Heartland publishes Annual Report and Notice of Meeting
Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | shareholders.heartland.co.nz
NZX/ASX release
28 September 2022
Heartland publishes Annual Report and Notice of Meeting
Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) has today published its Annual
Report for the year ended 30 June 2022, and the Notice of Meeting for its 2022 Annual Meeting.
Annual Report
Heartland is pleased to release its Annual Report for the year ended 30 June 2022. The Annual
Report is available electronically from shareholders.heartland.co.nz, and will be sent to shareholders
if requested. A copy is attached to this announcement.
Annual Meeting
Heartland’s Annual Meeting will be held online on Tuesday 8 November 2022, commencing at 2pm
(NZST).
The Notice of Meeting and Voting and Proxy Form are available from shareholders.heartland.co.nz
and will be sent to shareholders shortly. Copies of these documents are attached.
– ENDS –
The person who authorised this announcement:
Andrew Dixson
Chief Financial Officer
For further information and media enquiries, please contact:
Nicola Foley
Group Head of Communications
027 345 6809
nicola.foley@heartland.co.nz
Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland, New Zealand
---
Purongo Ā-tāu
Annual Report 2022
Purongo Ā-tāu
Annual Report 2022
Te kāpehu whetū
The star compass
Using the knowledge of the sun, moon, stars and winds, te kāpehu whetū provides a framework
for navigation. Around the circumference of the compass, 32 houses mark the places on the horizon
where a celestial body resides. The four main houses represent the cardinal points (listed below)
based on the sun’s placement in the sky – rising in the east, and returning to the ocean in the west.
These points break the compass further into four quadrants for each of the winds: Tokerau, Mararangi,
Whakarunga and Whakararo.
To know te kāpehu whetū is to know your way. The stars and the sun in the sky, and the wind and ocean
swells, can guide any navigator to their destination.
Navigating forth with confidence
Leveraging its whakapapa (history) dating back to
1875, Heartland has been on a journey to provide
banking products which are the best or only of their
kind since it was established as Heartland in 2011.
Guiding us to achieve our vision are our strategic
pillars: business as usual growth, frictionless
service at the lowest cost, expansion in Australia
and acquisitions - underpinned by our commitment
to our people, customers and shareholders, and
our sustainability framework. Together, these areas
of importance are depicted as houses around the
circumference of the star compass. As the stars
within each house provide guidance to navigators,
so too do these areas of importance to Heartland.
Te kāpehu whetū, the star compass, was used by the people of the Pacific
to navigate. Like the stars in the night sky, Heartland’s strategic pillars,
customers, shareholders and employees guide us towards sustainable growth
and differentiation.
In the centre of our compass is the raperape pattern.
Carved into the oars of waka, this pays reference
to the energy and movement of life. Diving into the
detail of the raperape, and within Whakararo (the
tail of the fish) and Whakarunga (the head of the
fish), is unaunahi, a fish scale pattern signifying
prosperity and abundance. Together, the raperape’s
shape in the centre of the compass represents the
powerful wake left by our Heartland waka as the
star compass guides us forward.
With our sights set firmly on our strategic vision,
Heartland is navigating with confidence towards
sustainable growth and differentiation.
2
6
7
8
C
D
E
F
4
3
5
B
1
A
Areas of importance
The winds
The cardinal points
4. Tomokanga: west where
the sun returns to the ocean
3. Tonga: to the left of the
sun’s passage (south)
2. Whitinga: east where the sun
rises out of the ocean
1. Raki: to the right of the
sun’s passage through the
sky (north)
8. Whakararo (the tail of the fish):
the north-west winds
7. Whakarunga (the head of the
fish): the south-west winds
6. Mararangi: the south-east
trade winds
5. Tokerau: the north-east
trade winds
F. Expansion in Australia
E. Frictionless service
D. Our people
C. Business as usual growth
B. Sustainability
A. Our customers and
shareholders
Rārangi ūpoko
Contents
This Annual Report of Heartland Group Holdings
Limited (Heartland) is dated 28 September 2022
and is signed on behalf of the Board of Directors by:
01 | Year in review
Chair’s report 3
CEO's report 7
FY2022 results at a glance 13
Delivering frictionless service 15
Motor: Digitalisation and fuel efficiency 17
Continuing our expansion into Australia 19
02 | Who we are
Our business 23
Our directors 25
Our leadership team 29
Diversity report 31
03 | Sustainability
Introduction 41
Environmental conservation 43
Social equity 45
Economic prosperity 47
04 | Disclosures
Corporate governance 51
Directors' disclosures 59
Executive remuneration 69
Shareholder information 70
Other information 72
05 | Our financial results
Financial commentary 75
Financial statements 81
Auditor's report 151
06 | Directory
Directory 155
Jeffrey Greenslade
Chief Executive Officer
and Executive Director
Geoffrey Ricketts
Chair of the Board
4
|
Heartland Annual Report 20225
01
Year in review
Equity raise
On 23 August 2022, Heartland announced a $200
million equity raise.
The equity raise comprised a $130 million fully
underwritten placement (Placement) and a
non-underwritten share purchase plan (SPP) to
shareholders in New Zealand and Australia to raise
up to $70 million, with the ability for Heartland to
accept oversubscriptions at its discretion.
Heartland chose this offer structure due to the
volatile market conditions to date in 2022, and
its objective to further diversify its share register
to promote increased liquidity on both the NZX
and ASX. This is important in driving long-term
value for all shareholders, by attracting depth of
investment and widening demand.
Pleasingly, the $130 million Placement was
fully subscribed. The Placement was strongly
supported by shareholders, and attracted
significant bids from new institutional and retail
investors who we welcome as shareholders.
The SPP had applications totalling approximately
$68.8 million from shareholders who we thank
for their ongoing support and contribution to
Heartland’s strategic ambitions.
The proceeds have been used to repay a
A$158 million acquisition finance facility
outstanding from the acquisition of StockCo
Australia in May 2022, with the remainder to
provide additional growth capital for Heartland’s
existing businesses in New Zealand and Australia.
Delivering sustainable profitability
Heartland’s sustainability framework consists of
three pillars: environmental conservation, social
equity and economic prosperity.
Significant progress has been made against
each pillar. Notably, work is underway to ensure
Heartland is in a position to report its Greenhouse
Gas (GHG) emissions for the year ending 30 June
2023 (FY2023) as part of its FY2023 financial
reporting.
From FY2023, Heartland’s GHG emissions
reporting will include emissions attributed to
customer activity enabled through lending.
With regard to social equity, Heartland has
implemented processes and controls to prevent
any connection to modern day slavery, whether
through business practices, customer practices, or
supply chain connections. Heartland was pleased
to introduce pay gap reporting, and Heartland
Bank Limited (Heartland Bank) was proud to
achieve the Rainbow Tick in line with concerted
efforts by Heartland’s people to focus on diversity,
equity and inclusion.
Economic prosperity was delivered though
Heartland’s Reverse Mortgage businesses
enabling more than 40,000 New Zealanders and
Australians to live a more comfortable retirement.
Heartland Bank’s deposit products were
recognised for their contribution to New Zealanders
by being awarded Canstar’s prestigious Bank
of the Year – Savings 2022, for the fifth year in a
row. Heartland continued its work in digitalisation,
with over 20,000 Heartland Bank customers now
using the Heartland Mobile App, which allows
Heartland to pass cost savings on to its customers
in the form of low competitive rates. 2022 also saw
the development of the Heartland Finance Mobile
App for Australian Reverse Mortgage customers.
The recent acquisition of StockCo Australia also
allows Heartland to grow the StockCo Australia
business and assist more of its agricultural clients
in Australia to reach their business goals.
Read more in the Sustainability section on page 23.
Heartland in the community
Through the Heartland Trust
3
, Heartland is pleased
to have the opportunity to make a positive impact
in the communities in which it operates. During the
year, the Heartland Trust made grants totalling
$501,933 to support our communities, including in
the areas of education, sport and wellbeing.
The Heartland Trust continued its support of the
InZone Education Foundation, Auckland University’s
Kupe Leadership Scholarship, the Auckland Writers
Festival, WORD Christchurch Festival and various
high school and club women’s and men’s 1st XV
rugby teams. This year, the Heartland Trust also
funded for the first time Heartland Bank’s Manawa
Ako internship programme. You can read more
about the activities of the Heartland Trust on
page 43 of this Annual Report.
1
All comparative results are based on the audited full year consolidated financial statements of the Group for FY2021
2
Underlying results exclude the impacts of StockCo Holdings 2 Pty Ltd and StockCo Australia Management Pty Limited (together,
StockCo Australia) and one-offs. Refer to Financial commentary on page 75 for a summary of reported and underlying FY2022
results. A detailed reconciliation between reported and underlying financial information, including details about FY2022 one-offs,
is set out in Heartland’s FY2022 full year results investor presentation available at shareholders.heartland.co.nz
3
The Heartland Trust is a registered charitable trust which is independent from, but closely supported by, Heartland and Heartland Bank.
Nā te kaiwhakahaere poari
Chair’s report
Geoffrey Ricketts Chair of the Board
On behalf of the Board, I am pleased to report that
Heartland and its subsidiaries (the Group) reported
another strong financial year.
Heartland achieved a net profit after tax (N PAT) of
$95.1 million for the financial year ended 30 June 2022
(FY2022), an increase of $8.1 million (9.3%) compared
with the financial year ended 30 June 2021 (FY2021)
1
.
On an underlying
2
basis, FY2022 NPAT was $96.1
million, an increase of $8.2 million (9.3%) compared
with the FY2021 underlying NPAT.
4
01 Year in review
| Nā te kaiwhakahaere poari | Chair's report
01 Year in review
|
Nā te Kaiwhakahaere Poari | Chair's report
4
NZ RegCo granted Heartland a waiver from the five Business Day notice requirement under NZX Listing Rule 3.14.1 in relation to
the final dividend.
Dividend
The Board resolved to pay a fully imputed
final dividend of 5.5 cents per share (cps)
on Wednesday 14 September 2022 to all
shareholders on Heartland’s register at 5.00pm
NZST on Friday 26 August 2022
4
. Together with
the interim dividend, the total FY2022 dividend
was 11.0 cps (flat on 2021). This represents a full
year payout ratio of 68% which compares to the
average over the last three years of 69%.
Heartland is pleased to be able to continue
to deliver positive shareholder return. Total
shareholder return (TSR) was 66.9% over the last
five years (19 August 2017 – 19 August 2022),
compared with the NZX50 Index TSR of 56.7% in
the same period. This is an excellent result for
our shareholders.
Regulatory update
Heartland continues to monitor the significant
volume of regulatory change, including the changes
being made to the New Zealand Credit Contracts
and Consumer Finance Act 2003 and the Credit
Contracts and Consumer Finance Regulations 2004
(CCCFA), the introduction of the Financial Markets
(Conduct of Financial Institutions) Amendment Act
2022 (Conduct Act), the Deposit Takers Bill, and
new Climate-Related Disclosures.
Initial changes to the CCCFA came into force on 1
December 2021, with additional CCCFA changes
announced in June 2022 (effective 7 July 2022).
Heartland Bank implemented new processes and
technologies to enable it to comply with these
changes, and continues to refine them. Following
the completion of the New Zealand Government’s
investigation into the impact of the December 2021
changes, further amendments, which seek to reduce
the unintended impacts of the initial changes, are
expected to be implemented in March 2023.
The Conduct Act was passed in June 2022 and is
planned to come into force in early 2025, following
a transitional period. The Conduct Act applies
in New Zealand to registered banks, licensed
insurers and licensed non-bank deposit takers, and
is regulated by the Financial Markets Authority
(FMA). The Conduct Act introduces a new conduct
licensing regime, the requirement to establish,
implement, maintain and take reasonable steps
to comply with a fair conduct programme, and
the regulation of incentives (via new regulations
which are yet to be consulted on). Incentives
regulations will apply both to Heartland Bank and
its intermediaries involved in the distribution of
its products.
Board and management changes
On 1 October 2021, Geoff Summerhayes and
Kate Mitchell were appointed directors of the
Heartland Board. Geoff and Kate were re-elected
to the Board, in accordance with the constitution,
on 28 October 2021.
On 28 October 2021, Sir Christopher Mace retired
from the Heartland Board after 10 years of service
to Heartland. Sir Christopher was appointed to the
new role of Kaumātua.
On 19 May 2022, Heartland was pleased
to announce the appointment of Chris Flood
(previously CEO of Heartland Bank) as Deputy CEO
of Heartland Group, and Leanne Lazarus as CEO of
Heartland Bank, with effect from 1 August 2022.
In his new role as Deputy CEO of Heartland Group,
Chris will take responsibility for Heartland’s organic
growth across New Zealand and Australia, applying
Heartland Bank’s successful growth model to
Heartland’s Australian entities. Chris will also lead
further strategic initiatives across the group.
Leanne joins Heartland Bank from her role as CEO
and Executive Director of Westpac Life Limited,
Westpac New Zealand Limited’s (Westpac NZ)
insurance entity. Leanne has 30 years of global
experience in banking and financial services,
including having held a range of executive positions
across Westpac NZ and ANZ Banking Group.
Leanne’s extensive experience in operations and
technology will contribute to advancing Heartland
Bank’s digitalisation strategy, and the ongoing
reduction of Heartland Bank’s cost to income
(CTI) ratio through removing customer friction and
enhancing customer experience.
Jeff Greenslade continues as CEO of Heartland
Group with responsibility for Heartland’s activity in
New Zealand and Australia.
During the year, Heartland enhanced its Strategic
Management Group (SMG), expanding the SMG
across Heartland Group and Heartland Bank to
support future growth. Heartland welcomed to
the SMG Monique Forbes (Group Chief Marketing
Officer, Heartland Group), Mike Grenfell (Chief
Operating Officer, Heartland Bank), Lana West
(Group Chief People & Culture Officer, Heartland
Group) and Andy Wood (Chief Risk Officer,
Heartland Bank). Michael Drumm (previously Chief
Risk Officer, Heartland Bank) was appointed as
Group Chief Operating Officer, Heartland Group.
Keira Billot continues as Chief People & Brand
Experience Officer, Heartland Bank, and Andrew
Dixson continues as Chief Financial Officer,
Heartland Group.
The Deposit Takers Bill is being developed to
strengthen the regulatory framework for all
institutions that take deposits (including Heartland
Bank) through the strengthening of the Reserve
Bank of New Zealand's (RBNZ's) supervision
and enforcement powers, and to introduce a new
depositor compensation scheme, overseen by
the RBNZ. An exposure draft of the Deposit Takers
Bill is expected to be introduced to Parliament in the
latter part of September 2022.
Continued preparation is underway to meet the
Climate-Related Disclosures obligations introduced
through the Financial Sector (Climate-Related
Disclosures and Other Matters) Amendment Act
2021, with Heartland’s first climate statement
required as part of reporting for the period ended
30 June 2024.
Outlook
The Board is confident in Heartland’s ability to
generate strong growth and profitability as it
continues to deliver against its strategy to provide
best or only products through scalable digital
platforms, with further expansion expected
in Australia.
The current economic environment presents the
obvious challenges of rising inflation and rapidly
rising interest rates, tempered somewhat by low
unemployment, flowing through into business
and consumer confidence. However, Heartland
expects its NPAT for FY2023 to be within the
guidance range of $109 million to $114 million,
excluding any impacts of fair value changes on
equity investments held.
On behalf of the Board, I would like to take this
opportunity to acknowledge the continued
support of our shareholders. In the face of a year
that continued to be hampered by the impacts of
COVID-19, I would also like to thank Heartland’s
management team and its people for their resilience
and strong customer focus which enabled an
exceptional result this year.
Geoffrey Ricketts
Chair of the Board
5
|
Heartland Annual Report 20226
01 Year in review
| Nā te kaiwhakahaere poari | Chair's report
01 Year in review
| Nā te kaiwhakahaere poari | Chair's report
Na te kaiwhakahaere matua
CEO’s report
Whakanōhanga rautaki
Kei te whakaata te putanga nei i te angitu o te
whāinga rautaki a Heartland ki te hanga i te
tupuranga toitū me te māhitihiti i ngā putanga pai
rawa rānei, takitahi rānei hei whakaratorato atu i
ngā paenga pūnaha matihiko. E whā ngā wāhanga
o te whāinga nei, nā, kua ahu whakamua tēnā,
tēnā o ēnā i te roanga o te tau.
1. Kaipakihi hei tupuranga māori
– kua tutuki te
pikinga 15.3% o te pūrongo taketake o ngā
toenga.
2. Ratonga Pāpākore ki te utu iti rawa – ko te
pikinga kia 120% o te hunga e whakamahi
ana i te taupānga harihari o Heartland me te
hekenga o te taupāpātanga CTI ki te 42.5%.
3. Whakarahinga atu i Ahitereiria – kua kitea i te
TMa2022 te pikinga o te wāhanga mākete o
ngā Mōkete Tauaro i te 29% ki te 33%.
5
4. Whiwhinga – kua rahi atu te rautaki 'pai
rawa rānei, takitahi rānei' i Ahitereiria i te
whiwhinga atu o StockCo Ahitereiria.
Kaipakihi hei tupuranga māori
Kua nukunuku atu te kohinga kōpaki o Heartland
ki ngā rawa kounga ake, tūraru iho:
• te tupuranga pūtahi teitei ohotata nei o
ngā Mōkete Tauaro me ngā Pūtea Taurewa
Kāinga ā-ipurangi;
• te whakarewa i ngā pūtea taurewa kāhui
kararehe e iti nei te utu whakakopa;
• te nukuhanga atu o te kōpaki Waka ki ngā
pūtea taurewa kounga ake;
• te whakakore i te tūraru nui o ngā pūtea
taurewa kiritaki.
Kua tupu rawa ngā kōpaki Mōkete Tauaro i
Aotearoa me Ahitereiria, ā, kua tutuki te tupuranga
nama mai o te 19.9% me te 15.2%
6
i tēnā, i tēnā.
Kei te piki tonu te aronga atu me te whakaaetanga
Jeff Greenslade Chief Executive Officer
Heartland achieved NPAT for FY2022 of $95.1 million,
up $8.1 million (9.3%) on FY2021
1
. On an underlying
2
basis, NPAT was $96.1 million, up $8.2 million (9.3%)
on the FY2021 underlying NPAT. This was driven by
growth in gross finance receivables (Receivables)
3
of
15.3% ($765.9 million)
4
on FY2021, to reach $6.2 billion.
I tutuki i a Heartland te THRi (tahua huamoni rauiti)
i te TAm2022 nei, te $95.1 miriona, arā, kia $8.1
miriona ake (kia 9.3% ake) i te TAm2021
1
. Hei matapae
taketake
2
, kua $96.1 te THRn (tahua huamoni raunui),
kia $8.2 miriona ake (kia 9.3% ake) i te THRn taketake
o te TAm2021. Na te āinga a te tupuranga o ngā
nama ahumoni raunui (Nama)
3
kia 15.3% (kia $765.9
miriona)
4
no te TAm2021 kua tae ake ki te $6.2 piriona.
1
All comparative results are based on the audited full year
consolidated financial statements of the Group for FY2021.
2
Underlying results exclude the impacts of StockCo
Australia and one-offs. Refer to Financial Commentary on
page 75 for a summary of reported and underlying FY2022
results. A detailed reconciliation between reported and
underlying financial information, including details about
FY2022 one-offs, is set out in Heartland's FY2022 full year
results investor presentation available at
shareholders.heartland.co.nz
3
Receivables include Reverse Mortgages and StockCo
Australia.
4
Excludes the impact of StockCo Australia and changes in
foreign currency exchange (FX) rates.
5
Based on APRA ADI Property Exposure and Heartland
Finance data as at 31 March 2021 and 31 March 2022.
6
Excluding the impact of changes in FX rates.
1
E ahu ana putanga whakariterite katoa i ngā arotakenga o ngā
tauākī ahumoni tōpū o Te Hono o te katoa o te TAm2021.
2
Kāore ngā pānga o StockCo Ahitereira me ngā mea
takitahi i roto i ngā matapae taketake. Tahuri atu ki
Financial commentary i te whārangi 75 hei pānui i te
whakarāpopototanga o ngā putanga taketake me ngā mea
kua pūrongohia i te TAm2022, me ngā taipitopito kōrero o ngā
putanga takitahi o taua tau, ā, ka kitea i
shareholders.heartland.co.nz
3
Hei nama hoki ko ngā Mōkete Tauaro me StockCo Ahitereiria.
4
Hāunga te tukinga o StockCo Ahitereiria me ngā rerenga
kētanga o ngā pāpātanga o ngā moni o tāwāhi (FX).
5
E ai ki te APRA ADI Property Exposure me ngā raraunga a
Heartland Ahumoni i te 31 o Māehe 2021 me te 31 o Māehe
2022.
6
Hāunga te pānga o ngā rerenga kētanga o ngā pāpātanga FX.
Strategic vision
This result reflects the success of Heartland’s
strategic vision to create sustainable growth
and differentiation through best or only products
delivered through scalable digital platforms.
There are four elements to this vision and
considerable progress was made in each of
these during the course of the year.
1. Business as usual growth – a 15.3%
increase in underlying balance sheet growth
was achieved.
2. Frictionless service at the lowest cost –
a 120% uplift in Heartland Mobile App users
and underlying CTI ratio reduction to 42.5%.
3. Expansion in Australia – increased market
share in Reverse Mortgages from 29%
to 33%.
5
4. Acquisitions – the acquisition of
StockCo Australia.
Business as usual growth
Heartland’s portfolio mix has shifted towards
higher quality and lower risk assets through:
• disproportionately higher aggregate growth in
Reverse Mortgages and online Home Loans;
• the introduction of lower impairment
livestock loans;
• a shift in the Motor book towards higher quality
loans; and
• the run-off of higher risk personal lending.
The Reverse Mortgage portfolios in New Zealand
and Australia have grown considerably, achieving
19.9% and 15.2%
6
growth in Receivables
respectively. Increasing awareness and
acceptance of reverse mortgages continues to
aid growth in both markets, especially in a
8
01 Year in review
Na te kaiwhakahaere matua
| CEO's report
01 Year in review
Na te kaiwhakahaere matua
| CEO's report
atu ki ngā Mōkete Tauaro e piki ai hoki te tupuranga i
ngā mākete e rua, i te wā tonu nei o te pikinga o te utu
oranga e pēhi kino nei i te hunga tāoki.
Kua tere hoki te pikinga o te tukutuku i ngā Pūtea
Taurewa Kāinga ā-ipurangi a Heartland, kua piki ngā
Nama whakaroto kia 450.8% ki te $274.7 miriona,
ahakoa ngā pānga tūpono noa o ngā rerenga kētanga
a te CCCFA i whakarewaina i te 1 o Tīhema, 2021.
Kua pāngia hoki te Ahumoni Waka e aua rerenga
kētanga, i heke nui ai ngā tono aunoa me ngā tono
takahuri i muri i ngā kawenga kētanga o te ture. I te
hurihuri o ngā tikanga a te CCCFA, ka kaha tonu mātou
ki te whakariterite i ngā pūnaha hei whakaō atu, nā
reira kua tahuri anō te kaha o te kōpaki Waka ki ngā
taumata māori.
Na te piki i te tokomaha o ngā kiritaki me ngā
pāpātanga whai pūtea taurewa, i huri te TAm2022
hei tihinga tau mo te Ahumoni Kāhui Kararehe o te
Pēke Heartland hei tuku tahua e hokona ai ngā kāhui
mā ngā kaipāmu o Aotearoa. I piki ngā Nama mai kia
57.0% ki te $62.3 miriona. Waihoki, toha atu ai a Hipi
& Kau Torotika
7
i te 53% o ngā kaipakihi tuawhenua
katoa, hei reira whakamātau ai i te mākete o ngā tono
pūtea taurewa ā-ipurangi a ngā kaipāmu hipi me
ngā kaipāmu kau i Aotearoa, te mākete e āhei ai ngā
kaipāmu ki te tono moni i te wāhi me te wā e hiahia
ana, hei aha te whakapau wā i te waea atu rānei ki te
pēke, i te tū rānei i te rārangi tangata.
He kōrero kē atu mō ngā mahi ahumoni a ngā kōpaki
tukutuku pūtea taurewa, tukutuku tahua a Heartland i
te Financial commentary i te whārangi 75.
Ratonga Pāpākore ki te utu iti rawa
I ahu whakamua tonu te whakamatirau i ngā putanga
me ngā pūnaha a Heartland. Ko te aronga ko te
whakaiti i te pāpā atu a ngā kiritaki me te hiki i te
ratonga atu i te wā tonu e hāpai ana i te rahinga me
te whāomotanga. He maha ngā tauira e whai hua
ai ngā kiritaki i te penapena moni o ngā pāpātanga
huamoni whakataetae nei. Hei mutunga atu, ka āhei a
Heartland ki te whakataetae i ngā mākete i te kati mai i
mua, he pērā me ngā Pūtea Taurewa Kāinga.
I whakahekea te taupāpātanga o te tōpūtanga rorohiko
(CTI) o Heartland, hei inenga o te whāomotanga o te
whakamatihiko, i te 44.8% i te TAm2021 ki te 42.5% i te
TAm2022, hei pūtake taketake. Ahakoa te koropupū o
te wā poto e tū mai nei, kua pūmau mātou, wā roa nei,
ki te whakahekeheke i te taupāpātanga CTI.
Tēnā, pānuihia te Delivering frictionless service i te
whārangi 15 hei whai atu i te ahunga whakamua o
ngā mahi whakamatihiko a Heartland.
Whakarahinga atu i Ahitereiria
He whāinga rautaki matua tonu te tupuranga
ake i Ahitereiria. I reira, kei te aro tonu mātou ki te
whakatupu tahi tonu i te kaipakihi Mōkete Tauaro me te
whiwhinga hou o te kaipakihi ahumoni kāhui kararehe,
i StockCo Ahitereiria, arā hoki, ka rapu tonu i ētahi atu
ara hei whakarahi i tā mātou rautaki 'pai rawa rānei,
takitahi rānei' i te whenua.
I Ahitereiria kua 33% te wāhanga mākete o Heartland
o ngā Mōkete Tauaro o Ahitereiria, me te 74% nā ngā
whakahaere o Ahitereiria ake.
8
Otirā, he ara tonu e
tupu ake ai i roto i te mākete e whakaawhiwhitia ana
kia rite ki te $10-15 piriona.
9
Whiwhinga
I te 31 o Mei, 2022, i oti i a Heartland te whiwhinga
ki te hunga ahumoni o ngā mahi kāhui kararehe, ki
StockCo Ahitereiria. Nā, ka tīmata āianei te whakatupu
i te kaipakihi kāhui kararehe nei i ngā mākete e
hāngai ana, me te hiki i te taumata hei ratonga matua
i te mākete motuhake o ngā kaipāmu kau me ngā
kaipāmu hipi, huri noa i Ahitereiria. Ko tā mātou hei
whakatutuki i tēnei whāinga, ko te ratorato i ngā moni
whakatuputupu, i ngā āheinga matihiko, i te toronga
atu ki ngā rāngai mākete hōu. Tēnā, pānuihia ngā
kōrero kē atu mo StockCo Ahitereiria i te whārangi 19.
No muri mai i te whakaotinga o te whiwhinga ki
StockCo Ahitereiria, ka rite tonu mātou ki te rapu i ngā
ara whakawhiwhi kē atu hei hiki i te ritenga rautaki i tō
tātou kaipakihi.
He pērā me te whakaaturanga o ngā putanga ā-tau oti
i te TAm2022, kua torotoro mātou i ngā ara e mana ai
rānei, e whai ai rānei i te raihana Umanga Whakaputu
Moni Whai Mana (ADI)
10
i Ahitereiria. Ā, kua uru atu
i te kawenata tauaroaro (MoU), herenga kore nei,
me Avenue Hold Limited (Avenue Hold) i runga i te
tūmanako ka whiwhi a Avenue Hold me te turuki
Avenue Bank Limited (Avenue Bank) – he ADI kōpiri e
rapu ana i te mana motuhake hei ADI.
Hei whai i te Kawenata Tauaroaro, kua whakarite
a Heartland i te tono A$5 miriona o te haupū rawa
o Avenue Hold hei tīmatanga. Kei te manatu tonu
te arotake haurapatanga o Heartland, waihoki te
tauwhiriwhiri i te kawenata paiherehere. Hāngai atu
ai ngā mahi tauwhiriwhiri nei i runga i ētahi take. Kei
te ahu whakamua tonu ngā tirohanga haurapatanga.
Tēnā, tahuri ki te Banking opportunity in Australia i
raro iho nei.
7
Based on APRA ADI Property Exposure and Heartland
Finance data for the 12 months to 31 March 2022 (based
solely on growing providers with publicly available data).
8
According to Deloitte at the 2021 Three Pillars Forum.
time where the increasing cost of living is placing
additional pressure on retirees.
Heartland’s online Home Loans has grown rapidly
with Receivables up 450.8% to $274.7 million
despite the unintended effects of the CCCFA
changes introduced on 1 December 2021. Motor
Finance was also affected by the CCCFA changes,
experiencing a considerable reduction in application
automation and conversion rates following the
law changes. As further amendments to the
CCCFA were made and we continued to refine our
processes in response, Motor portfolio performance
has begun to move towards more normal levels.
Heartland Bank’s Livestock Finance, funding the
purchase of livestock for farmers in New Zealand,
had a record year in FY2022, thanks to an increase
in customers and loan utilisation rates. Receivables
were up 57.0% to $62.3 million. Meanwhile, Sheep
& Beef Direct contributed 53% of total Rural new
business, confirming that there is a market for an
online rural loan application for sheep and cattle
farmers in New Zealand – allowing farmers to apply
for finance online when and where it suits them,
without having to take time from their day
to call a bank or stand in a queue.
Further information about the financial performance
of Heartland’s lending portfolios and funding
activity is set out in Financial commentary on
page 75.
Frictionless service at the lowest cost
Progress continued in the digitalisation of
Heartland’s products and platforms. The aim is to
reduce customer friction and improve service while
creating scale and efficiencies. In many cases,
this allows customers to benefit from cost savings
through competitive interest rates. This ultimately
enables Heartland to compete in markets we
previously were not able to, such as Home Loans.
Heartland’s CTI ratio, as a measure of the efficiency
of digitalisation, reduced from 44.8% in FY2021 to
42.5% in FY2022 on an underlying basis. Despite
the possibility of volatility in the short term, we are
committed in the long term to further reductions in
the CTI ratio.
Read Delivering frictionless service on page 15 for
more on Heartland’s digitalisation progress.
Expansion in Australia
Growth in Australia remains a key strategic priority
for Heartland. In Australia, our sights are set on
growing both the existing Reverse Mortgage
business and the recently acquired livestock finance
business StockCo Australia, while also seeking
further opportunities to expand our best or only
strategy in the country.
In Australia, Heartland has 33% of the reverse
mortgage market share and currently 74% share of
growth in Australia
7
. However, there is opportunity
for expansion in the potential addressable market
which is estimated to be $10-15 billion
8
.
Acquisitions
On 31 May 2022, Heartland completed the
acquisition of livestock financier, StockCo Australia.
Work now begins on growing the livestock finance
business in the markets in which it operates, and
enhancing its position as a market-leading provider
of specialist livestock finance for cattle and sheep
farmers across Australia. We intend to do this by
delivering growth capital, digital enhancements and
expanding into new market segments. Read more
about StockCo Australia on page 19.
Following the completion of the acquisition of
StockCo Australia, we will continue to be open to
further opportunities for acquisition in Australia as a
means of adding strategic value to our business.
As disclosed in our FY2022 full year results
announcement, we have been exploring
opportunities to establish or acquire an authorised
deposit-taking licence (ADI) in Australia and
have entered into a non-binding memorandum of
understanding (MoU) with Avenue Hold Limited
(Avenue Hold) in relation to the potential acquisition
of Avenue Hold and its subsidiary Avenue Bank
Limited (Avenue Bank) – a restricted ADI that is
currently seeking to become a full ADI.
In accordance with the MoU, Heartland has made
an initial subscription for A$5 million of capital in
Avenue Hold. Heartland’s due diligence review is
continuing, as is negotiation of binding transaction
documentation. Completion of any transaction
is expected to be conditional upon a number
of matters. Heartland’s due diligence review
is continuing. Refer to Banking opportunity in
Australia, below.
Banking opportunity in Australia
Becoming an ADI in Australia would enable
Heartland to carry out banking business,
7
Sheep & Beef Direct.
8
E ai ki te APRA ADI Property Exposure me ngā raraunga
Ahumoni a Heartland o te 12 marama e tae atu ai ki te 31 Māehe
2022 (e ai ki ngā raraunga pānui a ngā kairatorato e tokomaha
haere nei).
9
E ai ki Deloitte i te Hui o ngā Poupou e Toru 2021.
10
Authorised deposit-taking licence.
9
|
Heartland Annual Report 202210
01 Year in review
Na te kaiwhakahaere matua
| CEO's report
01 Year in review
Na te kaiwhakahaere matua
| CEO's report
11
MindTheGap.
12
Rainbow Tick.
• ko te hanga nei ka tino kaha tonu ngā Mōkete
Tauaro i Aotearoa me Ahitereiria, na te
whakakaumātua o te taupori, me te aro atu me te
whakaae atu ki ngā mōkete tauaro hei ōanga atu ki
te pikinga o ngā utu i ngā pēhanga oranga;
• ko te ngākau rorotu o Heartland e mea ana ka
wātea ētahi wāhanga hea mākete i te Ahumoni
Waka, Ahumoni Rawa, ahakoa ngā raruraru
whakaratorato;
• ko te iti o te ratonga atu o ngā pēke nunui ki te
mākete tuawhenua, ā, hei reira te whakakapinga i te
wehewehe haere o Heartland i ngā pūtea taurewa
rarahi o te hononga ki te rāngai tuawhenua;
• ko te matapae ka tuku atu a StockCo Ahitereiria i
te A$10-12 ki te TaM2023, THRi (tahua huamoni
rauiti) nei.
Engari, me ineine atu ērā ki te tītahataha here nei i
ētahi wāhanga o te mākete. Hei tāpiritanga atu, e
tāria ana te pikinga kōhukihuki o te ōhanga i te piki
o ngā pāpātanga huamoni. Kāore hoki ngā kiritaki o
Heartland e āraia atu i aua tukinga. Ka ngana tonu
mātou ki te tautoko i ā mātou kiritaki i ngā wā heke e
raruraru ai ētahi.
Kei te koropupū tonu te tūraru taiao o te ao.
Ahakoa kua whakaputaina kētia tā mātou kahurua
KOWHEORI-19, kua whakaaetia hoki te Kahurua
Ohaoha, e $8 miriona nei, hei whakangungu i ngā
āhuatanga whakaheke, he pērā me tō te Hononga
Kaipakihi me tō te Ahumoni Rawa, arā, i ngā wāhanga
e nui ana ngā tūraru. Hei tua atu, kua aro atu te
kohinga kōpaki ki ngā pūtea taurewa pakari ake, hei
tauira, kua tino piki ngā Mōkete Tauaro.
Hei te taha o te whakamatihiko, ko tētahi tino whāinga
whakarautaki ko Ahitereiria: koinei te tau oti tuatahi ko
StockCo Ahitereiria hei mema o te Rōpū. Waihoki, kei
te ahunga whakamua o te ara e huri ai a Heartland hei
pēke mana i te whāinga atu i te raihana ADI i Ahitereiria.
Ko ō tātou tāngata te poutokomanawa e tutuki ai
te rautaki. Ka pūmau tonu mātou ki ngā whāinga
kanorau, me te hanga i te taiao tuhera e poapoaina
ngā tāngata katoa – e tae ai te tangata me ōna
āhuatanga katoa ki te mahi, ā, hei reira kitea ai ngā tini
momo whakaaro e kaha atu ai mātou ki te aro atu me
te whakaō atu ki ngā kiritaki.
Ko tāku nei, ko te whakamihi i te whānau o Heartland e
whakatinana mai rā i ō tātou mātāpono i te roanga o te
tau nei, ā, ka whakamihi hoki i te hunga whai pānga e
tautoko tonu mai ana i a Heartland.
Ngā mihi nui,
Jeff Greenslade
Kaiwhakahaere Matua
Ara mana pēke i Ahitereiria
Ma te huri hei ADI i Ahitereiria, ka āhei a Heartland ki te
whai i ngā rau mahi pēke, arā, ko te whakaputu moni
na te marea o Ahitereiria. Hei reira ka āhei hoki
a Heartland:
• ki te tono atu i te pūtea hōhonu, whāomo o ngā
tāhua moni hei tautoko i ngā mahi whakatuputupu;
• ki te hiki pea i te paenga e iti iho ai ngā pāpātanga
putunga pēke hokotahi i ō ngā mea hokorau;
• ki te pūtake e whānui atu ai te rautaki pai rawa,
ahakoa kotahi noa iho, ki roto o Ahitereiria.
Tērā te tukanga kei te whāia kia kitea mehemea he
painga rautaki, he painga ahurea e tutuki pai ai te
raihana ADI.
Kia whakamana rānei a Heartland hei ADI, kia whai
rānei a Heartland i tētahi atu ADI, me mātua whiwhi
te whakaaetanga ā-ture, ā, ka roa te wā e tutuki ai.
Ko tā mātou e whakapae ana kāore te whiwhinga
atu e tutuki i mua i te whātanga whakamutunga i te
TaM2023. Mā mātou ngā ritenga hōu e pānui atu ki te
hunga whai pānga.
He manawa tangata – ō tātou tāngata
I muri i te tau werowero nei me tētahi whakarāhui
KOWHEORI-19 kē atu, me ngā tikanga aukati i
Aotearoa me Ahitereiria, kua whakaatu tonu ō tātou
tāngata o Heartland i tō rātou māia, ā, kua kaha hoki
ngā mahi kia tutuki ai ngā whāinga.
I te tau nei, i pārekareka mātou i te urunga atu ki
ngā mahi pūrongo angotanga utu, arā, ko Aroa te
Angotanga.
