,307
Net operating income

116,537 102,111 205,842

Operating expenses
4
54,597 43,356 85,589
Profit before impaired asset expense and income tax

61,940 58,755 120,253

Fair value movement on investment property

- - 1,936
Fair value gain on investment

2,097 - -
Impaired asset expense
5
9,023 13,286 20,676
Profit before income tax

55,014 45,469 101,513

Income tax expense

15,149 12,355 27,896
Profit for the period/year 39,865 33,114 73,617

Other comprehensive income
Items that are or may be reclassified subsequently to profit or
loss:

Effective portion of changes in fair value of derivative
financial instruments, net of income tax
(225) 781 (4,762)
Movement in fair value reserve, net of income tax (968) 170 2,968
Movement in foreign currency translation reserve, net of income
tax
(513) (4,003) (5,281)
Items that will not be reclassified to profit or loss:
Movement in defined benefit reserve, net of income tax - - (86)

Other comprehensive income for the year, net of income tax (1,706) (3,052) (7,161)

Total comprehensive income for the period/year 38,159 30,062 66,456
Earnings per share
Basic earnings per share 6 7c 6c 13c
Diluted earnings per share 6 7c 6c 13c

Total comprehensive income for the period/year is attributable to the owners of the Group.
The notes on pages 9 to 29 are an integral part of this consolidated interim financial statement.

4

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2019



$000's
NOTE
Share
Capital
Employee
Benefits
Reserve
Foreign
Currency
Translation
Reserve
Fair
Value
Reserve
Defined
Benefit
Reserve
Cash
Flow
Hedge
Reserve
Retained
Earnings
Total
Equity
Unaudited - December 2019


Balance at 1 July 2019 558,970 838 (4,021) 4,558 171 (5,843) 120,995 675,668
NZ IFRS 16 adjustment 1 - - - - - - (639) (639)
Restated balance at beginning of
period
558,970 838 (4,021) 4,558 171 (5,843) 120,356 675,029

Total comprehensive income for
the period

Profit for the period - - - - - - 39,865 39,865
Other comprehensive
income/(loss) net of income tax
- - (513) (968) - (225) - (1,706)
Total comprehensive income for
the period
- - (513) (968) - (225) 39,865 38,159

Contributions by and distributions
to owners

Dividends paid 9 - - - - - - (37,007) (37,007)
Dividend reinvestment plan 9 11,296 - - - - - - 11,296
Transaction costs associated with
capital raising
(30) - - - - - - (30)
Share based payments - 153 - - - - - 153
Shares vested 420 (420) - - - - - -
Total transactions with owners 11,686 (267) - - - - (37,007) (25,588)

Balance as at 31 December 2019 570,656 571 (4,534) 3,590 171 (6,068) 123,214 687,600

Unaudited - December 2018





Balance at 1 July 2018

542,315 2,559 1,260 1,590 257 (1,081) 117,260 664,160
NZ IFRS 9 adjustment (Restated) - - - - - - (19,283) (19,283)
Restated balance at beginning of
period
542,315 2,559 1,260 1,590 257 (1,081) 97,977 644,877

Total comprehensive income for
the period

Profit for the period - - - - - - 33,114 33,114
Other comprehensive
income/(loss) net of income tax
- - (4,003) 170 - 781 - (3,052)
Total comprehensive income for
the period
- - (4,003) 170 - 781 33,114 30,062

Contributions by and distributions
to owners

Dividends paid 9 - - - - - - (30,808) (30,808)
Dividend reinvestment plan 9 8,584 - - - - - - 8,584
Share based payments - 383 - - - - - 383
Total transactions with owners 8,584 383 - - - - (30,808) (21,841)

Balance as at 31 December 2018 550,899 2,942 (2,743) 1,760 257 (300) 100,283 653,098

The notes on pages 9 to 29 are an integral part of this consolidated interim financial statement.

5

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
For the six months ended 31 December 2019 (continued)



$000's
NOTE
Share
Capital
Employee
Benefits
Reserve
Foreign
Currency
Translation
Reserve
Fair
Value
Reserve
Defined
Benefit
Reserve
Cash
Flow
Hedge
Reserve
Retained
Earnings
Total
Equity
Audited - 30 June 2019


Balance at 1 July 2018 542,315 2,559 1,260 1,590 257 (1,081) 117,260 664,160
NZ IFRS 9 adjustment - - - - - - (19,283) (19,283)
Restated balance at beginning of
year
542,315 2,559 1,260 1,590 257 (1,081) 97,977 644,877

Total comprehensive income for
the year

Profit for the year - - - - - - 73,617 73,617
Other comprehensive
income/(loss) net of income tax

- - (5,281) 2,968 (86) (4,762) - (7,161)
Total comprehensive income for
the year
- - (5,281) 2,968 (86) (4,762) 73,617 66,456

Contributions by and distributions
to owners

Dividends paid
9
- - - - - - (50,599) (50,599)
Dividend reinvestment plan
9
14,333 - - - - - - 14,333
Transaction costs associated with
capital raising
(18) - - - - - - (18)
Share based payments - 619 - - - - - 619
Shares vested 2,340 (2,340) - - - - - -
Total transactions with owners 16,655 (1,721) - - - - (50,599) (35,665)

Balance as at 30 June 2019 558,970 838 (4,021) 4,558 171 (5,843) 120,995 675,668

The notes on pages 9 to 29 are an integral part of this consolidated interim financial statement.

6

CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
As at 31 December 2019


Unaudited Unaudited Audited
6 months to 6 months to 12 months to
$000's
NOTE
December 2019
December 2018
(Restated)
June 2019

Assets
Cash and cash equivalents
185,732
89,161 80,584
Investments
321,990
318,961 354,928
Investment properties
11,132
9,196 11,132
Derivative financial assets
11,936 1,238
12,675
Finance receivables 7(a)
3,101,366
2,934,170 3,029,231
Finance receivables - reverse mortgages 7(b)
1,419,557 1,232,353
1,318,819
Right of use assets

19,844
- -
Operating lease vehicles

18,549
16,430 15,516
Other assets

17,492
16,128 21,309
Intangible assets

72,159
73,085 72,679
Deferred tax asset

9,912
9,650 9,531
Total assets

5,189,669
4,700,372 4,926,404



Liabilities


Retail deposits 8
3,234,025
2,988,365 3,153,681
Other borrowings 8
1,209,540
1,039,420 1,056,653
Lease liabilities

21,306
- -
Tax liabilities

5,588
1,835 7,532
Derivative financial liabilities

9,843
148 10,372
Trade and other payables

21,767
17,506 22,498
Total liabilities

4,502,069
4,047,274 4,250,736



Equity

Share capital 9
570,656
550,899 558,970
Retained earnings and other reserves
116,944
102,199 116,698
Total equity
687,600
653,098 675,668

Total equity and liabilities
5,189,669
4,700,372 4,926,404

The notes on pages 9 to 29 are an integral part of this consolidated interim financial statement.