11
Ko Heartland tētahi o ngā whakahaere e
whitu noa iho nei i pūmau ki te pūrongo i ngā angotanga
utu ā-ira nei, i Ngāi Māori nei, i Ngāi Moutere nei hei
wāhanga o te rēhita pūrongorongo i whakarewaina
i te Māehe o 2022. Ahakoa kei runga ake [kia 7%] i te
angotanga utu ā-ira e 24% nei o te toharite ahumahi,
e 31% rā, ko tā mātou e mea ana he rahi rawa taua
angotanga, ā, me pukumahi tonu mātou kia heke iho ai.
Tēnā, pānuihia ngā kōrero kē atu mō ō mātou angotanga
utu i te whārangi 37 o te pūrongo Kanorau.
Ko tētahi atu tino mahi o te TaM2022 ko te tatūnga
o te Tunou Āniwaniwa
12
, te whai ingoa i ngā Tohu
HRNZ 2022 i tō mātou hōtaka pia, ko Manawa Ako,
te whakamātau hoki i te hāngaitanga o ō mātou
mātāpono ki ō mātou tāngata (koina tā te 93% i
whakakī i te uiuinga whakamutunga).
Tēnā, pānhuihia ngā kōrero kē atu mo te ahunga
whakamua o Heartland i te whārangi 31 o te
pūrongo Kanorau.
Titiro whakamua
Tohu ai te TaM2023 i te ara e pakari ake ai a Heartland:
• tohu ai te maha o ngā mōkete nōhanga i Aotearoa
e puta ake ana i ngā pāpātanga itaita i te roanga o
te tau i te ara e tupu ai ngā Pūtea Taurewa Kāinga;
such as accepting deposits from the public
in Australia. This would provide Heartland with:
• access to a deep and efficient pool of funding to
support ongoing growth;
• a potential uplift in our margin to the extent that
retail (bank deposit) funding rates are less than
wholesale rates; and
• a platform to extend our best or only strategy
further into Australia.
The process is underway to test whether Avenue
Hold provides a strategic and cultural fit and the
most efficient pathway to achieving an ADI licence.
Any establishment or acquisition by Heartland of
an ADI in Australia would be subject to regulatory
approvals and would take some time to complete.
It is expected that the completion of any acquisition
would take place no earlier than the last quarter
of FY2023. We will provide further updates to
shareholders as required.
He manawa tangata – our people
After another challenging year with further
COVID-19 lockdowns and restrictions in New
Zealand and Australia, our Heartland people have
continued to show their resilience and worked hard
to achieve results.
This year, we were pleased to participate in
MindtheGap pay gap reporting. Heartland was one
of just seven organisations to commit to reporting
pay gaps by gender, Māori and Pasifika as part of
a reporting register launched in March 2022. While
our gender pay gap of 24% is 7% better than the
industry average of 31%, we acknowledge our pay
gaps are far too high and work needs to be done
to reduce these. Read more about our pay gaps on
page 37 of the Diversity report.
Key activity in FY2022 also included the
achievement of the Rainbow Tick, becoming
recognised in the 2022 HRNZ Awards for
our Manawa Ako internship programme, and
confirming that our mātāpono (values) resonate
with our people (93% responded as such within a
recent survey).
Read more about Heartland’s progress in the
Diversity report on page 31.
Looking forward
The outlook for FY2023 offers potential for Heartland:
• the large number of residential mortgages in
New Zealand coming off fixed rates during
the course of the year provides opportunity for
growth in Home Loans;
• Reverse Mortgages in New Zealand and
Australia are expected to continue to perform
well, driven by an aging population, and
increasing awareness and acceptance of reverse
mortgages as a solution to increasing cost of
living pressures;
• Heartland Bank is optimistic that market share
gains in Motor and Asset Finance are available,
though these markets have seen some supply
disruptions;
• the focus on parts of the rural market that are
underserviced by larger banks has the potential
to offset the ongoing exit of Heartland’s larger
rural relationship loans; and
• StockCo Australia is expected to contribute
A$10-12 million to FY2023 NPAT.
However, this must be weighed against ongoing
volatility and decreasing confidence levels in some
sections of the market. In addition, rising interest
rates are expected to elevate stress in the economy.
Heartland customers are not immune from these
impacts. We will continue to support our customers
through what may be a difficult period for some.
The global risk environment remains uncertain.
While we have released our COVID-19 Overlay, we
have adopted an Economic Overlay of $8 million in
order to provide coverage for a potential downside
scenario in areas such as Business Relationship and
Asset Finance where there are risk concentrations.
In addition, the portfolio mix has shifted towards
higher quality loans, with a strong increase in
particular of Reverse Mortgages.
Alongside digitalisation, the major strategic priority
is Australia: the first full year with StockCo Australia
as a member of the Group, and in progressing
Heartland’s pathway to becoming a bank through
obtaining an ADI licence in Australia.
Our people are a crucial part of our ability to deliver
against our strategy. We remain committed to our
diversity initiatives, and to creating an environment
that is welcoming and inclusive of all people – so our
people can bring their whole selves to work, and,
with them, the diverse thinking that enables us to
better understand and respond to our customers.
I would like to thank our Heartland whānau for living
our mātāpono (values) throughout the year, and
wish to thank our shareholders for their continued
support of Heartland.
Ngā mihi nui,
Jeff Greenslade
Chief Executive Officer
11
|
Heartland Annual Report 202212
01 Year in review
Na te kaiwhakahaere matua
| CEO's report
01 Year in review
Na te kaiwhakahaere matua
| CEO's report
Ka kaperua ki ngā putanga o 2022
FY2022 results at a glance
Return on
equity
FY22
12 . 1%
Underlying return on equity 12.6%
F Y21
11.9%
Underlying return on equity 12.0%
Gross finance
receivables
1
FY22
$
6.2b
F Y21
$
5.0b
Total dividend
for the year
FY22
11.0cps
F Y21
11.0cps
Final dividend
declared
FY22
5.5cps
F Y21
7. 0 c p s
Net interest margin
2
Consistently higher than banking peers
3
FY22
4.16%
F Y21
4.35%
Earnings
per share
Underlying earnings per share 16.3 cps
Underlying earnings per share 15.1 cps
FY22
16.1cps
F Y21
14.9cps
1
Includes StockCo Australia as at 30 June 2022.
2
Adjusted for the impact of StockCo Australia.
3
KPMG FIPS Report March 2022.
Net profit
after tax (NPAT)
Underlying net profit after tax $96.1m
Underlying net profit after tax $87.9m
FY22
$
95.1m
F Y21
$
8 7. 0 m
Note: Underlying results exclude the impacts of one-offs.
FY2022 one-off items had a $0.9 million net impact on NPAT, consisting of a $1.6 million increase in NPAT contributed by one-off net
fair value gains and benefits, offset by a $2.5 million decrease in NPAT contributed by one-off expenses. For more detail on FY2022
one-off items, go to page 75. FY2021 one-off items had a $0.8 million net impact on NPAT, consisting of a $4.1 million increase in NPAT
contributed by one-off net fair value gains, offset by a $4.9 million decrease in NPAT contributed by one-off expenses.
4
Compound annual growth rate (CAGR) for the five years from FY2018-FY2022.
8 7. 0
73.6
31.1
36.4
33.1
40.5
39.9
32.1
44.1
42.9
47. 5
47. 6
6 7. 5
72.0
H1H2
FY22
95.1
FY18FY20FY19FY21
Five-year
CAGR
4
9.4%
Strategic highlights
• Heartland Bank received Canstar’s 2022 Bank of the Year –
Savings Award (fifth consecutive year), and awards for its
Direct Call and Notice Saver accounts.
• Heartland Reverse Mortgages Australia received various
awards for excellence in the sector.
• NZ Reverse Mortgages remains Consumer Trusted
(fifth consecutive year).
• Successfully completed the acquisition of StockCo Australia.
• Exploring options to establish or acquire an ADI in Australia.
13
|
Heartland Annual Report 202214
01 Year in review
| Ka kaperua ki ngā putanga o 2022 | FY2022 results at a glance
01 Year in review
| Ka kaperua ki ngā putanga o 2022 | FY2022 results at a glance
Te ratorato pāpākore
Delivering frictionless service
Heartland has always been committed to differentiation. Over the years,
we have demonstrated this through our focus on providing products which are
the best or only of their kind. That focus has evolved to providing best or only
products through scalable digital platforms, leading to our aim of becoming
a digitalised banking group.
1
Underlying results exclude the impacts of the acquisition of StockCo Australia and one-offs. For more information about FY2022
one-offs see Financial commentary on page 75.
Digitalisation allows Heartland to deliver value
for customers and shareholders. Time is precious,
and we don’t think it should be spent queuing
or waiting on the phone. By removing customer
friction through the digitalisation of our platforms
and processes, we can deliver fast, digital
solutions without costly processes. This provides
customers with better service, and, in some
cases, cost savings through competitive lending
interest rates, or attractive savings interest rates.
Importantly, digitalisation enables customers the
chance to spend their time on what matters most
to them.
We have invested in many digital developments
during FY2022, all designed to remove friction
for our customers and our teams. Here are some
of the notable initiatives Heartland has delivered
during the 2022 financial year.
Making more possible
When analysing our customer call data at the
beginning of FY2022, we discovered that a high
proportion of calls to Heartland Bank’s main
customer service phone lines in the second half of
FY2021 were from customers requesting loan or
account statements and balances, loan settlement
quotes or transaction details – simple requests that
we believe customers should be able to complete
at a time and place that suits them, without the
constraints of calling during business hours.
During FY2022, using these insights, we built
functionality within the Heartland Mobile App and
Heartland Digital, our online banking platform, to
allow Heartland Bank customers to generate a
statement or a settlement quote themselves, and
increase transfer and payment ability.
These developments, alongside separate efforts
to enable customers to self-serve within the
app, are paying off. By the end of June 2022, we
had significantly increased the number of users
of the Heartland Mobile App, up 120%. App
developments are providing an improved customer
experience, and enabling our people to focus on
providing higher value service.
More recently, we also launched a new online
platform and mobile app for Heartland Reverse
Mortgage customers in Australia. Our Australian
Reverse Mortgage customers can now view their
loan balance and any available cash reserve or
redraw facilities from their mobile, tablet
or computer.
During FY2023, we will continue to identify
features we can add to our digital banking
platforms to further reduce friction for existing
and new customers, and enable self-service.
Improving our platforms
In order to be effective, our customers’ self-service
access should be fast and intuitive. FY2022 also
saw us make improvements to our digital platforms
so they are easier for customers to use. Among
other things, these updates were designed to help
improve accessibility (particularly for older app
users), highlight important text, better prompt
actions, reduce the need to scroll, improve design
layout and create a more consistent user journey.
Automation and improved workflow processes
have also been introduced to improve the loan
application and onboarding experience behind the
scenes for our employees – including increased
DocuSign (digital document signature technology)
integration to enable faster loan documentation
execution and further reduce the need to print, and
automated loan documents and letters of offers for
some product areas.
Heartland’s CTI ratio can be used as a measure of
the efficiency of digitalisation. In FY2022 our CTI
ratio reduced from 44.8% in FY2021 to 42.5% on
an underlying basis.
1
Investing in technology
In order to achieve our long-term digitalisation
goals, we need to have scalable technologies
in place that will future-proof us for digital
growth. Over the course of FY2022, we have
been undertaking a significant piece of work
to upgrade our core banking system, requiring
substantial investment in technology and resource
to implement.
The upgrade is expected to provide Heartland with
a stable long-term platform, leading to improved
customer service. It is intended to provide us with
an improved core banking system that is faster,
offers enhanced security, and will position us well
for future developments to our digital banking
platforms that are not currently possible with our
existing banking system. This upgrade is expected
to be completed by the end of the calendar year,
with implementation underway in 2023.
In FY2023, we are continuing to increase our focus
on digitalisation to deliver further enhancements
to existing product platforms in New Zealand
and Australia. We will continue to develop digital
solutions that make banking easier and faster for
our customers. As a greater degree of self-service
functionality is developed, we will create scalable
digital platforms without costly processes, where
enhanced valued can be passed on to customers
through better service or competitive rates.
15
|
Heartland Annual Report 202216
01 Year in review
| Te ratorato pāpākore | Delivering frictionless service
01 Year in review
| Te ratorato pāpākore | Delivering frictionless service
Waka: Te whakamatihiko me te whāoma kora
Motor: Digitalisation and fuel efficiency
Maximising business as usual growth in our established product areas is a core
part of achieving Heartland’s strategic vision. Heartland Bank’s Motor Finance
business is an example of an area in which we have seen consistent growth
while supporting our dealership and branded partners to grow their businesses,
and helping New Zealanders to get behind the wheel.
Looking forward
As our partners increase their distribution of EV and hybrid vehicles, and supply chain constraints
ease, we anticipate lending to new generation vehicles to grow significantly in the coming year.
Ongoing development of our digital platforms is expected to support this growth. We will continue
to develop these platforms to ensure a frictionless customer experience, whether at the dealership
or direct to customers online. The next key development we are working towards is to streamline
the experience for customers applying via a mobile app. With these developments, more customers
will be able to apply online and then self-service their loan by continuing to use an app – saving the
customer time by reducing their need to wait in a queue or call.
In FY2022, Motor saw Receivables increase from
$1.3 billion in FY2021 to $1.4 billion. This growth
came despite the headwinds of COVID-19 and
global supply chain disruption, and the unintended
effects of changes to the CCCFA introduced on
1 December 2021.
Growth through branded partnerships
Heartland Bank’s Motor portfolio includes
lending direct to customers through Heartland
Bank or the Marac brand, and lending through
dealers, key partners and branded white label
partnerships. Our key partners, including white
label partnerships, are important contributors to
the Motor book’s growth.
Key partners, including branded white label
partners, contributed $293 million of total Motor
new business in FY2022, up 2% on FY2021.These
include partnerships with Peugeot and Citroen
(through Auto Distributors New Zealand Limited
(Auto Distributors) under the iOWN brand), Kia
(through Kia Finance and offering Kia Konfidence),
Jaguar and Land Rover.
Auto Distributors have also been appointed the
distributors for German Car brand Opel, arriving
late October 2022, with finance to be provided by
Heartland Bank.
Through these partnerships, Heartland Bank
provides white label finance to the brand which
the vehicle distributor or brand offers through its
dealerships. This gives the dealership access to
Heartland Bank’s vehicle lending product suite,
including Business Leasing, Operating Leases and
Guaranteed Future Value (GFV) loans, along with
the typical Consumer and Business term loans.
Strengthening these partnerships is mutually
beneficial. Heartland Bank’s digital platforms and
finance solutions support growth for branded
partners by providing New Zealanders with finance
options to help them purchase their next vehicle.
To aid ongoing growth, further digitalisation of
dealer platforms is expected through FY2023.
Digitalising our vehicle lending platforms
Heartland Bank released the first stage of our
online end-to-end platforms in the second quarter
of FY2022. This allows customers to apply online
anytime, anywhere with a decision possible
in minutes – without needing to go into the
dealership to apply for a loan. We will continue to
develop these platforms to improve the customer
experience and reduce friction.
This development will include integrating the
origination platforms with our dealer management
systems. For our dealership partners, this service
will free them up from having to complete an
application with the customer present. Customers
will be able to complete the application from the
comfort of their own home, in their own time, and
feel confident about the amount of lending they
can afford when choosing their next vehicle.
Lending for greener vehicles
The end-to-end dealer platforms we have
developed for our partners allows them to provide
their customers with a seamless vehicle purchase
and finance experience, and offer a range of
finance options including GFV loans. A GFV loan
allows customers to have fixed regular repayments
and assurance of the vehicle’s minimum value
at the end of the term. This service has been
particularly valuable for those looking to upgrade
to new generation EV and hybrid technology.
Heartland is committed to supporting our
partnerships and customers in the clean energy
transition to EV and hybrid vehicles. With our
continued focus on sustainability, we are pleased
to see the amount of lending in this area continue
to grow. Lending for electric vehicles and hybrids
now accounts for 5% of Motor lending, up from 1%
in FY2021.
This growth is primarily through our partnerships
with Kia, Peugeot and Citroen, who are seeing
the share of these vehicles grow over internal
combustion engine vehicles. Due to the Clean Car
Discount, they have seen these cars make-up
40% of their sales. In late October 2022, Opel is
expected to enter the market with a unique offering
with German engineered, electrification across the
range at an affordable price point – all models will
be eligible for the Clean Car Discount.
17
|
Heartland Annual Report 202218
01 Year in review
| Waka: Te whakamatihiko me te whāoma kora | Motor: Digitalisation and fuel efficiency
01 Year in review
| Waka: Te whakamatihiko me te whāoma kora | Motor: Digitalisation and fuel efficiency
Te whakarahinga tonu i Ahitereiria
Continuing our expansion into Australia
In FY2022, Heartland completed the acquisition
of StockCo Australia which specialises in livestock
finance for Australian cattle and sheep farmers –
similar to the livestock finance product offered by
Heartland Bank in New Zealand.
Holding a leading position in the market, StockCo
Australia offers a livestock lending platform,
aligning well with our strategic vision of creating
sustainable growth and differentiation through
best or only products and channels.
StockCo Australia contributed more than $337
million to Heartland’s existing Australian portfolio
at 30 June 2022, where our market-leading A$1.15
billion
1
Australian Reverse Mortgage business has
helped more than 23,000 Australians fund a more
comfortable retirement.
Expansion in Australia is a core component of Heartland’s strategy.
For Heartland, this means expansion within existing product areas, and looking
for new opportunities in niche markets where we already have expertise, such
as through the products offered by Heartland Bank in New Zealand.
Closely related to this strategic focus, is growth through acquisition.
“Like us, Heartland understands
the power of being niche and
specialised at what we do and
how we work.”
Doug Snell, StockCo Australia CEO
StockCo Australia has introduced some
digitalisation to its onboarding and fulfilment
process. However, part of the benefit of being
owned by Heartland is that StockCo Australia
can leverage Heartland’s considerable experience
in digitalising end-to-end customer application
journeys, in order to enhance its offering for
Australian farmers.
“Like us, Heartland understands the power of
being niche and specialised at what we do and
how we work,” explained StockCo Australia CEO
Doug Snell.
“When looking for a partner to assist us in moving
forward and becoming the leading provider of
livestock finance in Australia, it quickly became
apparent that Heartland’s goals and values were
closely aligned with ours.”
StockCo Australia has more than 1,560 customers
across Australia and has financed more than
$2.2 billion in livestock. With growing demand in
the market for livestock finance, the acquisition will
provide StockCo Australia with the balance sheet,
appetite, desire and capital to grow the business
through new clients and increased financial
support to existing clients.
“This is an exciting opportunity for StockCo
Australia and we’re looking forward to continuing
to support the livestock sector across Australia,
where we assist our clients to access capital
and generate profits for their businesses,”
Doug continued.
1
As at 30 June 2022.
2
Based on Australia Bureau of Statistics total rural debt and
StockCo Australia data.
Heartland’s future in Australia
Growth through acquisition is not new to Heartland.
Heartland’s Reverse Mortgage business in Australia
had a loan book of A$377 million when it was
acquired by Heartland in 2014. Eight years on,
Heartland’s Australian Reverse Mortgage book
is now just over A$1 billion (as at 30 June 2022).
Heartland hopes to achieve similar growth with
StockCo Australia – supported by a livestock finance
market currently estimated to be A$7 billion
2
.
The acquisition is expected to contribute additional
annual net profit after tax of A$10-12 million, before
any ongoing cost of acquisition debt funding
for FY2023.
With acquisitions as a core component of
Heartland’s strategy, we will continue to explore
opportunities that have either a compelling
distribution capability or offer innovative
technology that we can use to further our aim
of becoming a fully digitalised financial services
group. This includes opportunities to acquire or
obtain an ADI licence in Australia which would
enable us access to deep and efficient funding
markets to support ongoing growth across
the Tasman.
Bringing StockCo Australia into the
Heartland whānau
StockCo Australia was founded in 2014 with origins
in New Zealand dating back to 1995. Like Heartland
Bank’s livestock lending products in New Zealand,
StockCo Australia’s cashflow solutions are designed
for customers who are typically asset rich, allowing
them to purchase livestock, maximise returns and
run their business more effectively.
StockCo Australia’s livestock lending product is
relatively unique in the Australian market, offering
finance to cover up to 100% of the livestock
purchase. StockCo Australia pays the purchase
invoice directly with no repayments required from
the customer until the livestock are sold.
19
|
Heartland Annual Report 202220
01 Year in review
| Te whakarahinga tonu i Ahitereiria | Continuing our expansion into Australia
01 Year in review
| Te whakarahinga tonu i Ahitereiria | Continuing our expansion into Australia
02
Who we are
130,000+ Customers
2
(
= 10,000)
1
Tō mātou kaipakihi
Our business
525 in New Zealand
Our lending
Our people
28 in Australia
553 Employees in total
1
1
All lending portfolio figures exclude FX impact.
2
Previously referred to as Business Intermediated.
3
Business includes floorplan lending
to vehicle retailers and wholesale facilities to other lenders. The portfolio includes what was previously known as Business Relationship.
1
Excluding StockCo Australia employees.
2
Excluding StockCo Australia customers.
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13,000+ Shareholders
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Gender
Not stated
48
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51
Female
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3.6b Retail deposits ( = 100,000,000)
$
1.3b
$
0.6b
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facilities
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2423
|
Heartland Annual Report 2022
02 Who we are
| Tō mātou kaipakihi | Our business
02 Who we are
| Tō mātou kaipakihi | Our business
Poari o te Hono Heartland
Heartland Group board
From left to right:
Sir Christopher Mace
Kaumātua
Retired from the Board.
Appointed Kaumātua 28 October 2021
Geoff Summerhayes
Independent Non-Executive Director
Appointed 1 Oct 2021
Gregory Tomlinson
(Deputy Chair)
Non-Executive Director
Appointed 31 Oct 2018
Committee memberships:
Heartland Corporate
Governance, People,
Remuneration and
Nominations Committee
Geoffrey Ricketts (Chair)
Chair and Independent
Non-Executive Director
Appointed 31 Oct 2018
Committee memberships:
Heartland Audit and Risk
Committee, Heartland Corporate
Governance, People, Remuneration
and Nominations Committee (Chair)
Ellen Comerford
Independent Non-Executive Director
Appointed 31 Oct 2018
Committee memberships:
Heartland Audit and Risk
Committee (Chair)
Kathryn Mitchell
Independent Non-Executive Director
Appointed 1 Oct 2021
Committee memberships:
Heartland Audit and Risk Committee
Jeff Greenslade
CEO and Executive Director
Appointed 19 Jul 2018
As at the date of this
Annual Report.
For full profiles, visit
shareholders.heartland.co.nz
25
|
Heartland Annual Report 202226
02 Who we are
| Poari o te Hono Heartland | Heartland Group board
02 Who we are
| Poari o te Hono Heartland | Heartland Group board
Poari o te Pēke Heartland
Heartland Bank board
From left to right:
Edward John Harvey
Independent Non-Executive Director
Appointed 31 Dec 2015
Committee memberships:
Heartland Bank Audit Committee (Chair),
Heartland Bank Risk Committee
Kathryn Mitchell
Non-Independent Non-Executive Director
Appointed 29 Mar 2019
Committee memberships:
Heartland Bank Risk Committee
Geoffrey Ricketts
Non-Independent Non-Executive Director
Appointed 31 Dec 2015
Committee memberships:
Heartland Bank Audit Committee
Shelley Ruha
Independent Non-Executive Director
Appointed 1 Jan 2020
Committee memberships:
Heartland Bank Risk Committee (Chair),
Heartland Bank Audit Committee
Bruce Irvine (Chair)
Chair and Independent Non-Executive Director
Appointed 31 Dec 2015
Committee memberships:
Heartland Bank Audit Committee,
Heartland Corporate Governance, People,
Remuneration and Nominations Committee
Jeff Greenslade
Executive Director
Appointed 31 Dec 2015
As at the date of this Annual Report.
For full profiles, visit
shareholders.heartland.co.nz
27
|
Heartland Annual Report 202228
02 Who we are
| Poari o te Pēke Heartland | Heartland Bank board
02 Who we are
| Poari o te Pēke Heartland | Heartland Bank board
Hono Whakahaere Rautaki
Strategic Management Group
Heartland GroupHeartland Bank
As at the date of this Annual Report.
For full profiles, visit shareholders.heartland.co.nz
* On 19 May 2022, Heartland announced the appointment of Chris Flood as Deputy Group CEO of Heartland Group, and Leanne
Lazarus as CEO of Heartland Bank, with effect from 1 August 2022.
29
|
Heartland Annual Report 202230
02 Who we are
|
Hono Whakahaere Rautaki | Strategic Management Group
02 Who we are
|
Hono Whakahaere Rautaki | Strategic Management Group
Pūrongo aronga rau
Diversity report
The diversity of our people contributes to our success as a business.
Heartland is committed to supporting initiatives which foster diversity at all
levels of the organisation. This puts us in a better position to attract a wide
talent pool, understand and respond to diverse stakeholder needs, and enables
us to draw from a broad experience base to identify new opportunities, solve
problems and make decisions.
By embracing diversity, we promote a culture of
inclusion and a sense of belonging. This enables
our people to be engaged, feel comfortable to
bring their whole selves to work, and be motivated
to create the best outcomes for our customers,
shareholders and other stakeholders.
Our commitment to diversity is documented
within our Diversity and Inclusion Policy
which is available on our shareholder website,
shareholders.heartland.co.nz.
Diversity is the many characteristics that make
each of us different, including gender, ethnicity,
heritage, sexual orientation, age, religious beliefs or
other ideologies, family status, language, cultural
background, and physical and mental abilities.
An inclusive workplace is one where all those
forms of diversity are valued, respected and
leveraged, creating equal opportunities for
all employees.
Under this policy, the Board, with the assistance
of the Diversity and Inclusion Committee, is
responsible for setting measurable objectives
and reviewing progress against them.
Heartland’s diversity and inclusion measurable objectives
a) To improve the inclusiveness of our workplace by increasing cultural awareness and
celebrating diversity in all of its forms.
b) To achieve a gender balance at all levels of the organisation and work towards
ensuring diverse ethnicities are represented throughout the organisation.
c) To be a workplace where Māori can succeed as Māori and thereby create a pathway
to being an employer that is welcoming to all cultures and ethnicities.
d) To be a workplace and financial service that understands and welcomes sexuality and
gender diversity.
The following sections highlight progress against these measurable objectives across FY2022, noting that
due to COVID-19 lockdowns we embraced online and digital celebrations while working remotely.
Success is not the work of an individual,
but the work of many.
31
|
Heartland Annual Report 2022
02 Who we are
|
Pūrongo aronga rau | Diversity report
Ehara taku toa i te
toa takitahi, engari
he toa takitini.
Leanne Lazarus was appointed Heartland Bank
CEO on 1 August 2022.
To achieve a gender balance at all levels
of the organisation and work towards
ensuring diverse ethnicities are represented
throughout the organisation
Heartland continues to identify and address
gender imbalances at all levels. The table below
shows the gender diversity of directors and
employees of Heartland in both New Zealand and
Australia as at 30 June 2022 and 30 June 2021.
Heartland understands the importance of
building a pipeline of female leaders and remains
committed to this. This year we introduced a new
dataset for all of our people leader population
(people with line management responsibilities),
excluding the Strategic Management Group.
These statistics show females represent 44% of
our people leaders, and males represent 56%.
This is encouraging. We continue to look at ways
to increase opportunities for wāhine (women)
in leadership roles, and on 1 August 2022, were
pleased to welcome Heartland Bank’s first female
CEO, Leanne Lazarus. At Board level, we maintain
a 30%+ ratio of wāhine.
For our employees aged 35 and under, the gender
balance is encouraging, with 48% reporting as male
and 53% reporting as female. Heartland selected
four employees under 28 years of age to attend
the immersive leadership development experience
through Rotary Youth Leadership Awards, with the
goal to develop leadership skills and strengthen our
leadership pipeline. Our selection criteria aimed to
achieve a gender balance across attendees – since
2019, 58% of our selected participants have
been wāhine .
We’ve continued to invest in the individual
development of wāhine at Heartland. This is
evidenced by 58% of our Rangatahi Advisory
Board members being female as at 30 June
2022, and at the end of the 2021 calendar year,
four Heartland wāhine also completed the
Global Women Activate Leaders Programme.
Both opportunities provide a rich foundation for
development for our future female leaders.
To better reflect the current environment and
expectations of both current and potential
employees, we have refreshed our approach
towards supporting flexible working. Heartland’s
working from home experience during the
COVID-19 pandemic was a success, and we
remain committed to a flexible approach going
forward. We recognise that every individual is
different - each one of us has different personal
circumstances and different preferences, and
different roles require different degrees of
face-to-face connection. People leaders are
encouraged to take an open-minded approach
to requests for flexible working. Whilst we see
this as one of the many ways in which we can
attract and retain wāhine in more senior roles
in the organisation, the benefits of having a
flexible working policy extend beyond fostering a
gender balance – it is also aligned to Heartland’s
objective to be a more generally diverse and
inclusive workplace. Giving all employees
To improve the inclusiveness of our
workplace by increasing cultural awareness
and celebrating diversity in all of its forms
Heartland’s commitment to celebrating our
diverse workforce, consisting of a wide variety
of ethnicities, heritages, backgrounds, cultures,
genders, sexualities and ages, can be seen through
our dedication to strengthening our culture.
We embrace and celebrate our diversity which
enables our people to feel a sense of belonging,
and, therefore, be their authentic selves at work.
Heartland’s Diversity and Inclusion Committee
is a forum for our people to come together and
share ideas to measure, celebrate and promote
diversity and inclusion. The Committee reports to
the Board on diversity related matters, including
Heartland’s progress towards achieving our
measurable objectives.
The Diversity and Inclusion Committee
coordinated a number of events throughout the
year to celebrate and recognise times of cultural
significance, including Christmas, Ramadan,
Diwali, Matariki, and te wiki o te reo Māori
(Māori language week).
2022 marked the first year that Mānawatia a
Matariki, the Māori new year, was celebrated as
a national public holiday across New Zealand.
Heartland celebrated Matariki by sharing
educational resources on the importance of the
Māori new year, and by coming together during a
special Matariki event to reflect and celebrate the
year that had passed, and look to our aspirations for
the year ahead. As part of our Matariki celebrations,
and in the spirit of manaakitanga (showing support
and care for others), our people also collected food
parcels, with donations distributed to local pātaka
kai (open street pantries).
Acknowledgement of Pasifika language weeks has
been spread across the year through Heartland’s
intranet. This included showcasing languages
from Samoa, Tonga and Kiribati, which creates an
opportunity for our people to better understand the
richness Pasifika people bring to Aotearoa.
In order to create awareness and inclusion in
a wider sense, we also held virtual events and
shared information to celebrate and acknowledge
events including Mental Health Awareness
Week, NZ Sign Language Week, World Hearing
Awareness Month, World Elder Abuse Awareness
Day, International Women’s Day and Pride Month.
As at 30 June 2022As at 30 June 2021
PositionsFemaleMaleUnstatedTotalFemaleMaleUnstatedTotal
Board - Heartland
Group Holdings
2
(33%)
4
(67%)
06
1
(20%)
3
(60%)
1
(20%)
5
Board -
Heartland Bank
2
(33%)
4
(67%)
06
2
(33%)
4
(67%)
06
Strategic Management
Group (SMG)
3
(30%)
7
(70%)
010
4
(50%)
4
(50%)
08
All People Leaders
(excl SMG)
47
(44%)
60
(56%)
0107
41
(44%)
52
(56%)
093
All employees
284
(51%)
266
(48%)
3
(0.5%)
553
269
(52%)
241
(47%)
2
(0.4%)
512
33
|
Heartland Annual Report 202234
02 Who we are
|
Pūrongo aronga rau | Diversity report
02 Who we are
|
Pūrongo aronga rau | Diversity report
Members of Manawa Whenua, Heartland's committee for Māori employees and allies.
Heartland employees attended reo Māori programme,
Kura Reo Pakihi.
Manawa Ako 2021/2022 intake.
Heartland’s 2021/2022 Manawa Ako intake
required us to pivot to ensure we could continue
providing this internship experience amidst
changing COVID-19 traffic light settings in
New Zealand. We were pleased to successfully
run Manawa Ako virtually for 26 ākonga. Along
with continuing our relationship with the InZone
Education Foundation and a number of secondary
schools as part of the programme, this year we also
expanded the programme to our iwi partners, which
brought a new perspective for the ākonga to identify
opportunities to learn about the finance sector and
return those learnings to their iwi. Built on the Māori
principle of ako, to learn and to teach, while the
ākonga gain experience in a corporate environment,
Heartland also gains from the valuable perspectives
the ākonga bring to the workplace through their
close connection to their identity.
Progress has continued to make Heartland,
and thereby the banking sector, more inclusive
for Māori. Māori make up 7% of our Heartland
population, despite only 2% of people in the
financial and insurance services sector identifying
as Māori. Consistent with last year, 59% of our
employees who identify as Māori are aged 30 and
under. This can be attributed to the efforts invested
in the Manawa Ako internship programme, with
12 Manawa Ako alumni employed by Heartland as
at 30 June 2022. The programme helps to build a
workplace where Māori can see a career pathway
and establish their career with cultural integrity.
In recognition of our efforts with Manawa Ako,
Heartland was a finalist in the 2022 HRNZ Awards
in the Leader Māori HR award category. The Leader
Māori HR award is one of two newly launched
Mana Tāngata Awards which recognise individuals
or organisations commencing the journey to
incorporate bicultural HR practices (Emerging
Māori HR) and those demonstrating excellence in
the enactment of tikanga Māori based HR practice
(Leader Māori HR).
Manawa Whenua, Heartland’s internal network
for Māori employees and allies, has played a
pivotal role in liaising, advising, driving, guiding,
and celebrating Māori initiatives at Heartland,
and we continue to raise the status of te reo
Māori where we can. We acknowledge our role as
kaitiaki (guardians or caretakers) of the language
and our responsibility to maintain a high standard
of reo Māori by engaging recognised proficient
translators. Māori language continues to be used
in various contexts throughout the business, and,
as part of Heartland’s commitment, we offer reo
Māori lessons to our people. This year was the
first year our reo Māori lessons were online for a
group of employees who signed up to a ten-week
commitment to learning te reo and tikanga Māori.
The increased use of te reo Māori lifts the status of
the language, thereby creating a stronger sense of
belonging for people who identify as Māori.
We recognise that we are in a privileged position to
be able to have a positive impact on regenerating
our indigenous language, and making the business
and finance space more accessible and equitable.
As such, we were proud to continue our support
for Reo Whairawa’s Kura Reo Pakihi programme
– a marae-based Māori language course for the
financial and accounting community. Three people
from Heartland attended the two-day event held
this Rotorua in April 2022, with a second cohort
attending the course in July. Kura Reo Pakihi
provided a great opportunity to connect with others
in the industry and collectively support the use and
development of te reo Māori.
To be a workplace where Māori can succeed
as Māori, and thereby create a pathway
to being an employer that is welcoming
to all cultures and ethnicities
To improve our ethnic and cultural diversity we’re
starting close to home with New Zealand’s own
people: our tangata whenua. Māori have a unique
and significant role in Aotearoa, which Heartland is
embracing – we aspire to be a workplace that Māori
want to be part of. It is our belief that if we can
enhance our working environment so that Māori
language, culture and values are embraced, and
where Māori feel confident to join us and succeed
authentically as Māori, then we will have set a good
foundation for being a more welcoming place for
people of all cultures and ethnicities.
Whāia te iti kahurangi is Heartland’s framework
for providing a workplace and financial service that
enables Māori to succeed as Māori. The purpose
of Whāia te iti kahurangi is to support the work
we do with Māori, te reo Māori, and customary
practices. It is used as a reference point for our
people on operational issues, and to support the
inclusion of an indigenous perspective around the
work that we do. This framework sits alongside our
policy documents and is linked to various business
operations to ensure it is kept in our line of sight,
reflecting its mana.
Our Manawa Ako internship programme also
operates to further this objective, with 102
rangatahi (young people) joining the programme
as ākonga (interns) over the past five years.
flexibility enables them to access personal
pursuits such as sport, community work, religious
celebrations or care for family members.
Increased commitment to gender balance is
expected in the year ahead. In FY2022, Heartland
established a Growing Families group internally,
providing a forum for employees who are parents
and caregivers of young children and growing
families to connect and share with each other,
and to provide input to future initiatives and
developments which support gender balance
at Heartland.
35
|
Heartland Annual Report 202236
02 Who we are
|
Pūrongo aronga rau | Diversity report
02 Who we are
|
Pūrongo aronga rau | Diversity report
Heartland employees participated in Sweat with Pride,
raising $2,021, which Heartland matched.
To be a workplace and financial service
that understands and welcomes sexuality
and gender diversity
Inclusion of our Rainbow community is another
priority for Heartland. In FY2022, Heartland was
pleased to receive the Rainbow Tick. Achieving the
Rainbow Tick isn’t the end of our journey to create
an inclusive space for Rainbow people, but it was
a proud moment for us to know we are making
good progress.
As part of our support of Pride Month in 2022,
our people participated in Sweat with Pride,
a fundraising event supporting the Burnett
Foundation Aotearoa (formally the New Zealand
AIDS Foundation), Rainbow Youth and Outline,
being organisations that actively work towards
improving mental, physical and sexual health for
our Rainbow communities. Heartland employees
fundraised $2,021, which Heartland matched.
In the first half of FY2023, we will again be offering
educational workshops facilitated by Rainbow Tick
to enable our people to learn and understand more
about our Rainbow communities.
Work is underway to gain a greater understanding
of ethnic representation at Heartland, and we hope
to provide a more accurate representation of ethnic
pay gaps over time.
FY2022 pay gaps
• Gender pay gap: the gap between the median
pay of men and women across all New Zealand
roles at Heartland is 24%.
• Māori pay gap: the gap between the median
pay of non-Māori and Māori across all New
Zealand roles at Heartland is 32%.
• Pasifika pay gap: the gap between the median
pay of non-Pasifika and Pasifika across all
New Zealand roles at Heartland is 29%.
1
Heartland’s pay gap reporting includes pay for all New Zealand
employees, including base pay and discretionary payments.
Pay gap reporting
1
Heartland’s commitment to diversity, equity and
inclusion extends to ensuring we are providing
fair pay to our people. In New Zealand, some of
the ways we do this is by being a Living Wage
Accredited Employer, and through our participation
in MindtheGap pay gap reporting.
In FY2022, Heartland was one of just seven
organisations in New Zealand who committed to
reporting pay gaps for gender, Māori and Pasifika
when the MindtheGap pay gap reporting register
was launched in March 2022.
We know that the financial and insurance services
industry gender pay gap is 31%. At 30 June 2022
our gender pay gap was 24%. While this is lower
than the industry average, we are committed to
reducing it and our ethnic pay gaps further.
Our reporting on ethnic pay gaps is limited to those
who choose to identify as Māori or Pasifika.
Heartland employees are increasingly taking up the
option to include pronouns in their email signatures
as a way to easily convey the words they would like
others to use when being addressed or referred to.
We recognise that diversity comes in all forms, and
the ability to self-identify promotes confidence in
bringing your true and authentic self to work.
The activities undertaken over the past year have
created a sound foundation which we will continue
to build on as we strengthen our focus towards
increasing Rainbow awareness and ally-ship, and
being an organisation that understands, welcomes
and embraces sexuality and gender diversity.
We are very proud of what we have
continued to achieve in FY2022
in embracing and promoting the
diversity of our people. We are
creating a more welcoming and
inclusive workplace where all
people are respected and valued.
We recognise that all forms of
diversity bring different perspectives
and expressions of ideas and opinions
throughout the organisation, and
contribute to Heartland’s productivity,
profitability and connection with our
communities and stakeholders.
In the year ahead, we will continue
to embrace and promote diversity,
leverage diversity as a competitive
advantage to attract, retain and
motivate the widest possible pool
of talent, and recognise, understand
and value individual contribution
and performance across Heartland.
3837
|
Heartland Annual Report 2022
02 Who we are
|
Pūrongo aronga rau | Diversity report
03
Sustainability
Heartland’s sustainability framework
encapsulates our environmental,
social and economic impact across
New Zealand and Australia, and was
defined for the first time in our Annual
Report for the financial year ended 30
June 2020 (FY2020). In the two years
since then, Heartland has achieved
a number of milestones across these
three pillars.
Now, as we begin our third year
operating within this framework, our
intention is to embed sustainability
as a strategic focus throughout the
business. By promoting sustainable
ideals in all facets of the organisation,
we can ensure we are operating in
a way that’s sustainable for our
planet, customers, communities
and stakeholders.
We’re proud to share with you
Heartland’s FY2022 achievements
across our three-pillar framework,
and our trajectory and goals for the
coming financial year.
03 Our sustainability journey
|
Te atawhai ā-taiao | Environmental conservation
Te atawhai ā-taiao
Environmental conservation
Acting as kaitiaki of our natural environment
Reducing our
direct impact on
the environment
Creating an
internal culture
of environmental
awareness and
conscientiousness
Creating business
practices that support
good environmental
outcomes
Amidst the challenges posed during FY2022 by COVID-19 lockdowns and
restrictions, there were silver linings to be found – particularly from an
environmental perspective.
Heartland employee Shreyansh Patni participating
in the Aotearoa Bike Challenge, where Heartland
employees rode 1,087km, saving 32kg of CO2.
Motor Finance Regional Manager, Matt Atkin, and his
children, with his new hybrid vehicle.
Heartland continued work towards hitting our
ambitious emissions reduction targets, achieving
a 31% absolute reduction in our most recent
reporting period (FY2021). An estimated 21% of
which can be attributed to newly embedded ways
of operating which reduce carbon emissions, and
the remainder of which is a result of the ongoing
impact of COVID-19. This puts us ahead of track
to meet our absolute GHG emissions reduction
target of 35% by the end of the financial year
ending 30 June 2026 (FY2026), compared with
our baseline for the financial year ended 30 June
2019 (F Y2019).
Heartland’s vehicle fleet is the single biggest
contributor towards our GHG emissions. For that
reason, fleet optimisation has been one of our
primary environmental conservation focuses
for a number of years, with FY2021 seeing the
achievement of a 7% decrease in fleet size. During
FY2022, we’re pleased to confirm that we began
phasing out our petrol- and diesel-engine fleet,
starting with the replacement of all internal 4WD
vehicles (equating 23% of the total fleet) with
hybrid alternatives. The remaining 77% of the
fleet (2WD petrol cars) will be considered for
replacement in the first half of FY2023. Heartland
has also commenced the installation of EV
charging stations at our key office locations.
In terms of funding more fuel-efficient vehicles
for customers, Heartland is financing an
increasing number of “new generation” (electric
and hybrid) vehicles. During FY2022, 5% of
vehicles financed in our Motor portfolio were new
generation. However, that percentage increased
steadily over the year and continues to climb as
Heartland’s key partners (including Kia, Peugeot,
Citroen, Jaguar and Land Rover) increase their
production of new generation vehicles.
FY2022 also brought with it the introduction of a
mandatory reporting regime for climate-related
disclosures in New Zealand through the Financial
Sector (Climate-related Disclosures and Other
Matters) Amendment Act 2021. This comes into
effect from FY2024 and will require qualifying
financial institutions to report on their environmental
impact in a way that’s visible to the market.
Through our memberships with the New Zealand
Bankers Association and the Climate Leaders
Coalition, Heartland contributed to the consultation
process for this new regime.
Our FY2022 GHG emissions are currently being
measured to ensure that we will be in a position
to report our FY2023 GHG emissions as part of
our FY2023 financial reporting. From FY2023,
Heartland’s GHG emissions reporting will include
emissions attributed to customer activity enabled
though lending.
Analysis of the physical risks (including flood,
drought or other natural hazard risk) and
transitional risks (including the potential for climate
change related regulatory change, the ongoing
availability of insurance, and changes in borrower
behaviour and preferences) has also been
conducted using two climate change scenarios
over the medium- and long-term, to understand
the potential impact of climate change on our
product portfolios. This will support informed
decision making going forward.
Heartland is building good momentum in respect
of our environmental conservation efforts,
however, there is much to do. We are committed
to continuing to transition our business and
support our customers to transition to a lower
carbon future. This includes remaining focused on
lowering our emissions activity to hit our FY2026
emissions reduction targets. In FY2023, we also
intend to continue to engage our employees in
sustainability-minded activities and more actively
support the green initiatives of our customers,
intermediaries and branded partners.
Increasingly financing
“new generation” vehicles
COVID-19-adjusted reduction
in GHG emissions
21
%
of vehicle fleet replaced
with hybrid alternatives
23
%
GHG emissions in FY2021,
reduced from 955 tCO2e in FY2020
798.62 tCO2e
43
|
Heartland Annual Report 202244
03 Our sustainability journey
|
Te atawhai ā-taiao | Environmental conservation
03 Our sustainability journey
|
Te tōkeke ā-hapori | Social equity
Te tōkeke ā-hapori
Social equity
He aha te mea nui o tea o? He tangata, he tangata, he tangata!
What is the most important thing in the world? It is people, it is people, it is people!
Heartland has been part of the fabric of the New
Zealand community since 1875, and we remain
dedicated to supporting our people, customers
and local communities.
In FY2022, we achieved our goal of becoming
Rainbow Tick Accredited, demonstrating our
ongoing commitment to being an organisation that
understands, welcomes and embraces sexuality
and gender diversity. Heartland also introduced
pay gap reporting around gender and ethnicity
during FY2022, and was one of only seven
organisations to disclose its gender, Māori and
Pasifika pay gap measures on the first day of the
registry’s launch. Our gender pay gap as at 30
June 2022 of 24% is better than the financial and
insurance services industry average of 31%.
While this is a good start, it is still far too high,
and we are committed to reducing our pay gaps
further. More detail about Heartland’s diversity
and inclusion commitments are described in the
Diversity report on page 31.
Through the Heartland Trust
1
, we continued
supporting organisations and initiatives in the
areas of education and learning, arts and culture,
and mental health and wellbeing over the course
of the financial year. Heartland Trust grants for
FY2022 totalled $501,933. This included giving
back to the community through grants to Auckland
City Mission, InZone Education, and various high
school and club rugby teams.
Among the initiatives funded through the
Heartland Trust in FY2022 was Heartland Bank’s
2021-2022 Manawa Ako intake. The Manawa
Ako internship programme is Heartland’s annual
6-week paid internship programme for rangatahi
Māori and Pasifika, which this year was recognised
as a finalist in the 2022 HRNZ Awards’ Leader
Māori HR award category (read more in the
Diversity report on page 31).
Social equity includes creating a work environment
where our people can thrive. Ensuring alignment
between individual and organisational values is
a great contributor to this. In May, we refreshed
our mātāpono (values) and conducted a survey
to understand the connection our people have to
our Heartland mātāpono, so we know what we
are doing well, and where we need to improve.
Pleasingly, 93% of employees resonate with our
mātāpono, stating that they are values that are
important to them personally.
As part of Heartland’s commitment to social equity,
we aim to ensure that we prevent any connection
to modern day slavery, whether through our own
practices, our customers or our supply chain.
In FY2022, we implemented processes and
controls across Heartland Group to assess our risk
Caring for our people, customers and communities
1
The Heartland Trust is a registered charitable trust which is
independent from, but closely supported by, Heartland and
Heartland Bank.
Ensuring our conduct
and culture drives
fair outcomes for
our customers
Making a positive
difference in our
communities
Creating and fostering
internal and external
cultures of diversity
and inclusivity
exposure to modern day slavery practices on an
ongoing basis and have found the exposure to be
relatively limited – however, ongoing improvements
continue to be made, including developing a due
diligence framework for ongoing governance of
higher risk suppliers.
In FY2023, our main focuses in the social equity
space continue to be on achieving gender and
ethnic balance at all levels of the organisation,
including working towards reducing our pay gaps.
Began reporting gender, Māori
and Pasifika pay gaps
Received Rainbow Tick
accreditation
rangatahi Māori and Pasifika who took
part in the 2021-2022 Manawa Ako
internship programme
granted through the
Heartland Trust
of employees resonate with
Heartland’s mātāpono (values)
Finalist for Leader Māori HR award at
the 2022 HRNZ Awards for Manawa Ako
93
%
26
$
501,933
45
|
Heartland Annual Report 202246
03 Our sustainability journey
|
Te tōkeke ā-hapori | Social equity
Heartland’s $154.4 million acquisition of livestock
financier StockCo Australia was finalised on
31 May 2022, a purchase that is expected to
contribute additional annual net profit after tax of
A$10-12 million, in a market estimated to be worth
$7 billion
1
. More information about the StockCo
Australia acquisition can be found on page 19.
Heartland’s Australian Reverse Mortgage loan
book also surpassed $1 billion at the beginning
of FY2022, reporting $1.24 billion
2
in Receivables
by 30 June 2022 – growth of $846 million in just
over eight years. Continued sustainable economic
growth in Australia remains one of Heartland’s
strategic priorities moving forward.
Our New Zealand Reverse Mortgage team also
achieved a significant milestone this year, helping
their 20,000th customer. Together with our
Australian Reverse Mortgages team, we have
helped more than 40,000 New Zealanders and
Australians to live a more comfortable retirement
through a reverse mortgage.
After most of FY2022 presented an extremely low
interest rate environment, rates in New Zealand
have been steadily inclining, with the average
(standard) 1-year mortgage rate of the big four
banks increasing by 245 basis points (bps) from
July 2021 to June 2022.
3
Our self-serve online
home loan application has enabled us to continue
offering online Home Loans customers with
cost-savings through some of New Zealand’s
lowest mortgage rates, despite the rapidly rising
interest rate environment. Our online home loan
offering has been a success in proving the merit of
a digital-only loan application offering where low
onboarding costs mean better rates for customers.
We will continue exploring new opportunities
where we can adopt similar approaches to other
product platforms in the future.
Another notable achievement in the economic
prosperity sphere was the updating of our
Procurement Policy to connect it more closely with
Heartland’s sustainability framework. The aim is
to promote our values amongst new and existing
supply chain partners and support a more diverse
and inclusive network. This work was completed
in FY2022 and will support us in building stronger,
more sustainable supply chain partnerships
moving forward.
Heartland continued to deliver positive economic
outcomes for shareholders despite the continued
economic challenges presented by COVID-19.
We were pleased to be able to pay a final dividend
of 5.5 cps, bringing our total dividend in respect
1
Based on Australia Bureau of Statistics total rural debt and
StockCo Australia data.
2
Excluding FX impact.
3
Calculated by averaging ANZ, ASB, BNZ and Westpac’s
standard (non-special) 1-year mortgage rates as advertised
on interest.co.nz, comparing 4 July 2021 with 23 June 2022.
4
Underlying EPS was 16.3 cps, up 1.2 cps from FY2021.
of FY2022 to 11.0 cps with a full year payout ratio
of 68%, consistent with the average over the last
three years.
In addition to this, Heartland delivered total
shareholder return (TSR) of 66.9% over the last
five years (19 August 2017 – 19 August 2022),
compared with the NZX50 Index TSR of 56.7% in
the same period, while also delivering growth in
EPS (up 1.2 cps to 16.1 cps)
4
.
In conjunction with our full year results
announcement for FY2022, we also announced a
proposed equity raise of $200 million to repay a
A$158 million debt from the acquisition of StockCo
Australia, and to fund future growth ambitions
in Australia and New Zealand – our first equity
raise since 2017. The equity raise included a $130
million fully underwritten placement and a non-
underwritten share purchase plan to shareholders
in New Zealand and Australia of up to $70
million, with the ability for Heartland to accept
oversubscriptions. Pleasingly, the Placement was
fully subscribed and the SPP received applications
totalling approximately $68.8 million.
Dividend per share (cps)
FY2022 saw a number of exciting developments for Heartland from an
economic prosperity point of view – particularly across the ditch.
Te tōnuitanga ohaoha
Economic prosperity
Creating sustainable economic outcomes for our stakeholders
Positively contributing
to the New Zealand
and Australian
economies
Enhancing economic
outcomes for customers
through digitalisation
Creating sustainable
economic value for
our shareholders
New Zealanders and Australians enabled
to live a more comfortable retirement
through a Reverse Mortgage
Total shareholder return over
the last five years (19 August
2017 – 19 August 2022)
40,000
Heartland Bank awarded Canstar's
Bank of the Year - Savings 2022
(for the fifth consecutive year)
Funding raised through 2022
equity raise to enable future
growth ambitions
$
198.6m
66.9%
3.5
4.0
5.5
4.5
7. 0
5.5
2.5
6.5
FY20FY21FY22FY19
Interim dividendFinal dividend
47
|
Heartland Annual Report 202248
03 Our sustainability journey
|
Te tōnuitanga ohaoha | Economic prosperity
03 Our sustainability journey
|
Te tōnuitanga ohaoha | Economic prosperity
04
Disclosures
Te urungi ā-rangatōpū
Corporate governance
Heartland, as the parent company of the Group,
is committed to ensuring that Heartland’s policies
and practices reflect current best practice, in the
interests of Heartland’s shareholders and other
stakeholders. In addition to information about
Heartland’s corporate governance policies and
practices, this section also includes information
about Heartland Bank’s corporate governance
policies and practices. Heartland Bank has its
own Board and Board Committees, and makes
independent decisions (including on corporate
governance matters), however Heartland and
Heartland Bank Board and Committee meetings
are usually held consecutively and members of
both Boards or Committees (as applicable) attend
both meetings. Heartland’s important corporate
governance policies and practices either apply to,
or have been adopted by, Heartland Bank.
Heartland is pleased to report that, other than in
respect of the matters explained in the “Principle 2 –
Board Composition & Performance” and “Principle 3
– Board Committees” sections to follow, it was fully
compliant with the corporate governance principles
contained in the NZX Corporate Governance Code
(the NZX Code) as at 30 June 2022.
Insider Trading Policy
In addition to the prohibition on insider trading,
the Group’s directors, senior employees and other
restricted persons are prohibited from buying
or selling the Group’s quoted financial products
during ‘blackout periods’ – which are periods
that commence 30 days’ prior to the end of the
half-year and the full-year and end once the
financial results from the half-year or the full-year
have been released to the market. In addition, all
of the Group’s directors, senior employees and
other restricted persons are required to obtain
consent before buying or selling the Group’s quoted
financial products outside of blackout periods, and
to certify that their decision to buy or sell has not
been made on the basis of inside information.
The Board continually assesses, with the
assistance of the Heartland Bank Board, whether
any matters under consideration are likely to
materially influence Heartland’s share price and
therefore whether additional trading restrictions
should be imposed on directors, senior employees
and other restricted persons.
The Insider Trading Policy is available on
Heartland’s shareholder website,
shareholders.heartland.co.nz. Through our share
registrar, Link Market Services, we actively monitor
trading in Heartland shares by directors, senior
employees and other restricted persons.
Principle 1 – Code of Ethical Behaviour
Directors should set high standards of ethical
behaviour, model this behaviour and hold
management accountable for these standards
being followed throughout the organisation.
Codes of Conduct
Heartland’s Code of Conduct and Directors’ Code
of Conduct set out the ethical and behavioural
standards expected of Group directors, employees
and intermediaries. The Codes of Conduct are
available on Heartland’s shareholder website,
shareholders.heartland.co.nz.
The Codes of Conduct cover a wide range of
areas, including:
• Heartland’s responsibilities towards
shareholders and the financial community, its
customers, clients and service providers, and
its employees;
• conflicts of interest, including the receipt of gifts
and other corporate opportunities;
• confidentiality; and
• the procedure for advising Heartland of a
suspected breach.
Every new director or employee is to be provided
with a copy of the Code of Conduct and is required
to read it. Each director and employee has an
obligation, at all times, to comply with the spirit
as well as the letter of the law, and to comply with
the principles of the Code of Conduct, including
exhibiting a high standard of ethical behaviour.
The Codes of Conduct are subject to annual review.
This corporate governance statement describes Heartland’s corporate
governance policies and practices as at 30 June 2022, and has been approved
by the Board.
Principle 2 – Board Composition
and Performance
To ensure an effective board, there should be
a balance of independence, skills, knowledge,
experience and perspectives.
Role of the Board
The Board is responsible for corporate governance
and setting the Group’s overall strategic direction.
The Board charter regulates Board procedure and
describes the Board’s role and responsibilities in
detail, and is available on Heartland’s shareholder
website, shareholders.heartland.co.nz.
The Board establishes objectives, strategies and
an overall policy framework within which the
Group’s business is conducted.
The Board schedules regular meetings at which it
receives briefings on key strategic and operational
issues from management.
Board processes
The Board held 8 meetings, and the Heartland
Bank Board held 8 meetings, during the year
ended 30 June 2022. The following table shows
attendance by each director at the meetings of
the Heartland and Heartland Bank Boards and
Heartland Board Committees of which he or she
was a member.
Heartland BoardHeartland Bank Board
Attended
as Director
Attended as
Observer
Attended as
Director
Attended as
Observer
J K Greenslade8-7-
E F Comerford8--8
E J Harvey-88-
B R Irvine-88-
C R Mace
1
4--8
K Mitchell
2
538-
G T Ricketts8-8-
G R Tomlinson8--8
S M Ruha -88-
G E Summerhayes
3
51-6
1
C M Mace resigned from the Heartland Board on 28 October 2021.
2
K Mitchell joined the Heartland Board on 1 October 2021.
3
G E Summerhayes joined the Heartland Board on 1 October 2021.
51
|
Heartland Annual Report 202252
04 Discolsures
| Te urungi ā-rangatōpū | Corporate governance
04 Discolsures
| Te urungi ā-rangatōpū | Corporate governance
04 Discolsures
| Te urungi ā-rangatōpū | Corporate governance
04 Discolsures
| Te urungi ā-rangatōpū | Corporate governance
of its strategic priorities, and for the Board to
have a balance of skills and attributes in order to
support diversity at Board level. With this in mind,
the composition of both the Heartland and the
Heartland Bank Boards is regularly reviewed and
their collective skills, knowledge and experience
formally assessed. This exercise provides an
opportunity to reflect on and discuss current Board
composition, as well as succession planning.
The current Boards comprise directors with a mix of
qualifications, skills and attributes who hold diverse
business, governance and industry experience.
Board training and performance assessment
To ensure ongoing education, directors are regularly
informed of developments that affect the industry
and business environment, as well as company and
legal issues that impact the directors themselves.
Directors have access to management and any
additional information they consider necessary for
informed decision making.
The Boards of Heartland and Heartland Bank
undertake a formal review of their own, their
committees’ and individual directors’ performance
at least annually. This is to ensure that they each
have a range of complementary skills, knowledge
and experience in order to effectively govern the
Group, to monitor its performance, and to support
the implementation of its strategic priorities – in the
interests of its shareholders and other stakeholders.
Diversity and inclusion
In order to articulate its commitment to diversity,
Heartland has developed a Diversity & Inclusion
Policy, which requires the Board, with the help
of the Diversity & Inclusion Committee, to set
measurable objectives for achieving diversity and to
track progress against them. Heartland’s Diversity
& Inclusion Policy is available on Heartland’s
shareholder website,
shareholders.heartland.co.nz.
A discussion of Heartland’s Diversity & Inclusion
Policy and a report on the measurable objectives
which were set for 2022 is included on
page 31 of
this Annual Report.
4
G E Summerhayes became an independent director on 1 January 2022 following the cessation of a contractor arrangement with
Heartland Australia Group Pty Ltd.
5
Recommendation 2.8 of the NZX Code provides that a majority of the Board should be independent directors.
Heartland directorshipsHeartland Bank directorships
Audit & Risk
Committee
Corporate
Governance, People,
Remuneration
and Nominations
Committee
Audit
Committee
Risk
Committee
J K Greenslade5*6*1*-
E F Comerford6-6*6*
E J Harvey6*-66
B R Irvine6*661*
C R Mace4**-4*1*
K Mitchell4***-2*6
G T Ricketts666-
G R Tomlinson1*6--
S M Ruha1*-66
*These meetings were attended by the director as an observer rather than as a member.
** The first two meetings were attended as a member and the subsequent two as an observer.
*** K Mitchell was appointed to the Committee during FY22 and attended all Committee meetings following her appointment.
All of the then serving members of the Board,
and Heartland Bank Board, attended the Annual
Meeting in-person or virtually, held on 28 October
2021.
Director appointment
The Corporate Governance, People, Remuneration
and Nominations Committee is tasked with the role
of reviewing Heartland Board composition, and
reviewing and making recommendations in relation
to nominations, for the Board’s consideration.
Each new director of Heartland is required,
pursuant to the Heartland Board charter, to enter
into a written agreement with Heartland in respect
of his or her appointment and Heartland has a pro
forma director appointment letter which is tailored
for individual appointments.
Board membership, size and composition
The NZX Main Board Listing Rules provide that the
number of directors must not be fewer than three.
Subject to this limitation, the size of the Board is
determined from time to time by the Board.
As at 30 June 2022, the Board comprised six
directors, being an independent Chairman, the
Deputy Chair, the Chief Executive Officer and three
non-executive directors. The Board encourages
rigorous discussion and analysis when making
decisions.
On 1 October 2021, K Mitchell and G E Summerhayes
were appointed to the Board. The retirement of
C M Mace from the Board was announced on 28
October 2021. K Mitchell was an independent
director from appointment and G E Summerhayes
became an independent director on 1 January 2022.
4
Accordingly, Heartland did not strictly comply with
recommendation 2.8 of the NZX Code
5
during the
period from 29 October 2021 to 1 January 2022, as
half of the Board were independent directors, rather
than a majority. G E Summerhayes’ appointment to
the Board boosted its director capability with his
commercial and regulatory experience. The short
period of non-independence allowed him to conclude
a contractor arrangement with another member of
the Group and was considered appropriate by the
Board given its brevity.
As aforementioned, Heartland Bank has its own
Board and Board Committees, and meetings are
held consecutively with Heartland Board and Board
Committees meetings. Members of both Boards and
Committees (as applicable) attend both Heartland
and Heartland Bank Board or Committee meetings
(as applicable), which further encourages rigorous
discussion and analysis.
The Board recognises the need to have a range of
complementary skills, knowledge and experience
in order to support the Group’s implementation
Principle 3 - Board Committees
The Board should use committees where this will
enhance its effectiveness in key areas, while still
retaining board responsibility.
As at 30 June 2022, Heartland had two permanently
constituted Board Committees, each of which is
tasked with working with management in its specific
area of responsibility and reporting its findings and
recommendations to the Board. Management attend
committee meetings as required at the invitation of
the relevant Committee.
Each of these Committees has a charter which
sets out the committee’s objectives, membership,
procedures and responsibilities. A Committee
does not take action or make decisions on behalf
of the Board unless it is specifically mandated to
do so. The charter of each Committee is available
on Heartland’s shareholder website,
shareholders.heartland.co.nz.
The Board is comfortable that no other standing
Committees are necessary at this stage; however
other ad hoc Committees are established for specific
purposes from time to time.
As at 30 June 2022 Heartland Bank had a
permanently constituted Risk Committee and an
Audit Committee which are tasked with working
with management and reporting their findings and
recommendations to the Heartland Bank Board.
Audit & Risk Committee
Membership is restricted to non-executive directors,
with at least three members, the majority of whom
must be independent. The Chair of the Audit & Risk
Committee must be an independent director who is
not the Chair of the Board.
As at 30 June 2022, the members of the Audit & Risk
Committee were E F Comerford (Chair), K Mitchell
and G T Ricketts.
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The role of the Corporate Governance, People,
Remuneration and Nominations Committee includes
advising and making recommendations to the
Board regarding:
• corporate governance matters;
• people strategy, including organisation
structure, performance, succession
planning, development, culture, diversity and
remuneration strategy and policies and any
other strategic people initiatives;
• remuneration of the directors, Chief Executive
Officer and senior executives;
• the performance of the Chief Executive Officer
including setting and review of annual KPIs; and
• director and senior executive appointments,
Board composition and succession planning.
Takeovers Response Manual
The Board has documented and adopted a
Takeover Response Manual document, which is
designed to give the Board and management
clear direction on the steps that need to be taken
following receipt of a takeover offer.
The document, amongst other things, includes an
“independent director” protocol for directors who
are involved or associated with the bidder, talks
to the scope of independent advisory reports to
shareholders, and prompts the Board to consider
the option of establishing an independent takeover
committee following receipt of a takeover offer.
Principle 4 – Reporting and disclosures
The board should demand integrity in financial
and non-financial reporting, and in the timeliness
and balance of corporate disclosures.
Heartland appreciates that its investors and other
stakeholders value both financial and non-financial
reporting, and Heartland seeks to ensure that its
investors have timely access to full and accurate
material information about Heartland which is
factual and balanced.
Heartland’s Disclosure Policy sets out procedures
that are in place to make sure all material
information is identified and disclosed in a timely
manner, and to prevent the selective disclosure
of material non-public information. Under the
Policy, potentially ‘material information’ is required
to be brought to the attention of the Disclosure
Committee, which is ultimately responsible for
determining whether information is material,
and approving the form and content of material
information that is disclosed. Heartland also
The role of the Audit & Risk Committee is to advise
and provide assurance to the Board in order to
enable the Board to discharge its responsibilities in
relation to the oversight of:
• the integrity of financial control, financial
management and external financial reporting;
• the internal audit function;
• the independent audit process;
• the formulation of its risk appetite; and
• to provide the Board with assurance that
all risks within the key risk categories which are
relevant to the Group have been appropriately
identified, managed and reported to the Board.
The Audit & Risk Committee works closely with
the Heartland Bank Audit Committee and the
Heartland Bank Risk Committee, which have similar
responsibilities in relation to Heartland Bank, and
their meetings occur consecutively. As at 30 June
2022, the Board determined that all committee
members had a recognised form of financial
expertise in accordance with the Audit & Risk
Committee’s charter.
Corporate Governance, People,
Remuneration and Nominations Committee
The Corporate Governance, People, Remuneration
and Nominations Committee is required to have at
least three directors, the majority of whom must
be independent.
As at 30 June 2022, the members of the Corporate
Governance, People, Remuneration and Nominations
Committee were G T Ricketts (Chair), B R Irvine and
G R Tomlinson. Although B R Irvine is a director of
Heartland Bank and not Heartland, the Board are
of the view that a director of Heartland Bank should
be a member of the Corporate Governance, People,
Remuneration and Nominations Committee given
that the majority of employees of the Group are
employed by Heartland Bank. B Irvine, as Chairman
of Heartland Bank, represents Heartland Bank’s
position in that regard. Accordingly, Heartland has
not strictly complied with recommendation 3.3 of
the NZX Code as the majority of the committee are
not independent directors of Heartland. Instead,
the committee has one independent director
of Heartland and one independent director of
Heartland Bank but, as described above, the Board
considers this appropriate for Heartland.
monitors information in the market about itself and
(with the assistance of the Disclosure Committee)
will release information to the extent necessary
to prevent development of a false market for the
Group’s quoted financial products.
All of Heartland’s key governance documents,
including the Disclosure Policy, are available
on Heartland’s shareholder website,
shareholders.heartland.co.nz. Heartland
also maintains copies of its stock exchange
announcements, and half-year and full-year
reports, investor presentations and details of annual
shareholder meetings, on its shareholder website.
Audit & Risk Committee
The Audit & Risk Committee oversees the quality
and timeliness of all external financial reports,
including all disclosure documents issued
by Heartland.
The Audit & Risk Committee oversees the
preparation of Heartland’s financial statements
and setting policy to ensure the information
presented is useful for investors and other
stakeholders. Heartland makes its financial
statements easy to read by using clear, plain
language, and structuring them so that key
information is prominent. In addition to the full-year
audit, Heartland’s external auditor completes a
review of the interim financial statements.
The Chief Executive Officer and Chief Financial
Officer are also required to certify to the Audit &
Risk Committee that the financial statements of
the Group present a true and fair view of Heartland
and comply with all relevant accounting standards.
Heartland is committed to delivering value for its
customers, shareholders, employees, communities,
partners and intermediaries. This is the fourth year
that Heartland has reported against a Corporate
Social Responsibility Framework in order to provide
more detailed information on the value created for
Heartland’s stakeholders. Refer to page 39 of this
Annual Report.
Principle 5 – Remuneration
The remuneration of directors and executives
should be transparent, fair and reasonable.
Heartland’s remuneration strategy is designed to
create a high-performance culture which attracts
and retains quality candidates by incentivising and
rewarding exceptional performance.
Heartland has developed a Remuneration Policy
which explains its remuneration strategy and
its approach to setting remuneration in more
detail. The key principles are that Heartland’s
remuneration policy:
• supports the attraction, retention and
engagement of quality, diverse candidates;
• does not discriminate on the basis of gender,
ethnicity, sexuality or any other individual factor;
• should further Heartland’s aspiration to achieve
pay equity across the organisation;
• rewards for high performance;
• has the flexibility to cater for Heartland’s
operational differences;
• recognises the link between company
performance and remuneration, and the
importance of creation of shareholder value; and
• is understood by employees.
The full Remuneration Policy is available on
Heartland’s shareholder website at
shareholders.heartland.co.nz.
Heartland’s Corporate Governance, People,
Remuneration and Nominations Committee is
kept up to date with relevant market information
and best practice, obtaining advice from external
advisors when necessary.
Remuneration levels are reviewed annually for
market competitiveness and alignment with
strategic and performance priorities. All senior
executive performance is assessed by the
Corporate Governance, People, Remuneration and
Nominations Committee with reference to Group
risk management policies and frameworks.
6
C M Mace resigned from the Committee and K Mitchell was appointed to the Committee during the financial year ended 30 June 2022.
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Non-executive directors’ remuneration
Total remuneration available to the Group’s non-
executive directors is determined by Heartland’s
shareholders. The current aggregate approved
amount by shareholders is $1,200,000 per annum.
Heartland’s policy is to pay directors’ fees in cash.
There is no requirement for directors to take a
portion of their remuneration in shares and nor is
there a requirement for directors to hold shares
in Heartland. However, as at 30 June 2022, a
number of the directors held shares, or a beneficial
interest in shares, in Heartland (see the Directors’
disclosures section on page 59 of this Annual
Report for further details).
Senior executive remuneration
The objective is to provide competitive remuneration
that aligns executives’ remuneration with shareholder
value and rewards the executives’ achievement of
the Group’s strategies and business plans.
All senior executives receive a base salary and are
also eligible to participate in short-term and, in some
cases, long-term incentive plans under which they
are rewarded for achieving key performance and
operating results.
Disclosure of the CEO’s remuneration is included in
the Directors’ disclosures section on page 65 of this
Annual Report.
Principle 6 – Risk Management
Directors should have a sound understanding of
the material risks faced by the issuer and how to
manage them. The Board should regularly verify
that the issuer has appropriate processes that
identify and manage potential and material risks.
Risk management
The Board ensures that Heartland has a Risk
Management Programme in place which identifies,
manages and communicates the key risks that
may impact Heartland’s business. Specific risk
management strategies have been developed
for each of the key risks identified. The Audit &
Risk Committee of the Board oversees the risk
management programme and strategy. Heartland
also has in place insurance cover for insurable
liability and general business risk.
Health and safety
Heartland promotes a working environment where
we engage with all our people, so that together
we can maintain a workplace that is mentally and
physically safe and healthy; and to promote a
positive health and safety culture. We engage with
our people to identify, assess, control and review
risk, with a focus on continuous improvement of
health and safety.
All Group employees are required to read and attest
to our Health, Safety & Wellbeing Policy. Induction
includes instruction on our Health, Safety &
Wellbeing Policy and procedures. The Health, Safety
& Wellbeing Committee, representing all employees,
convenes every second month to discuss reported
incidents, accidents and near misses, initiatives and
tabled reports. Incidents, accidents and near misses
are registered in our Risk Management System
(RMS). A Health & Safety Report that includes RMS
data, number of employee insurance claims, number
of employees accessing counselling, and summaries
of initiatives is provided to the Executive Risk
Committee and to the Board.
In the year ended 30 June 2022, there have
been no notifiable events to report to WorkSafe
New Zealand.
Principle 7 – Auditors
The Board should ensure the quality and
independence of the external audit process.
The Audit & Risk Committee is responsible for
overseeing the external, independent audit of
Heartland’s financial statements. This encompasses
processes for sustaining communication with
Heartland’s external auditors, ensuring that the
ability of the external auditors to carry out their
statutory audit role is not impaired, or could
reasonably be perceived to be impaired, to address
what other services may be provided by the external
auditors to Heartland, and to provide for the
monitoring and approval of any such services.
Heartland’s External Auditor Independence Policy
provides guidelines to ensure that non-audit related
services do not conflict with the independent role of
the external auditor, and the Audit & Risk Committee
ensures that non-audit work undertaken by the
auditors is in accordance with that Policy. That
Policy also sets out guidelines in relation to the
tenure and re-appointment of the external auditor,
which the Audit & Risk Committee ensures are
complied with. Refer to Heartland’s shareholder
website,
shareholders.heartland.co.nz, for a copy of
the External Auditor Independence Policy.
The external auditor monitors its independence and
reports to the Audit & Risk Committee bi-annually
to confirm that it has remained independent
in the previous six months, in accordance with
Heartland’s External Auditor Independence Policy
and the external auditor’s policies and professional
requirements. There have been no threats to auditor
independence identified during the year ended 30
June 2022.
Heartland also has an internal audit function which
is independent of the external auditors. The Audit &
Risk Committee approves the annual internal audit
programme, which is developed in consultation
with the Heartland Bank Audit Committee and
management of Heartland.
Principle 8 – Shareholder rights
and relations
The board should respect the rights of
shareholders and foster constructive
relationships with shareholders that encourage
them to engage with the issuer.
The Board is committed to maintaining a full and
open dialogue with all shareholders, as outlined
in the Disclosure Policy which is available on
Heartland’s shareholder website,
shareholders.heartland.co.nz.
Heartland keeps shareholders informed through:
• periodic and continuous disclosure to NZX
and ASX;
• information provided to analysts and media
during briefings;
• Heartland’s shareholder website
(shareholders.heartland.co.nz);
• the Annual Meeting, at which shareholders’
have the opportunity to ask questions; and
• annual reports.
The Board encourages full participation of
shareholders at the Annual Meeting to ensure a
high level of accountability. Heartland’s external
auditor also attends the Annual Meeting and
is available to answer questions relating to the
external audit.
Heartland equity raise – August 2022
On 23 August 2022, Heartland announced a
NZ$200 million equity raise via a fully underwritten
NZ$130 million placement of new shares
(Placement) and a non-underwritten share
purchase plan offer (SPP) of up to NZ$70 million.
The Placement was fully subscribed and the SPP
had applications totalling approximately $68.8
million. For the purposes of recommendation 8.4 of
the NZX Code, below is an explanation of why this
capital raising method was preferred.
Heartland elected to undertake this offer structure
having regard to the volatile market conditions
preceding the offer and its objective to further
diversify its share register to promote increased
liquidity on both the NZX and ASX.
Heartland endeavoured to treat existing
shareholders in eligible jurisdictions fairly through
the Placement via an allocation policy that
sought, to the extent possible, to provide pro rata
allocations to existing shareholders that bid for
at least such quantum into the Placement. To
further enhance fairness for retail shareholders
who participated in the SPP offer (which allows
applications up to $50,000), downside pricing
protection was provided (but was ultimately not
required). This was intended to reduce market
risk for retail shareholders during the offer period,
which is not available under a rights offer.
In addition, the proposed size of the SPP ($70
million with ability to accept oversubscriptions) was
larger than retail demand Heartland had previously
seen from its shareholder base. The 2017 SPP
received applications totalling $62 million and the
2017 rights offer received applications (including
oversubscriptions) for $67 million.
7
Heartland’s trading liquidity is lower than other NZX50 companies of similar size. Increasing liquidity is expected to attract further
institutional investors which is positive for Heartland and all shareholders.
8
The final price was the lower of the Placement price ($1.80) or a 2.5% discount to the 5-day VWAP prior to, and including, the
closing date for the SPP Offer. Shares were allocated under the SPP offer at $1.80.
57
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Heartland Annual Report 202258
Puakanga kaitohutohu
Directors’ disclosures
Directors
The following persons were directors of Heartland and its subsidiaries during the year ended 30 June 2021.