7

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the six months ended 31 December 2019

Unaudited Unaudited
Audited
6 months to 6 months to 12 months to
$000's NOTE December 2019 December 2018 June 2019
Cash flows from operating activities

Interest received 173,788 149,255 304,991
Operating lease income received 2,450 2,961 4,761
Lending, credit fees and other income received 9,381 3,363 4,587
Operating inflows 185,619 155,579 314,339

Interest paid 73,520 50,799 89,607
Payments to suppliers and employees 59,797 71,393 135,404
Taxation paid 12,512 19,730 25,895
Operating outflows 145,829 141,922 250,906

Net cash flows from operating activities before
changes in operating assets and liabilities
39,790 13,657 63,433

Proceeds from sale of operating lease vehicles 1,101 2,414 4,641
Purchase of operating lease vehicles (6,614) (2,996) (5,495)
Net movement in finance receivables (174,276) (196,828) (384,367)
Net movement in deposits 80,344 105,388 271,876
Net cash flows (applied to) / from operating
activities
(59,655) (78,365) (49,912)

Cash flows from investing activities

Net decrease in investments 45,373 21,928 -
Total cash provided from investing activities 45,373 21,928 -

Purchase of office fit-out, equipment and intangible
assets
6,989 2,379 4,512
Net increase in investments - - 11,468
Total cash applied to investing activities 6,989 2,379 15,980

Net cash flows from / (applied to) investing
activities
38,384 19,549 (15,980)

Cash flows from financing activities

Net increase/(decrease) in wholesale funding 49,720 143,459 31,000
Proceeds from issue of Unsubordinated Notes 103,167 - 125,000
Total cash provided from financing activities 152,887 143,459 156,000

Dividends paid 9 25,711 22,224 36,266
Repayments of subordinated Notes - 22,846 22,846
Principal elements of lease payments 757 - -
Total cash applied to financing activities 26,468 45,070 59,112

Net cash flows from financing activities 126,419 98,389 96,888

Net increase / (decrease) in cash held 105,148 39,573 30,996
Opening cash and cash equivalents 80,584 49,588 49,588
Closing cash and cash equivalents 185,732 89,161 80,584




The notes on pages 9 to 29 are an integral part of this consolidated interim financial statement.

8

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
For the six months ended 31 December 2019 (continued)
Unaudited Unaudited
Audited
6 months to 6 months to 12 months to
$000's NOTE December 2019 December 2018 June 2019
Profit for the period 39,865 33,114 73,617

Add / (less) non-cash items:
Depreciation and amortisation expense 4,357 2,701 5,760
Depreciation on lease vehicles 1,962 1,676 3,363
Capitalised net interest income (24,859) (12,040) (29,417)
Impaired asset expense 5 9,023 13,286 20,676
Fair valuation gain on investments (2,097) - (1,936)
Total non-cash items (11,614) 5,623 (1,554)

Add / (less) movements in operating assets and liabilities:
Finance receivables (174,276) (196,828) (384,367)
Operating lease vehicles (4,652) (582) (1,354)
Other assets (4,337) (5,377) (8,260)
Current tax (1,944) (9,624) (3,927)
Derivative financial instruments revaluation (757) (1,948) (8,701)
Deferred tax (381) (4,630) 3,759
Deposits 80,344 105,388 271,876
Right of use asset 19,884 - -
Other liabilities (1,787) (3,501) 8,999
Total movements in operating assets and liabilities (87,906) (117,102) (121,975)

Net cash flows applied to operating activities (59,655) (78,365) (49,912)




The notes on pages 9 to 29 are an integral part of this consolidated interim financial statement.

9

NOTES TO THE INTERIM FINANCIAL STATEMENTS
For the 6 months ended 31 December 2019

1 Financial statements preparation
Basis of preparation
The interim financial statements of the Group incorporated in this Interim Report have been prepared in accordance with Generally
Accepted Accounting Practice in New Zealand (NZ GAAP) as defined in the Financial Reporting Act 2013, the NZX Main Board Listing
Rules, and the ASX Listing Rules. The financial statements comply with NZ IAS 34 Interim Financial Reporting as appropriate for
publicly accountable for-profit entities and IAS 34 Interim Financial Reporting.
The interim report does not include all notes of the type normally included in an annual financial report. Accordingly, this report is to
be read in conjunction with the annual report for the year ended 30 June 2019 and any public announcements made by the Group
during the interim reporting period.
The interim financial statements presented here are for the following periods:
 6 month period ended 31 December 2019 – Unaudited
 6 month period ended 31 December 2018 – Unaudited
 12 month period ended 30 June 2019 – Audited
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period
with the exception of the adoption of new and amended standards as set out below.
Impact of adopting NZ IFRS 16 Leases
The Group has adopted NZ IFRS 16 retrospectively from 1 July 2019, but has not restated comparatives for the 2019 reporting period,
as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new
leasing rules are therefore recognised in the opening balance sheet on 1 July 2019.
Accounting treatment for leasing activities
The Group leases office space, car parks, equipment and cars. Rental contracts are typically made for fixed periods but may have
extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
Until 30 June 2019, leases of property, plant and equipment were classified as either finance or operating leases. Payments made
under operating leases (net of any incentives received from the lessor) were charged to profit or loss.
From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is
available for use by the Group. The right-of-use assets are initially measured at cost, comprising the amount of the initial
measurement of lease liability, any lease payments made at or before the commencement date less any lease incentives received,
any initial direct costs and restoration costs. The right-of-use asset is depreciated over the shorter of the asset's estimated useful life
and the lease term on a straight-line basis. The estimated useful lives of right-of-use assets are determined on the same basis as
those of property, plant and equipment.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an
extension option. Extension options are only included in the lease term if the lease is reasonably certain to be extended.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in
profit or loss. Short-term leases are leases with a lease term of 12 months or less.
On adoption of NZ IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as
‘operating leases’ under the principles of NZ IAS 17 Leases. These liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee’s incremental borrowing rate as at 1 July 2019. The weighted average lessee’s
incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 2.9%.

10

1. Financial statements preparation (continued)
The Group elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts
entered into before the transition date, the Group relied on its assessment made applying NZ IAS 17 and NZ IFRIC 4 Determining
whether an Arrangement contains a Lease.