CompanyDirectors Status
Heartland Group
Holdings Limited
Geoffrey Thomas Ricketts
Gregory Raymond Tomlinson
Ellen Frances Comerford
Jeffrey Kenneth Greenslade
Christopher Robert Mace
Kathryn Mitchell
Geoffrey Edward Summerhayes
Independent Director (Chair)
Non-Independent Director (Deputy Chair)
Independent Director
Executive Director
Independent Director (retired 28 October 2021)
Independent Director (appointed 1 October 2021)
Independent Director (appointed 1 October 2021)
1
Heartland Bank
Limited
Bruce Robertson Irvine
Jeffrey Kenneth Greenslade
Edward John Harvey
Shelley Maree Ruha
Kathryn Mitchell
Geoffrey Thomas Ricketts
Independent Director (Chair)
Non-Independent Director
Independent Director
Independent Director
Non-Independent Director
Non-Independent Director
ASF Custodians Pty
Limited
Richard Glenn Udovenya
Jeffrey Kenneth Greenslade
Australian Seniors
Finance Pty Limited
Jeffrey Kenneth Greenslade
Christopher David Andrew Cowell
Andrew Peter Dixson
Sharon Susan Yardley
Heartland Australia
Holdings Pty Ltd
Jeffrey Kenneth Greenslade
Christopher David Andrew Cowell
Andrew Peter Dixson
Sharon Susan Yardley
Geoffrey Edward Summerhayes
Appointed 21 March 2022
Heartland Australia
Group Pty Ltd
Jeffrey Kenneth Greenslade
Christopher David Andrew Cowell
Andrew Peter Dixson
Sharon Susan Yardley
Heartland NZ Trustee
Limited
Philippa Rosemary Drury
Christopher Patrick Francis Flood
Heartland PIE Fund
Limited
Je ffrey Kenneth Greenslade
Bruce R obertson Irvine
MARAC Insurance
Limited
Andrew James Aitken
Christopher Patrick Francis Flood
Christopher Robert Mace
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04 Discolsures
| Puakanga kaitohutohu |
Directors' disclosures
VPS Properties LimitedChristopher Patrick Francis Flood
Fuelled Limited Christopher Patrick Francis Flood
StockCo Holdings 2 Pty
Limited (acquired 31
May 2022)
Jeffrey Kenneth Greenslade
Douglas Robert Snell
Andrew Peter Dixson
Geoffrey Edward Summerhayes
StockCo Holdings Pty
Limited (acquired 31
May 2022)
Jeffrey Kenneth Greenslade
Douglas Robert Snell
Andrew Peter Dixson
StockCo AgriCapital
Pty Ltd (acquired 31
May 2022)
Jeffr ey Kenneth Greenslade
Douglas Robert Snell
Andre w Peter Dixson
StockCo Feedlot
Holdings Pty Limited
(acquired 31 May 2022)
Jeffrey Kenneth Greenslade
Douglas Robert Snell
StockCo Feedlot
Capital Pty Limited
(acquired 31 May 2022)
Jeff rey Kenneth Greenslade
Dougl as Robert Snell
StockCo Australia
Management Pty Ltd
(acquired 31 May 2022)
Jeffrey Kenneth Greenslade
Douglas Robert Snell
Andrew Peter DixsonAppointed 7 June 2022
1
Geoff Summerhayes became an independent director on 1 January 2022 following the cessation of a contractor arrangement with
Heartland Australia Group Pty Ltd.
When determining whether a director of Heartland is independent, the factors described in the NZX Code
as possibly impacting a director’s independence were considered and it was determined that none of
those factors applied to the directors noted above as independent in such a way that those factors might
interfere, or might reasonably be seen to interfere, with the director’s capacity to bring an independent
judgment to bear on issues before the Board, to act in the best interests of Heartland and to represent the
interests of its shareholders generally.
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Directors' disclosures
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Directors' disclosures
General notice of disclosure of interests in the interests register
Details of any changes to Heartland and Heartland Bank directors’ general disclosures entered in the
relevant interests register under Section 140 of the Companies Act 1993 during the year ended 30 June 2022
are as follows:
E J ComerfordNo amendments for the year ended 30 June 2022.
E J HarveyCeased directorships of Investore Property Limited, Stride Property Limited and
Stride Investment Management Limited from 31 May 2022.
B R IrvineAppointed director to Scenic Circle (Rotorua) Limited, Scenic Circle (Queenstown)
Limited, Scenic Hotels Limited, Abalon Investments Limited, Airedale
Developments (Auckland) Limited, Scenic Hotels (Tonga) Limited, Waiho
Investments Limited, Scenic Circle Hotels Management Services Limited, Scenic
Circle Punakaiki Rocks Hotel Limited, Scenic Hotel Collection New Zealand
Limited, Scenic Hotels (Auckland) Limited, Scenic Hotels (Niue) Limited, Scenic
Hotels (Kaikoura) Limited, Heartland Hotels Limited, Scenic (Franz Josef) Limited,
Scenic Circle (Airedale) Limited, Scenic Circle (Bay Of Islands) Limited, Platinum
Hotels Limited, Scenic Aviation Limited, Scenic Circle (Bay Of Plenty) Limited,
Scenic Circle (Blenheim) Limited, Karma Finance Limited, Scenic Circle Hotels
(Dunedin) Limited, Refined Hotels Limited, Scenic Hospitality Services Limited,
Scenic Circle Glacier Country Hotel Limited, Scenic Circle (North Island) Limited,
Scenic Hotels Technology Limited and Scenic Circle (Rotorua Lakes) Limited from
15 December 2021, Ezibed Limited, Mainstay International Hotels (NZ)(2022)
Limited, Gold Chain (NZ) Limited, Mainstay International Hotels (2022) Limited
and Mitchell Corp New Zealand (2022) Limited from 23 March 2022.
Ceased directorship of Rakon ESOP Trustee Limited and Rakon PPS Trustee
Limited from 21 June 2022, Rakon Limited from 4 April 2022 and USC
Investments Limited from 25 February 2022.
K MitchellNo amendments for the year ended 30 June 2022.
G T RickettsAppointed director to MCF3 Re. Group Limited from 21 December 2021, MCF
11 Limited from 21 October 2021 and MCF3 Architectus Limited from 7 October
2021.Ceased directorship of Tamaki Health Group from 31 March 2022.
S M RuhaAppointed director to Paysauce Limited from 17 February 2022.
G R TomlinsonAppointed director to Terra Vitae Vineyards Limited from 30 September 2021
and Villa Maria Estate Limited from 30 September 2021.
J K GreensladeAppointed director to StockCo Holdings 2 Pty Limited, StockCo Holdings Pty
Limited, StockCo AgriCapital Pty Ltd, StockCo Feedlot Holdings Pty Limited,
StockCo Feedlot Capital Pty Limited and StockCo Australia Management Pty
Ltd from 31 May 2022.
G SummerhayesAppointed director of Beyond Zero Emissions (BZE) from 30 November 2021,
Zurich Investment Management Limited, Zurich Australia Limited, Zurich
Australian Insurance Limited, Zurich Financial Services Australia Limited,
OnePath Life Limited and OnePath General Insurance Pty Limited from 1
January 2022. Appointed director of Heartland Australia Holdings Pty Ltd from
21 March 2022 and StockCo Holdings 2 Pty Limited from 31 May 2022.
Details of Heartland Bank directors’ general disclosures entered in the relevant interest register under
Section 140 of the Companies Act 1993 prior to 1 July 2020 can be found in earlier Annual Reports.
Specific disclosures of interest in the interests register
There were no specific disclosures of interests in transactions entered into by the Group (including Heartland
Bank) during the period 1 July 2021 to 30 June 2022.
Information used by directors
No director of the Group (including Heartland Bank) disclosed use of information received in his or her
capacity as a director that would not otherwise be available to that director.
Interests Register
The following are the entries in the Interests Register of the Group made during the year ended
30 June 2022.
Indemnification and insurance of directors
Heartland has given indemnities to, and has effected insurance for, directors of the Group to indemnify
and insure them in respect of any liability for, or costs incurred in relation to, any act or omission in their
capacity as directors, to the extent permitted by the Companies Act 1993. The cost of the insurance
premiums to the Group for the year ended 30 June 2022 was $319,987 (including GST).
Share dealings by directors
Details of individual directors’ share dealings as entered in the Interests Register of Heartland and Heartland
Bank under Section 148(2) of the Companies Act 1993 during the year ended 30 June 2022 are as follows
(all dealings are in ordinary shares unless otherwise specified):
E J Harvey
Date of acquisition/
disposal
Nature of
relevant interestAcquisition/disposalNo. of sharesConsideration
15 September 2021Allotment under DRPAcquisition4,023$9,137.27
16 March 2022Allotment under DRPAcquisition3,499$7,384.54
B R Irvine
Date of acquisition/
disposal
Nature of
relevant interestAcquisition/disposalNo. of sharesConsideration
15 September 2021Allotment under DRPAcquisition3,764$8,549.01
15 September 2021Allotment under DRPAcquisition13,053$29,646.71
16 March 2022Allotment under DRPAcquisition3,274$6,909.68
16 March 2022Allotment under DRPAcquisition11,354$23,962.28
S M Ruha
Date of acquisition/
disposal
Nature of
relevant interestAcquisition/disposalNo. of sharesConsideration
15 September 2021Allotment under DRPAcquisition4,420$10,038.95
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04 Discolsures
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Directors' disclosures
Heartland and Heartland Bank directors’ relevant interests
Director
Number of ordinary
shares – beneficial
Number of ordinary
shares – non-beneficial
1
Number
of options
J K Greenslade1,993,078NilNil
E J Harvey147,7876,475,976Nil
B R Irvine617,8226,475,976Nil
G T Ricketts13,267,2856,475,976Nil
G R Tomlinson58,392,997NilNil
S M Ruha158,536NilNil
K Mitchell53,088NilNil
Directors’ remuneration
The current total fee pool for the non-executive directors of the Group approved by shareholders at the
Annual Shareholder Meeting of Heartland Bank held on 22 November 2016 is $1,200,000 per annum.
2
The table below sets out the fees payable to the non-executive directors of Heartland for the year ended
30 June 2022 based on the position(s) held.
Board/committee
3
Position Fees (per annum)
Board of Directors
Chair
Member
$150,000
$100,000
Heartland Audit & Risk Committee
Chair
Member
$15,000
Nil
Heartland Bank Audit Committee
Chair
Member
$15,000
Nil
Heartland Bank Risk Committee
Chair
Member
$15,000
Nil
Corporate Governance, People, Remuneration and
Nominations Committee
Chair
Member
$15,000
Nill
The total remuneration and value of other benefits
4
received by each non-executive director who held
office in Heartland and/or any of its subsidiaries during the year ended 30 June 2022 is set out in the
table on next page. Directors’ fees exclude GST where appropriate.
1
The non-beneficial interest in the 6,475,976 shares arises from those directors being a trustee of the Heartland Trust, which held
6,475,976 shares in Heartland as at 30 June 2021.
2
On 4 October 2018, NZX granted Heartland a waiver from Rule 3.5.1, to the extent that this Rule requires the directors'
remuneration pool to be authorised by an Ordinary Resolution of Heartland Group Holdings Limited (as opposed to Heartland Bank
Limited).
3
If a director sits on both the Heartland and Heartland Bank, they are only entitled to receive one fee.
4
In addition to these amounts, Heartland meets costs incurred by directors, which are incidental to the performance of their duties.
This includes providing directors with telephone concessions and paying the cost of directors’ travel. As these costs are incurred by
Heartland to enable directors to perform their duties, no value is attributable to them as benefits to directors for the purposes of the
tables included in this report.
5
For the purposes of the total remuneration column in this table, A$ fees have been converted to NZ$ using an exchange rate of
$1.0406.
DirectorBoard Fees
Heartland
Audit & Risk
Committee
Heartland
Bank Audit
Committee
Heartland
Bank Risk
Committee
Heartland
Corporate
Governance,
People,
Remuneration
& Nominations
CommitteeOther
Total
Remuneration
5
Heartland and Heartland Bank directorships
E F Comerford$100,000$15,000-
-
- $115,000
E J Harvey$100,000$15,000--- $115,000
B R Irvine$150,000- --- $150,000
K Mitchell $100,000---- $100,000
C R Mace$32,610
6
---- $32,610
G T Ricketts$150,000- -$15,000- $165,000
S M Ruha$100,000-$15,000-- $115,000
G R Tomlinson$100,000 ---- $100,000
G E
Summerhayes
$75,000$75,000
Subsidiary directorships
A J Aitken$32,000
7
---- $32,000
E F ComerfordA$55,000
8
$57,233
P Drury$20,000
9
---- $20,000
C R Mace$15,000
10
---- $15,000
R G UdovenyaA$30,000
11
$31,218
G E
Summerhayes
12
A$73,860$76,859
Total$1,199,920
6
Retired as a director of Heartland on 28 October 2021.
7
Fees paid to A J Aitken as a director of MARAC Insurance Limited.
8
Fees paid to E F Comerford by Heartland Australia Group Pty Limited and Heartland Australia Holdings Pty Limited (E F Comerford
resigned as a director from 26 July 2019 but still receives fees in return for consultancy services provided to these companies).
9
Fees paid to P Drury as a director of Heartland NZ Trustee Limited.
10
Fees paid to C R Mace as Chair of MARAC Insurance Limited.
11
Fees paid to R G Udovenya as a director of ASF Custodians Pty Limited.
12
Upon cessation of Geoff Summerhayes’ contractor arrangement (see footnote 1), all fees payable to him became subject to the $1.2
million fee cap approved by shareholders. So that the directors’ fee cap for FY2022 was not exceeded, Geoff Summerhayes agreed
to defer payment of part of his FY2022 director fees pending approval by shareholders at the Annual Meeting to increase the total
fee pool for non-executive directors.
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| Puakanga kaitohutohu |
Directors' disclosures
04 Discolsures
| Puakanga kaitohutohu |
Directors' disclosures
13
Motor vehicle
14
Cost of FY2018/2019 grant spread over the three-year service period (noting that this grant was amended and has effectively been
spread over its five-year service period). Also includes cost of FY2021 grant spread over its three-year service period and FY2022
grant spread over its four-year period.
15
Cost of FY2018/2019 grant spread over the four-year service period (noting that this grant was amended, and has effectively been
spread over its five-year service period). Also includes cost of FY2021 grant spread over its three-year service period.
16
Where “N/A”, there were no maximum limits for the relevant period.
17
The service period for the Senior Executive Scheme shares which are being treated as vesting in FY2019 was FY2019.
18
The service period for the Senior Executive Scheme shares which are being treated as vesting in FY2018 was FY2018.
19
STI payments are entirely discretionary and entitlement is not guaranteed even if measures are achieved.
20
Value of the grant which vested on 24 August 2022 and in respect of which Heartland shares were allotted on 16 September 2022,
spread over its five-year service period. One fifth is referable to FY2022, with the other four fifths referable to FY2018 to FY2021,
respectively. The total value of the awards which actually vested is $1,948,536.
Remuneration and/or other benefits from the company and its subsidiaries to executive directors
The remuneration for the Executive Director (being, in Heartland’s case, the CEO) includes a fixed
remuneration component, a variable remuneration component comprising short-term incentives (STIs) and
long-term incentives (LT Is), and other benefits. LTIs are offered to selected employees (including the CEO) in
order to incentivise them to enhance long-term shareholder value.
STI scheme
The CEO is entitled to receive STIs which are cash payments, determined by the Board, and paid at the end
of a financial year for exceeding performance expectations in the relevant financial year. Ultimately, STI
payments are entirely discretionary and entitlement is not guaranteed even if performance expectations
have been met or exceeded.
LTI schemes
Set out on the next page is a summary of the grants made to the CEO under LTI schemes relating to the
financial year ended 30 June 2022.
Performance Rights Plan – FY2022 Grant
Under the Performance Rights Plan – FY2022 Grant, the CEO was issued performance rights which, subject
to continuous employment except in limited circumstances and achievement of certain financial measures,
specified culture and conduct measures and key strategic objectives over the period commencing 1 July 2021
and ending on 30 June 2025, are to vest into shares in Heartland.
The Scheme Rules provide flexibility to adjust the relevant performance hurdles, including in order to account
for changes during the performance period. This feature, in conjunction with the other features of the
Performance Rights Plan, ensures that the FY2022 Grant will vest only if, and to the extent, that sustainable
shareholder value is created during the performance period.
CEO remuneration disclosures
In the year ended 30 June 2022, the CEO received a fixed salary, a variable remuneration component
comprising STI, and other benefits as detailed in the following tables. The tables also show a comparison
between the year ended 30 June 2021 and the year ended 30 June 2022 and a summary of the CEO’s total
remuneration over the last five financial years.
This year, Heartland has presented the following summary using the cost to Heartland (being the accounting
cost) of all current LTI grants made to the CEO. The accounting cost of all current LTI grants differs from the
value of the awards which actually vested. This is because the accounting cost of a grant is determined at
the time the grant is made, reflects the uncertainty around whether the relevant performance criteria will be
met, and is spread over the entire performance period of that grant. The value of the awards which actually
vested and were referable to the year ended 30 June 2022 (and previous financial years forming part of the
measurement period), being the amount of remuneration actually received by the CEO in relation to service
during the relevant financial year, are included in the Breakdown of CEO At Risk Pay (FY2022) table.
CEO remuneration (FY2022 and FY2021)
Financial year
endedSalaryBenefits
13
At Risk Pay
STILT I
30 June 2022$1,089,200$10,800$975,000Cost to
Heartland in
FY2022
$990,103
14
30 June 2021$989,200$10,800$1,000,000Cost to
Heartland in
FY2021
$650,666
15
Five-year summary of total CEO remuneration
This year Heartland has presented the below summary using the value of the awards which actually vested
during the relevant financial year.
Financial year
ended
Percentage STI
against maximum
Value of LTI awards
vested in that
financial year
Percentage LTI
vesting against
maximum
16
Span of relevant LTI
performance period
30 June 202289%$2,000,000100%5 years
30 June 2021100%N/AN/AN/A
30 June 202096%N/AN/A N/A
30 June 201945%$1,379,161100%FY2019
17
30 June 201890%$736,489100%FY2018
18
Breakdown of CEO At Risk Pay (FY2022)
DescriptionPerformance measures
Percentage
achieved
STIUp to 100% of base salary based on
the achievement of financial and non-
financial performance expectations.
Based on achievement of financial and
non-financial performance
expectations.
19
89%
LTIValue of $389,707 on vesting of
performance rights, subject to
achievement of certain performance
measures.
20
Based on achievement of certain
financial measures, specified culture
and conduct measures and key strategic
objectives over the period commencing
1 July 2017 and ending on 30 June 2022.
100%
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Directors' disclosures
04 Discolsures
| Puakanga kaitohutohu |
Directors' disclosures
CEO Grant under Performance Rights Scheme (FY2021 Grant)
Type of scheme
interestBasis of award
Face value of
award and % of
award vesting
at threshold
Length of
vesting period
Summary of
performance
measures and
targets
Performance rights
(2022 Grant)
LTI Value
($2,500,000) / the
Volume Weighted
Average of the sale
prices (VWAP)
of Heartland’s
shares on the NZX
measured over the
20 Business Days
after Heartland
announced its full
year results for the
financial year ended
30 June 2021.
$2,500,000 face
value.
100% vesting on
full achievement
of performance
measures or partial
vesting depending
upon the extent to
which performance
measures were met.
22 September 2021
to the date falling
1 business day
following the date
on which Heartland
announces its full
year results for the
year ending 30 June
2025.
Continued
employment and
achievement of
certain financial
performance,
culture and conduct,
and strategic
objectives during
the vesting period.
21
$2.283659 was the VWAP used at the time of calculating the performance rights.
Five-year summary of Heartland’s TSR performance (30 June 2017 – 30 June 2022)
The above five-year total shareholder return (TSR) performance graph is provided to aid comparability
between Heartland’s performance and the remuneration information provided in this section. TSR has been
calculated as at the end of the five-year period to 30 June 2022, including the benefit of imputation credits.
A comparison is shown against the NZX50 Index which measures the performance of the 50 largest eligible
stocks listed on the NZX Main Board by float-adjusted market capitalisation.
CEO remuneration as a multiple of employee remuneration
The CEO’s salary as a multiple of the employee average is 11.08 times (FY2021: 10.5 times), and his total
remuneration as a multiple of the employee average is 23.17 times (FY2021: 19.76 times).
Utu tumu whakarae
Executive remuneration
Mōhiohio o te hunga whaipānga
Shareholder information
The number of Heartland employees (including former employees, and excluding directors) who received
remuneration (including non-cash benefits) in excess of $100,000 during FY2022 is detailed in the
remuneration bands below.
RemunerationNumber of employees
$100,000 - $109,99918
$110,000 - $119,99925
$120,000 - $129,99928
$130,000 - $139,99919
$140,000 - $149,99921
$150,000 - $159,99910
$160,000 - $169,9997
$170,000 - $179,9997
$180,000 - $189,9993
$190,000 - $199,9991
$200,000 - $209,9992
$210,000 - $219,9992
$220,000 - $229,9993
$240,000 - $249,9991
$250,000 - $259,9993
$260,000 - $269,9992
$270,000 - $279,9992
$280,000 - $289,9991
$290,000 - $299,9993
$310,000 - $319,9992
$320,000 - $329,9991
$330,000 - $339,9992
$410,000 - $419,9991
$480,000 - $489,9991
$490,000 - $499,9992
$560,000 - $569,9991
$640,000 - $649,9991
$650,000 - $659,9991
$790,000 - $799,9991
$1,160,000 - $1,169,9991
Grand total172
Spread of shares
Set out below are details of the spread of shareholders of Heartland as at 1 August 2022 (being a date
not more than two months prior to the date of this Annual Report).
Size of holding
Number of
shareholdersTotal shares% of issued shares
1 - 1,000 shares1,554838,8800.14
1,001 - 5,000 shares3,4539,895,5441.67
5,001 - 10,000 shares2,31517,350,4792.93
10,001 - 50,000 shares4,494101,587,47617.13
50,001 - 100,000 shares78755,078,1969.29
100,001 shares and over522408,153,24568.84
Total13,125592,903,820100.00
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04 Discolsures
| Mōhiohio o te hunga whaipānga | Shareholder information
Mōhiohio kē atu
Other information
Twenty largest shareholders
Set out below are details of the 20 largest shareholders of Heartland as at 1 August 2022 (being a date
not more than two months prior to the date of this Annual Report).
RankShareholderTotal shares% of issued shares
1Harrogate Trustee Limited58,392,9979.85
2FNZ Custodians Limited36,514,3246.16
3Citibank Nominees (NZ) Limited 21,805,6823.68
4Custodial Services Limited15,322,2262.58
5New Zealand Depository Nominee14,352,3702.42
6Oceania & Eastern Limited13,267,2852.24
7Philip Maurice Carter11,416,6471.93
8Accident Compensation Corporation11,053,1361.86
9Bnp Paribas Nominees NZ Limited10,800,2021.82
10Hobson Wealth Custodian Limited10,024,6361.69
11JPMORGAN Chase Bank7,294,5151,23
12
HSBC Nominees (New Zealand) Limited
<040-016842-230>
6,986,8411.18
13Heartland Trust6,475,9761.09
14HSBC Nominees (New Zealand) Limited5,322,9840.90
15Pt Booster Investments Nominees Limited4,801,9060.81
16Jarden Custodians Limited4,794,6670.81
17Public Trust4,496,3170.76
18Forsyth Barr Custodians Limited4,240,9310.72
19ASB Nominees Limited4,230,7350.71
20TEA Custodians Limited4,003,0120.68
Total255,597,38943.12
Substantial product holders
As at 30 June 2022, the following product holders are substantial product holders in Heartland.
NameNumber of sharesClass of shares
% of total number
of shares in class
Harrogate Trustee Limited and
Gregory Raymond Tomlinson
58,392,997Ordinary9.85
Auditors’ fees
KPMG has continued to act as auditors of
Heartland and its subsidiaries. The amount
payable by Heartland and its subsidiaries to KPMG
as audit fees during the year ended 30 June 2022
was $879,000. The amount of fees payable to
KPMG for non-audit work during the year ended
30 June 2022 was $103,000. These non-audit fees
were primarily for regulatory assurance services,
agreed upon procedures engagements and
supervisor reporting.
Credit rating
As at the date of this Annual Report, Heartland
has a Fitch Australia Pty Limited (Fitch) long-term
credit rating of BBB (outlook negative). Heartland
Bank has a Fitch long-term credit rating of BBB
(outlook stable) and Heartland Australia Group
Pty Ltd has a Fitch long-term credit rating of BBB-
(outlook negative).
Donations
The total amount of donations made by Heartland
during the year ended 30 June 2022 was $5,034.
Exercise of NZX disciplinary powers
NZX Limited did not exercise any of its powers
under Listing Rule 9.9.3 in relation to Heartland and
its subsidiaries during the year ended 30 June 2022.
NZX waivers
No waivers were granted to Heartland or relied on
by Heartland during the 12 month period to 30 June
2022. However, the following is a summary of the
waivers granted by NZ RegCo to Heartland on 22
August 2022 relating to Heartland’s $200 million
equity raise via a fully underwritten $130 million
placement of new shares and a non-underwritten
SPP offer of up to $70 million which was announced
on 23 August 2022 (Offer):
• Waiver under Listing Rule 3.14.1:
This Listing Rule requires an issuer to release
details of a proposal to pay a dividend at least
five business days before the record date. The
waiver permitted Heartland to have a shorter
three business day notice period. Heartland
wished to set the record date so that any
shares allotted under the Offer would not be
able to participate in the dividend relating to
FY2022. This waiver was granted by the NZ
RegCo for the reasons described in its decision.
• Waiver from Listing Rule 4.14.1(b)(ii)(A):
This waiver permits Heartland to acquire
Heartland shares from an employee who is
also a director of Heartland. This waiver was
obtained from NZ RegCo in the context of
the long term incentive scheme operated by
Heartland under which selected employees
are offered performance share rights (PRs) to
be converted to ordinary shares in Heartland
(Shares), for nil consideration, subject to certain
performance hurdles being met (Scheme).
Heartland wished to assist participants in the
Scheme to meet their tax obligations arising
when the PRs vested by offering to pay
PAYE on the participants’ behalf and funding
the participants’ corresponding liability to
Heartland by buying back an amount of the
Shares equal in value to the participants’ PAYE
liability. Listing Rule 4.14.1(b)(ii)(A) would have
prevented Heartland purchasing shares off a
participant who is also a director of Heartland,
so a waiver from NZ RegCo was sought to
enable all Scheme participants to receive the
buyback offer. This waiver was granted by the
NZ RegCo for the reasons described in
its decision.
For further information about this equity raise refer
to page 58 in the Corporate governance section of
this Annual Report.
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04 Discolsures
| Mōhiohio o te hunga whaipānga | Shareholder information
04 Discolsures
| Mōhiohio kē atu | Other information
05
Our financial results
Financial position
Total assets increased by $1,412.7 million (24.9%)
during FY2022, driven by a $1,177.5 million (23.5%)
increase in gross finance receivables (Receivables)
3
.
On an underlying basis, which excludes the
impacts of the StockCo Australia acquisition
and changes in foreign exchange (FX) rates,
Receivables grew $765.9 million (15.3%) in
FY2022. The unintended effects of changes to
the New Zealand Credit Contracts and Consumer
Finance Act 2003 and the Credit Contracts and
Consumer Finance Regulations 2004 (CCCFA),
introduced on 1 December 2021, initially resulted
in a temporary slowdown, particularly in the Motor
and Home Loans portfolios. Despite this, growth
momentum recovered and strong growth was
experienced across the majority of Heartland’s
portfolios. This was partly offset by the decrease in
the Harmoney Corp Limited (Harmoney) personal
loans channel.
Borrowings
4
increased by $1,312.1 million
(27.0%). On an underlying basis, which excludes
the impacts of the StockCo Australia acquisition,
borrowings increased by $810.4 million (16.7%),
with deposits increasing by $409.1 million (12.8%),
while other borrowings increased by $401.3 million
(24.0%) during FY2022.
Net assets increased by $47.0 million to $808.7
million. Net tangible assets (N TA) decreased by
$111.7 million to $566.8 million, primarily due
to growth in intangible assets as a result of the
StockCo Australia acquisition, resulting in an NTA
per share of $0.96 (30 June 2021: $1.16).
Profitability
NPAT was $95.1 million, an $8.1 million (9.3%)
increase on FY2021. Underlying NPAT was $96.1
million, a $8.2 million (9.3%) increase on FY2021.
Return on equity (ROE) was 12.1%, up 21 bps from
FY2021. Underlying ROE was 12.6%, up 59 bps
from FY2021.
Earnings per share (EPS) was 16.1 cps, up 1.2 cps
from FY2021. Underlying EPS was 16.3 cps, also
up 1.2 cps from FY2021.
FY2022 reported results include StockCo Australia
earnings contribution since the completion of the
acquisition on 31 May 2022, and one-off items
which should be considered when analysing the
underlying result
2
.
Significant one-off items included in Heartland’s
FY2022 reported results are outlined on the
next page.
1
All comparative results are based on the audited full year consolidated financial statements of the Group for FY2021.
2
Underlying results exclude the impacts of StockCo Australia and one-offs. Refer to Profitability for a summary of reported and
underlying FY2022 results. A detailed reconciliation between reported and underlying financial information, including details about
FY2022 one-offs, is set out in Appendix 3 on page 47 of Heartland’s FY2022 full year results investor presentation available at
shareholders.heartland.co.nz.
General information about the use of non-GAAP financial measures is set out on page 3 of that presentation.
3
Receivables include Reverse Mortgages and StockCo Australia.
4
Includes retail deposits and other borrowings.
1. Hedge accounting impacts: A $16.7 million
gain was recognised in relation to derivatives
that were de-designated from hedge
accounting relationships. Heartland’s hedging
strategy was economically very effective
throughout FY2022, with interest rate swaps
utilised to hedge fixed lending with tenors
greater than 12 months to 3-month Bank Bill
Reference Rate (BKBM), thus limiting volatility
to future interest rate changes. However,
3-month BKBM ceased to be an identifiable
risk for hedging relationships during FY2022.
This resulted in balances held in the Cash
Flow Hedge Reserve against these hedge
relationships having to be released to the profit
and loss for the 30 June 2022 period.
2. Impairment provisions: The $9.6 million
COVID-19 Overlay, originally raised in FY2020,
remained entirely unutilised and was released
in full. However, given the uncertainty of the
current operating environment, it has been
considered prudent to create a new $8.0 million
Economic Overlay.
3. Fair value loss on equity investment in
Harmoney: A $12.7 million net fair value loss
was recognised on investment in Harmoney
shares during FY2022. The fair value as at
30 June 2022 takes into consideration the
closing market price of Harmoney shares
on the ASX of A$0.71.
The impact of one-off items on the respective financial metrics is outlined in the table below.
ReportedUnderlying
FY2022FY2021MovementFY2022FY2021Movement
NOI
5
($m)267.6251.216.4262.0247.114.9
Operating expenses ($m)116.8117.7(0.9)111.4110.80.6
NPAT ($m)95.187.08.196.187.98.2
Net interest margin (NIM)4.05%4.35%(29 bps)4.16%4.35%(19 bps)
NIM excl. liquid assets
6
4.35%4.69%(33 bps)4.47%4.69%(22 bps)
CTI ratio43.6%46.8%(3.2 pps)42.5%44.8%(2.3 pps)
Impairment expense ratio0.25%0.31%(6 bps)0.29%0.31%(2 bps)
ROE12.1%11.9%21 bps12.6%12.0%59 bps
EPS16.1 cps14.9 cps1.2 cps16.3 cps15.1 cps1.2 cps
Income
Total NOI was $267.6 million, an increase of $16.4
million (6.5%) from FY2021.
Underlying NOI was $262.0 million, $14.9 million
(6.0%) higher than in FY2021. This was largely due
to a $14.7 million (6.3%) increase in net interest
income, driven by $599.5 million (11.2%) higher
average interest earning assets in FY2022 than
in FY2021, and a 19 bps decrease in underlying
NIM compared with FY2021. Underlying other
operating income remained stable year-on-year.
Expenses
Operating expenses were $116.8 million, a
decrease of $0.9 million (0.8%) on FY2021.
Excluding the impact of one-offs, the underlying
operating expenses were $0.6 million (0.6%)
higher compared with FY2021.
Higher underlying operating expenses were
primarily due to a $2.8 million (19.2%) increase in IT
and communication expenses, driven by software
amortisation and licencing costs as a result of
continued investments in technology
and digital capabilities.
The CTI ratio decreased to 43.6%, down 3.2
percentage points (pps) compared with FY2021.
The underlying CTI ratio decreased 2.3 pps to 42.5%.
5
Net operating income (NOI) includes fair value gains/losses on investments.
6
Calculated based on average gross interest earning assets excluding liquid assets.
Whakawākanga ahumoni
Financial commentary
Heartland (NZX/ASX: HGH) was pleased to announce a NPAT of $95.1 million
for FY2022, an increase of $8.1 million (9.3%) compared with FY2021
1
. On an
underlying
2
basis, FY2022 NPAT was $96.1 million, an increase of $8.2 million
(9.3%) compared with the FY2021 underlying NPAT.
05 | Our financial results
| Whakawākanga ahumoni | Financial commentary
05 | Our financial results
| Whakawākanga ahumoni | Financial commentary
75
|
Heartland Annual Report 202276
Impairment expense
Impairment expense was $13.8 million, $1.2
million (7.7%) down on FY2021. This includes
the net benefit of $1.6 million due to the release
of Heartland’s $9.6 million COVID-19 Overlay,
partially offset by the newly created $8.0 million
Economic Overlay. Excluding this and the impacts
of the acquisition of StockCo Australia, underlying
impairment expense was $15.7 million, $0.7 million
(4.9%) higher than in FY2021.
While the Receivables portfolio recorded strong
growth during the year, impairment expense
benefitted from an improved book quality as a
result of the continued tilt of the portfolio mix
towards lower risk assets.
Business Receivables increased $74.3 million
(13.4%)
7
to $629.4 million. Growth in facility
utilisation rates has been driven by strong
underlying demand in motor vehicle sales
combined with erratic shipping schedules.
Heartland has onboarded new customers in this
segment, and supported the growth strategies of
wholesale borrowers in other sectors.
Open for Business
Open for Business (O4B) is Heartland’s first digital
platform that provides unsecured loans to the
small-to-medium enterprise (SME) sector, with
online approval possible within one minute.
O4B NOI was $13.7 million, a decrease of $0.8
million (5.8%) compared with FY2021.
O4B Receivables decreased $3.3 million (2.3%)
7
to
$141.2 million. COVID-19 interrupted momentum in
Heartland’s O4B target market more severely than
in other Business segments. Although there were
signs of recovery early in FY2022, the arrival of the
Omicron COVID-19 variant adversely impacted
sector demand again. O4B growth in FY2023 will
remain challenging as the SME sector struggles to
accommodate difficult macro-economic, logistical,
and labour conditions.
Motor
Motor Finance NOI was $73.1 million, an increase of
$3.9 million (5.6%) compared with FY2021. Motor
Finance Receivables increased $90.8 million (7.0%)
to $1.38 billion.
Growth was mainly from the Motor dealer book via
car dealerships, brokers and partnerships such as
Kia Finance, Jaguar/Land Rover Financial Services,
and Peugeot and Citroen (through Auto Distributors
New Zealand Limited (Auto Distributors) under
the iOwn brand). Auto Distributors have also been
appointed the distributors for Opel which arrives in
late September 2022.
Growth in FY2022 was hindered by COVID-19
and the unintended effects of changes to the
CCCFA introduced on 1 December 2021, which
considerably reduced application automation rates
and impacted conversion rates. Since implementing
a new process for premium customers, application
automation rates have started to increase.
Motor Finance portfolio performance returned to
more normal levels in the last quarter of FY2022,
recording a 194% increase in growth on the
previous quarter, and producing an annualised
growth rate of 7.4% for the quarter.
Personal Lending
Personal Lending includes loans originated directly
through Heartland Bank, and those originated by
Harmoney in New Zealand and Australia. Personal
Lending NOI was $10.3 million, a decrease of $7.0
million (40.4%) compared with FY2021.
Personal Lending Receivables decreased by
$67.3 million (50.9%)
to $64.9 million. Harmoney
Receivables decreased by $94.9 million (75.6%)
7
,
made up of a decrease in the New Zealand
Harmoney channel of $58.3 million (76.0%) to
$18.4 million, and a decrease in the Australian
Harmoney channel of $36.6 million (74.9%)
7
to
$12.2 million.
Heartland had been in negotiations with
Harmoney on proposed new wholesale facilities
as Harmoney moved its funding model from
a peer-to-peer off-balance sheet model to
wholesale securitised on-balance sheet funding via
warehouse structures. These negotiations ended in
March 2022. Heartland’s Harmoney personal loans
channel is therefore running down.
From a risk perspective, Heartland is comfortable
with the reduction in Personal Lending in the
current environment.
Home Loans
8
Home Loans NOI was $2.1 million (FY2021: $0.1
million). Home Loans Receivables increased $224.8
million (450.8%) to $274.7 million.
Rising interest rates drove a high volume of
applications in FY2022, as customers sought
to lock in competitive rates. Heartland’s rates
were frequently market-leading across standard
residential mortgage products throughout the year.
Although growth in Q2 (1 October to 31 December
2021) was adversely impacted by the unintended
effects of the CCCFA changes, Q3 (1 January to
31 March 2022) advertising saw a return to rapid
growth, with the Home Loans book size increasing
by $51.8 million. Heartland’s commitment to
decision new loan applications within 48 hours
of receipt of all loan documentation has further
disrupted a credit market in which longer
timeframes have traditionally prevailed. Heartland
has also experienced strong customer retention
in a competitive market – the retention rate for
customers whose fixed rates expired during the
second half of FY2022 (2H2022) was 91.1%.
Heartland Home Loans remains in a phase of rapid
growth, and is targeting a book size of $495 million
by the end of FY2023.
7
Excluding the impact of changes in FX rates.
8
Excludes legacy Retail Mortgages.
Rural
Rural lending NOI was $30.2 million, a decrease of
$2.0 million (6.1%) compared with FY2021.
Overall Rural portfolio Receivables increased by
$102.5 million (17.5%) to $689.1 million. Livestock
Receivables increased by $62.3 million (57.0%) to
$171.7 million, and Rural Receivables increased by
$40.2 million (8.4%) to $517.4 million.
Heartland’s Livestock business enjoyed record
growth in FY2022, resulting from an increase in
customers, and facility utilisation rates reaching
a historic high. New and expanded partnership
opportunities that were developed in FY2022 are
expected to flow positively into FY2023.
Heartland’s Sheep & Beef Direct platform has been
a success story throughout FY2022, contributing
53% of total Rural new business. The product
produced consistent growth, which confirmed the
market niche it was developed for. FY2022 also
saw the development of a similar product for dairy
farmers, Dairy Direct, which is expected to grow
consistently with Sheep & Beef Direct.
StockCo Australia
On 31 May 2022, Heartland completed the
acquisition of StockCo Australia. StockCo Australia
specialises in livestock finance for cattle and sheep
farmers across Australia (74% cattle/26% sheep),
with total assets of A$358 million, and a leading
position in the market, estimated to be A$7 billion.
9
The acquisition’s total consideration (which includes
A$1.6 million of deferred consideration payable
subject to performance hurdles) was A$154.4
million, funded through a A$158 million bridge
facility provided by a major Australasian financial
institution. At the same time, a new long-term
syndicated securitisation warehouse was executed,
with A$300 million of senior funding provided by
two major Australasian financial institutions.
Business performance
Asset Finance
Asset Finance NOI was $30.6 million, an increase
of $2.1 million (7.5%) compared with FY2021.
Asset Finance Receivables increased $62.6 million
(11.0%) to $633.6 million. Despite the impacts
of COVID-19, new business growth in FY2022
exceeded expectations as Heartland continues to
build its intermediated partnership strategy and
delivery processes. Demand from the logistics and
other productive sectors remained resilient through
variable conditions, and activity remains focused
in these segments. Significant market share
opportunities exist and will be pursued in
the financial year ending 30 June 2023 (FY2023).
Business
Business includes floorplan lending to vehicle
retailers and wholesale facilities to other lenders.
The portfolio includes what was previously known
as Business Relationship.
Business NOI was $30.9 million, an increase of
$4.9 million (18.6%) compared with FY2021.
9
Based on Australia Bureau of Statistics total rural debt and
StockCo Australia data.
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Heartland’s focus is to build on StockCo Australia’s
position as a market-leading provider of specialist
livestock finance for cattle and sheep farmers
across Australia.
Transaction costs of $1.2 million were expensed in
FY2022, and StockCo Australia contributed $1.4
million to FY2022 NPAT (excluding bridge finance
costs). StockCo Australia is projected to contribute
A$10 million to A$12 million to FY2023 NPAT.
New Zealand Reverse Mortgages
New Zealand Reverse Mortgages NOI was
$32.5 million, an increase of $8.1 million (33.4%)
compared with FY2021. Receivables increased
$119.8 million (19.9%) to $721.3 million.
Growth was due to:
‒ strong new business particularly in 2H2022
(17.6% higher than in the first half of FY2022);
‒ increased awareness and acceptance of
reverse mortgages as a solution to help older
homeowners live a more comfortable retirement;
‒ cost of living increases placing pressure on
retirees and a Reverse Mortgage being a
solution; and
‒ continued enhancement of the product and
application process.
The outlook for New Zealand Reverse Mortgages
remains positive, with the pipeline sitting well
above the previous corresponding period. As cost
of living pressures continue and indebtedness
in retirement increases, greater awareness and
acceptance of reverse mortgages is expected to
lead to increased demand through FY2023.
Australian Reverse Mortgages
Australian Reverse Mortgages NOI was $39.2
million, an increase of $3.0 million (8.2%) compared
with FY2021.
Australian Reverse Mortgages Receivables
increased by $163.8 million (15.2%)
10
to $1.24
billion, driven primarily by:
‒ the relaxation of COVID-19 lockdowns in
Australia;
‒ growing acceptance of the use of reverse
mortgages to age in place (i.e. for a person to
remain in their home as they age);
‒ promotion by the Australian Federal
Government of its Home Equity Access Scheme,
normalising equity release options further; and
‒ targeted marketing to increase uptake and
interest at key seasonal points across the year,
leading to record applications and settlements
in key months.
Funding and liquidity
Heartland increased borrowings by $1,312.1
million (26.9%) to $6,170.7 million, contributed to
by increases in New Zealand and Australia.
On an underlying basis, which excludes the
impacts of the StockCo Australia acquisition,
borrowings increased by $810.4 million (16.7%)
to $5,669.0 million.
New Zealand
Heartland Bank increased borrowings by $624.2
million (16.8%) to $4,346.6 million.
Deposits
11
grew $377.6 million (11.7%) during
FY2022 to $3,597.1 million, which was driven
primarily by the launch of a 32 Day Notice Saver
product early in the period and, more recently,
a 90 Day Notice Saver product.
During the period, Heartland Bank significantly
increased the number of active users of the
Heartland Mobile App, providing an improved
customer experience, and enabling employees to
focus on providing higher value service. Heartland
Bank was also pleased to be awarded Canstar’s
Savings Bank of the Year 2022 (for the fifth
consecutive year), and to receive Canstar awards
for its Direct Call and Notice Saver accounts.
Term deposits decreased by $55.5 million (2.5%),
while call deposits decreased by $73.1 million
(7.6%) during FY2022, with the call to total deposit
ratio decreasing to 25% as at 30 June 2022 (30
June 2021: 30%).
Other borrowings increased by $246.6 million
(49.0%), largely driven by increases in Heartland
Bank’s committed auto warehouse facility, whose
limit was increased from $300 million to $400
million in September 2021, with the amount drawn
down increasing by $159.6 million.
Heartland Bank’s total liquidity remained stable,
increasing by $6.4 million (1.0%) to $627.9 million,
well in excess of regulatory minimums. Regulatory
liquidity ratios remained strong.
Heartland Bank’s capital position has progressively
increased during FY2022, reflecting its continued
strong profitability and partial removal of the RBNZ
restrictions on distributions. Heartland Bank’s
regulatory capital ratio was 13.49% as at 30
June 2022 (30 June 2021: 13.88%), well in excess
of regulatory minimums, and providing a strong
platform for Heartland Bank to meet RBNZ’s future
higher capital requirements. These requirements
are for a core capital ratio of 11.50% and a total
capital ratio of 16.00% by 1 July 2028.
Australia
The Heartland Australia group (comprising
Heartland Australia Holdings Pty Ltd and its
subsidiaries) increased borrowings by A$102.6
million (9.3%) to A$1,200.2 million.
The Heartland Australia group continues to
successfully execute on its strategic funding
programme to cater for strong growth in its
portfolios, with a further A$45 million Medium
Term Note (MTN) issued in July 2021, and a A$115
million MTN issued in May 2022 to refinance an
existing A$100 million MTN and provide additional
funding for future growth, taking the aggregate
outstanding issuance under Heartland Australia’s
MTN programme to A$280 million as at 30 June
2022. Additionally, a A$30 million tap into an
existing A$45 million funding line, maturing in July
2024, was issued in August 2022, adding further
diversity to the funding base.
Maturity of reverse mortgage securitisation
warehouses was extended by two and three years,
and aggregate senior limits were expanded by
A$100 million, providing additional headroom to
fund future growth in the portfolio. This provides
Heartland Australia group with access to A$1.35
billion of committed funding in aggregate.
Further expansion of existing warehouse funding
through increased senior limits and the introduction
of mezzanine funding is well advanced, and focus
will continue to be on sourcing optimal long-term
duration matched funding.
10
Excluding the impact of changes in FX rates.
11
Includes intercompany deposits received by Heartland Bank
(30 June 2022: $4.6 million; 30 June 2021: $36.1 million).
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Financial statements
General information 83
Auditor 83
Other material matters 83
Directors 83
Directors' statements 85
Consolidated statement 86
of comprehensive income
Consolidated statement 87
of changes in equity
Consolidated statement 88
of financial position
Consolidated statement 89
of cash flows
Notes to the financial statements
1. Financial statements preparation 91
Risk management
22. Enterprise risk management 131
23. Credit risk exposure 134
24. Liquidity risk 139
25. Interest rate risk 141
Other disclosures
26. Significant subsidiaries 144
27. Structured entities 144
28. Staff share ownership 146
arrangements
29. Insurance business, securitisation, 148
funds management, other fiduciary
activities
30. Concentrations of funding 149
31. Contingent liabilities and 150
commitments
32. Events after the reporting date 150
Auditor's report
Auditor's report 151
Performance
2. Segmental analysis 96
3. Net interest income 99
4. Net operating lease income 100
5. Other income 100
6. Operating expenses 101
7. Compensation of auditor 101
8. Impaired asset expense 102
9. Taxation 103
10. Earnings per share 105
Financial position
11. Investments 106
12. Derivative financial instruments 107
13. Finance receivables 109
14. Operating lease vehicles 114
15. Borrowings 115
16. Share capital and dividends 116
17. Other reserves 117
18. Other balance sheet items 117
19. Acquisition 120
20. Related party transactions 122
and balances
21 Fair value 124
Tauākī ahumoni
Financial statements
for the year ended 30 June 2022
Contents
Financial statements
General information
These financial statements are issued by Heartland Group Holdings Limited (HGH) and its subsidiaries
(the Group) for the year ended 30 June 2022.
Name and address for service
The Group’s address for service is Level 3, 35 Teed Street, Newmarket, Auckland 1023.
Details of incorporation
HGH was incorporated under the Companies Act 1993 on 19 July 2018.
Auditor
KPMG
KPMG Centre
18 Viaduct Harbour Avenue
Auckland 1010
Other material matters
There are no material matters relating to the business or affairs of the Group that are not disclosed in
these consolidated financial statements which, if disclosed, would materially affect the decision of a
person to subscribe for debt or equity instruments of which the Group is the issuer.
Directors
All Directors of HGH reside in New Zealand with the exception of Ellen Frances Comerford and Geoffrey
Edward Summerhayes who reside in Australia. Communications to the Directors can be sent to Heartland
Group Holdings Limited, Level 3, 35 Teed Street, Newmarket, Auckland 1023.
On 1 October 2021, Kathryn Mitchell and Geoffrey Edward Summerhayes were appointed as Directors
and have been re-elected on 28 October 2021. Christopher Robert Mace retired as a Director on
28 October 2021.
There have been no other changes to the composition of the Board of Directors of the Group for the year
ended 30 June 2022.
The Directors of HGH and their details at the time these financial statements were signed were:
Chairman - Board of Directors
Name: Geoffrey Thomas Ricketts CNZM Qualifications: LLB (Hons), LLD
(honoris causa), CFInstD
Occupation: Company Director Type of Director: Independent Non-Executive
External Directorships: Janmac Capital Limited, Maisemore Enterprises Limited, MCF2 Message4U
Limited, MCF3 Amplify Limited, MCF3 Green Limited, MCF3 E&P Holdco Limited, MCF3 Re. Group Limited,
MCF3 Architectus Limited, MCF 10 Limited, MCF2 (Fund 1) Limited, MCF 11 Limited, MCF2A General
Partner Limited, MCF2 GP Limited, MCF3 GP Limited, MCF3B General Partner Limited, MCF3A General
Partner Limited, MCF2 FFF-GK Limited, MCF3 Cook Limited, MCF3 TEG Limited, MCF3 Resourceco
Limited, MCF3 Squiz Limited, MC Medical Properties Limited, Mercury Capital No.1 Fund Limited, Mercury
Capital No. 1Trustee Limited, New Zealand Catholic Education Office Limited, NZCEO Finance Limited,
O & E Group Services Limited, Oceania and Eastern Finance Limited, Oceania and Eastern Group Funds
Limited, Oceania and Eastern Holdings Limited, Oceania and Eastern Limited, Oceania and Eastern
Securities Limited, Oceania North Limited, Oceania Securities Limited, Quartet Equities Limited.
Name: Ellen Frances Comerford Qualifications: BEc
Type of Director: Non-Independent Non-Executive Director Occupation: Company Director
External Directorships: Airtasker Limited, Comerford Gohl Holdings Pty Limited, Hollard Holdings Australia
Pty Limited, Lendi Group Pty Ltd, The Hollard Insurance Company Pty Ltd.
Name: Gregory Raymond Tomlinson Qualifications: AME
Type of Director: Non-Independent Non-Executive Director Occupation: Company Director
External Directorships: Alta Cable Holdings Limited, Chippies Vineyard Limited, Indevin Group Limited,
Little Ngakuta Trust Company Limited, Mountbatten Trustee Limited, Nearco Stud Limited, Oceania
Healthcare Limited, Pelorus Finance Limited, St Leonards Limited, Tomlinson Group Argenta GP Limited,
Tomlinson Group NZ Limited, Tomlinson Holdings Limited, Tomlinson Group Investments Limited,
Tomlinson Ventures Limited, Terra Vitae Vineyards Limited, Villa Maria Estate Limited.
Name: Jeffrey Kenneth Greenslade Qualifications: LLB
Type of Director: Non-Independent Executive Director Occupation: Chief Executive Officer of HGH
External Directorships: Henley Family Investments Limited.
Name: Kathryn Mitchell Qualifications: BA, CMInstD
Type of Director: Independent Non-Executive Director Occupation: Company Director
External Directorships: Chambers@151 Limited, Christchurch International Airport Limited, Farmright
Limited, Firsttrax Limited, Helpings Hands Holdings Limited, Link Engine Management Limited, Morrison
Horgan Limited, The New Zealand Merino Company Limited.
Name: Geoffrey Edward Summerhayes Qualifications: BBA
Type of Director: Independent Non-Executive Director Occupation: Company Director
External Directorships: Zurich Financial Services Australia Limited, Zurich Australian Insurance Limited,
Zurich Investment Management Limited, Zurich Australia Limited, OnePath Life Limited, OnePath General
Insurance Pty Limited.
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$000sNoteJune 2022June 2021
Interest income3342,101327,935
Interest expense391,95994,418
Net interest income250,142233,517
Operating lease income45,2845,004
Operating lease expense43,3833,149
Net operating lease income1,9011,855
Lending and credit fee income9,6398,090
Other income518,9333,634
Net operating income280,615247,096
Operating expenses6116,753117,658
Profit before impaired asset expense and income tax163,862129,438
Fair value (loss)/gain on investment(12,998)4,092
Impaired asset expense813,82314,974
Profit before income tax137,041118,556
Income tax expense941,91631,530
Profit for the year95,12587,026
Other comprehensive income
Items that are or may be reclassified subsequently to profit or loss, net of income tax:
Effective portion of change in fair value of derivative financial instruments7,0418,940
Movement in fair value reserve(712)(5,646)
Movement in foreign currency translation reserve2,340(68)
Items that will not be reclassified to profit or loss, net of income tax:
Movement in defined benefit reserve(171)-
Other comprehensive income(473)-
Other comprehensive income/(loss) for the year, net of income tax8,0253,226
Total comprehensive income for the year103,15090,252
Earnings per share
Basic earnings per share10 16.13c14.92c
Diluted earnings per share10 16.13c14.92c
Consolidated statement of comprehensive income
For the year ended 30 June 2022
Total comprehensive income for the year is attributable to the owners of the Group.
The notes to the financial statements form an integral part of, and should be read in conjunction with,
these consolidated financial statements.
Directors’ statements
The consolidated financial statements are dated 22 August 2022 and have been signed by all
the Directors.
G T Ricketts (Chair)
J K Greenslade
K Mitchell
G R Tomlinson
E F Comerford
G E Summerhayes
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The notes to the financial statements form an integral part of, and should be read in conjunction with,
these consolidated financial statements.
Consolidated statement of financial position
As at 30 June 2022
The notes to the financial statements form an integral part of, and should be read in conjunction with,
these consolidated financial statements.
Consolidated statement of changes in equity
For the year ended 30 June 2022
June 2022June 2021
$000sNote
Share
CapitalReserves
Retained
Earnings
Total
Equity
Share
CapitalReserves
Retained
Earnings
Total
Equity
Balance at beginning
of year
583,781(477)178,388761,692576,25(5,500)129,223699,980
Total comprehensive
income for the year
Profit for the year-- 95,12595,125-- 87,02687,026
Other comprehensive
income /(loss), net of
income tax
17- 8,498(473)8,025- 3,226- 3,226
Total comprehensive
income for the year
-8,49894,652103,150-3,22687,02690,252
Contributions by and
distributions to owners
Dividends paid16-- (73,454)(73,454)-- (37,861)(37,861)
Dividend reinvestment plan16 15,404-- 15,4047,524-- 7,524
Share based payments- 1,915- 1,915- 1,797- 1,797
Total transactions
with owners
15,4041,915 (73,454)(56,135)7,5241,797 (37,861)(28,540)
Balance at end of the year599,1859,936 199,586808,707583,781(477)178,388761,692
$000sNoteJune 2022June 2021
Assets
Cash and cash equivalents310,758182,333
Investments11289,294377,823
Investment properties11,83211,832
Derivative financial instruments1245,22114,139
Finance receivables134,146,8213,288,466
Finance receivables - reverse mortgages131,996,8541,676,073
Operating lease vehicles1415,16110,865
Right of use assets1814,14515,985
Other assets1818,22916,815
Intangible assets18218,87469,165
Deferred tax asset923,07414,117
Total assets7,090,2635,677,613
Liabilities
Deposits153,592,5083,183,454
Other borrowings152,578,2131,675,133
Lease liabilities1816,24018,166
Tax liabilities22,0447,440
Derivative financial instruments126,3414,802
Trade and other payables1866,21026,926
Total liabilities6,281,5564,915,921
Equity
Share capital16599,185583,781
Retained earnings and other reserves209,522177,911
Total equity808,707761,692
Total equity and liabilities7,090,2635,677,613
Total interest earning and discount bearing assets6,667,2605,432,181
Total interest and discount bearing liabilities6,131,5934,840,310
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Consolidated statement of cash flows
For the year ended 30 June 2022
Consolidated statement of cash flows (continued)
For the year ended 30 June 2022
Reconciliation of profit after tax to net cash flows from operating activities
The notes to the financial statements form an integral part of, and should be read in conjunction with,
these consolidated financial statements.
The notes to the financial statements form an integral part of, and should be read in conjunction with,
these consolidated financial statements.
$000sJune 2022June 2021
Cash flows from operating activities
Interest received222,894233,447
Operating lease income received3,9135,046
Lending, credit fees and other income received6,1014,625
Operating inflows232,908243,118
Interest paid(100,467)(85,058)
Payments to suppliers and employees(69,463)(97,205)
Taxation paid(32,987)(34,004)
Operating outflows(202,917)(216,267)
Net cash flows from operating activities before changes in operating
assets and liabilities29,99126,851
Proceeds from sale of operating lease vehicles4,4816,821
Purchase of operating lease vehicles(10,758)(1,788)
Net movement in finance receivables(693,512)(296,754)
Net movement in deposits407,484(74,608)
Net cash flows (applied to) operating activities
1
(262,314)(339,478)
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets(9,809)(7,562)
Net movement in investments75,53123,276
Purchase of subsidiary, net of cash acquired(159,919)-
Total cash (applied to)/from investing activities(94,197)15,714
Net cash flows (applied to)/from investing activities(94,197)15,714
Cash flows from financing activities
Net increase in wholesale funding468,139309,680
Proceeds from issue of unsubordinated notes77,24381,801
Total cash provided from financing activities545,382391,481
Dividends paid(58,050)(30,337)
Payment of lease liabilities(2,396)(2,226)
Total cash (applied to) financing activities(60,446)(32,563)
Net cash flows from financing activities484,936358,918
Net increase in cash held128,42535,154
Opening cash and cash equivalents182,333147,179
Closing cash and cash equivalents310,758182,333
1
Cash flows from operating activities do not include cash flows from wholesale funding which are included as part
of financing activities.
$000sNoteJune 2022June 2021
Profit for the year95,12587,026
Add/(less) non-cash items:
Depreciation and amortisation expense10,69114,615
Depreciation on lease vehicles143,1032,801
Capitalised net interest income and fee income(95,271)(68,755)
Impaired asset expense813,82314,974
Investment fair value movement12,998(4,092)
Other non-cash items(30,407)(24,538)
Total non-cash items (85,063)(64,995)
Add/(less) movements in operating assets and liabilities:
Finance receivables(693,512)(296,754)
Operating lease vehicles(6,277)5,033
Other assets(207)3,448
Current tax 14,604(4,863)
Derivative financial instruments(23,214)(163)
Deferred tax(8,957)3,006
Deposits407,484(74,608)
Other liabilities37,7033,392
Total movements in operating assets and liabilities(272,376)(361,509)
Net cash flows applied to operating activities
1
(262,314)(339,478)
1
Cash flows from operating activities do not include cash flows from wholesale funding which are included as part
of financing activities.
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Notes to the financial statements
For the year ended 30 June 2022
1. Financial statements preparation
Reporting entity
The financial statements presented are the consolidated financial statements comprising Heartland
Group Holdings (HGH) and its subsidiaries (the Group). Refer to Note 26 – Significant subsidiaries for
further details.
As at 30 June 2022, HGH is a company incorporated in New Zealand under the Companies Act 1993 and
a Financial Market Conduct (FMC) reporting entity for the purposes of the Financial Markets Conduct
Act 2013.
Basis of preparation
The consolidated financial statements have been prepared in accordance with Generally Accepted
Accounting Practice in New Zealand (NZ GAAP) the New Zealand Exchange (NZX) Main Board Listing
Rules and the Australian Securities Exchange (ASX) Listing Rules. The financial statements comply with
New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable
Financial Reporting Standards as appropriate for profit-oriented entities. The financial statements also
comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
The consolidated financial statements are presented in New Zealand dollars which is the Group's
functional and presentation currency. Unless otherwise indicated, amounts are rounded to the nearest
thousand dollars.
The consolidated financial statements have been prepared on a going concern basis after considering the
Group's funding and liquidity position.
The accounting policies adopted have been applied consistently throughout the periods presented in
these consolidated financial statements.
Certain comparative balances have been reclassified to align with the presentation used in the current
financial year. These reclassifications have no impact on the overall financial performance or financial
position for the comparative year.
Basis of measurement
The financial statements have been prepared on the basis of historical cost, except for certain financial
instruments and investment properties, which are measured at their fair values as identified in the
accounting policies set out in the accompanying notes to the financial statements.
Principles of consolidation
The consolidated financial statements of the Group incorporate the assets, liabilities and results of all
controlled entities. Controlled entities are all entities in which the Group is exposed to, or has rights to,
variable returns from its involvement with the entities and has the ability to affect those returns through
its power over the entities. Intercompany transactions, balances and any unrealised income and expense
(except for foreign currency transaction gains or losses) between controlled entities are eliminated.
Assets and liabilities in a transactional currency that is not the New Zealand dollar, are translated at the
exchange rates ruling at balance date. Revenue and expense items are translated at the average rate at
the balance date. Exchange differences are taken to the consolidated statement of comprehensive income.
1. Financial statements preparation (continued)
Changes in accounting standards
Accounting standards issued and effective
There have been no changes to accounting policies or 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
The final version of NZ IFRS 17 Insurance Contracts was issued in August 2017 and is applicable to
general and life insurance contracts. The standard will be effective for the Group’s reporting for the
financial year ending 30 June 2024, including 30 June 2023 comparatives.
Marac Insurance Limited (MIL), a subsidiary of Heartland Bank Limited (HBL), ceased writing insurance
policies in 2020 with the periodic policies expected to expire in 2025.
Other amendments to existing standards that are not yet effective are not expected to have a material
impact on the Group.
Estimates and judgements
The preparation of the Group’s consolidated financial statements requires the use of estimates and
judgements. This note provides an overview of the areas that involve a higher degree of judgement or
complexity. Detailed information about each of these estimates and judgements is included in the relevant
notes together with the basis of calculation for each affected item in the financial statements.
• Provisions for impairment - The effect of credit risk is quantified based on the Group's best
estimate of future cash repayments and proceeds from any security held or by reference to risk
profile groupings, historical loss data and forward-looking information. Refer to Note 8 - Impaired
asset expense, and Note 13 - Finance receivables for further details.
• Investment in equity securities - Judgements have been applied in techniques to determine the fair
value of Harmoney equity securities to reflect the underlying characteristics. Refer to Note 21 -
Fair value for further details.
• Fair value of reverse mortgages - Fair value is quantified by the transaction price and the Group’s
subsequent best estimate of the risk profile of the reverse mortgage portfolio. Refer to Note 21 -
Fair value for further details.
• Goodwill - Determining the fair value of assets and liabilities of acquired businesses requires the
Group to exercise judgement. The carrying value of goodwill is tested annually for impairment,
refer to Note 18 - Other balance sheet items.
Assumptions made at each reporting date (e.g. the calculation of the provision for impairment and
fair value adjustments) are based on best estimates as at that date. Although the Group has internal
controls in place to ensure that estimates can be reliably measured, actual amounts may differ from these
estimates. The estimates and judgements used in the preparation of the Group’s financial statements are
continually evaluated. They are based on historical experience and other factors, including expectations
of future events that may have a financial impact on the entity. Revisions to accounting estimates are
recognised in the reporting period in which the estimates are revised and in any future periods affected.
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1. Financial statements preparation (continued)
Estimates and judgements (continued)
COVID-19 pandemic - impact on estimates and judgements
The COVID-19 pandemic resulted in the Group adopting an economic overlay for expected credit losses
(ECL) to its portfolios as at 30 June 2020 of pre-tax $9.6 million in response to the uncertain but potential
economic impact of COVID-19 on HGH's borrowers (COVID Overlay). The COVID Overlay was sized
based on a range of techniques including stress testing, benchmarking, scenario analysis and expert
judgement.
Whilst economic uncertainty remains, credit risk factors arising from the impact of COVID-19 are
now apparent. Consequently the COVID Overlay has been released in full and it has been considered
appropriate to create an economic overlay of $8.0 million as at 30 June 2022, resulting in a net $1.6 million
release to profit or loss.
The accounting judgement that is most impacted by the economic overlay is the ECL on finance
receivables at amortised cost. The Group measures the allowance for ECL using an impairment model in
compliance with NZ IFRS 9 Financial Instruments.
Financial assets and liabilities
Financial Assets
Financial assets are classified based on:
• the business model within which the assets are managed; and
• whether the contractual cash flows of the instrument represent solely payment of principal and
interest (SPPI).
The Group determines the business model at the level that reflects how groups of financial assets are
managed. When assessing the business model, the Group considers factors including how performance
and risks are managed, evaluated and reported and the frequency and volume of, and reason for sales in
previous periods.
Financial assets are classified into the following measurement categories:
Financial Assets Measurement Category Note
Bank bonds and floating rate notesFair value through other comprehensive income (FVOCI)11
Public sector securities and corporate bondsFVOCI11
Equity investmentsFair value through profit or loss (FVTPL) and FVOCI11
Finance receivables – reverse mortgagesFVTPL13
Finance receivablesAmortised cost13
1. Financial statements preparation (continued)
Financial assets and liabilities (continued)
Financial Assets (continued)
Financial assets measured at amortised cost
Financial assets are measured at amortised cost if they are held within a business model whose objective
is achieved through holding the financial asset to collect contractual cash flows which represent SPPI.
Financial assets at amortised cost are initially recognised at fair value and subsequently measured at
amortised cost using the effective interest rate method.
Financial assets measured at FVOCI
Financial assets are measured at FVOCI if they are held within a business model whose objective is
achieved both through collecting contractual cash flows which represent SPPI or selling the
financial asset.
Financial assets at FVOCI are measured at fair value with unrealised gains and losses recognised in other
comprehensive income except for interest income, impairment charges and foreign exchange gains and
losses, which are recognised in profit or loss.
Financial assets measured at FVTPL
Financial assets are measured at FVTPL if:
• they are held within a business model whose objective is achieved through selling or repurchasing
the financial asset in the near term, or forms part of a portfolio of financial instruments that are
managed together and for which there is evidence of short-term profit taking; or
• they are designated at FVTPL upon initial recognition to eliminate or reduce an
accounting mismatch.
Financial assets at FVTPL are measured at fair value with subsequent changes in fair value recognised in
profit or loss.
Financial Liabilities
Financial liabilities are classified into the following measurement categories:
• those to be measured at amortised cost;
• those to be measured at FVTPL.
Financial liabilities measured at amortised cost
Financial liabilities are measured at amortised cost if they are not held for trading or not designated
at FVTPL.
Financial liabilities measured at amortised cost are accounted for using the effective interest rate method.
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1. Financial statements preparation (continued)
Financial assets and liabilities (continued)
Financial Liabilities (continued)
Financial liabilities measured at FVTPL
Financial liabilities are measured at FVTPL if:
• they are held for trading whose principal objective is achieved through selling or repurchasing
the financial liability in the near term, or forms part of a portfolio of financial instruments that
are managed together and for which there is evidence of short-term profit taking; or
• they are designated at FVTPL upon initial recognition to eliminate or reduce an accounting
mismatch.
Financial liabilities at FVTPL are measured at fair value with subsequent changes in fair value recognised
in profit or loss.
Further details of the accounting policy for each category of financial asset or financial liability mentioned
above is set out in the note for the relevant item.
The Group’s policies for determining the fair value of financial assets and financial liabilities are set out in Note
21 - Fair value.
Recognition
The Group initially recognises finance receivables and borrowings on the date that they are originated.
All other financial assets and liabilities (including assets and liabilities designated at FVTPL) are initially
recognised on the trade date at which the Group becomes a party to the contractual provisions of
the instrument.
Derecognition
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction
in which substantially all the risks and rewards of ownership of the financial asset are transferred.
Any interest in transferred financial assets that is created or retained by the Group is recognised as
a separate asset.
The Group enters into transactions whereby it transfers assets recognised on its consolidated statement
of financial position, but retains either all risks or rewards of the transferred assets or a portion of them.
If all or substantially all risks and rewards are retained, then the transferred assets are not derecognised
from the consolidated statement of financial position. Transfers of assets with the retention of all or
substantially all risks and rewards include, for example, securitised assets and repurchase transactions.
Financial liabilities are derecognised when the obligation is discharged, cancelled or expires. Where an
existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, the exchange or modification is treated
as a derecognition of the original liability and the recognition of a new liability, with the difference in the
respective carrying amounts recognised in profit or loss.
Offsetting financial instruments
The Group offsets financial assets and financial liabilities and reports the net balance in the balance sheet
where there is currently a legally enforceable right to set off and there is an intention to settle on a net
basis or to realise the asset and settle the liability simultaneously.
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
The Group operates within New Zealand and Australia and comprises the following main
operating segments:
MotorMotor vehicle finance.
Reverse mortgages
Reverse mortgage lending in New Zealand. Refer to Note 23 - Credit Risk Exposure for
details of this product.
Personal lendingTransactional, home loans and personal loans to individuals.
Business
Term debt, plant and equipment finance, commercial mortgage lending and working capital
solutions for small-to-medium sized 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.
StockCo Australia
Specialising in livestock finance within Australia. This segment was acquired through the
acquisition of StockCo Holdings 2 Pty Ltd and StockCo Australia Management Pty Ltd on 31
May 2022. As at 30 June 2022, one month of Profit and loss is recognised in this segment.
Refer to Note 19 - Acquisition for details.
AustraliaReverse mortgage lending and other financial services within Australia.
Certain operating expenses, such as premises, IT and support centre costs are not allocated to operating
segments and are included in Other. Finance receivables are allocated across the operating segments.
Other assets and liabilities are managed centrally and therefore are not allocated across the
operating segments.
The Group's operating segments are different from the industry categories detailed in Note 23 - Credit
risk exposure. The operating segments are primarily categorised by sales channel, whereas Note 23 -
Credit risk exposure categorises exposures based on credit risk concentrations.
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2 Segmental analysis (continued)
$000sMotor
Reverse
Mortgages
Personal
LendingBusinessRural
StockCo
AustraliaAustraliaOtherTotal
June 2022
Net interest
income
69,73029,95710,28770,60229,4601,88938,662(445) 250,142
Net other
income
3,3262,5831,5622,6797413 2,69016,88930,473
Net operating
income
73,05632,54011,84973,28130,2011,89241,35216,444280,615
Operating
expenses
3,7924,4856,4199,3583,0381,69211,28676,683116,753
Profit/(loss)
before
impaired
asset expense
and income tax
69,26428,0555,43063,92327,16320030,066(60,239)163,862
Fair value (loss)
on investments
------- (12,998)(12,998)
Impaired asset
expense/
(benefit)
1,481- (877)11,8312,256(291)(577)- 13,823
Profit before
income tax
67,78328,0556,30752,09224,90749130,643(73,237)137,041
Income tax
expense
------- 41,91641,916
Profit/(loss) for
the year
67,78328,0556,30752,09224,90749130,643 (115,153)95,125
Total assets1,382,367721,264332,7831,387,352687,232372,1721,288,494918,5997,090,263
Total liabilities6,281,556
2 Segmental analysis (continued)
$000sMotor
Reverse
Mortgages
Personal
LendingBusinessRural
StockCo
AustraliaAustraliaOtherTotal
June 2021
Net interest
income
65,82922,25712,07363,89830,579- 39,348(467) 233,517
Net other
income
3,3432,1431,9462,723881- 2,684(141)13,579
Net operating
income
69,17224,40014,01966,62131,46042,032(608)247,096
Operating
expenses
3,7874,2846,83311,3402,124- 12,39076,900117,658
Profit/(loss)
before
impaired
asset expense
and income tax
65,38520,1167,18655,28129,336-29,642(77,508)129,438
Fair value gain
on investments
---- 700-- 3,3924,092
Impaired asset
expense
5,298- 2,0815,6491,649- 297- 14,974
Profit/(loss)
before income
tax
60,08720,1165,10549,63228,387-29,345(74,116)118,556
Income tax
expense
------- 31,53031,530
Profit/(loss) for
the year
60,08720,1165,10549,63228,387-29,345 (105,646)87,026
Total assets1,287,978601,505137,9101,225,710586,318-1,149,610688,5825,677,613
Total liabilities4,915,921
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3 Net interest income
Policy
Interest income and expense on financial instruments is measured using the effective interest rate
method that discounts the financial instruments' future cash flows to their present value and allocates
the interest income or expense over the life of the financial instrument. The effective interest rate is
established on initial recognition of the financial assets or liabilities and is not subsequently revised.
For financial instruments at amortised cost, the calculation of the effective interest rate includes
all yield related fees and commissions paid or received that are an integral part of the underlying
financial instrument.
$000sJune 2022June 2021
Interest income
Cash and cash equivalents811119
Investments5,1566,979
Finance receivables236,916232,845
Finance receivables - reverse mortgages99,21887,992
Total interest income342,101327,935
Interest expense
Deposits45,71755,273
Other borrowings46,11035,609
Net interest expense on derivative financial instruments1323,536
Total interest expense91,95994,418
Net interest income 250,142233,517
4 Net operating lease income
Policy
As a lessor, the Group retains substantially all the risks and rewards incidental to ownership of the
assets and therefore classifies the leases as operating leases. Rental income and expense from
operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct
costs incurred in negotiating and arranging an operating lease are added to the carrying amount of
the leased asset and recognised on a straight-line basis over the lease term. Profits on the sale of
operating lease assets are included as part of operating lease income. Current year depreciation and
losses on the sale of operating lease assets are included as part of operating lease expenses.
The leased assets are depreciated over their useful lives on a basis consistent with similar assets.
$000sJune 2022June 2021
Operating lease income
Lease income4,1613,908
Gain on disposal of lease assets1,1231,096
Total operating lease income5,2845,004
Operating lease expense
Depreciation on lease assets3,1032,801
Direct lease costs280348
Total operating lease expense3,3833,149
Net operating lease income1,9011,855
5 Other income
Policy
Rental income from investment properties
Rental income from investment properties is recognised on a straight-line basis over the term of the
relevant lease.
Insurance income
Insurance premium income and commission expense are recognised in profit or loss from the date of
attachment of the risk over the period of the insurance contract. Claim expense is recognised in the
profit or loss on an accrual basis once our liability to the policyholder has been confirmed under the
terms of the contract.
$000sJune 2022June 2021
Rental income from investment properties8331,055
Insurance income6641,096
Gain on sale of investments-157
Other income7031,117
Fair value gain on derivative financial instruments16,723-
FX gain10209
Total other income18,9333,634
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6 Operating expenses
Policy
Operating expenses are recognised as the underlying service is rendered or over a period in which an
asset is consumed or a liability is incurred.
$000sJune 2022June 2021
Personnel expenses61,15261,476
Directors' fees1,1491,129
Superannuation1,5301,535
Depreciation - property, plant and equipment2,4592,995
Legal and professional fees3,1122,876
Advertising and public relations4,5105,138
Depreciation - right of use asset2,3102,312
Technology services9,3747,262
Telecommunications, stationary and postage1,7231,843
Customer acquisition costs5,9746,982
Amortisation of intangible assets5,9229,308
Other operating expenses
1
17,53814,802
Total operating expenses116,753117,658
1
Other operating expenses include compensation of auditor which is disclosed in Note 7.
7 Compensation of auditor
$000sJune 2022June 2021
Audit and review of the financial statements
1
879790
Other assurance services paid to auditor
2
103103
Total compensation of auditor982893
1
Audit and review of the financial statements includes fees paid for both the audit of the annual financial statements
and review of interim financial statements.
2
Other assurance related services paid to the auditor comprise regulatory assurance services, trust deed reporting,
registry audits and other agreed upon procedure engagements.
8 Impaired asset expense
Policy
Impairment of finance receivables
At each reporting date, the Group applies a three stage approach to measuring ECL to finance
receivables not carried at fair value. The ECL model assesses whether there has been a significant
increase in credit risk since initial recognition.
The ECL model is a forward looking model where impairment allowances are recognised before losses
are actually incurred. On initial recognition, an impairment allowance is required, based on events that
are possible in the next 12 months.
Assets may migrate between the following stages based on their change in credit quality:
Stage 1 - 12 months ECL (past due 30 days or less)
Where there has been no evidence of increased credit risk since initial recognition, and finance
receivables are not credit impaired upon origination, the portion of the lifetime ECL associated with
the probability of default events occurring within the next 12 months is recognised.
Stage 2 - Lifetime ECL not credit impaired (greater than 30 but less than 90 days past due)
Where there has been a significant increase in credit risk.
Stage 3 - Lifetime ECL credit impaired (90 days past due or more)
Objective evidence of impairment, so are considered to be in default or otherwise credit impaired.