$000’s

Operating lease commitments as at 30 June 2019 12,385
Discounted using the Group's incremental borrowing rate on initial application (1,060)
Adjustments relating to changes in the index or rate effective variable payments 316
Lease liability recognised as at 1 July 2019 11,641
Of which are:

Current lease liabilities 1,947
Non-current lease liabilities 9,694
Total lease liabilities 11,641

The associated right-of-use assets of which are substantially in relation to property leases were measured on a retrospective basis as
if the new rules had always been applied. There were no onerous lease contracts that would have required an adjustment to the
right-of-use assets at the date of initial application.
The change in accounting policy affected the following items in the balance sheet on 1 July 2019:
 Right-of-use assets: increased by $10.7 million
 Deferred tax assets: increased by $0.3 million
 Lease liabilities: increased by $11.6 million
The net impact on retained earnings on 1 July 2019 was a decrease of $0.6 million.
The adoption of NZ IFRS 16 has no material impact to the Group’s leasing business where the Group acts as the lessor.
There have been no other changes to accounting policies or other new or amended standards that are issued and effective that are
expected to have a material impact on the Group.
Accounting standards issued but not yet effective
NZ IFRS 17 Insurance Contracts was issued in July 2017 and is applicable to general and life insurance contracts. NZ IFRS 17 will
replace NZ IFRS 4 Insurance Contracts. In mid-2019 an Exposure Draft on amendments to NZ IFRS 17 was issued and proposed that
the effective date of NZ IFRS 17 be deferred by one year. As such it is expected that the standard will be effective for the Group for
the financial year ending 30 June 2023. The Group is in the process of restructuring its insurance business and will assess the impact
arising from NZ IFRS 17 in conjunction with the restructure. Further information on the restructure is included in Note 17 of the
financial statements.

Other amendments to existing standards that are not yet effective are not expected to have a material impact to the Group.

11

PERFORMANCE
2 Segmental analysis
Segment information is presented in respect of the Group's operating segments which are those used for the Group's management
and internal reporting structure.

Operating segments

Motor Motor vehicle finance.

Reverse Mortgages Reverse mortgage lending.

Other Personal A comprehensive range of financial services – including term, transactional and savings-based deposit
accounts and personal loans to individuals.

Business Term debt, plant and equipment finance, commercial mortgage lending and working capital solutions
for small-to-medium businesses.

Rural Specialist financial services to the farming sector primarily offering livestock finance, rural mortgage
lending, seasonal and working capital financing, as well as leasing solutions to farmers.

Australia Reverse mortgage lending and other financial services within Australia.


Certain operating expenses and assets, such as premises, IT and support centre costs are not allocated to operating segments and are
included in Other.



Motor
Reverse
Mortgages
Other
Personal
Business Rural Australia Other Total
$000's
Unaudited - 6 months ended
31 December 2019



Net interest income 28,204 11,826 9,238 28,026 15,380 12,549 (40) 105,183
Net other income 1,895 2,779 646 1,317 535 1,567 2,615 11,354
Net operating income 30,099 14,605 9,884 29,343 15,915 14,116 2,575 116,537



Operating expenses 1,615 3,178 1,934 5,980 1,396 6,828 33,666 54,597
Profit/(loss) before impaired
asset expense and income tax
28,484 11,427 7,950 23,363 14,519 7,288 (31,091) 61,940
Fair value gain on investment - - - - - - 2,097 2,097
Impaired asset expense 3,611 - 3,345 1,880 139 48 - 9,023
Profit/(loss) before income tax
from continuing operations
24,873 11,427 4,605 21,483 14,380 7,240 (28,994) 55,014

Income tax expense - - - - - 2,173 12,976 15,149
Profit/(loss) for the period 24,873 11,427 4,605 21,483 14,380 5,067 (41,970) 39,865

Total assets 1,127,408 536,462 244,498 1,148,614 615,072 883,668 633,947 5,189,669
Total liabilities - - - - - 824,880 3,677,189 4,502,069

12

2 Segmental analysis (continued)


Motor
Reverse
Mortgages
Other
Personal
Business Rural Australia Other Total
$000's
Unaudited - 6 months ended 31 December 2018

Net interest income 27,716 9,937 8,304 26,904 15,426 11,555 (1,820) 98,022
Net other income 467 112 1,195 723 404 196 992 4,089
Net operating income 28,183 10,049 9,499 27,627 15,830 11,751 (828) 102,111

Operating expenses 1,203 1,261 2,975 4,539 1,899 2,633 28,846 43,356
Profit / (loss) before impaired
asset expense and income tax
26,980 8,788 6,524 23,088 13,931 9,118 (29,674) 58,755

Impaired asset expense /
(benefit)
4,654 - 5,036 3,812 (135) (322) 241 13,286
Profit / (loss) before income tax 22,326 8,788 1,488 19,276 14,066 9,440 (29,915) 45,469

Income tax expense - - - - - 931 11,424 12,355
Profit / (loss) for the period 22,326 8,788 1,488 19,276 14,066 8,509 (41,339) 33,114

Total assets (restated) 1,021,673 478,037 200,823 1,083,029 634,486 754,933 527,391 4,700,372
Total liabilities - - - - - - 4,047,274 4,047,274


Motor
Reverse
Mortgages
Other
Personal
Business Rural Australia Other Total
$000's
June 2019 – Audited



Net interest income 54,753 20,673 16,345 54,334 30,865 21,148 (535) 197,583
Net other income 2,313 224 2,563 1,524 816 1,582 (763) 8,259
Net operating income 57,066 20,897 18,908 55,858 31,681 22,730 (1,298) 205,842



Operating expenses 2,543 2,279 5,602 9,163 3,263 5,115 57,624 85,589
Profit/(loss) before impaired
asset expense and income tax
54,523 18,618 13,306 46,695 28,418 17,615 (58,922) 120,253

Fair value movement on
investment property
- - - - - - 1,936 1,936
Impaired asset expense /
(benefit)
5,009 268 8,307 7,102 (132) - 122 20,676
Profit/(loss) before income tax
from continuing operations
49,514 18,350 4,999 39,593 28,550 17,615 (57,108) 101,513

Income tax expense - - - - - 5,016 22,880 27,896
Profit/(loss) for the year 49,514 18,350 4,999 39,593 28,550 12,599 (79,988) 73,617

Total assets
1,074,446 561,211 215,253 1,096,253 643,278
758,268
577,695 4,926,404
Total liabilities - - - - - 740,111 3,510,625 4,250,736

13

3 Net interest income


Unaudited Unaudited Audited
6 months to 6 months to 12 months to
$000's

December 2019 December 2018 June 2019
Interest income
Cash and cash equivalents 309 312 717
Investments 4,364 4,906 10,864
Finance receivables 124,658 128,687 242,556
Finance receivables - reverse mortgages 43,205 32,355 80,193
Total interest income 172,536 166,260 334,330