In determining whether credit risk has increased all available information relevant to the assessment
of economic conditions at the reporting date are taken into consideration. To do this the Group
considers its historical loss experience and adjusts this for current observable data. In addition to
this the Group uses reasonable and supportable forecasts of future economic conditions including
experienced judgement to estimate the amount of an expected impairment loss. Future economic
conditions consider macroeconomic factors such as unemployment, interest rate, gross domestic
product, and inflation, and requires an evaluation of both the current and forecast direction of the
economic cycle. The methodology and assumptions including any forecasts of future economic
conditions are reviewed regularly as incorporating forward-looking information increases the level
of judgement as to how changes in these macroeconomic factors will affect the ECL.
The calculation of expected credit loss is modelled for portfolios of like assets. For portfolios which are
either new or too small to model, judgement is used to determine impairment provisions.
For assets that are individually assessed for ECL, the allowance for ECL is calculated directly as
the difference between the defaulted assets carrying value and the recoverable amount (being the
present value of expected future cash flows, including cash flows from the realisation of collateral or
guarantees, where applicable).
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8 Impaired asset expense (continued)
$000sJune 2022June 2021
Non-securitised
Individually impaired asset expense10,7839,131
Collectively impaired asset expense3,1106,001
Total non-securitised impaired asset expense13,89315,132
Securitised
Collectively impaired asset expense(70)(158)
Total securitised impaired asset expense(70)(158)
Total
Individually impaired asset expense10,7839,131
Collectively impaired asset expense3,0405,843
Total impaired asset expense13,82314,974
The Group’s models for estimating ECL for each of its portfolios are based on the historic credit experience
of those portfolios. The models assume that economic conditions (such as GDP growth, unemployment
rates, and house price index forecasts) remain static over time. If the Group forecasts that economic
conditions may change in the foreseeable future, the Group applies judgement to determine whether
the modelled output should be subject to an economic overlay. Judgement is required to establish clear
correlation between key economic indicators and the credit performance of the Group’s unique portfolios.
9 Ta xa tion
Policy
Income tax
Income tax expense for the year comprises current tax and movements in deferred tax balances,
including any adjustment required for prior years' tax expense. Income tax expense is recognised in
profit and loss except to the extent that it relates to items recognised directly in other comprehensive
income, in which case it is recognised in equity or other comprehensive income.
Current tax
Current tax is the expected tax payable or receivable on the taxable income for the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to the tax payable
or receivable in respect of previous years. Current tax for current and prior years is recognised as a
liability (or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is provided using the balance sheet liability method, providing for temporary differences
between the carrying amounts of assets and liabilities for accounting purposes and the amounts used
for taxation purposes. As required by NZ IAS 12 Income Taxes, a deferred tax asset is recognised only
to the extent that it is probable that a future taxable profit will be available to realise the asset.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of GST. As the Group is predominantly
involved in providing financial services, only a proportion of GST paid on inputs is recoverable.
The non-recoverable proportion of GST is treated as an expense or, if relevant, as part of the cost
of acquisition of an asset.
9 Taxation (continued)
Income tax expense
$000sJune 2022June 2021
Income tax recognised in profit or loss
Current tax
Current year46,23930,584
Adjustments for prior year(760)(1,854)
Tax other rates486426
Deferred tax
Current year(3,750)1,283
Adjustments for prior year(282)1,145
Tax other rates(17)(54)
Total income tax expense recognised in profit or loss41,91631,530
Income tax recognised in other comprehensive income
Current tax
Derivatives at fair value reserve(5,271)(2,197)
Fair value movements of cash flow hedge7,7433,457
Total income tax expense recognised in other comprehensive income2,4721,260
Reconciliation of effective tax rate
Profit before income tax137,041118,556
Tax at New Zealand income tax rate of 28%38,37233,196
Higher tax rate for overseas jurisdiction469372
Adjusted tax effect of items not taxable/deductible4,117(1,330)
Adjustments for prior year(1,042)(708)
Total income tax expense41,91631,530
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9 Taxation (continued)
Deferred tax assets comprise the following temporary differences:
$000sJune 2022June 2021
Employee expenses2,1691,647
Share Based payment1,039503
Provision for impairment14,64915,097
Intangibles and property plant and equipment(2,968)(3,816)
Deferred acquisition costs(196)(475)
Operating lease vehicles680479
Deferred income(4,786)-
Prior year tax loss9,362-
Deductible prior year expense603-
Other temporary differences2,522682
Total deferred tax assets23,07414,117
Opening balance of deferred tax assets14,11717,123
Movement recognised in profit or loss4,084(3,006)
Transfer on acquisition of business4,873-
Closing balance of deferred tax assets23,07414,117
Imputation credit account
$000sJune 2022June 2021
Imputation credit account19,11419,990
10 Earnings per share
June 2022June 2021
Earnings
Per Share
Cents
Net Profit
After Tax
$000s
Weighted
Average No.
of Shares
000s
Earnings
Per Share
Cents
Net Profit
After Tax
$000s
Weighted
Average No.
of Shares
000s
Basic earnings16.1395,125589,77114.9287,026583,467
Diluted earnings16.1395,125589,77114.9287,026583,467
Financial Position
11 Investments
Policy
Investments are classified into one of the following categories:
Fair value through profit or loss
Investments under this category include equity investments and are measured at fair value plus
transaction costs. Changes in fair value of these investments are recognised in profit or loss in the
period in which they occur.
Fair value through other comprehensive income
Investments under this category include bank bonds, floating rate notes, local authority stock, public
securities, corporate bonds and equity investments. These are initially measured at fair value, including
transaction costs, and subsequently carried at fair value. Changes in fair value of these investments
are recognised in other comprehensive income and presented within the fair value reserve.
Amortised cost
Investments under this category include bank deposits and are measured using effective interest
rate method. They are held to collect contractual cash flows that are solely payments of principal and
interest on the principal amount outstanding.
$000sJune 2022June 2021
Bank deposits, bank bonds and floating rate notes261,259351,613
Public sector securities and corporate bonds12,9535,543
Equity investments15,08220,667
Total investments289,294377,823
Refer to Note 21 - Fair value for details of the split between investments measured at fair value through
profit or loss, fair value through other comprehensive income and amortised cost.
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12 Derivative financial instruments
Policy
The Group uses derivatives for risk management purposes. Derivatives held for risk management
purposes include hedges that either meet the hedge accounting requirements set out in NZ IAS 39,
or economic hedges not placed into an accounting hedge relationship.
Derivatives are recognised at their fair value, with the derivatives being carried as assets when their
fair value is positive and as liabilities when their fair value is negative.
A hedged item is an asset, liability, firm commitment or highly probable forecast transaction that
exposes the Group to risk of changes in fair value or cash flows, and that is designated as being
hedged. The Group applies fair value hedge accounting to hedge movements in the value of fixed
interest rate assets and liabilities subject to interest rate risk. The Group applies cash flow hedge
accounting to hedge the variability in highly probable forecast future cash flows attributable to
interest rate risk on variable rate assets and liabilities.
Fair value hedge accounting
The criteria that must be met for a relationship to qualify for hedge accounting include:
• the hedging relationship must be formally designated and documented at inception of
the hedge;
• effectiveness testing must be carried out on an on-going basis to ensure the hedge is effective
and consistent with the originally documented risk management strategy; and
• the instruments or counterparty must be a third party external to the Group.
The Group documents, at the inception of the transaction, the relationship between hedged items and
hedging instruments, as well as its risk management objective and strategy for undertaking various
hedge transactions. The Group also documents its assessment, both at hedge inception and on an
ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in
offsetting changes in fair value of hedged items.
Subsequent to initial designation, changes in the fair value of derivatives that are designated and
qualify for fair value hedge accounting are recorded through profit or loss alongside any changes in the
fair value of the hedged asset or liability that are attributable to the hedged risk.
Where the hedged item is carried at amortised cost, the movement in fair value of the hedged item
attributable to the hedged risk is made as an adjustment to the carrying value of the hedged asset or
liability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
for hedge accounting, the adjustment to carrying amount of a hedged item carried at amortised cost
is amortised to the consolidated statement of comprehensive income on an effective yield basis over
the remaining period to maturity of the hedged item. Where a hedged item carried at amortised cost is
derecognised from the balance sheet, the adjustment to the carrying amount of the asset or liability is
immediately transferred to the consolidated statement of comprehensive income.
Cash flow hedge accounting
The criteria that must be met for a relationship to qualify for hedge accounting include:
• the hedging relationship must be formally designated and documented at inception of the hedge;
• effectiveness testing must be carried out on an on-going basis to ensure the hedge is
effective and consistent with the originally documented risk management strategy; and
• the instruments or counterparty must be a third party external to the Group.
12 Derivative financial instruments (continued)
Cash flow hedge accounting (continued)
The Group documents, at the inception of the transaction, the relationship between hedged items and
hedging instruments, as well as its risk management objective and strategy for undertaking various
hedge transactions. The Group also documents its assessment, both at hedge inception and on an
ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in
offsetting changes in cash flows of hedged items.
A fair value gain or loss associated with the effective portion of a derivative designated as a cash flow
hedge is recognised initially in the hedging reserve. The ineffective portion of a fair value gain or loss
is recognised immediately in the consolidated statement of comprehensive income.
When a hedging derivative expires or is sold, the hedge no longer meets the criteria for hedge
accounting, or the Group elects to revoke the hedge designation, the cumulative gain or loss on the
hedging derivative remains in the cash flow hedging reserve until the forecast transaction occurs and
affects income, at which point it is transferred to the corresponding income or expense line.
If a forecast transaction is no longer expected to occur, the cumulative gain or loss on the hedging
derivative previously reported in the cash flow hedging reserve is immediately transferred to the
consolidated statement of comprehensive income.
June 2022June 2021
$000s
Notional
Principal
Fair Value
Assets
Fair Value
Liabilities
Notional
Principal
Fair Value
Assets
Fair Value
Liabilities
Held for risk
management
Interest rate related
contracts
Swaps 1,495,84145,2216,3411,121,17914,1224,533
Foreign currency
related contracts
Forwards786--69,52517269
Total derivative
financial instruments
1,496,62745,2216,3411,190,70414,1394,802
The Group has entered into credit support annexes (CSAs) which form a part of International Swaps and
Derivatives Association (ISDA) Master Agreement, in respect of certain exposures relating to derivative
transactions. As per these CSAs, the Group or the counterparty needs to collateralise the market value of
outstanding derivative transactions. As at 30 June 2022, the Group has received $32.34 million of cash
collateral (2021: $4.09 million) against derivative assets. The cash collateral received is not netted off
against the balance of derivative assets disclosed in the consolidated statement of financial position.
The Group actively manages interest rate risk by entering into derivative contracts to hedge against
movements in interest rates. During the year interest rate swaps entered into by the Group could not be
designated into a hedging relationship with the portfolio of financial assets and liabilities held considering
their underlying risks could no longer be critically matched against those of the interest rate swaps.
Consequently, hedge accounting could not be established resulting in the recognition of fair value gains
from the interest rate swaps in the consolidated statement of comprehensive income.
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13 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 the provision
for impairment losses by class.
$000s
12-
Month ECL
Lifetime
ECL Not
Credit
Impaired
Lifetime
ECL Credit
Impaired
Specific
ProvisionTotal
June 2022
Non-securitised
Impairment allowance as at 30 June 202126,5912,40516,8237,62953,448
Changes in loss allowance
Transfer between stages(3,903)(2,447)1,0745,276-
New and increased provision (net of
collective provision releases)
(3,652)1,99813,3965,50717,249
Recovery of amounts written off-- (3,356)- (3,356)
Credit impairment charge(7,555)(449)11,11410,78313,893
Recovery of amounts previously written off--3,356-3,356
Write offs-- (16,692)(3,411)(20,103)
Effect of changes in foreign exchange rate323--35
Acquisition of portfolio-----
Impairment allowance as at 30 June 202219,0681,95914,60115,00150,629
Securitised
Impairment allowance as at 30 June 2021216221-239
Changes in loss allowance
Transfer between stages(6)(109)115--
New and increased provision (net of
collective provision releases)
(14)85(141)-(70)
Recovery of amounts written off-----
Credit impairment charge(20)(24)(26)-(70)
Recovery of amounts previously written off-----
Write offs--26-26
Effect of changes in foreign exchange rate-1--1
Acquisition of portfolio992--1881,180
Impairment allowance as at 30 June 20221,188(1)11881,376
13 Finance receivables
(a) Finance receivables held at amortised cost
Policy
Finance receivables are initially recognised at fair value plus incremental direct transaction costs
and are subsequently measured at amortised cost using the effective interest method, less any
impairment loss.
Fees and direct costs relating to loan origination, financing and loan commitments are deferred
and amortised to interest income over the life of the loan using the effective interest rate method.
Lending fees not directly related to the origination of a loan are recognised over the period of service.
Past due but not impaired assets are any assets which have not been operated by the counterparty
within their key terms but are not considered to be impaired by the Group.
Individually impaired assets are those loans for which the Group has evidence that it will incur a loss,
and will be unable to collect all principal and interest due according to the contractual terms of the loan.
In determining whether credit risk has increased all available information relevant to the assessment
including information about past events, current conditions and reasonable and supportable forecasts
of economic conditions at the reporting date are taken into consideration.
The calculation of expected credit loss is modelled for portfolios of like assets. For portfolios which are
either new or too small to model, judgement is used to determine impairment provisions.
$000sJune 2022June 2021
Non-securitised
Neither at least 90 days past due nor impaired 3,404,4513,140,489
At least 90 days past due41,76836,882
Individually impaired66,18338,143
Gross finance receivables3,512,4023,215,515
Less provision for impairment(50,629)(53,448)
Total non-securitised finance receivables3,461,7733,162,067
Securitised
Neither at least 90 days past due nor impaired 686,236126,638
Individually impaired188-
Gross finance receivables686,424126,638
Less provision for impairment(1,376)(239)
Total securitised finance receivables685,048126,399
Total
Neither at least 90 days past due nor impaired 4,090,6873,267,128
At least 90 days past due41,76836,882
Individually impaired66,37138,143
Gross finance receivables4,198,8263,342,153
Less provision for impairment(52,005)(53,687)
Total finance receivables4,146,8213,288,466
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$000s
12-
Month ECL
Lifetime
ECL Not
Credit
Impaired
Lifetime
ECL Credit
Impaired
Specific
ProvisionTotal
Total
Impairment allowance as at 30 June 202126,8072,42716,8247,62953,687
Changes in loss allowance
Transfer between stages(3,909)(2,556)1,1895,276-
New and increased provision (net of
collective provision releases)
(3,666)2,08313,2555,50717,179
Recovery of amounts written off-- (3,356)- (3,356)
Credit impairment charge(7,575)(473)11,08810,78313,823
Recovery of amounts previously written off--3,356-3,356
Write offs-- (16,666)(3,411)(20,077)
Effect of changes in foreign exchange rate324--36
Acquisition of portfolio992--1881,180
Impairment allowance as at 30 June 202220,2561,95814,60215,18952,005
June 2021
Non-securitised
Impairment allowance as at 30 June 202032,1602,14322,6685,30162,272
Changes in loss allowance
Transfer between stages(2,485)(1,090)(22)3,597-
New and increased provision (net of
collective provision releases)
(3,207)1,32913,7156,03417, 8 71
Recovery of amounts written off-- (2,739)- (2,739)
Credit impairment charge(5,692)23910,9549,63115,132
Recovery of amounts previously written off--2,739-2,739
Write offs-- (19,729)(7,303)(27,032)
Effect of changes in foreign exchange rate(10)13-(6)
Acquisition of portfolio13322188-343
Impairment allowance as at 30 June 202126,5912,40516,8237,62953,448
$000s
12-
Month ECL
Lifetime
ECL Not
Credit
Impaired
Lifetime
ECL Credit
Impaired
Specific
ProvisionTotal
Securitised
Impairment allowance as at 30 June 202026023114-397
Changes in loss allowance
Transfer between stages(4)(3)7--
New and increased provision (net of
collective provision releases)
(40)2(120)-(158)
Recovery of amounts written off-----
Credit impairment charge(44)(1)(113)-(158)
Recovery of amounts previously written off-----
Write offs-----
Effect of changes in foreign exchange rate-----
Acquisition of portfolio-----
Impairment allowance as at 30 June 2021216221-239
Total
Impairment allowance as at 30 June 202032,4202,16622,7825,30162,669
Changes in loss allowance
Transfer between stages(2,489)(1,093)(15)3,597-
New and increased provision (net of
collective provision releases)
(3,247)1,33113,5956,03417,713
Recovery of amounts written off-- (2,739)- (2,739)
Credit impairment charge(5,736)23810,8419,63114,974
Recovery of amounts previously written off--2,739-2,739
Write offs-- (19,729)(7,303)(27,032)
Effect of changes in foreign exchange rate(10)13-(6)
Acquisition of portfolio13322188-343
Impairment allowance as at 30 June 202126,8072,42716,8247,62953,687
13 Finance receivables (continued)
(a) Finance receivables held at amortised cost (continued)
Movement in provision (continued)
13 Finance receivables (continued)
(a) Finance receivables held at amortised cost (continued)
Movement in provision (continued)
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13 Finance receivables
(a) Finance receivables held at amortised cost (continued)
Impact of changes in gross finance receivables held at amortised cost on allowance for ECL
$000s
12-
Month ECL
Lifetime
ECL Not
Credit
Impaired
Lifetime
ECL Credit
Impaired
Specific
ProvisionTotal
June 2022
Gross finance receivables as at 30 June 20213,092,653165,79345,56438,1433,342,153
Transfer between stages(112,179)25,53231,25355,394-
Additions2,433,553--3,1902,436,743
Deletions(1,446,110)(72,901)(12,782)(26,945)(1,558,738)
Write offs-- (17,921)(3,411)(21,332)
Gross finance receivables as at 30 June 20223,967,917118,42446,11466,3714,198,826
June 2021
Gross finance receivables as at 30 June 20202,826,208183,26073,72924,6673,107,864
Transfer between stages(103,233)67,41913,31422,499-
Additions1,435,408--955 1,436,363
Deletions(1,065,730)(84,886)(20,337)(466) (1,171,419)
Write offs-- (21,142)(9,512)(30,654)
Gross finance receivables as at 30 June 20213,092,653165,79345,56438,1433,342,153
(b) Finance receivables held at fair value
Policy
Finance receivables – reverse mortgages are initially recognised, and subsequently measured, at fair
value through profit or loss.
$000sJune 2022June 2021
Finance receivables - reverse mortgages1,996,854 1,676,073
Total finance receivables - reverse mortgages1,996,854 1,676,073
Note 21 (a) - Financial instruments measured at fair value discloses further information regarding the
Group’s valuation policy.
Note 23 - Credit risk exposure discloses further information regarding how reverse mortgages operate.
Credit risk adjustments on financial assets designated at fair value through profit or loss
There were no credit risk adjustments on individual financial assets.
14 Operating lease vehicles
Policy
Operating lease vehicles are stated at cost less accumulated depreciation.
Operating lease vehicles are depreciated on a straight-line basis over their expected useful life
after allowing for any residual values. The estimated lives of these vehicles vary up to five years.
Vehicles held for sale are not depreciated but are tested for impairment.
$000sJune 2022June 2021
Cost
Opening balance16,11424,098
Additions10,7581,788
Disposals(6,422)(9,772)
Closing balance20,45016,114
Accumulated depreciation
Opening balance5,2496,495
Depreciation charge for the year3,1032,801
Disposals(3,063)(4,047)
Closing balance5,2895,249
Opening net book value10,86517,603
Closing net book value15,16110,865
The future minimum lease payments receivable under operating leases not later than one year is $3.057
million (2021: $2.141 million), within one to five years is $6.465 million (2021: $1.406 million) and over five
years is nil (2021: nil).
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15 Borrowings
Policy
Borrowings and deposits are initially recognised at fair value including incremental direct transaction
costs. They are subsequently measured at amortised cost using the effective interest method.
$000sJune 2022June 2021
Deposits3,592,5083,183,454
Total borrowings related to deposits3,592,5083,183,454
Unsubordinated notes636,407521,399
Securitised borrowings1,559,1081,043,516
Certificate of deposit198,71569,853
Bank borrowings173,982-
Money market borrowings10,001-
Repurchase agreement-40,365
Total other borrowings2,578,2131,675,133
Deposits and unsubordinated notes rank equally and are unsecured.
The Group has the following unsubordinated notes on issue at balance sheet date. Australian (AU)
borrowings are stated in their functional currency AU dollars.
PrincipalValuationIssue DateMaturity Date
Frequency of
Interest Repayment
$125 millionAmortised cost12 April 201912 April 2024Semi-annually
$150 millionAmortised cost21 September 201721 September 2022Semi-annually
AU $45 million Amortised cost8 March 202121 April 2023Quarterly
AU $45 millionAmortised cost9 July 20219 July 2024Quarterly
AU $47 millionAmortised cost15 March 20176 October 2022Monthly
AU $75 millionAmortised cost15 January 202121 April 2023Quarterly
AU $115 millionAmortised cost13 May 202213 May 2025Quarterly
At 30 June 2022 the Group had the following securitised borrowings outstanding:
• Heartland Auto Receivables Warehouse Trust 2018-1 securitisation facility $400 million, drawn
$268 million (2021: $300 million, drawn $108 million). Notes issued to investors are secured over
the assets of the Heartland Auto Receivables Warehouse Trust 2018-1 (predominantly motor
loans). The facility has a maturity date of 26 August 2023.
• Senior Warehouse Trust securitisation facility AU $600 million, drawn AU $585 million (2021:
AU$600 million, drawn AU $556 million). Notes issued to investors are secured over the assets of
Seniors Warehouse Trust (predominantly reverse mortgage loans). The facility has a maturity date
of 30 September 2025.
• Senior Warehouse Trust No. 2 securitisation facility AU $350 million, drawn AU $210 million (2021:
AU$250 million, drawn AU $182 million). Notes issued to investors are secured over the assets
of Seniors Warehouse Trust No. 2 (predominantly reverse mortgage loans). The facility has a
maturity date of 1 July 2024.
15 Borrowings (continued)
• Atlas 2020-1 Trust securitisation facility AU $127 million, drawn AU $127 million (2021: AU $137
million, drawn AU $137 million). Loans issued to investors are secured over the assets of Atlas 2020-1
Trust (predominantly reverse mortgage loans) and has a maturity date of 24 September 2050.
• StockCo Securitisation Trust 2022-1 securitisation facility AU $300 million, drawn AU $249 million
(2021: nil). Loans issued to investors are secured over the assets of StockCo Securitisation Trust
2022-1 (predominantly livestock loans). The facility has a maturity date of 27 May 2024.
16 Share capital and dividends
Policy
Ordinary shares are classified as equity, incremental costs directly attributable to the issue of ordinary
shares and share options are recognised as a deduction from equity, net of any tax effect.
$000s
June 2022
Number of
Shares
June 2021
Number of
Shares
Issued shares
Opening balance585,904580,979
Shares issued - dividend reinvestment plan7,0004,925
Closing balance592,904585,904
The Group issued 3,930,116 new shares at $2.2713 per share on 15 September 2021 and 3,069,339 new
shares at $2.1105 per share on 16 March 2022 under the dividend reinvestment plan for the period (2021:
2,482,921 new shares issued at $1.8035 per share on 16 March 2021 and 2,442,338 new shares at
$1.2470 per share on 9 October 2020 under dividend reinvestment plan).
Dividends paid
June 2022June 2021
Date
Declared
Cents
Per Share$000s
Date
Declared
Cents
Per Share$000s
Final dividend24 August 20217.0 41,01317 September 20202.5 14,524
Interim dividend22 February 20225.5 32,44122 February 20214.0 23,337
Total dividends paid73,45437,861
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17 Other reserves
$000s
Employee
Benefit
Reserve
Foreign
Currency
Translation
Reserve
(FCTR)
Fair Value
Reserve
Defined
Benefit
Reserve
Cash Flow
Hedge
ReserveTotal
June 2022
Balance as at 30 June 20212,731(3,975)(322)171918(477)
Other comprehensive income, net of
income tax
- 2,340(712)(171)7,0418,498
Share based payments1,915---- 1,915
Balance as at 30 June 20224,646(1,635)(1,034)-7,9599,936
June 2021
Balance as at 30 June 2020934(3,907)5,324171(8,022)(5,500)
Other comprehensive income, net of
income tax
-(68)(5,646)- 8,9403,226
Share based payments1,797---- 1,797
Balance as at 30 June 20212,731(3,975)(322)171918(477)
18 Other balance sheet items
Policy
Property, plant and equipment are stated at cost less accumulated depreciation and impairment
(if any). Depreciation is calculated on a straight line basis to write off the net cost or revalued amount
of each asset over its expected life to its estimated residual value.
$000sJune 2022June 2021
Other assets
Trade receivables-643
GST receivables2,9461,763
Prepayments7,6743,699
Property, plant and equipment7,3369,061
Other receivables2731,059
Collateral paid on derivatives-590
Total other assets18,22916,815
18 Other balance sheet items (continued)
Policy
Intangible assets
Intangible assets with finite useful lives
Software acquired or internally developed by the Group is stated at cost less accumulated
amortisation and any accumulated impairment losses. Expenditure on software assets is capitalised
only when it increases the future economic value of that asset. Amortisation of software is on a
straight line basis, at rates which will write off the cost over the assets’ estimated useful lives.
The expected useful life of the software has been determined to be ten years.
Goodwill
Goodwill arising on acquisition represents the excess of the cost of the acquisition over the Group’s
interest in the fair value of the identifiable net assets acquired. Goodwill that has an indefinite useful
life is not subject to amortisation and is tested for impairment annually. Goodwill is carried at cost less
accumulated impairment losses.
$000sJune 2022June 2021
Computer software
Cost61,91444,371
Accumulated depreciation26,27520,349
Net carrying value of computer software35,63924,022
Goodwill
Cost182,71845,143
Foreign exchange movement 517-
Net carrying value of goodwill183,23545,143
Total intangible assets218,87469,165
For the purposes of impairment testing, goodwill is allocated to cash generating units. A Cash Generating
Unit (CGU) is the smallest identifiable group of assets that generate independent cash inflows. The Group
has assessed that goodwill should be allocated to the smallest identifiable CGU:
• Heartland Australia Holdings Pty Limited: $15.3 million (2021: $15.3 million)
• Heartland Bank Limited: $29.8 million (2021: $29.8 million)
• StockCo AU Group: $138.1 million (2021: nil).
Goodwill is tested for impairment at a cash generating unit level. The recoverable amounts are determined
on a value in use basis using a five-year discounted cash flow methodology based on financial budget and
forecasts. Key assumptions used in the models included a discount rate of 10-14% and a terminal growth
rate of 2% which reflect both past experience and external sources of information. The recoverable
amounts for each CGU are compared to the respective carrying value of net assets.
There was no indication of impairment and no impairment losses have been recognised against the
carrying amount of goodwill for the year ended 30 June 2022 (30 June 2021: nil).
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18 Other balance sheet items (continued)
Policy
Employee benefits
Annual leave entitlements are accrued at amounts expected to be paid. Long service leave is accrued
by calculating the probable future value of the entitlements and discounting back to present value.
Obligations to defined contribution superannuation schemes are recognised as an expense when the
contribution is paid.
$000sJune 2022June 2021
Trade and other payables
Trade payables21,35811,243
Insurance liability1,8383,353
Employee benefits9,5487,616
Other tax payables1,124623
Collateral received on derivatives32,3424,091
Total trade and other payables66,21026,926
Policy
Leases
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.
In determining the lease term, all facts and circumstances that create an economic incentive to
exercise an extension option are considered. Extension options are only included in the lease term if
the lease is reasonably certain to be extended.
Lease liabilities are measured at the present value of the remaining lease payments and discounted
using the Group's incremental borrowing rate (IBR). Lease liabilities are measured using the effective
interest method. Carrying amounts are remeasured only upon reassessments and lease modifications.
Right of use assets are depreciated at the shorter of lease term or the Group’s depreciation policy for
that asset class.
18 Other balance sheet items (continued)
$000sJune 2022June 2021
Right of use assets
Balance at beginning of year15,98518,362
Depreciation charge for the year, included within depreciation expense in the
income statement
(2,310)(2,313)
Additions/(terminations) to right of use assets470(64)
Total right of use assets14,14515,985
Lease liability
Current3,6742,339
Non-current12,56615,827
Total lease liability16,24018,166
Interest expense relating to lease liability479568
19 Acquisition
Policy
Business combination
The Group accounts for business combinations using the acquisition method when the acquired set
of activities and assets meets the definition of a business and control is transferred to the Group.
In determining whether a particular set of activities and assets is a business, the Group assesses
whether the set of assets and activities consists of inputs and processes applied to those inputs
that have the ability to contribute to the creation of outputs.
The consideration transferred in the acquisition and any contingent consideration to be transferred
are generally measured at fair value, as are the identifiable net assets acquired. Goodwill is initially
measured at cost (being the excess of the aggregate of the consideration transferred over the fair
value of the net assets acquired) and is tested annually for impairment. Any gain on a bargain
purchase is recognised in profit or loss immediately. If the initial accounting for a business combination
is incomplete by the end of the reporting period in which the combination occurs, the Group reports
provisional amounts for the items for which the accounting is incomplete. Those provisional amounts
are adjusted during the measurement period (see paragraph below), or additional assets or liabilities
are recognised, to reflect new information obtained about facts and circumstances that existed as
of the acquisition date that, if known, would have affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date the Group obtains
complete information about facts and circumstances that existed as of the acquisition date, and does
not exceed twelve months. Transaction cost related to the acquisition is recognised as an expense in
profit or loss when incurred with the exception of costs to issue debt or equity securities.
On 31 May 2022, the Group acquired 100% of the shares in StockCo Holdings 2 Pty Ltd and StockCo
Australia Management Pty Ltd (collectively StockCo Australia). The Group is assessing the fair value of
the identifiable assets and liabilities acquired, and determining the related deferred tax effects, in line
with the principles for estimating fair value adopted by the Group. Values were provisionally allocated to
identifiable assets and liabilities on completion date, based on information available. They may be adjusted
during the 12 months following that date on the basis of new information obtained relating to
the facts and circumstances prevailing at completion date.
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19 Acquisition (continued)
Total consideration in relation to these transactions was AU $155.78 million (NZ $171.58 million), including
non-cash consideration of AU $0.28 million (NZ $0.31 million) and deferred consideration estimated to be
AU $1.62 million (NZ $1.78 million) as at 30 June 2022. Provisional goodwill of AU $124.91 million
(NZ $137.58 million) has been recognised from the acquisitions.
The fair values of the identifiable assets and liabilities of StockCo Australia as at the date of
acquisition were:
$000s
Provisional fair value
recognised on acquisition
Assets
Cash and cash equivalents9,564
Livestock receivables374,384
Right of use assets354
Deferred tax asset5,285
Other assets4,713
Total assets394,300
Liabilities
Other borrowings358,942
Lease liabilities354
Trade and other payables1,001
Total liabilities360,297
Net assets acquired34,003
Provisional goodwill arising on acquisition137,575
Fair value of consideration171,578
Less:
Non - cash consideration transferred314
Deferred consideration1,781
Total cash consideration transferred169,483
Cash flow on acquisition
Net cash acquired with the subsidiary9,564
Net change in cash and cash equivalents159,919
Provisional goodwill represents the future economic benefits that the Group expects to derive from the
acquisition of StockCo Australia. It has been allocated to the StockCo Australia business segment.
Transaction costs of $1.1 million have been expensed and are included in the operating expenses in the
consolidated statement of comprehensive income.
From the date of acquisition, StockCo Australia contributed $3.3 million to Interest income and $1.7 million
to Net profit before tax of the Group. If the acquisition had taken place at the beginning of the year, it is
estimated that the contribution to the Group's interest income and net profit before tax would have been
$37.6 million and $13.5 million respectively.
20 Related party transactions and balances
Policy
A person or entity 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 the Group. This includes all executive staff, 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 the Group
are comparable to transactions with other employees and did not involve more than the normal risk of
repayment or present other unfavourable features.
All other transactions with KMPs and their related entities are made on terms equivalent to those that
prevail in arm's length transactions.
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20 Related party transactions and balances (continued)
(a) Transactions with key management personnel
$000sJune 2022June 2021
Transactions with key management personnel
Interest income receivable2639
Interest expense payable(24)(22)
Key management personnel compensation
Short-term employee benefits(8,790)(9,384)
Share-based payment expense(1,915)(1,797)
Total transactions with key management personnel(10,703)(11,181)
Due from/(to) key management personnel
Lending229415
Borrowings - deposits(508)(23,409)
Total due (to) key management personnel(279)(22,994)
(b) Transactions with related parties
HGH is the ultimate parent company of the Group.
Entities within the Group have regular transactions with each other on agreed terms. The transactions
include the provision of tax and administrative services and customer operations. Banking facilities are
provided by HBL to other 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. Related party transactions
outside of the Group are as follows:
$000sJune 2022June 2021
Southern Cross Building Society Staff Superannuation Scheme (SCBS)
Interest expense payable to SCBS612
Management fees receivable from SCBS1010
Cash recieved from SCBS350-
ASF Custodians Pty Limited
Audit fees77
Heartland Trust (HT)
Dividends paid809421
HT held 6,475,976 shares in HGH (2021: 6,475,976 shares).
The Trustees of HT and certain employees of the Group provided their time and skills to the oversight and
operation of HT at no charge.
20 Related party transactions and balances (continued)
(c) Other balances with related parties
$000sJune 2022June 2021
Southern Cross Building Society Staff Superannuation Scheme
Retail deposits owing to SCBS
1
351,760
1
During the year, the beneficiaries of SCBS accepted a settlement offer and were paid a final lump sum
totalling $1.3 million. This was supported by an actuarial valuation and approved by the Financial Markets
Authority (FMA). The residual balance was transferred to HBL as the employer, leaving the above balance
to cover remaining costs.
The Group has indemnified HBL against a non performing loan which had a balance of $4.3 million as at
30 June 2022 (2021: nil).
21 Fair value
Policy
Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
On initial recognition, the transaction price generally represents the fair value of the financial
instrument, unless there is observable information from an active market that provides a more
appropriate fair value.
The fair values of financial assets and financial liabilities that are traded in active markets are based
on quoted market prices or dealer price quotations. For all other financial instruments, the Group
determines fair value using other valuation techniques.
The Group measures fair values using the following fair value hierarchy, which reflects the
observability of the inputs used in measuring fair value:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (derived from prices).
Level 3 - Inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
The Group recognises transfers between levels of the fair value hierarchy as at the end of the
reporting period during which the change has occurred.
(a) Financial instruments measured at fair value
The following methods and assumptions were used to estimate the fair value of each class of financial asset
and liability measured at fair value on a recurring basis in the consolidated statement of financial position.
The Group has an established framework in performing valuations required for financial reporting purposes
including Level 3 fair values. The Group regularly reviews and calibrates significant unobservable inputs and
valuation adjustments in accordance with market participants’ views. If external valuation specialists are
engaged to measure fair values, the Group assesses the evidence obtained from these specialists to support
the conclusion of these valuations. All significant valuations are reported to the Group's Board Audit and
Risk Committee for approval prior to its adoption in the financial statements.
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21 Fair value (continued)
(a) Financial instruments measured at fair value (continued)
Investments
Investments in public sector securities and corporate bonds are stated at fair value through other
comprehensive income (FVOCI), with the fair value being based on quoted market prices (Level 1 under
the fair value hierarchy) or modelled using observable market inputs (Level 2 under the fair
value hierarchy).
Investments valued under Level 2 of the fair value hierarchy are valued either based on quoted market
prices or dealer quotes forsimilar instruments, or discounted cash flows analysis.
Investments in equity securities are classified as fair value through profit or loss unless an irrevocable
election is made by the Group to measure at FVOCI. Investment in listed securities traded in liquid, active
markets where prices are readily observable are measured under Level 1 of the fair value hierarchy
with no modelling or assumptions used in the valuation. Investments in unlisted equity securities are
measured under Level 3 of the fair value hierarchy with the fair value being based on unobservable inputs
using market accepted valuation techniques. Where appropriate, the Group may apply adjustments to
the above-mentioned techniques to determine fair value of an equity security to reflect the underlying
characteristics. These adjustments are reflective of market participant considerations in valuing the
said security.
Equity Investment in Harmoney Corp Limited
Harmoney Corp Limited (Harmoney) listed on the ASX with a foreign exempt listing on the NZX on 19
November 2020, raising AU $92.5 million as part of its Initial Public Offering (IPO). As part of the IPO,
HGH, alongside other major shareholders, employees and directors, entered into escrow arrangements
that restrict the ability to sell its Harmoney shares, with approximately 72% of total shares were subject to
escrow arrangements (Escrow Restrictions) from the time that Harmoney completed its IPO.
There are two categories of escrowed shares: being unaffiliated escrow shareholders and affiliated
escrow shareholders. The timing of release of escrowed shareholdings is dependent on these categories.
The escrowed shareholdings for unaffiliated escrow shareholders have a two staged release with the first
50% of those escrowed shares released in September 2021 and the remaining 50% released in
March 2022. HGH is considered an unaffiliated escrow shareholder for its shareholding recorded at the
time of the IPO. The escrowed shareholdings for affiliated escrow shareholders have a three stage release
with the first 25% released in September 2021, a second 25% released in March 2022 and the remaining
50% of the affiliated escrow shares (representing 16.3% of the total Harmoney shares on issue) expected
to be released at the time or after the release of Harmoney’s FY22 annual audited financial report.
Previously, the Escrow Restrictions had significantly reduced the available trading pool of shares, resulting
in an illiquid market for the instrument, wide bid-ask spreads and volume that is insufficient to meet
the definition of an active market under NZ IFRS 13 Fair Value Measurement for purposes of Harmoney
shares traded.
Considering the remaining pool of shares under Escrow Restrictions is no longer substantial as at 30 June
2022, the Group has measured fair value of the equity investment in Harmoney using the quoted closing
price of Harmoney of AU $0.71, which is a Level 1 input within the fair value hierarchy.
For the prior reporting period, the fair value of HGH’s investment in Harmoney has been measured using
a six-month volume weighted average price (V WAP) of Harmoney shares traded on the ASX. This is
considered Level 3 within the fair value hierarchy as unobservable inputs under a market approach
valuation technique were used. This VWAP was evaluated through a composite valuation weighting the
closing price of Harmoney shares as at 30 June 2021, revenue multiples of comparable public companies,
IPO price and analyst valuations. Both the VWAP and composite valuation approaches derived
reasonably consistent outcomes. The fair value measurement of HGH’s equity investment in Harmoney
was AU $1.90 per share at 30 June 2021. This was a 26% premium to the quoted closing price of AU $1.51.
21 Fair value (continued)
Investment properties
Investment properties are initially recorded at their fair value, with subsequent changes in fair value
recognised in profit or loss. Fair value are determined by qualified independent valuers or other similar
external evidence, adjusted for changes in market conditions.
Investment properties have been acquired through the enforcement of security over finance receivables
and are held to earn rental income or for capital appreciation (or both).
Finance receivables - reverse mortgages
Reverse mortgage loans are classified at FVTPL. On initial recognition the Group considers the
transaction price to represent the fair value of the loan.
For subsequent measurement the Group has considered if the fair value can be determined by reference
to a relevant active market or observable inputs, but has concluded relevant support is not currently
available. In the absence of such market evidence the Group has used valuation techniques (income
approach) including actuarial assessments to consider the 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 potential move into 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 (2021: nil). Fair value is not highly sensitive to the above assumptions due to the nature of
reverse mortgage loans. In particular, given conservative origination loan-to-value ratio criteria, a material
deterioration in house prices combined with a material increase in interest rates over a sustained period of
time would likely need to occur before any potential impact to fair value.
The Group will continue to reassess the existence of a relevant active market and movements in
expectations on an on-going basis.
Derivative financial instruments
Interest rate and foreign currency related contracts are recognised in the financial statements at fair
value. Fair values are determined from observable market prices as at the reporting date, discounted cash
flow models or option pricing models as appropriate (Level 2 under the fair value hierarchy).
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21 Fair value (continued)
(a) Financial instruments measured at fair value (continued)
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 consolidated statement of financial position.
$000sLevel 1Level 2Level 3Total
June 2022
Assets
Investments279,841-7,032286,873
Investment properties--11,83211,832
Derivative financial instruments-45,221-45,221
Finance receivables - reverse mortgages-- 1,996,8541,996,854
Total financial assets measured at fair value279,84145,2212,015,7182,340,780
Liabilities
Derivative financial instruments-6,341-6,341
Total financial liabilities measured at fair value-6,341-6,341
June 2021
Assets
Investments259,04192,47620,667372,184
Investment properties--11,83211,832
Derivative financial instruments-14,139-14,139
Finance receivables - reverse mortgages-- 1,676,0731,676,073
Total financial assets measured at fair value259,041106,6151,708,5722,074,228
Liabilities
Derivative financial instruments-4,802-4,802
Total financial liabilities measured at fair value-4,802-4,802
During the year, $8.1 million of equity investments transferred out of Level 3 to Level 1. There were no
other transfers between levels in the fair value hierarchy in the year ended 30 June 2022 (2021: nil).
21 Fair value (continued)
(a) Financial instruments measured at fair value (continued)
The movement in Level 3 assets measured at fair value are below:
$000s
Finance Receivables
- Reverse MortgageInvestments
Investment
propertiesTotal
June 2022
As at 30 June 20211,676,07320,66711,8321,708,572
New loans439,110--439,110
Repayments(257,319)--(257,319)
Capitalised Interest and fees106,966--106,966
Purchase of investments-7,414-7,414
Fair value (loss)/gain on investment-(12,998)-(12,998)
Other32,024--32,024
Transfer out of Level 3-(8,051)-(8,051)
As at 30 June 20221,996,8547,03211,8322,015,718
June 2021
As at 30 June 20201,538,58516,33511,1321,566,052
New loans300,689--300,689
Repayments(257,999)--(257,999)
Capitalised Interest and fees91,812--91,812
Purchase of investments-940-940
Fair value (loss)/gain on investment-3,3927004,092
Other2,986--2,986
As at 30 June 20211,676,07320,66711,8321,708,572
(b) Financial instruments not measured at fair value
The following assets and liabilities of the Group are not measured at fair value in the consolidated
statement of financial position.
Cash and cash equivalents
Cash and cash equivalents are measured at amortised cost and their carrying value is considered
equivalent to their fair value due to their short term nature.
Finance receivables
The fair value of the Group's finance receivables is calculated using a valuation technique which assumes
the Group's current weighted average lending rates for loans of a similar nature and term.
The current weighted average lending rate used to fair value finance receivables with a fixed interest rate
was 7.77% (2021: 7.08%). Finance receivables with a floating interest rate are deemed to be at current
market rates. The current amount of credit provisioning has been deducted from the fair value calculation
of finance receivables as a proxy for future losses.
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21 Fair value (continued)
(b) Financial instruments not measured at fair value (continued)
Borrowings
The fair value of deposits, bank borrowings and other borrowings is the present value of future cash flows
and is based on the current market interest rates payable by the Group for debt of similar maturities.
The average current market rate used to fair value borrowings was 3.57% (2021: 1.23%).
Other financial assets and financial liabilities
The fair value of financial instruments such as short-term trade receivables and payables is considered
equivalent to their carrying value due to their short-term nature.
The following table sets out financial instruments not measured at fair value, compares their carrying
value against their fair value and analyses them by level in the fair value hierarchy.
June 2022June 2021
$000s
Fair Value
Hierarchy
Total Fair
Value
Total
Carrying
Value
Fair Value
Hierarchy
Total Fair
Value
Total
Carrying
Value
Assets
Cash and cash equivalentsLevel 1310,758310,758Level 1182,333182,333
Investments
1
Level 22,4182,421Level 25,6405,639
Finance receivablesLevel 34,073,9774,146,821Level 33,362,5363,288,466
Other financial assetsLevel 3273273Level 32,2922,292
Total financial assets4,387,4264,460,2733,552,8013,478,730
Liabilities
Retail depositsLevel 23,590,9183,592,508Level 23,192,7083,183,454
Borrowings - securitisedLevel 21,559,1081,559,108Level 2631,617631,617
Other borrowingsLevel 21,019,1051,019,105Level 21,043,5161,043,516
Other financial liabilitiesLevel 355,53855,538Level 318,68718,687
Total financial liabilities6,224,6696,226,2594,886,5284,877,274
1
Included within Investments are bank deposits which are held to support the Group's contractual cash
flows. Such investments are measured at amortised cost.
21 Fair value (continued)
(c) Classification of financial instruments
The following tables summarise the categories of financial instruments and the carrying value and fair
value of all financial instruments of the Group:
$000sFVOCIFVTPL
Amortised
Cost
Total
Carrying
Value
Total Fair
Value
June 2022
Assets
Cash and cash equivalents-- 310,758310,758310,758
Investments277,3189,5552,421289,294289,291
Investment properties-11,832-11,83211,832
Finance receivables-- 4,146,8214,146,8214,073,977
Finance receivables - reverse mortgages- 1,996,854- 1,996,8541,996,854
Derivative financial instruments26,13719,084-45,22145,221
Other financial assets--273273273
Total financial assets303,4552,037,3254,460,2736,801,0536,728,206
Liabilities
Deposits-- 3,592,5083,592,5083,590,918
Other borrowings-- 2,578,2132,578,2132,578,213
Derivative financial instruments1,1055,236-6,3416,341
Other financial liabilities--55,53855,53855,538
Total financial liabilities1,1055,2366,226,2596,232,6006,231,010
June 2021
Assets
Cash and cash equivalents-- 182,333182,333182,333
Investments351,51720,6675,639377,823377,824
Investment properties-11,832-11,83211,832
Finance receivables-- 3,288,4663,288,4663,362,536
Finance receivables - reverse mortgages- 1,676,073- 1,676,0731,676,073
Derivative financial instruments3,23010,909-14,13914,139
Other financial assets--2,2922,2922,292
Total financial assets354,7471,719,4813,478,7305,552,9585,627,029
Liabilities
Deposits-- 3,183,4543,183,4543,192,708
Other borrowings-- 1,675,1331,675,1331,675,133
Derivative financial instruments4,408394-4,8024,802
Other financial liabilities--18,68718,68718,687
Total financial liabilities4,4083944,877,2744,882,0764,891,330
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Risk Management
22 Enterprise risk management program
The board of directors (the Board) sets and monitors the Group’s risk appetite across the primary risk
domains of credit, capital, liquidity, market (including interest rate), operational and compliance and
general business risk. Management are, in turn, responsible for ensuring appropriate structures, policies,
procedures and information systems are in place to actively manage these risk domains, as outlined
within the Enterprise Risk Management Framework (ERMF). Collectively, these processes are known as
the Group's Enterprise Risk Management Program (RMP).
Role of the Board and the Board Audit Risk Committee
The Board, through its Board Audit and Risk Committee (BARC) is responsible for oversight and
governance of the development of the RMP. The role of the BARC includes assisting the Board to
formulate its risk appetite, and monitoring the effectiveness of the RMP. BARC’s responsibilities
also include:
• financial reporting and application of accounting policies as part of the internal control and risk
assessment framework;
• monitors the identification, evaluation and management of all significant risks through the Group.
This work is supported by internal audit, which provides an independent assessment of the design,
adequacy and effectiveness of internal controls. The BARC receives regular reports
from internal audit;
• to advise the Board on the formulation of the Board's Risk Appetite Statement;
• to review any reports, policies, standards, other risk documents or matters, or minutes which have
been prepared by or in respect of the HGH's Board; and
• to monitor material, emerging and strategic risks for the Group and its subsidiaries.
Internal Audit
The Group has an Internal Audit function, the objective of which is to provide independent, objective
assurance over the internal control environment. In certain circumstances, Internal Audit will provide risk
and control advice to Management provided the work does not impede the independence of the Internal
Audit function. The function assists the Group in accomplishing its objectives by bringing a systematic
and disciplined approach to evaluate and improve the effectiveness of risk management, control, and
governance processes.
Internal Audit is allowed full, free and unfettered access to any and all of the organisation’s records,
personnel and physical properties deemed necessary to accomplish its activities.
A regular cycle of review has been implemented to cover all areas of the business, focused on assessment,
management and control of risks identified. The audit plan takes into account cyclical review of various
business units and operational areas, as well as identified areas of higher identified risk. The audit
methodology is designed to meet the International Standards for the Professional Practice of Internal
Auditing of The Institute of Internal Auditors.
Each audit has specific audit procedures tailored to the area of business that is being reviewed.
The audit procedures are updated during each audit to reflect any process changes. Audit work papers
are completed to evidence the testing performed in accordance with the audit procedures.
Audit reports are addressed to the manager of the relevant area that is being audited in addition to other
relevant stakeholders within the Group. Management comments are obtained from the process owner(s)
and are included in the report.
22 Enterprise risk management program (continued)
Internal Audit (continued)
The Head of Internal Audit has a direct reporting line to the Chair of the BARC. Internal audit has
accountability to the BARC of the Group. A schedule of all outstanding internal control issues is
maintained and presented to the BARC to assist and track the resolution of previously identified issues.
Any issues raised that are categorised as high risk are specifically reviewed by internal audit during a
follow up review once the issue is considered closed by management. The follow up review is performed
with a view to formally close out the issue.
Asset and Liability Committee (ALCO)
The ALCO comprises the CEO HBL, CFO, CRO, Head of Retail, Financial Controller HBL and Chief
Distribution Officer. The ALCO generally meets monthly, and provides reports to the BARC. ALCO's
specific responsibilities include decision making and oversight of risk matters in relation to:
• market risk (including non-traded interest rate risk and the investment of capital);
• liquidity risk (including funding);
• foreign exchange rate risk;
• balance sheet structure; and
• capital management.
Operational and compliance risk
Operational and compliance risk is the risk arising from day to day operational activities in the execution
of the Group's strategy which may result in direct or indirect loss. Operational and compliance risk losses
can occur as a result of fraud, human error, missing or inadequately designed processes, failed systems,
damage to physical assets, improper behaviour or from external events. The losses range from direct
financial losses, to reputational damage, unfavourable media attention, injury to or loss of staff or clients
or as a breach of laws or banking regulations. Where appropriate, risks are mitigated by insurance.
To ensure appropriate responsibility is allocated for the management, reporting and escalation of
operational and compliance risk, the Group operates a “three lines of defence” model which outlines
principles for the roles, responsibilities and accountabilities for operational and compliance
risk management:
• the first line of defence is the business line management of the identification, management
and mitigation of the risks associated with the products and processes of the business.
This accountability includes regular testing and attestation of the adequacy and effectiveness
of controls and compliance with the Group's policies;
• the second line of defence is the Risk and Compliance function, responsible for the design and
ownership of the Operational Risk Management Framework. It incorporates key processes including
Risk and Control Self-Assessment (RCSA), incident management, independent evaluation of the
adequacy and effectiveness of the internal control framework, and the attestation process; and
• the third line of defence is Internal Audit which is responsible for independently assessing how
effectively the Group is managing its risk according to its stated risk appetite.
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22 Enterprise risk management program (continued)
Market risk
Market risk is the possibility of experiencing losses or gains due to factors affecting the overall performance
of financial markets in which the Group is exposed. The primary market risk exposures for the Group are
interest rate risk and foreign exchange risk. The risk being that market interest rates or foreign exchange
rates will change and adversely impact on the Group’s earnings due to either adverse moves in foreign
exchange market rates or in the case of interest rate risks mismatches between repricing dates of interest
bearing assets and liabilities and/or differences between customer pricing and wholesale rates.
Interest rate risk
Interest rate risk refers to exposure of an entity’s earnings and / or capital because of a mismatch between
the interest rate exposures of its assets and liabilities. Interest rate risk for the Group arises from the
provision of non-traded retail banking products and services and from traded wholesale transactions
entered into to reduce aggregate interest rate risk (known as hedges). This risk arises from four
key sources:
• mismatches between the repricing dates of interest bearing assets and liabilities (yield curve and
repricing risk);
• banking products repricing differently to changes in wholesale market rates (basis risk);
• loan prepayment or deposit early withdrawal behaviour from customers that deviates from the
expected or contractually agreed behaviour (optionality risk); and
• the effect of internal or market forces on a bank’s net interest margin where, for example, in a low
rate environment any fall in rates will further decrease interest income earned on the assets whereas
funding cost cannot be reduced as it is already at the minimum level (margin compression risk).
Refer to Note 25 - Interest rate risk for further details regarding interest rate risk.
Foreign exchange risk
Foreign exchange risk is the risk that the Group’s earnings and shareholder equity position are adversely
impacted from changes in foreign exchange rates. The Group has exposure to foreign exchange
translation risks through its Australian subsidiaries (which have a functional currency of Australian
dollars (AUD)), in the forms of profit translation risk and balance sheet translation risk.
Profit translation risk is the risk that deviations in exchange rates have a significant impact on the
reported profit. Balance sheet translation risk is the risk that whilst the foreign currency value of the net
investment in a subsidiary may not have changed, when translated back to the New Zealand dollars
(NZD), the NZD value has changed materially due to movements in the exchange rates. Foreign exchange
revaluation gains and losses are booked to the foreign currency translation reserve. Foreign exchange rate
movements in any given year may have an impact on other comprehensive income. The Group manages
this risk by setting and approving the foreign exchange rate for the upcoming financial year and entering
into hedging contracts to manage the foreign exchange translation risks.
22 Enterprise risk management program (continued)
Counterparty Credit Risk
The Group has on-going credit exposure associated with:
• cash and cash equivalents;
• finance receivables;
• holding of investment securities; and
• payments owed to the Group from risk management instruments.
Counterparty credit risk is managed against limits set in the Market Risk Policy including credit
exposure on derivative contracts, bilateral set-off arrangements, cash and cash equivalents and
investment securities.
23 Credit risk exposure
Credit risk is the risk that a borrower will default on any type of debt by failing to make payments which
it is obligated to make. The risk is primarily that of the lender and includes loss of principal and interest,
disruption to cash flows and increased collection costs.
Credit risk is managed to achieve sustainable risk-reward performance whilst maintaining exposures
within acceptable risk “appetite” parameters. This is achieved through the combination of governance,
policies, systems and controls, underpinned by commercial judgement as described below.
To manage this risk the HBL’s Executive Risk Committee (ERC) oversees the formal credit risk
management strategy. The ERC reviews the Group's credit risk exposures typically on a monthly basis.
The credit risk management strategies aim to ensure that:
• credit origination meets agreed levels of credit quality at point of approval;
• sector concentrations are monitored;
• maximum total exposure to any one debtor is actively managed;
• changes to credit risk are actively monitored with regular credit reviews.
The BARC also oversees the Group's credit risk exposures to monitor overall risk metrics having regard to
risk appetite set by the Board.
HBL's Board Risk Committee (BRC) has authority for approval of all credit exposures. Lending authority
has been provided to the HBL's Credit Committee, and to the business units under a detailed Delegated
Lending Authority framework. Application of credit discretions in the business operation are monitored
through a defined review and hindsight structure as outlined in the Credit Risk Oversight Policy.
Delegated Lending Authorities are provided to individual officers with due cognisance of their
experience and ability. Larger and higher risk exposures require approval of senior management,
the Credit Committee and ultimately through to HBL's BRC.
The Group employs a credit risk oversight process of hindsighting loans to ensure that credit policies and
the quality of credit processes are maintained.
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23 Credit risk exposure (continued)
Reverse mortgage loans and negative equity risk
Reverse mortgage loans are a form of mortgage lending designed for the needs of people over 60
years of age. These loans differ to conventional mortgages in that they typically are not repaid until the
borrower ceases to reside in the property. Further, interest is not required to be paid, it is capitalised into
the loan balance and is repayable on termination of the loan. As such, there are no incoming cash flows
and therefore no default risk to manage during the term of the loan. Negative equity risk arises from the
promise by the Group that the maximum repayment amount is limited to the net sale proceeds of the
borrowers' property.
The Group’s exposure to negative equity risk is managed by the Credit Risk Oversight Policy in conjunction
with associated lending standards specific for this product. In addition to usual criteria regarding the type,
and location, of security property that the Group will accept for reverse mortgage lending, a key aspect
of the Group's policy is that a borrower’s age on origination of the reverse mortgage loan will dictate
the loan-to-value ratio of the reserve mortgage on origination. Both New Zealand and Australia reverse
mortgage operations are similarly aligned. The policy is managed and reviewed periodically to ensure
appropriate consistency across locations.
Business Finance Guarantee Scheme (BFGS)
HBL, along with other registered banks in New Zealand, has entered into a Deed of Indemnity with the
New Zealand Government to implement the New Zealand Government's Business Finance Guarantee
Scheme. The purpose of the scheme is to provide short term credit to eligible small and medium size
businesses, who have been impacted by the economic effects of COVID-19. The scheme allows banks
to lend to a maximum of $5 million for a maximum of five years. The New Zealand Government will
guarantee 80% of any loss incurred (credit risk) with HBL holding the remaining 20%. As at 30 June 2022
the Group had a total exposure of $64.8 million (2021: $64.3 million) to its customers under the scheme.
BFGS has concluded on 30 June 2021 with scheme loans no longer being available.
Maximum exposure to credit risk at the relevant reporting dates
The following table represents the maximum credit risk exposure, without taking into account any
collateral held. The on balance sheet exposures set out below are based on net carrying amounts as
reported in the consolidated statement of financial position.
$000sJune 2022June 2021
On balance sheet:
Cash and cash equivalents310,758182,333
Investments274,212357,156
Finance receivables4,146,8213,288,466
Finance receivables - reverse mortgages1,996,8541,676,073
Derivative financial assets45,22114,139
Other financial assets2732,292
Total on balance sheet credit exposures6,774,1395,520,459
Off balance sheet:
Letters of credit, guarantee commitments and performance bonds8,96913,484
Undrawn facilities available to customers416,561299,544
Conditional commitments to fund at future dates34,79119,083
Total off balance sheet credit exposures460,321332,111
Total credit exposures7,234,4605,852,570
23 Credit risk exposure (continued)
As at 30 June 2022 there was $0.003 million undrawn lending commitments available to counterparties
for whom drawn balances are classified as individually impaired (2021: $0.216 million).
Concentration of credit risk by geographic region
$000sJune 2022June 2021
New Zealand5,264,6094,402,656
Australia1,809,1041,243,522
Rest of the world
1
212,752260,079
7,286,4655,906,257
Provision for impairment(52,005)(53,687)
Total credit exposures7,234,4605,852,570
1
These overseas assets are primarily NZD-denominated investments in AA+ and higher rated securities issued by
offshore supranational agencies ("Kauri Bonds").
Concentration of credit risk by industry sector
The Australian and New Zealand Standard Industrial Classification (ANZSIC) codes have been used as
the basis for categorising customer and investee industry sectors.
$000sJune 2022June 2021
Agriculture1,120,678670,428
Forestry and fishing148,797153,160
Mining12,52412,684
Manufacturing78,43276,951
Finance and insurance784,948674,854
Wholesale trade41,98656,522
Retail trade and accommodation 423,975279,388
Households3,555,5662,994,980
Other business services189,860148,011
Construction291,971241,668
Rental, hiring and real estate services199,388185,320
Transport and storage323,732297,920
Other114,608114,371
7,286,4655,906,257
Provision for impairment(52,005)(53,687)
Total credit exposures7,234,4605,852,570
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23 Credit risk exposure (continued)
Credit risk grading
The Group's finance receivables are monitored either by account behaviour (Behavioural portfolio) or a
regular assessment of their credit risk grade based on an objective review of defined risk characteristics
(Judgemental portfolio).
Finance receivables - reverse mortgages have no arrears characteristics and are assessed on origination
against a pre-determined criteria.
The Judgemental portfolio consists mainly of business and rural lending where an on-going and detailed
working relationship with the customer has been developed while the Behavioural portfolio consists of
consumer, retail and smaller business receivables.
Judgemental loans are individually risk graded based on loan status, financial information, security and
debt servicing ability. Exposures in the Judgemental portfolio are credit risk graded by an internal risk
grading mechanism where grade 1 is the strongest risk. Grade 8 and grade 9 are the weakest risk grades
where a loss is probable. Behavioural loans are managed based on their arrears status.
Upon adoption of NZ IFRS 9 all loans past due but not impaired have been categorised into three
impairments stages (see Note 8) which are in most cases based on arrears status. If a Judgemental loan
is risk graded 6 or above it will be classified as stage 2 as a minimum and carry a provision based on
lifetime ECL.
23 Credit risk exposure (continued)
Credit risk grading (continued)
$000s
12 Months
ECL
Lifetime
ECL Not
Credit
Impaired
Lifetime
ECL Credit
Impaired
Specifically
Provided
Fair
ValueTotal
June 2022
Judgemental portfolio
Grade 1 - Very strong26----26
Grade 2 - Strong10,859---- 10,859
Grade 3 - Sound53,756---- 53,756
Grade 4 - Adequate697,5905,3821,052-- 704,024
Grade 5 - Acceptable1,366,6801,82353-- 1,368,556
Grade 6 - Monitor- 25,1062,308--27,414
Grade 7 - Substandard- 64,2034,998-- 69,201
Grade 8 - Doubtful--- 62,860- 62,860
Grade 9 - At risk of loss---3,511-3,511
Total Judgemental portfolio2,128,91196,5148,41166,371- 2,300,207
Total Behavioural portfolio1,839,00621,91037,703- 1,996,8543,895,473
Gross finance receivables3,967,917118,42446,11466,3711,996,8546,195,680
Provision for impairment(20,256)(1,958)(14,602)(15,189)- (52,005)
Total finance receivables3,947,661116,46631,51251,1821,996,8546,143,675
$000s
12 Months
ECL
Lifetime
ECL Not
Credit
Impaired
Lifetime
ECL Credit
Impaired
Specifically
Provided
Fair
ValueTotal
June 2021
Judgemental portfolio
Grade 1 - Very strong34----34
Grade 2 - Strong10,85464--- 10,918
Grade 3 - Sound50,816163--- 50,979
Grade 4 - Adequate580,2894,6751,734-- 586,698
Grade 5 - Acceptable877,3935,6581,882-- 884,933
Grade 6 - Monitor-58,1781,038-- 59,216
Grade 7 - Substandard-71,7188,107-- 79,825
Grade 8 - Doubtful--- 33,228- 33,228
Grade 9 - At risk of loss---4,915-4,915
Total Judgemental portfolio1,519,386140,45612,76138,143- 1,710,746
Total Behavioural portfolio1,573,26725,33732,803- 1,676,0733,307,480
Gross finance receivables3,092,653165,79345,56438,1431,676,0735,018,226
Provision for impairment(26,807)(2,427)(16,824)(7,629)- (53,687)
Total finance receivables3,065,846163,36628,74030,5141,676,0734,964,539
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24 Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations as they fall due.
The timing mismatch of cash flows and the related liquidity risk in all banking operations and is closely
monitored by the Group.
Measurement of liquidity risk is designed to ensure that the Group has the ability to generate or obtain
sufficient cash in a timely manner and at a reasonable price to meet its financial commitments on a
daily basis.
The Group’s exposure to liquidity risk is governed by a policy approved by the Board and managed by the
Asset and Liability Committee (ALCO). This policy sets out the nature of the risk which may be taken and
aggregate risk limits, which ALCO must observe. Within this, the objective of the ALCO is to derive the
most appropriate strategy for the Group in terms of a mix of assets and liabilities given its expectations of
future cash flows, liquidity constraints and capital adequacy. The ALCO employs asset and liability cash
flow modelling to determine appropriate liquidity and funding strategies.
Reserve Bank of New Zealand (RBNZ) facilities
In March 2020, HBL was onboarded by the RBNZ as an approved counterparty and executed a 2011
Global Master Repo Agreement providing an additional source for intra-day liquidity for the Group
if required.
From 26 May 2020, the RBNZ made available a Term Lending Facility (TLF) to offer loans for a fixed
term of three years at the Official Cash Rate, with access to the funds linked to banks’ lending under the
Business Finance Guarantee Scheme. On 25 May 2021, RBNZ announced to close TLF applications on
28 July 2021.
Additional stimulus provided through a Funding for Lending Programme also commenced in December
2020 designed to enable banks to provide low-cost lending to the customer.
The Group had not utilised any of these facilities as at 30 June 2022 (2021: nil).
The Group holds the following liquid assets and committed funding sources for the purpose of managing
liquidity risk:
$000sJune 2022June 2021
Cash and cash equivalents310,758182,333
Investments274,212357,156
Undrawn committed bank facilities360,859311,993
Total liquidity945,829851,482
Contractual liquidity profile of financial liabilities
The following tables present the Group's financial 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 actual cash flows. This occurs
as a result of future actions by the Group and its counterparties, such as early repayments or refinancing
of term loans and borrowings. Deposits and other public borrowings include customer savings deposits
and transactional accounts, which are at call. These accounts provide a stable source of long term funding
for the Group.
24 Liquidity risk (continued)
Contractual liquidity profile of financial liabilities (continued)
$000s
On
Demand
0-6
Months
6-12
Months
1-2
Years
2-5
Years
5+
YearsTotal
June 2022
Non - derivative financial
liabilities
Deposits887,9762,028,225561,468103,19241,655- 3,622,516
Other borrowings- 505,191268,653702,3491,160,157210,4282,846,778
Lease liabilities-1,5751,5252,6166,9854,91117,612
Other financial liabilities- 55,538---- 55,538
Total non - derivative
financial liabilities
887,9762,590,529831,646808,1571,208,797215,3396,542,444
Derivative financial liabilities
Inflows from derivatives- 15,6811,7593,505813- 21,758
Outflows from derivatives- 14,8003,2276,621839- 25,487
Total derivative
financial liabilities
-(881)1,4683,11626-3,729
Undrawn facilities available
to customers
416,561----- 416,561
Undrawn committed
bank facilities
360,859----- 360,859
June 2021
Non - derivative
financial liabilities
Deposits971,9241,291,863560,232292,09191,107- 3,207,217
Other borrowings- 124,431120,8551,205,5471 5 7, 8 5 5181,2441,789,932
Lease liabilities- 1,4191,4332,8367,6057,08520,378
Other financial liabilities- 18,687---- 18,687
Total non - derivative
financial liabilities
971,9241,436,400682,5201,500,474256,567188,3295,036,214
Derivative financial liabilities
Inflows from derivatives- 14,25161080012- 15,673
Outflows from derivatives- 16,7502,1741,31616- 20,256
Total derivative
financial liabilities
-2,4991,5645164-4,583
Undrawn facilities available
to customers
299,544----- 299,544
Undrawn committed
bank facilities
311,993----- 311,993
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25 Interest rate risk
The Group's market risk is derived primarily of exposure to interest rate risk, predominantly from raising
funds through the retail and wholesale deposit market, the debt capital markets and committed and
uncommitted bank funding, securitisationof receivables, and offering loan finance products to the
commercial and consumer market in New Zealand and Australia.
The Group’s exposure to market risk is governed by a policy approved by the Board and managed by
the ALCO. This policy sets out the nature of risk which may be taken and aggregate risk limits, and the
ALCO must conform to this. The objective of the ALCO is to derive the most appropriate strategy for the
Group in terms of the mix of assets and liabilities given its expectations of the future and the potential
consequences of interest rate movements, liquidity constraints and capital adequacy.
The objective of the Group’s interest rate risk policies is to limit underlying net profit after tax (NPAT)
volatility. The measurement comprises net interest income the Group generates from its interest earning
assets and interest bearing liabilities.
The exposure to net interest income comes from a reduction in margins on interest earning assets or
interest bearing liabilities and is managed when setting rates by taking into consideration wholesale
rates, liquidity premiums, as well as appropriatelending credit margins.
An analysis of the Group’s sensitivity to an increase (+) or decrease (-) in market interest rates by 100
basis points (BP) is as follows. An (+)/(-) to market interest rates of 100 BP would result in a $0.67 million
(+)/(-) to NPAT (2021: $0.45 million (+)/(-)) with a corresponding impact to equity.
The Group also manages interest rate risk by:
• monitoring maturity profiles and seeking to match the re-pricing of assets and liabilities;
• monitoring interest rates daily and regularly (at least monthly) reviewing interest rate
exposures; and
• entering into derivatives to hedge against movements in interest rates.
25 Interest rate risk (continued)
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.
$000s
0–3
Months
3-6
Months
6-12
Months
1–2
Years
2+
Years
Non-
Interest
BearingTotal
June 2022
Financial assets
Cash and cash equivalents310,749----9 310,758
Investments1,56885451,14491,974128,67215,082289,294
Finance receivables1,906,457277,891426,251561,636913,21061,3764,146,821
Finance receivables -
reverse mortgages
1,996,854----- 1,996,854
Derivative financial assets----- 45,22145,221
Other financial assets-----273273
Total financial assets4,215,628278,745477,395653,6101,041,882121,9616,789,221
Financial liabilities
Deposits2,190,337684,378546,71899,19638,32533,5543,592,508
Other borrowings2,320,575130,873- 121,191- 5,574 2,578,213
Derivative financial liabilities----- 6,3416,341
Lease liabilities----- 16,24016,240
Other financial liabilities----- 55,53855,538
Total financial liabilities4,510,912815,251546,718220,38738,325117,2476,248,840
Effect of derivatives held for
risk management
986,194(76,349)(127,004)(309,781)(473,060)--
Net financial assets/
(liabilities)
690,910(612,855)(196,327)123,442530,4974,714540,381
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25 Interest rate risk (continued)
Contractual repricing analysis (continued)
$000s
0–3
Months
3-6
Months
6-12
Months
1–2
Years
2+
Years
Non-
Interest
BearingTotal
June 2021
Financial assets
Cash and cash equivalents182,323----10 182,333
Investments31,8968,03419,66953,505244,05220,667377,823
Finance receivables1 , 5 8 7, 71 8151,674299,305462,900715,03271,8373,288,466
Finance receivables -
reverse mortgages
1,676,073----- 1,676,073
Derivative financial assets----- 14,13914,139
Other financial assets----- 2,2922,292
Total financial assets3,478,010159,708318,974516,405959,084108,9455,541,126
Financial liabilities
Deposits1,670,667570,068554,340285,02585,07718,2773,183,454
Other borrowings1,342,61250,837- 153,751127,933- 1,675,133
Derivative financial liabilities----- 4,8024,802
Lease liabilities----- 18,16618,166
Other financial liabilities----- 18,68718,687
Total financial liabilities3,013,279620,905554,340438,776213,01059,9324,900,242
Effect of derivatives held for
risk management
474,010(9,023)(146,067)(85,669)(233,251)--
Net financial assets/
(liabilities)
938,741(470,220)(381,433)(8,040)512,82349,013640,884
The tables above illustrate the periods in which the cash flows from interest rate swaps are expected to
occur and affect profit or loss.
Other disclosures
26 Significant subsidiaries
Proportion of ownership
and voting power held
Significant Subsidiaries
Country of
Incorporation
and Place of
BusinessNature of BusinessJune 2022June 2021
Heartland Bank LimitedNew ZealandBank100%100%
VPS Properties LimitedNew Zealand
Investment property
holding company
100%100%
Marac Insurance LimitedNew ZealandInsurance services100%100%
Heartland Australia Holdings Pty LimitedAustraliaFinancial services100%100%
Heartland Group Pty LimitedAustraliaFinancial services100%100%
Australian Seniors Finance Pty LimitedAustraliaManagement services100%100%
StockCo Holdings 2 Pty LimitedAustraliaFinancial services100%-
StockCo Australia Management Pty LimitedAustraliaManagement services100%-
27 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 holding 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 Fund (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:
$000sJune 2022June 2021
Deposits149,824153,244
(b) Heartland Auto Receivable Warehouse Trust 2018-1 (Auto Warehouse)
The Auto Warehouse securitises motor loan receivables as a source of funding.
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.
$000sJune 2022June 2021
Cash and cash equivalents20,1979,047
Finance receivables312,239126,399
Other borrowings(315,308)(128,125)
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27 Structured entities (continued)
(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. The reverse mortgage loans held by the Trusts are set aside for the benefit of the
investors in the Trusts. The balances of SW Trusts and ASF Trust are represented as follows:
$000sJune 2022June 2021
Cash and cash equivalents26,00329,170
Finance receivables - reverse mortgages1,136,644934,523
Other borrowings(902,155)(822,112)
(d) Atlas 2020-1 Trust (Atlas Trust)
Atlas Trust was set up on 11 September 2020 as part of ASF's reverse mortgage business similar to the
existing SW Trusts and ASFTrust. The Trustee for the Trust is BNY Trust Company of Australia Limited
and the Trust Manager is ASF. The balances of Atlas Trust are represented as follows:
$000sJune 2022June 2021
Cash and cash equivalents15,77417,592
Finance receivables - reverse mortgages138,950140,044
Other borrowings(145,219)(145,943)
(e) StockCo Securitisation Trust 2022-1
StockCo Securitisation Trust 2022-1 was set up on 31 May 2022 as part of StockCo's livestock business.
The Trustee for the Trust is AMAL Trustees Pty Limited and the Trust Manager is AMAL Management
Services Pty Limited. The balances of StockCo Securitisation Trust 2022-1 are represented as follows:
$000sJune 2022
Cash and cash equivalents15,007
Finance receivables354,901
Other borrowings(311,415)
28 Staff share ownership arrangements
The Group operates a number of share-based compensation plans that are equity settled. The fair value
determined at the grant date is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity.
At the end of each reporting period the Group revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss
such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the
employee benefits reserve.
(a) Share-based compensation plan details
Heartland performance rights plan (PR plan)
The PR plan was established to enhance the alignment of participants' interests with those of the Group’s
shareholders. Under the PR plan participants are issued performance rights which will entitle them to
receive shares in the Group. As at June 2022, there were 6 tranches being 2017, 2018, 2022, 2023, 2024
and 2025. All tranches are subject to the existing rules of the PR plan.
PR Plan 2017 Tranche and PR Plan 2018 Tranche (collectively the Legacy Tranches)
The rules for the Legacy Tranches have been aligned with PR plan 2022 Tranche and therefore have
the same terms and conditions applying regarding participants, awarding of performance rights,
measurement date and vesting as outlined below:
PR Plan 2022 Tranche (PR plan 2022)
The number of performance rights offered is determined by the participant’s long-term incentive (LT I)
value over the volume weighted average price (V WAP) of the Group's ordinary shares on the NZX Main
Board for the 20 business days immediately before (and excluding) the issue date. The issue date is 14
September 2019. Performance rights do not entitle participants to dividends or voting rights.
The performance rights are issued subject to the participants’ continued employment with the Group until
the measurement date and the Group achieving its financial measures, strategic objectives and culture
and conduct objectives, over the period commencing 1 July 2019 and ending on 30 June 2022. The targets
are dynamic and may be adjusted by the Board from time to time in order to account for unanticipated
capital changes during the performance period. The measurement date is the business day following the
date on which the Group announces its full year results for the financial year ended 2022.
Performance rights will vest on the measurement date to the extent these criteria have been met, but
subject to caps and also to retesting on a later measurement date if the criteria are not met on the initial
measurement date.
PR Plan 2023 Tranche (PR plan 2023)
PR plan 2023 was issued for period commencing 1 July 2020 and ending on 30 June 2023. The tranche
rules have been aligned with PR plan 2022. The measurement date for this tranche is the business day
after the Group announces its full year results for the financial year ended 30 June 2023.
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28 Staff share ownership arrangements (continued)
(a) Share-based compensation plan details (continued)
PR Plan 2024 Tranche (PR plan 2024) and PR Plan 2025 Tranche (PR plan 2025)
PR plan 2024 and PR plan 2025 were issued for period commencing 1 July 2021 and ending on
30 June 2024 and 30 June 2025 respectively. The tranche rules have been aligned with PR plan 2022.
Measures are tested on the business day after the announcement of full year results for the financial years
ended 30 June 2024 and 30 June 2025 respectively.
June 2022
PR Plan
Number of
Rights
June 2021
PR Plan
Number of
Rights
Opening balance7,742,2763,216,927
Issued2,454,3955,342,289
Forfeited(1,395,575)(816,940)
Closing balance8,801,0967,742,276
(b) Effect of share-based payment transactions
$000sJune 2022June 2021
Award of Shares
PR Plan1,9151,797
Total expense recognised1,9151,797
As at 30 June 2022, $3.1 million of the share scheme awards remain unvested and not expensed (2021:
$3.0 million). This expense will be recognised over the performance period of the awards.