Interest expense
Retail deposits 47,731 48,595 97,119
Other borrowings 18,223 18,233 36,382
Net interest expense on derivative financial instruments 1,399 1,410 3,246
Total interest expense 67,353 68,238 136,747

Net interest income 105,183 98,022 197,583


4 Operating expenses


Unaudited Unaudited Audited
6 months to 6 months to 12 months to
$000's

December 2019 December 2018 June 2019
Personnel expenses 27,108 23,285 47,427
Directors' fees 514 612 1,099
Audit and review of financial statements
1
401 338 614
Other assurance services paid to auditor
2
31 15 52
Depreciation - property, plant and equipment 1,112 898 1,867
Amortisation - intangible assets 2,102 1,803 3,893
Depreciation - right of use asset 1,143 - -
Operating lease expense as a lessee - 912 1,807
Legal and professional fees 1,787 1,843 3,130
Other operating expenses 20,399 13,650 25,700
Total operating expenses 54,597 43,356 85,589

1
Audit and review of financial statements includes fees paid for both audit of financial statements and review of interim financial statements.

2
Other assurance services paid to the auditor comprise review of regulatory returns, trust deed reporting, registry audits and other agreed upon procedures
engagements.

14

5 Impaired asset expense
At each reporting date, the Group applies a three stage approach to measuring expected credit loss (ECL) to finance receivables not
carried at fair value. The following table details impairment charges of those finance receivables for the six months ended 31
December 2019.

Unaudited Unaudited Audited
6 months to 6 months to 12 months to
$000’s December 2019 December 2018 June 2019
Non-securitised

Individually impaired expense/(benefit)
553 (425) 1,311
Collectively impaired expense
8,469 13,740 19,024
Total non-securitised impaired asset expense
9,022 13,315 20,335


Securitised

Collectively impaired expense/(benefit)
1 (29) 341
Total securitised impaired asset expense
1 (29) 341


Total

Individually impaired expense/(benefit)
553 (425) 1,311
Collectively impaired expense
8,470 13,711 19,365
Total impaired asset expense
9,023 13,286 20,676


6 Earnings per share

December 2019 December 2018
June 2019

Earnings
per share
(cents)
Net profit
after tax
$000’s
Weighted
average
no. of
shares
000’s
Earnings
per share
(cents)
Net profit
after tax
$000’s
Weighted
average
no. of
shares
000’s
Earnings
per share
(cents)
Net profit
after tax
$000’s
Weighted
average
no. of
shares
000’s
Basic earnings 7 39,865 574,277 6 33,114 561,188
13 73,617 563,364
Diluted earnings 7 39,865 574,277 6 33,114 561,188
13 73,617 563,364

15

FINANCIAL POSITION
7 Finance Receivables
(a) Finance receivables held at amortised cost
Unaudited Unaudited Audited


December 2019 December 2018 June 2019
$000’s (Restated)
Non-securitised
Neither 90 days past due nor impaired 3,049,814 2,766,520 3,016,844
At least 90 days past due 46,780 34,854 44,466
Individually impaired 28,433 36,773 26,412
Gross finance receivables 3,125,027 2,838,147 3,087,722
Less provision for impairment (60,381) (57,803) (58,491)
Total non-securitised finance receivables 3,064,646 2,780,344 3,029,231

Securitised
Neither 90 days past due nor impaired 36,843 154,642 -
At least 90 days past due - 197 -
Individually impaired - - -
Gross finance receivables 36,843 154,839 -
Less provision for impairment (123) (1,013) -
Total securitised finance receivables 36,720 153,826 -

Total
Neither 90 days past due nor impaired 3,086,657 2,921,162 3,016,844
At least 90 days past due 46,780 35,051 44,466
Individually impaired 28,433 36,773 26,412
Gross finance receivables 3,161,870 2,992,986 3,087,722
Less provision for impairment (60,504) (58,816) (58,491)
Total finance receivables 3,101,366 2,934,170 3,029,231

16

7 Finance Receivables (continued)
(a) Finance receivables held at amortised cost (continued)
Movement in provision

The following table details the movement from the opening balance to the closing balance of provision for impairment by class.
$000’s
12- month
ECL
Lifetime
ECL
Not credit
impaired
Lifetime
ECL
Credit
impaired
Specific
provision Total
Unaudited - December 2019


Non-securitised
Impairment allowance as at 1 July 2019
30,421 1,780 18,427 7,863 58,491
Changes in loss allowance

Transfer between stages
(925) (127) 1,046 - (6)

New and increased provision (net of collective
provision releases)
168 665 8,196 1,638 10,667
Recovery of amounts written off
- - (1,767) - (1,767)
Credit impairment charge
(757) 538 7,475 1,638 8,894
Recovery of amounts previously written off
- - 1,767 - 1,767
Write offs
- - (8,671) (100) (8,771)
Impairment allowance as at 31 December 2019 29,664 2,318 18,998 9,401 60,381

Securitised
Impairment allowance as at 1 July 2019
- - - - -
Changes in loss allowance

Transfer between stages
122 - - - 122

New and increased provision (net of collective
provision releases)
- 1 - - 1
Recovery of amounts written off
-
- - - -
Credit impairment charge
122 1 - - 123
Recovery of amounts previously written off
- - - - -
Write offs
- - - - -
Impairment allowance as at 31 December 2019 122 1 - - 123

Total
Impairment allowance as at 1 July 2019
30,421 1,780 18,427 7,863 58,491
Changes in loss allowance

Transfer between stages
(803) (127) 1,046 - 116

New and increased provision (net of collective
provision releases)
168 666 8,196 1,638 10,668
Recovery of amounts written off
-
- (1,767) - (1,767)
Credit impairment charge
(635) 539 7,475 1,638 9,017
Recovery of amounts previously written off
- - 1,767 - 1,767
Write offs
- - (8,671) (100) (8,771)
Impairment allowance as at 31 December 2019 29,786 2,319 18,998 9,401 60,504

17

7 Finance Receivables (continued)
(a) Finance receivables held at amortised cost (continued)

$000’s
12-month
ECL
(Restated)
Lifetime
ECL
Not credit
impaired
(Restated)
Lifetime
ECL
Credit
impaired
(Restated)
Collective
provision
June
2018
Specific
provision
(Restated)
Total
(Restated)
Unaudited - December 2018

Non-securitised
Impairment allowance as at 30 June 2018
- - - 20,301 9,066 29,367
Restated for adoption of NZ IFRS 9
31,784 1,365 14,945 (20,301) (169) 27,624
Restated impairment allowance as at 1 July 2018
31,784 1,365 14,945 - 8,897 56,991
Changes in loss allowance

Transfer between stages
(607) (108) 637 - - (78)

New and increased provision (net of
collective provision releases)
106 354 11,095 - 1,791 13,346
Recovery of amounts written off
- - (293) - (13) (306)
Credit impairment charge
(501) 246 11,439 - 1,778 12,962
Recovery of amounts previously written off
- - 293 - 13 306
Write offs
- - (7,953) - (4,503) (12,456)
Impairment allowance as at 31 December 2018 31,283 1,611 18,724 - 6,185 57,803

Securitised
Impairment allowance as at 30 June 2018
- - - 304 - 304
Restated for adoption of NZ IFRS 9
400 20 345 (304) - 461
Restated impairment allowance as at 1 July 2018
400 20 345 - - 765
Changes in loss allowance

Transfer between stages
616 - (369) - - 247

New and increased provision (net of
collective provision releases)
- 1 - - - 1
Recovery of amounts written off
- - - - - -
Credit impairment charge
616 1 (369) - - 248
Recovery of amounts previously written off
- - - - - -
Write offs
- - - - - -
Impairment allowance as at 31 December 2018 1,016 21 (24) - - 1,013

Total
Impairment allowance as at 30 June 2018
- - - 20,605 9,066 29,671
Restated for adoption of NZ IFRS 9
32,184 1,385 15,290 (20,605) (169) 28,085
Restated impairment allowance as at 1 July 2018
32,184 1,385 15,290 - 8,897 57,756
Changes in loss allowance

Transfer between stages
9 (108) 268 - - 169

New and increased provision (net of
collective provision releases)
106 355 11,095 - 1,791 13,347
Recovery of amounts written off
- - (293) - (13) (306)
Credit impairment charge
115 247 11,070 - 1,778 13,210
Recovery of amounts previously written off
- - 293 - 13 306
Write offs
- - (7,953) - (4,503) (12,456)
Impairment allowance as at 31 December 2018 32,299 1,632 18,700 - 6,185 58,816

18

7 Finance Receivables (continued)
(a) Finance receivables held at amortised cost (continued)

$000’s
12-month
ECL
Lifetime
ECL
Not credit
impaired
Lifetime
ECL
Credit
impaired
Collective
provision
June
2018
Specific
provision Total
Audited - June 2019


Non-securitised
Impairment allowance as at 30 June 2018
- - - 20,301 9,066 29,367
Restated for adoption of NZ IFRS 9
31,784 1,365 14,945 (20,301) (169) 27,624
Restated impairment allowance as at 1 July 2018
31,784 1,365 14,945 - 8,897 56,991
Changes in loss allowance

Transfer between stages
(1,071) (205) 11,671 - (43) 10,352

New and increased provision (net of
collective provision releases)
(292) 620 7,531 - 4,002 11,861
Recovery of amounts written off
- - (829) - - (829)
Credit impairment charge
(1,363) 415 18,373 - 3,959 21,384
Recovery of amounts written off
- - 829 - - 829
Write offs
- - (15,720) - (4,993) (20,713)
Impairment allowance as at 30 June 2019 30,421 1,780 18,427 - 7,863 58,491

Securitised
Impairment allowance as at 30 June 2018
- - - 304 - 304
Restated for adoption of NZ IFRS 9
400 20 345 (304) - 461
Restated impairment allowance as at 1 July 2018
400 20 345 - - 765
Changes in loss allowance

Transfer between stages
(400) (21) (345) - - (766)

New and increased provision (net of
collective provision releases)
- 1 - - - 1
Recovery of amounts written off
-
- - - - -
Credit impairment charge
(400)
(20) (345) - - (765)
Recovery of amounts written off
- - - - - -
Write offs
- - - - -
-
Impairment allowance as at 30 June 2019 - - - - - -

Total
Impairment allowance as at 30 June 2018
- - - 20,605 9,066 29,671
Restated for adoption of NZ IFRS 9
32,184 1,385 15,290 (20,605) (169) 28,085
Restated impairment allowance as at 1 July 2018
32,184 1,385 15,290 - 8,897 57,756
Changes in loss allowance

Transfer between stages
(1,471) (226) 11,326 - (43) 9,586

New and increased provision (net of
collective provision releases)
(292) 621 7,531 - 4,002 11,862
Recovery of amounts written off
- - (829) - - (829)
Credit impairment charge
(1,763) 395 18,028 - 3,959 20,619
Recovery of amounts written off
- - 829 - - 829
Write offs
- - (15,720) - (4,993) (20,713)
Impairment allowance as at 30 June 2019 30,421 1,780 18,427 - 7,863 58,491

19

7 Finance Receivables (continued)
(b) Finance receivables held at fair value
When the Group enters into a reverse mortgage loan the Group has set expectations regarding the loan’s current and future risk
profile and expectation of performance. This expectation references a wide range of assumptions including:
 mortality and move to care;
 voluntary exits;
 house price changes;
 no negative equity guarantee; and
 interest rate margin.

At balance date the Group does not consider any of the above expectations to have moved outside of the original expectation range.
Therefore the Group has continued to estimate the fair value of the portfolio at transaction price. There has been no fair value
movement recognised in profit or loss during the period. Given the loan terms and the current market conditions the fair value as
recorded is not considered to be sensitive to changes in house prices or interest rates.


$000’s



Unaudited
6 months to
December 2019
Unaudited
6 months to
December 2018
Audited
12 months to
June 2019
Finance receivables - reverse mortgages

1,419,557 1,232,353 1,318,819

8 Borrowings
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
$000’s

December 2019 December 2018 June 2019
Deposits
3,234,025 2,988,365 3,153,681
Total borrowings relating to deposits
3,234,025 2,988,365 3,153,681


Unsubordinated notes
444,128 151,902 337,680
Bank borrowings
- - 25,002
Certificates of deposit
69,811 144,555 34,836
Borrowings - securitised
695,601 742,963 659,135
Total other borrowings
1,209,540 1,039,420 1,056,653


Total borrowings
4,443,565 4,027,785 4,210,334

Deposits and unsubordinated notes rank equally and are unsecured.
The Group has the following unsubordinated notes on issue at balance sheet date:
Principal Valuation NOTE Issue date Maturity Date Frequency
$125 million Fair value 11(a) 12 April 2019 12 April 2024 Half yearly
$150 million Fair value 11(a) 21 September 2017 21 September 2022 Half yearly
AUD$50 million Amortised cost 11(b) 8 March 2019 8 March 2021 Quarterly
AUD$100 million Amortised cost 11(b) 13 November 2019 13 May 2022 Quarterly

20

9 Share capital and dividends

Unaudited Unaudited Audited
December 2019 December 2018 June 2019
000’s
Number of shares Number of shares Number of shares
Issued shares
Opening balance 569,338 560,588 560,588
Dividend reinvestment plan 7,314 5,283 9,191
Shares issued during the period 816 - -
Cancelled shares - (441) (441)
Closing balance 577,468 565,430 569,338

The Company had issued 7,313,501 new shares at $1.5445 per share on 6 September 2019 under the dividend reinvestment plan for
the period (2019: 5,282,619 new shares were issued at $1.6250 per share on 21 September 2018 and 3,907,858 at $1.4709 per share
on 1 April 2019).
Dividends paid

December 2019 June 2019
Date declared
Cents per
share
$000’s Date declared
Cents per
share
$000’s
Final dividend 15 August 2019 6.5 37,007 15 August 2018 5.5 30,808
Interim dividend - - - 19 February 2019 3.5 19,791
Total dividends paid 37,007 50,599

21

10 Related party transactions and balances
A person or entity that is a related party under the following circumstances:

a) A person or a close member of that person’s family if that person:
i) has control or joint control over HGH;
ii) has significant influence over HGH; or
iii) is a member of the key management personnel of HGH.

b) An entity is related to HGH if any of the following conditions applies:
i) the entity and HGH are members of the same group;
ii) one entity is an associate or joint venture of the other entity;
iii) both entities are joint ventures of the same third party;
iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
v) the entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related
to HGH;
vi) the entity is controlled, or jointly controlled by a person identified in (a); and
vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of
the entity (or of a parent of the entity).

(a) Transactions with key management personnel
Key management personnel (KMP), are those who, directly or indirectly, have authority and responsibility for planning, directing and
controlling the activities of HGH. This includes all executive staff reporting to the CEO, Directors and their close family members.

KMP receive personal banking and financial investment services from the Group in the ordinary course of business. The terms and
conditions, for example interest rates and collateral, and the risks to HGH are comparable to transactions with other employees and
did not involve more than the normal risk of repayment or present other unfavourable features.

Unaudited Unaudited Audited
6 months to 6 months to 12 months to
$000’s

December 2019 December 2018 June 2019
Transactions with key management personnel
Interest income - - -
Interest expense (55) (31) (76)
Total transactions with key management personnel (55) (31) (76)
Due from / (to) key personnel
Borrowings - deposits (2,322) (2,960) (3,019)
Total due (to) key management personnel (2,322) (2,960) (3,019)

(b) Transactions with related parties
Heartland Group Holdings Limited is the ultimate parent company of the Group.

Entities within the Group have regular transactions between each other on agreed terms. The transactions include the provision of
administrative services, tax transactions, and customer operations and call centre. Banking facilities are provided by Heartland Bank
Limited to other Heartland Group entities on normal commercial terms as with other customers. There is no lending from subsidiaries
within the Group to HGH.

Related party transactions between the Group eliminate on consolidation.

22

11 Fair value
(a) Financial instruments measured at fair value
The following table analyses financial instruments measured at fair value at the reporting date by the level in the fair value hierarchy
into which each fair value measurement is categorised. The amounts are based on the values recognised in the Statement of
Financial Position.
$000's Level 1 Level 2 Level 3 Total
Unaudited - December 2019


Assets
Investments 282,428 16,572 16,020 315,020
Derivative financial instruments - 11,936 - 11,936
Finance receivables - reverse mortgages - - 1,419,557 1,419,557
Total financial assets measured at fair value 282,428 28,508 1,435,577 1,746,513

Liabilities
Derivative financial instruments
- 9,843 - 9,843
Unsubordinated notes
- 287,323 - 287,323
Total financial liabilities measured at fair value - 297,166 - 297,166



$000's Level 1 Level 2 Level 3 Total
Unaudited - December 2018

Assets
Investments 209,048 100,219 9,694 318,961
Derivative financial instruments - 1,238 - 1,238
Finance receivables - reverse mortgages - - 1,232,353 1,232,353
Total financial assets measured at fair value 209,048 101,457 1,242,047 1,552,552

Liabilities
Derivative financial instruments - 148 - 148
Unsubordinated notes (restated) - 151,902 - 151,902
Total financial liabilities measured at fair value - 152,050 - 152,050


Audited - June 2019


Assets
Investments 255,875 86,618 12,435 354,928
Derivative financial instruments - 12,675 - 12,675
Finance receivables - reverse mortgage - - 1,318,819 1,318,819
Total financial assets measured at fair value 255,875 99,293 1,331,254 1,686,422

Liabilities
Derivative financial instruments - 10,372 - 10,372
Unsubordinated notes (restated) - 285,435 - 285,435
Total financial liabilities measured at fair value - 295,807 - 295,807

23

11 Fair value (continued)
(b) Financial instruments measured not at fair value
The following assets and liabilities of the Group are not measured at fair value in the Consolidated Statement of Financial Position.
Unaudited Unaudited Audited

Total Fair
Value
Total
Carrying
Value
Total Fair
Value
Total
Carrying
Value
Total Fair
Value
Total
Carrying
Value


$000's
December
2019
December
2019
December
2018
(Restated)
December
2018
(Restated)
June 2019 June 2019
Assets
Cash and cash equivalents Level 1 185,732 185,732 89,161 89,161 80,584 80,584
Investments
1
Level 2 6,961 6,970 - - - -
Finance receivables Level 2 3,082,052 3,101,366 2,919,721 2,934,170 3,017,327 3,029,231
Other financial assets Level 3 1,805 1,805 1,383 1,383 3,277 3,277
Total financial assets 3,276,550 3,295,873 3,010,265 3,024,714 3,101,188 3,113,092

Liabilities (restated)
Retail deposits Level 2 3,245,194 3,234,025 2,993,208 2,988,365 3,160,426 3,153,681
Borrowings - securitised Level 2 695,601 695,601 742,963 742,963 659,135 659,135
Other borrowings Level 2 226,616 226,616 144,555 144,555 112,083 112,083
Other financial liabilities Level 3 11,344 11,344 7,895 7,895 11,787 11,787
Total financial liabilities 4,178,755 4,167,586 3,888,621 3,883,778 3,943,431 3,936,686

1
Included within investments are bank deposits which are held to support its contractual cash flows. Such investments are measured
at amortised cost.

24

RISK MANAGEMENT
12 Enterprise risk management program
There have been no material changes in the Group’s policies for managing risk, or material exposures to any new types of risk since
the reporting date of the previous financial statement, refer to the Group’s financial statements for the year ended 30 June 2019.
13 Credit risk exposure
(a) Maximum exposure to credit risk at the equivalent reporting dates

The following table represents the maximum credit risk exposure, without taking account of any collateral held. The exposures set
out below are based on net carrying amounts as reported in the Statement of Financial Position.

Unaudited
$000's
December
2019
Cash and cash equivalents

185,732
Investments 321,990
Finance receivables 3,101,366
Finance receivables - reverse mortgages 1,419,557
Derivative financial assets 11,936
Other financial assets 1,805
Total on balance sheet credit exposures 5,042,386

(b) Concentration of credit by geographical region

Unaudited
$000’s
December
2019
New Zealand:
Auckland 1,155,990
Wellington 253,439
Rest of North Island 1,286,936
Canterbury 521,223
Rest of South Island 605,396
Australia:
Queensland 178,662
New South Wales 481,462
Victoria 208,551
Western Australia 45,336
South Australia 30,898
Rest of Australia 18,998
Rest of the world
1
255,495
Total on balance sheet credit exposures 5,042,386

1
The overseas assets are primarily investments in AA+ and higher rated securities issued by offshore supranational agencies (“Kauri Bonds”)

25

13 Credit risk exposure (continued)
(c) Concentration of credit by industry sector

Unaudited

December
2019
Agriculture

709,731
Forestry and Fishing

90,469
Mining

14,185
Manufacturing

86,612
Finance & Insurance

18,665
Wholesale Trade

40,768
Retail Trade

138,997
Households

2,380,554
Property and Business Services

249,981
Transport and Storage

256,182
Other
1

1,116,746

5,102,890
Collective provision (60,504)
Total on balance sheet credit exposures 5,042,386

1
Industry sectors classified within Other include religious services, parking services, laundry and dry cleaning, other machinery and
equipment repair and maintenance.

26

14 Liquidity risk
The Group holds the following financial assets for the purpose of managing liquidity risk:

$000's


Unaudited
December 2019
Cash and cash equivalents

185,732
Investments

305,970
Undrawn committed bank facilities

325,451
Total liquidity 817,153

Contractual liquidity profile of financial assets and liabilities

The following tables present the Group’s financial assets and liabilities by relevant maturity groupings based upon contractual
maturity date. The amounts disclosed in the tables represent undiscounted future principal and interest cash flows. As a result, the
amounts in the tables below may differ to the amounts reported on the Consolidated Statement of Financial Position.

The contractual cash flows presented below may differ significantly from the actual cash flows. This occurs as a result of future
actions by the Group and its counterparties, such as early repayment or refinancing of term loans and borrowings. Deposits and
other public borrowings include customer savings deposits and transactional accounts, which are at call. History demonstrates that
such accounts provide a stable source of long term funding for the Group.

The Group does not manage its liquidity risk on a contractual liquidity basis.
On 0-6 6-12 1-2 2-5 5+ Total
$000's Demand Months Months Years Years Years
Unaudited - 31 December 2019
Financial assets
Cash and cash equivalents 185,732 - - - - - 185,732
Investments - 98,350 18,643 62,779 130,199 5,145 315,116
Finance receivables - 1,059,953 487,984 891,643 1,163,939 219,428 3,822,947
Finance receivables - reverse
mortgage
- 17,138 17,138 32,533 96,315 4,147,037 4,310,161
Derivative financial assets 11,936 - - - - - 11,936
Other financial assets - 1,805 - - - - 1,805
Total financial assets 197,668 1,177,246 523,765 986,955 1,390,453 4,371,610 8,647,697

Financial liabilities
Borrowings 991,345 1,548,685 475,476 313,245 500,461 - 3,829,212
Borrowings - securitised - 38,877 6,342 15,129 675,187 - 735,535
Lease liabilities - 1,167 1,397 2,838 10,874 8,139 24,415
Derivative financial liabilities 9,843 - - - - - 9,843
Other financial liabilities - 11,344 - - - - 11,344
Total financial liabilities 1,001,188 1,600,073 483,215 331,212 1,186,522 8,139 4,610,349

Net financial (liabilities) / assets (803,520) (422,827) 40,550 655,743 203,931 4,363,471 4,037,348

Undrawn facilities available to
customers
134,743 - - - - - 134,743
Undrawn committed bank facilities 325,451 - - - - - 325,451

27

15 Interest rate risk
Contractual repricing analysis
The interest rate risk profile of financial assets and liabilities that follows has been prepared on the basis of maturity or next repricing
date, whichever is earlier.

0-3 3-6 6-12 1-2 2+ Non- Total
Months Months Months Years Years interest
$000's bearing
Unaudited - 31 December 2019
Financial assets
Cash and cash equivalents 185,729 - - - - 3 185,732
Investments 34,690 60,279 15,534 59,787 135,680 16,020 321,990
Finance receivables 1,543,914 215,723 355,919 563,825 417,055 4,930 3,101,366
Finance receivables - reverse mortgages 1,419,557 - - - - - 1,419,557
Derivative financial assets - - - - - 11,936 11,936
Other financial assets - - - - - 1,805 1,805
Total financial assets 3,183,890 276,002 371,453 623,612 552,735 34,694 5,042,386

Financial liabilities -
Borrowings 1,688,278 602,765 597,217 235,773 96,449 13,543 3,234,025
Other borrowings 228,470 968 - - 284,501 - 513,939
Borrowings - securitised 695,601 - - - - - 695,601
Derivative financial liabilities - - - - - 9,843 9,843
Lease liabilities - - - - - 21,306 21,306
Other financial liabilities - - - - - 11,344 11,344
Total financial liabilities 2,612,349 603,733 597,217 235,773 380,950 56,036 4,486,058

Effect of derivatives held for risk
management
380,373 (437) (94,721) (291,712) 6,497 -
Net financial assets / (liabilities)
951,914 (328,168) (320,485) 96,127 178,282 (21,342) 556,328

The tables above illustrate the periods in which the cash flows from interest rate swaps are expected to occur and affect profit or
loss.

The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s
financial assets and liabilities to various standard and nonstandard interest rate scenarios. Standard scenarios which are considered
on a monthly basis include a 100 basis point parallel fall or rise in the yield curve. There is no material impact on profit or loss in
terms of a fair value change from movement in market interest rates. Furthermore there is no material cash flow impact on the
Consolidated Statement of Cash flows from a 100 basis point change in interest rates.

28

Other Disclosures
16 Structured entities
A structured entity is one which has been designed such that voting or similar rights are not the dominant factor in deciding who
controls the entity. Structured entities are created to accomplish a narrow and well defined objective such as the securitisation or
hold of particular assets, or the execution of a specific borrowing or lending transaction. Structured entities are consolidated where
the substance of the relationship is that the Group controls the structured entity.

(a) Heartland Cash and Term PIE (Heartland PIE Fund)

The Group controls the operations of the Heartland PIE Fund which is a portfolio investment entity that invests in the Group’s
deposits. Investments of Heartland PIE Fund are represented as follows:

Unaudited Unaudited Audited
$000's 31 December 2019 31 December 2018 30 June 2019
Deposits 165,602 140,012 146,094

(b) Heartland Auto Receivables Warehouse Trust 2018-1 (Auto Warehouse)

The Group had securitised a pool of receivables comprising commercial and motor vehicle loans sold to Auto Warehouse.

The Group continues to recognise the securitised assets and associated borrowings in the Consolidated Statement of Financial
Position as the Group remains exposed to and has the ability to affect variable returns from those assets and liabilities. Although the
Group recognises those interests in Auto Warehouse, the loans sold to the Trust are set aside for the benefit of investors in Auto
Warehouse and other depositors and lenders to the Group have no recourse to those assets.

Unaudited Unaudited Audited
$000's

31 December 2019 31 December 2018 30 June 2019
Cash and cash equivalents - securitised 1,338 7,821 555
Finance receivables - securitised 36,720 153,826 -
Borrowings - securitised (30,015) (127,944) -

(c) Seniors Warehouse Trust, Seniors Warehouse Trust No.2 (together the SW Trusts) and ASF Settlement Trust (ASF Trust)

SW Trusts and ASF Trust (collectively the trusts) form part of ASF's reverse mortgage business and were set up by ASF as asset
holding entities. The Trustee for the trusts is ASF Custodians Pty Limited and the Trust Manager is ASF Trust. The reverse mortgage
loans held by the Trusts are set aside for the benefit of the funders and bank depositors have no recourse to these assets. The
balances of SW Trusts and ASF Trust are represented as follows:

Unaudited Unaudited Audited
$000's

31 December 2019 31 December 2018 30 June 2019
Cash and cash equivalents - securitised 17,324 6,839 35,356
Finance receivables – reverse mortgages 833,554 674,226 759,749
Borrowings - securitised (665,586) (615,019) (659,135)

29

17 Insurance business, securitisation, funds management, other fiduciary activities
Insurance business

The Group conducts insurance business through its subsidiary MARAC Insurance Limited (MIL).

The Group's aggregate amount of insurance business comprises the total consolidated assets of MIL of $11.6 million, which
represents 0.2% of the total consolidated assets of the Group.

Since 30 June 2019, the Group has undertaken a strategic review of its insurance business in line with its core business. The Group
has entered into a distribution agreement with DPL Insurance Limited (DPL) to distribute DPL’s insurance products through the
Group’s network and has stopped writing insurance policies in December 2019.

Securitisation, funds management and other fiduciary activities
Changes to the Group’s involvement in securitisation activities are set out in note 16. There have been no material changes to the
Group’s involvement in funds management and other fiduciary activities, in either case since the reporting date of the previous
financial statement.
18 Contingent liabilities and commitments
Contingent liabilities are possible obligations, whose existence will be confirmed only by uncertain future events, or present
obligations where the transfer of economic benefit is uncertain or cannot be reliably measured. Contingent liabilities are not
recognised, but are disclosed, unless they are remote. Where some loss is probable, provisions have been made.

There are no pending legal proceedings or arbitrations concerning any member of the Group at the date of reporting that may have a
material adverse effect on the Group.
Contingent liabilities and credit related commitments arising in respect of the Group's operations were:

$000's
Unaudited
December 2019
Unaudited
December 2018
Audited
June 2019

Letters of credit, guarantee commitments and performance bonds
5,990 6,417 6,757
Total contingent liabilities 5,990 6,417 6,757

Undrawn facilities available to customers 134,743 80,633 102,285
Conditional commitments to fund at a future date 97,144 73,877 89,317
Total commitments 231,887 154,510 191,602


19 Events after the reporting date
The Group declared a fully imputed interim dividend of 4.5 cents per share on 17 February 2020, to be paid to shareholders on
11 March 2020.

© 2020 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.




31

Independent Review Report
To the shareholders of Heartland Group Holdings Limited
Report on the consolidated interim financial statements of Heartland Group Holdings Limited (the
“Group”)
Conclusion
Based on our review, nothing has come to our
attention that causes us to believe that the
consolidated interim financial statements on pages
4 to 30 do not:
i. present fairly in all material respects the
Group’s financial position as at 31
December 2019 and its financial
performance and cash flows for the 6
month period ended on that date; and
ii. comply with NZ IAS 34 Interim Financial
Reporting (“NZ IAS 34”).
We have completed a review of the accompanying
consolidated interim financial statements which
comprise:
— the consolidated interim statement of financial
position as at 31 December 2019;
— the consolidated interim statements of
comprehensive income, changes in equity and
cash flows for the 6 month period then ended;
and
— notes to the interim financial statements.
Basis for conclusion
A review of consolidated interim financial statements in accordance with NZ SRE 2410 Review of Financial
Statements Performed by the Independent Auditor of the Entity (“NZ SRE 2410”) is a limited assurance
engagement. The auditor performs procedures, consisting of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review procedures.
As the auditor of Heartland Group Holdings Limited, NZ SRE 2410 requires that we comply with the ethical
requirements relevant to the audit of the annual financial statements.
Our firm has also provided other services to the Group in relation to an assessment of Heartland Bank Limited’s
compliance with the quantitative requirements of BS13. Subject to certain restrictions, partners and employees
of our firm may also deal with the Group on normal terms within the ordinary course of trading activities of the
business of the Group. These matters have not impaired our independence as reviewer of the Group. The firm
has no other relationship with, or interest in, the Group.
Use of this Independent Review Report
This report is made solely to the shareholders as a body. Our review work has been undertaken so that we
might state to the shareholders those matters we are required to state to them in the Independent Review
Report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the shareholders as a body for our review work, this report, or any of the
opinions we have formed.

32

Responsibilities of the Directors for the consolidated interim financial
statements
The Directors, on behalf of the Group, are responsible for:
— the preparation and fair presentation of the consolidated interim financial statements in accordance with NZ
IAS 34 Interim Financial Reporting;
— implementing necessary internal control to enable the preparation of consolidated interim financial
statements that are fairly presented and free from material misstatement, whether due to fraud or error; and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the review of the consolidated interim
financial statements
Our responsibility is to express a conclusion on the interim financial statements based on our review. We
conducted our review in accordance with NZ SRE 2410. NZ SRE 2410 requires us to conclude whether anything
has come to our attention that causes us to believe that the interim financial statements are not prepared, in all
material respects, in accordance with NZ IAS 34.
The procedures performed in a review are substantially less than those performed in an audit conducted in
accordance with International Standards on Auditing (New Zealand). Accordingly we do not express an audit
opinion on these consolidated interim financial statements.
This description forms part of our Independent Review Report.



KPMG
Auckland
17 February 2020