(c) Number of rights outstanding
June 2022June 2021
$000s
Rights
Outstanding
Remaining
Years
Rights
Outstanding
Remaining
Years
PR Plan - 20171,543-1,9431
PR Plan - 2018139-1701
PR Plan - 2022568-7221
PR Plan - 20234,09614,9082
PR Plan - 20249222--
PR Plan - 20251,5333--
Total8,8017,743
29 Insurance business, securitisation, funds management, other fiduciary activities
Insurance business
Marac Insurance Limited (MIL), a subsidiary of HBL, no longer conducts insurance business as HBL
entered into a distribution agreement with DPL Insurance Limited (DPL) to distribute DPL’s insurance
products through HBL's network. MIL ceased writing insurance policies in 2020 with the periodic policies
expected to expire in 2025.
The Group's aggregate amount of insurance business comprises the total consolidated assets of MIL of
$7.4 million (2021: $8.5 million), which represents 0.11% of the total consolidated assets of the Group
(2021: 0.15%).
Securitisation, funds management and other fiduciary activities
Changes to the Group’s involvement in securitisation activities are set out in Note 27 Structured entities.
There have been no material changes to the Group’s involvement in funds management and other
fiduciary activities during the year.
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30 Concentrations of funding
(a) Concentration of funding by industry
The Australian and New Zealand Standard Industrial Classification (ANZSIC) codes have been used as
the basis for categorising customer and investee industry sectors.
$000sJune 2022June 2021
Agriculture113,848102,107
Forestry and fishing14,39114,226
Mining1,52494
Manufacturing18,64311,592
Finance and insurance2,420,8501,669,055
Wholesale trade5,85411,218
Retail trade and accommodation19,49128,521
Households2,754,4522,322,514
Rental, hiring and real estate services43,79746,245
Construction28,44924,231
Other business services66,73158,334
Transport and storage4,5984,337
Other 41,68644,714
Total5,534,3144,337,188
Unsubordinated Notes636,407521,399
Total borrowings6,170,7214,858,587
(b) Concentration of funding by geographical area
$000sJune 2022June 2021
New Zealand4,410,3723,599,337
Overseas1,760,3491,259,250
Total borrowings6,170,7214,858,587
31 Contingent liabilities and commitments
The Group in the ordinary course of business will be subject to claims and proceedings against it whereby
the validity of the claim will only be confirmed by uncertain future events. In such circumstances the
contingent liabilities are possible obligations, or present obligations if known, 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 on a case
by case basis.
Contingent liabilities and credit related commitments arising in respect of the Group's operations were:
$000sJune 2022June 2021
Letters of credit, guarantee commitments and performance bonds8,96913,484
Total contingent liabilities8,96913,484
Undrawn facilities available to customers416,561299,544
Conditional commitments to fund at future dates34,79119,083
Total commitments451,352318,627
32 Events after reporting date
HGH subsidiary Heartland Australia Group Pty Limited completed an issuance of an AU $30 million senior
unsecured bond on 16 August 2022 as an increase to the existing AU $45 million senior unsecured bond.
On 9th August 2022 the Group completed an AU $5 million investment in Avenue Hold Limited
(Avenue Hold). Avenue Hold is the Non-operating Holding Company of Avenue Bank Limited which
holds a Restricted Authorised Deposit-taking Institution licence in Australia.
The Group approved a fully imputed final dividend of 5.5 cents per share on 22 August 2022.
There were no other events subsequent to the reporting period which would materially affect the
consolidated financial statements.
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© 2022 KPMG, a New Zealand Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved.
68
Independent Auditor’s Report
To the shareholders of Heartland Group Holdings Limited
Report on the audit of the consolidated financial statements
Opinion
In our opinion, the consolidated financial statements
of Heartland Group Holdings Limited and its
subsidiaries (the “Group”) on pages 81 to 150
present fairly in all material respects the Group’s
financial position as at 30 June 2022 and its
financial performance and cash flows for the year
ended on that date in accordance with New Zealand
Equivalents to International Financial Reporting
Standards and International Financial Reporting
Standards.
We have audited the accompanying consolidated
financial statements which comprise:
— the consolidated statement of financial position
as at 30 June 2022;
— the consolidated statements of comprehensive
income, changes in equity and cash flows for the
year then ended; and
— notes, including a summary of significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (“ISAs (NZ)”). We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of
Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the
New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional Accountants (including International Independence
Standards) (the “IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the Auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the Group in relation to the review of the Group’s consolidated interim
financial statements, regulatory assurance services, agreed upon procedure engagements and supervisor
reporting. 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 auditor of the Group. The firm has no other relationship with, or interest in, the
Group.
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and
on the consolidated financial statements as a whole. The materiality for the consolidated financial statements as a
whole was set at $6,540,000 determined with reference to a benchmark of the Group’s profit before tax. We
chose the benchmark because, in our view, this is a key measure of the Group’s performance.
We agreed with the Board Audit and Risk Committee that we would report to them, misstatements identified
during our audit above $320,000 as well as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
69
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements in the current period. We summarise below those matters and our key audit
procedures to address those matters in order that the shareholders as a body may better understand the process
by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the
purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express
discrete opinions on separate elements of the consolidated financial statements
The key audit matter How the matter was addressed in our audit
Provision for impairment of finance receivables
Refer to notes 1, 13 and 23 to the consolidated financial statements.
The provision for impairment of finance
receivables is a key audit matter due to the
financial significance and the inherent
complexity of the Group’s expected credit loss
(“ECL”) models.
Significant judgement and estimates are
required to incorporate forward-looking
information to reflect future economic
conditions.
The collective provision is estimated through
the ECL models using historical data which is
adjusted for forward looking information and
the assigned risk grade or arrears status.
Additionally, management apply judgement in
the determination of provision overlays to
adjust for future market conditions.
The level of judgement involved in
determining the provision for collectively
impaired assets requires us to challenge the
appropriateness of management’s
assumptions.
The provision for individually impaired assets is
based on the application of management
judgement regarding expected future
cashflows, which are inherently uncertain.
Our procedures, amongst others, included:
Assessing the Group’s governance and oversight, including the
continuous reassessment of overall provisioning;
Assessing the Group’s significant accounting policies and
expected credit loss (“ECL”) modelling methodology against the
requirements of the standards and underlying accounting
records;
Testing key controls including the arrears calculations, customer
loan ratings, annual loan reviews, credit risk reviews and data
reconciliations between the ECL models and source systems;
Assessing the model output against actual losses incurred by the
Group;
Challenging the key assumptions, including forward looking
economic assumptions, against external information including
benchmarking management’s estimates to a range of observable
industry data and market forecasts;
Evaluating individual credit assessments for a sample of ‘rural’
and other ‘corporate’ loans on management’s credit watchlist.
This included inspection of the latest correspondence with the
borrower, assessment of the provision estimates prepared by
credit risk officers, and consideration of the resolution strategy.
We challenged assumptions and assessed collateral values by
comparing them to valuations performed by independent valuers;
and
Assessing the disclosures in the consolidated financial
statements against the requirements of NZ IFRS.
From the procedures performed we consider the Group appropriately
identified and considered the uncertainties in the provision estimates.
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70
The key audit matter How the matter was addressed in our audit
Valuation of finance receivables – reverse mortgages
Refer to note 21 of the consolidated financial statements.
The Group’s reverse mortgage portfolio is held
at fair value.
The fair value calculation is based on the
application of management judgement. In
assessing the fair value, the Group
continuously considers evidence of a relevant
active market. In the absence of such a
market, in the current period, the Group
considered changes since loan origination and
expected future cashflows.
The inherent uncertainties include estimated
exits, interest rates and security property
values.
Our procedures over the fair value loan portfolios, amongst others,
included:
Testing key controls over the accuracy of data impacting the fair
value assessment;
Assessing evidence of a relevant active market or observable
inputs; and
Challenging the key assumptions used by the Group in
determining the portfolio’s fair value.
The estimates and assumptions used to determine the valuation of
finance receivables are reasonable, with no evidence of management
bias or influence identified from our procedures.
Operation of IT systems and controls
The Group is reliant on complex IT systems for
the processing and recording of significant
volumes of transactions and other core
banking activity.
For significant financial statement balances,
such as finance receivables and deposits,
where relevant, our audit involves an
assessment of the design of the Group’s
internal control environment. There are some
areas of the audit where we seek to test and
place reliance on IT systems, automated
controls and reporting.
The effective operation of these controls is
dependent upon the Group’s general IT control
environment, which incorporates controls
relevant to IT system changes and
development, IT operations, and developer
and user access.
Our audit procedures, amongst others, included:
Gaining an understanding of business processes, key controls
and IT systems relevant to significant financial statement
balances, including technology services provided by a third party;
Assessing the effectiveness of the IT control environment,
including core banking IT systems, key automated controls and
reporting; and
Evaluating general IT controls relevant to IT system changes and
development, IT operations, and developer and user access.
Where we noted design or operating effectiveness matters relating to
IT system or application controls relevant to our audit, we performed
alternative audit procedures. We also identified and tested mitigating
controls in order to respond to the impact on our overall audit
approach.
We did not identify any material issues or exceptions from those
additional procedures.
Other information
The Directors, on behalf of the Group, are responsible for the other information included in the entity’s Annual
Report. Other information may include the Chairman’s Report, Chief Executive Officer’s Report and disclosures
relating to corporate governance. Our opinion on the consolidated financial statements does not cover any other
information and we do not express any form of assurance conclusion thereon.
The Annual Report is expected to be made available to us after the date of this Independent Auditor's Report. Our
responsibility is to read the Annual Report when it becomes available and consider whether the other information it
contains is materially inconsistent with the consolidated financial statements, or our knowledge obtained in the
audit, or otherwise appear misstated. If so, we are required to report such matters to the Directors.
71
Use of this independent auditor’s report
This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been
undertaken so that we might state to the shareholders those matters we are required to state to them in the
independent auditor’s 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 audit work, this independent
auditor’s report, or any of the opinions we have formed.
Responsibilities of the Directors for the consolidated financial
statements
The Directors, on behalf of the Group, are responsible for:
— the preparation and fair presentation of the consolidated financial statements in accordance with generally
accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial
Reporting Standards) and International Financial Reporting Standards;
— implementing necessary internal control to enable the preparation of a consolidated set of financial statements
that is 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 audit of the consolidated financial
statements
Our objective is:
— to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error; and
— to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance
with ISAs NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located at the
External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is Graeme Edwards.
For and on behalf of
KPMG
Auckland
22 August 2022
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06 | Te rēhita
Directory
Directors
Heartland Group Board
Geoffrey Ricketts
Chair and Independent Non-Executive Director
Gregory Tomlinson
Deputy Chair and Non-Executive Director
Jeff Greenslade
CEO and Executive Director
Ellen Comerford
Independent Non-Executive Director
Kathryn Mitchell
Independent Non-Executive Director
Geoff Summerhayes
Independent Non-Executive Director
Sir Christopher Mace
Kaumātua
(retired from the Board on 28 October 2021)
Heartland Bank Board
Bruce Irvine
Chair and Independent Non-Executive Director
Jeff Greenslade
Executive Director
Edward John Harvey
Independent Non-Executive Director
Kathryn Mitchell
Non-Independent Non-Executive Director
Geoffrey Ricketts
Non-Independent Non-Executive Director
Shelley Ruha
Independent Non-Executive Director
Strategic Management Group
Heartland Group
Jeff Greenslade
Heartland Group CEO
Chris Flood*
Deputy Group CEO
Andrew Dixson
Chief Financial Officer
Michael Drumm
Group Chief Operating Officer
Monique Forbes
Group Chief Marketing Officer
Lana West
Group Chief People & Culture Officer
Heartland Bank
Leanne Lazarus*
Heartland Bank CEO
Keira Billot
Chief People & Brand Experience Officer
Mike Grenfell
Chief Operating Officer
Andy Wood
Chief Risk Officer
Registered office
35 Teed Street
Newmarket, Auckland 1023
PO Box 9919
Newmarket, Auckland 1149
T: 0508 432 785
E: shareholders@heartland.co.nz
W: shareholders.heartland.co.nz
Auditor
KPMG
KPMG Centre
18 Viaduct Harbour Avenue
Auckland 1010
T: 09 367 5800
Share registry
Link Market Services Limited
Level 30, PWC Tower
15 Customs Street West
Auckland 1010
T: 09 375 5998
F: 09 375 5990
E: enquiries@linkmarketservices.co.nz
W: linkmarketservices.co.nz
* On 19 May 2022, Heartland announced the appointment of Chris Flood as Deputy Group CEO of Heartland Group, and Leanne Lazarus as
CEO of Heartland Bank, with effect from 1 August 2022.
06 | Te rehita
| Directory
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shareholders.heartland.co.nz
---
Hui Ā-tāu
Annual Meeting 2022
1
Dear Shareholders,
On behalf of the board, I am pleased to invite you to the 2022 annual meeting of
Heartland Group Holdings Limited (Heartland) which is to be held online at
www.virtualmeeting.co.nz/hgh22 on Tuesday 8 November 2022, commencing at
2pm (New Zealand time).
Due to the continuing COVID-19 situation and prevalence of other illnesses, Heartland
advises that its Annual Meeting will be held virtually.
Jeff Greenslade and I will be retiring by rotation and standing for re-election at the
annual meeting. Shareholders will be asked to vote on our re-elections as directors.
The board unanimously supports our re-election. You can read about my and Jeff’s
background in the explanatory notes to this notice of meeting.
Shareholders will also be asked to vote on an increase to the pool available for directors’
remuneration and to refresh Heartland’s placement and share purchase plan capacity.
If you are unable to attend the annual meeting, I encourage you to cast a postal vote
or appoint a proxy to attend and vote at the annual meeting on your behalf. Your
personalised voting form accompanies this notice of meeting.
Yours sincerely
Geoffrey Ricketts
Chair of the Board
Notice of 2022 Annual Meeting
Hui Ā-tau
Heartland Group Holdings Limited invites you, our shareholders,
to join us at our online annual meeting, being held at 2pm
(New Zealand time) on Tuesday 8 November 2022.
2
Agenda for the Annual Meeting
Resolution 1: Re-election of Geoffrey Ricketts
That Geoffrey Ricketts, who retires by rotation and is
eligible for re-election, be re-elected as a director of
Heartland Group.
Resolution 1 is an ordinary resolution, requiring approval
by a majority (being more than 50%) of the votes of
those shareholders entitled to vote and voting.
Resolution 2: Re-election of Jeff Greenslade
That Jeff Greenslade, who retires by rotation and is
eligible for re-election, be re-elected as a director of
Heartland Group.
Resolution 2 is an ordinary resolution, requiring approval
by a majority (being more than 50%) of the votes of those
shareholders entitled to vote and voting.
Resolution 3: Directors’ remuneration
That the total annual remuneration available to all non-
executive directors be increased from NZ$1,200,000
to NZ$1,600,000 or AUD$1,400,000 (whichever is
the greater amount from time to time), an increase
of NZ$400,000 (33%) effective for the financial year
ending 30 June 2023 and onwards, with such sum to
be divided amongst the non-executive directors as the
Board may from time-to-time determine.
Resolution 3 is an ordinary resolution, requiring approval
by a majority (being more than 50%) of the votes of
those shareholders entitled to vote and voting.
Resolution 4: Ratification of Placement
That the shareholders of Heartland approve and ratify
for all purposes, including NZX Listing Rule 4.5.1(c), the
previous issue under NZX Listing Rule 4.5.1 of 72,222,222
fully paid ordinary shares in Heartland to investors at an
issue price of NZ$1.80 per share on 29 August 2022.
Resolution 4 is an ordinary resolution, requiring approval
by a majority (being more than 50%) of the votes of those
shareholders entitled to vote and voting.
A. Chair’s welcome and address
B. Chief Executive Officer’s review
C. Shareholder discussion
D. Formal business
Resolution 5: Ratification of Share Purchase Plan
That the shareholders of Heartland approve and ratify
for all purposes, including NZX Listing Rule 4.5.1(c), the
Share Purchase Plan announced by Heartland on 23
August 2022, including the issue under NZX Listing Rule
4.5.1 of 14,989,825 fully paid ordinary shares, and the
issue under NZX Listing Rule 4.3.1(c) of 23,832,633 fully
paid ordinary shares, in Heartland to investors at an
issue price of NZ$1.7674 (A$1.5857 in respect of eligible
shareholders who applied in Australian dollars) per
share on 9 September 2022.
Resolution 5 is an ordinary resolution, requiring approval
by a majority (being more than 50%) of the votes of
those shareholders entitled to vote and voting.
Resolution 6: Auditor’s remuneration
That the board be authorised to fix the remuneration of
Heartland’s auditor, KPMG, for the financial year ending
30 June 2023.
Resolution 6 is an ordinary resolution, requiring approval
by a majority (being more than 50%) of the votes of
those shareholders entitled to vote and voting.
A brief description of each resolution is included in the
explanatory notes. The board unanimously supports
each resolution.
On behalf of the board,
Geoffrey Ricketts
Chair of the board
28 September 2022
To consider, and if thought fit, to pass the following resolutions:
3
Explanatory notes
Resolutions 1 and 2:
Re-election of Geoffrey Ricketts (Chair and
Independent Non-Executive Director) & Jeff
Greenslade (Non-Independent Executive Director
and Chief Executive Officer)
Heartland Group’s constitution and the NZX Listing
Rules require each director to retire by rotation at least
every three years. This year Geoffrey Ricketts and Jeff
Greenslade are retiring and standing for re-election.
Biographies for Geoffrey Ricketts and Jeff Greenslade
are set out on page 6, together with a list of their current
directorships.
Resolution 3: Directors’ remuneration
The board is proposing to increase the total annual
remuneration available to all non-executive
directors from NZ$1,200,000 to NZ$1,600,000 or
AUD$1,400,000 (whichever is the greater amount
from time to time), an increase of NZ$400,000 (33%).
If approved, the increase in remuneration would be
effective for the financial year ending 30 June 2023 and
onwards, with such sum to be divided amongst the non-
executive directors as the Board may from time-to-time
determine. Shareholder approval is required under NZX
Listing Rule 2.11.1.
The fees payable to Heartland’s non-executive
directors have not been increased since they were fixed
at Heartland’s Annual Shareholders Meeting on 22
November 2016.
1
Since that time, the Heartland Group has undergone
considerable growth, becoming the Australasian
financial services group it is today. In addition, Heartland
Group has also become subject to an increasing degree
of regulation, both in New Zealand and Australia, and
continues to monitor and prepare for a significant volume
of regulatory change.
Heartland’s strategic vision has involved expansion in
Australia for some time. This includes exploring options
to acquire an authorised deposit-taking institution (ADI),
an update in respect of which was provided together
with Heartland’s FY22 results announcement.
To support progress towards the achievement of this
goal, Heartland identified during FY2022 the need
to engage the assistance of an Australian based
independent, non-executive director who knows
that industry well, would be able to assist Heartland
to achieve its desired outcome and (subject to the
completion of an acquisition) would ultimately Chair
Heartland’s banking business in Australia. This resulted
in the appointment of Geoff Summerhayes to the
boards of Heartland (on 1 October 2021) and HAH
(on 21 March 2022). In engaging Mr Summerhayes,
Heartland needed to meet the market for remuneration
of Australian independent, non-executive directors of
financial services groups. In setting Mr Summerhayes’
remuneration, Heartland obtained independent advice
around market rates, and took that advice into account
when setting Mr Summerhayes’ fee at A$320,000 per
annum. Payment of AUD$21,390 (plus GST, if any) of
this fee was held back, subject to shareholder approval
at the Annual Meeting, so as not to breach the existing
directors’ fee cap which applied during FY2022..
In addition, Heartland Bank Limited intends to appoint
an additional independent non-executive director in or
about November 2022, following the Annual Meeting.
The appointment is intended to expand the capability of
the Board, strengthening Heartland Bank’s governance
in the face of ongoing and significant regulatory change,
and as Heartland Bank continues to pursue business
as usual growth and its focus on providing frictionless
service at the lowest cost. To enable this appointment,
the director fee pool needs to be increased to provide
for that director’s remuneration, currently set at
NZ$100,000.
At the conclusion of the meeting, Heartland Group will
have nine non- executive directors in office. As noted
above, it is intended that an additional non-executive
director will be appointed to the board of Heartland
Bank Limited in or about November 2022, following
the conclusion of the Annual Meeting. The size and
composition of the Heartland Group boards (following
the appointment described above) is considered
appropriate with reference to both their business and
regulatory obligations. This includes (amongst other
things) the independence requirements prescribed by
the NZX Corporate Governance Code and Reserve Bank
of New Zealand Corporate Governance standard, which
apply to Heartland and Heartland Bank, respectively.
The updated total remuneration will apply to these
directors (in the case of the new Heartland Bank Limited
non-executive director, from appointment), assuming
all directors seeking re-election at the meeting are
re-elected.
Given the continued expansion of Heartland into
Australia, and the need to therefore attract and retain
directors with experience within the Australian market,
the Board proposes that the fees payable to the Board
be fixed in both New Zealand and Australian dollars,
with whichever is the greater amount from time-to-time
being the limit. This will minimise the risk of unfavourable
1
On 4 October 2018, NZX granted Heartland a waiver from Rule 3.5.1, to the extent that this Rule required Heartland’s directors’ remuneration
pool to be authorised by an Ordinary Resolution of Heartland Group Holdings Limited (as opposed to Heartland Bank Limited) so that the
directors’ remuneration pool approved at Heartland Bank Limited’s annual shareholders’ meeting on 22 November 2016 would continue as the
directors’ remuneration pool for Heartland as if it had been approved by the shareholders of Heartland Group Holdings Limited.
4
2
See the explanation above regarding the director’s fees payable to Mr Summerhayes, which are in addition to those referenced in this table.
currency movements which may adversely impact the
ability to continue to pay Board fees at a level that will
enable Heartland to attract and retain directors with the
necessary experience.
Whilst the Board retains discretion to determine how
fees are allocated amongst non-executive directors, no
change is proposed for the financial year ending 30 June
2023 to the current fee allocations as summarised in the
following table.
Table 1: Current Board fees
2
RoleCurrent Fee
Board ChairNZ$150,000
Board Member NZ$100,000
Chair Heartland Audit and Risk CommitteeNZ$15,000
Member Heartland Audit and Risk
Committee
Nil
Chair Heartland Bank Audit CommitteeNZ$15,000
Member Heartland Bank Audit CommitteeNil
Chair Heartland Bank Risk CommitteeNZ$15,000
Member Heartland Bank Risk CommitteeNil
Chair Corporate Governance, People,
Remuneration and Nominations Committee
NZ$15,000
Member Corporate Governance, People,
Remuneration and Nominations Committee
Nil
The proposed increase in directors’ remuneration has the
unanimous support of the Board.
The NZX Listing Rules require that remuneration of
directors be authorised by an ordinary resolution. In
accordance with NZX Listing Rule 6.3.1, Heartland
will disregard any votes cast in favour of Resolution
3 (Directors’ Remuneration) by any director who is
intended to receive directors’ fees (and their respective
Associated Persons), unless such shareholder is casting
a vote under an expressly directed proxy of a person
who is not disqualified from voting.
Resolution 4: Ratification of Placement
Under the placement announced on 23 August 2022
(Placement), Heartland issued 72,222,222 fully paid
ordinary shares to new and existing investors who
were invited to participate in the Placement at a price of
NZ$1.80 per share.
The Placement raised gross proceeds of approximately
NZ$130 million, with net proceeds from the Placement,
together with the share purchase plan undertaken
in connection with the Placement, used to provide
funding to repay a A$158 million acquisition finance
facility outstanding in relation to the recent acquisition
of StockCo Australia, and to provide additional growth
capital for Heartland’s existing businesses both in
Australia and New Zealand.
All the shares issued under the Placement were issued
under NZX Listing Rule 4.5.1. In broad terms, that Listing
Rule permits an issue of shares up to 15% of the issued
shares of Heartland in any 12 month period without
prior shareholder approval. The shares issued under the
Placement were equal to approximately 12.18% of the
issued shares of Heartland as at the date on which the
shares were issued, being 29 August 2022.
This resolution is being proposed by the Directors in
accordance with NZX Listing Rule 4.5.1(c), which allows
shareholders to ratify a prior issue of shares under NZX
Listing Rule 4.5.1. If shareholders pass the resolution,
and ratify the issue of 72,222,222 shares under the
Placement, the capacity to issue equity securities
under NZX Listing Rule 4.5.1 up to the 15% limit will be
refreshed by that number of shares.
This would preserve the ability of Heartland to issue
further equity securities up to the 15% threshold
in accordance with NZX Listing Rule 4.5.1, should
Heartland wish to undertake a further placement of
equity securities in the next 12 month period.
Failure to pass this resolution will not affect the validity
of the shares issued under the Placement but will reduce
the number of equity securities that can be issued by
Heartland under NZX Listing Rule 4.5.1 for a period of
twelve months from 29 August 2022.
The Board recommends to shareholders that they vote
in favour of this resolution, as it will provide Heartland
with flexibility to raise money through the issue of further
equity securities.
The anticipated rationale for the issue of further shares
would be to fund additional growth of Heartland’s
businesses in New Zealand and Australia. There is no
guarantee that any such further issue will be undertaken
or as to the terms of, and timing for, any such issue.
In accordance with NZX Listing Rule 6.3.1, Heartland
will disregard any votes cast in favour of Resolution
4 (Ratification of Placement) by any shareholder
who acquired shares under the Placement (and their
respective Associated Persons), unless such shareholder
is casting a vote under an expressly directed proxy of a
person who is not disqualified from voting.
Resolution 5: Ratification of Share Purchase Plan
Under the Share Purchase Plan announced on 23
August 2022 (SPP), Heartland issued:
• 14,989,825 fully paid ordinary shares to existing
shareholders under NZX Listing Rule 4.5.1; and
5
• 23,832,633 fully paid ordinary shares to existing
shareholders under NZX Listing Rule 4.3.1(c),
at a price of NZ$1.7674 (A$1.5857 in respect of eligible
shareholders who applied in Australian dollars)
per share.
Ratification for the purposes of NZX Listing Rule 4.5.1(c)
As noted above, 14,989,825 shares issued under the
SPP were issued under NZX Listing Rule 4.5.1. In broad
terms, that Listing Rule permits an issue of shares up to
15% of the issued shares of Heartland in any 12 month
period without prior shareholder approval. The shares
issued under the SPP in reliance upon NZX Listing Rule
4.5.1 were equal to approximately 2.25% of the issued
shares of Heartland as at the date on which the shares
were issued, being 9 September 2022.
This resolution is being proposed by the Directors
to ratify the SPP for all purposes, including in
accordance with NZX Listing Rule 4.5.1(c), which allows
shareholders to ratify a prior issue of shares under NZX
Listing Rule 4.5.1. If shareholders pass the resolution,
and ratify the issue of14,989,825 shares under the SPP,
the capacity to issue equity securities under NZX Listing
Rule 4.5.1 up to the 15% limit will be refreshed by that
number of shares.
This would preserve the ability of Heartland to issue
further equity securities up to the 15% threshold
in accordance with NZX Listing Rule 4.5.1, should
Heartland wish to undertake a further placement of
equity securities in the next 12 month period.
Failure to pass this resolution will not affect the validity
of the shares issued under the SPP but will reduce
the number of equity securities that can be issued by
Heartland under NZX Listing Rule 4.5.1 for a period of
twelve months from 9 September 2022.
Ratification for the purposes of NZX Listing Rule 4.3.1(c)
A further 23,832,633 shares issued under the SPP
were issued under NZX Listing Rule 4.3.1(c). In broad
terms, that Listing Rule permits an issue of shares up to
$15,000 to each Heartland shareholder in any 12 month
period without prior shareholder approval.
On 27 July 2022, NZX released a consultation
paper on capital raising settings and listing options
(the Consultation Paper). The Consultation Paper
proposes that the NZX Listing Rules be amended so
that shareholders are permitted to ratify a prior share
purchase plan. The Consultation Paper also proposes
that the $15,000 per shareholder limit is increased to
$50,000 per shareholder in any 12 month period.
This resolution has been drafted in anticipation of the
NZX Listing Rules being amended as outlined in the
Consultation Paper. If shareholders pass the resolution,
and thereby ratify the SPP, Heartland will be able to offer
shares under a share purchase plan under NZX Listing
Rule 4.3.1(c) up to the limit per shareholder permitted
by the rule. This would preserve the ability of Heartland
to issue further equity securities up to the limit per
shareholder in accordance with NZX Listing Rule 4.3.1(c),
should Heartland wish to undertake a further share
purchase plan in the next 12 month period.
Failure to pass this resolution will not affect the validity
of the shares issued under the SPP but will reduce the
dollar amount of shares that can be issued by Heartland
under NZX Listing Rule 4.3.1(c) to a shareholder who has
participated in the SPP for a period of twelve months
from 9 September 2022. If the proposed amendments
outlined in the Consultation Paper do not take effect or
do not permit Heartland to ratify the SPP as a whole, the
resolution will still be effective for the purposes of NZX
Listing Rule 4.5.1(c).
Recommendation and rationale
The Board recommends to shareholders that they vote
in favour of this resolution, as it will provide Heartland
with flexibility to raise money through the issue of further
equity securities.
As with Resolution 4, the anticipated rationale for the
issue of further shares would be to fund additional
growth of Heartland’s businesses in New Zealand and
Australia. There is no guarantee that any such further
issue will be undertaken or as to the terms of, and
timing for, any such issue.
In accordance with NZX Listing Rule 6.3.1, Heartland
will disregard any votes cast in favour of Resolution 5
(Ratification of Share Purchase Plan) by any shareholder
who acquired shares under the SPP (and their respective
Associated Persons), unless such shareholder is casting a
vote under an expressly directed proxy of a person who is
not disqualified from voting.
Resolution 6:
Auditor’s remuneration
KPMG will be automatically reappointed as Heartland
Group’s auditor under section 207T of the Companies Act
1993. It is proposed that the board be authorised to fix
KPMG’s remuneration for the year ending 30 June 2023 in
accordance with section 207S of the Companies Act 1993.
6
Geoffrey Ricketts
CNZM, LLB (Hons), LLD (honoris causa), CFInstD
Chair and Independent Non-Executive Director
Term of office
Appointed 30 September 2010
3
Board committees
Chair of the Heartland Corporate Governance, People,
Remuneration and Nominations Committee, and member of
the Heartland Audit and Risk Committee.
Geoff is a company director and investor with wide
experience in the New Zealand and Australian business
environments. His past roles include directorships of Suncorp
Group New Zealand, Todd Corporation, Spotless Group,
Oceania & Eastern Limited and Lion Nathan, as well as
numerous other private companies. His current roles include
directorships of Heartland Group Holdings Limited, Mercury
Capital Limited and Oceania and Eastern Group.
Geoff has extensive experience in New Zealand and Australia
as a commercial lawyer and partner at Russell McVeagh.
In 2008, Geoff was named the Deloitte/New Zealand
Management Magazine Chairperson of the Year. He is a strong
supporter of community and philanthropic activities and is
Chair of the University of Auckland Foundation. In 2013 he
received the insignia of a Companion of the New Zealand
Order of Merit for services to Education, the Arts and Business.
Current directorships
Heartland Group Holdings Limited, Heartland Bank Limited,
Janmac Capital Limited, Maisemore Enterprises Limited, MCF2
Message4U Limited, MCF3 Amplify Limited, MCF3 Green
Limited, MCF3 E&P Holdco Limited, MCF3 Re. Group Limited,
MCF3 Architectus Limited, MCF 10 Limited, MCF2 (Fund 1)
Limited, MCF 11 Limited, MCF2A General Partner Limited, MCF2
GP Limited, MCF3 GP Limited, MCF3B General Partner Limited,
MCF3A General Partner Limited, MCF2 FFF-GK Limited, MCF3
Cook Limited, MCF3 TEG Limited, MCF3 Resourceco Limited,
MCF3 Squiz Limited, MC Medical Properties Limited, Mercury
Capital No.1 Fund Limited, Mercury Capital No. 1Trustee Limited,
New Zealand Catholic Education Office Limited, NZCEO Finance
Limited, O & E Group Services Limited, Oceania and Eastern
Finance Limited, Oceania and Eastern Group Funds Limited,
Oceania and Eastern Holdings Limited, Oceania and Eastern
Limited, Oceania and Eastern Securities Limited, Oceania North
Limited, Oceania Securities Limited, Quartet Equities Limited.
3
Geoffrey Ricketts was first appointed as a director of Heartland Bank Limited on 30 September 2010 and then as a director of Heartland Group
Holdings Limited on 31 October 2018 in connection with the corporate restructure completed on that date by Heartland.
4
Jeff Greenslade was first appointed as a director of Heartland Bank Limited on 30 September 2010 and reappointed as a director of Heartland
Group Holdings Limited on 31 October 2018 in connection with the corporate restructure completed on that date by Heartland.
Jeff Greenslade
LLB
Non-Independent Executive Director and Chief
Executive Officer
Term of office
Appointed 30 September 2010
4
Board committees
N/A
Jeff Greenslade joined Heartland in 2009 as Chief Executive
Officer of Marac Finance Limited – one of the four New
Zealand entities that merged in 2011 to become what is now
known as Heartland.
Led by Jeff as Group CEO, Heartland provides banking
and financial products in New Zealand (where it operates
Heartland Bank Limited) and Australia (where it operates
Heartland Finance, Australia’s leading reverse mortgage
provider, and StockCo Australia, a specialist provider of
livestock finance).
Jeff has over 20 years’ experience as a senior banking
executive, including with the ANZ National Banking Group,
where he last held the position of Managing Director of
Corporate and Commercial Banking for ANZ National Bank.
From February 2006 until February 2008 he spent time on the
board of UDC Finance Limited. Jeff has also held a number of
senior positions in the Institutional and Capital Markets areas
of The National Bank of New Zealand and its subsidiary,
Southpac.
Current directorships
Heartland Group Holdings Limited, Heartland Bank Limited,
Heartland PIE Fund Limited, Henley Family Investments Limited.
7
Voting
Each shareholder will be entitled to one vote for every
share held as at 7pm (New Zealand time) on
4 November 2022.
Your right to vote may be exercised by:
• attending the online meeting and voting online
• submitting a postal vote
• appointing a proxy (or representative) to attend the
meeting and vote in your place (Proxy).
How to submit a postal vote or appoint
a proxy
If you are not able to attend the online annual meeting but
wish to submit a postal vote or appoint a Proxy to attend
the online meeting and vote on your behalf, you can:
• lodge your postal vote or appoint a Proxy online at
https://vote.linkmarketservices.com/HGH. You will
be required to enter your CSN/Holder Number and
Authorisation Code (FIN). If you do not have a FIN
number, please contact Link Market Services at
09 375 5998 or enquiries@linkmarketservices.co.nz.
• complete and return your voting form in accordance
with the instructions on the voting form.
Your completed voting form must be received by Link
Market Services, or your postal vote or your Proxy
appointment lodged online, by no later than 2pm (New
Zealand time) on 6 November 2022.
If you wish, you may appoint the Chair of the meeting as
your proxy. To do so, please write “Chair of the meeting”
in the relevant section. The Chair will vote according to
your instructions. If the Chair is not instructed how to
vote, the Chair will vote as he thinks fit.
How to attend the online meeting
To attend the online meeting, please go to
www.virtualmeeting.co.nz/hgh22. Shareholders
attending online will be able to vote during the annual
meeting. Shareholders who will be attending the online
meeting and wish to ask a question are encouraged
to submit their question(s) prior to the annual meeting
in accordance with the instructions below. More
information regarding virtual attendance at the annual
meeting (including how to vote during the meeting) is
available in the Virtual Annual Meeting Online Portal
Guide available at bcast.linkinvestorservices.co.nz/
generic/docs/OnlinePortalGuide.pdf.
Shareholder questions prior to the
annual meeting
Shareholders present at the annual meeting will have
the opportunity to ask questions during the meeting.
If you cannot attend the annual meeting but would
like to ask a question, you can submit a question by
going to vote.linkmarketservices.com/HGH or emailing
your proxy form with your question to meetings@
linkmarketservices.com (please put the words Heartland
Group Holdings Proxy Form in the subject line for easy
identification), or New Zealand-based shareholders
may fax the form to (09) 375 5990 and overseas
shareholders may fax it to +64 9 375 5990.
Shareholder questions will need to be submitted by
2pm (New Zealand time) on 4 November 2022.
Questions should relate to matters being addressed at
the annual meeting.
Procedural Notes
---
Admission card
If you are not attending the meeting, but wish to make a postal
vote or appoint a proxy, you can do so online or by completing
and returning this form to Link Market Services Limited. It must be
received by no later than 2pm on 6 November 2022.
This is the cut-off time for postal votes to be cast and proxies to
be appointed online.
Signing this form
If your shares are held by:
(a) an individual, this form must be signed by the individual (or his
or her duly authorised attorney);
(b) a company, this form must be signed by a duly authorised
signatory of the company (including a director);
(c) a trust, this form should be signed as above by at least
one trustee in accordance with the relevant trust deed (in
accordance with (a) or (b) above, as applicable if the trustee
is an individual or a company);
(d) a partnership, this form should be signed by at least
one partner in accordance with the rules governing the
partnership (in accordance with (a) or (b) above, as applicable
if the partner is an individual or a company); or
(e) joint shareholders, this form should be signed by at least
one joint shareholder (or as otherwise required by the
arrangements between the joint shareholders) in accordance
with the relevant method for that joint shareholder set
out above.
If this form is completed by an attorney or representative, a copy
of the power of attorney or letter of appointment of representative
(unless previously provided), must accompany this form together
with a completed certificate of non-revocation of authority.
Postal voting
If you are entitled to vote at the meeting, you may cast a postal
vote by ticking the Postal Vote box, completing the Resolutions
section and signing and returning this form. Alternatively, you can
cast your postal vote online.
If you return a postal vote without indicating how you wish to
vote on a resolution, you will be deemed to have abstained from
voting on that resolution. If you lodge a postal vote and also
appoint a proxy, your postal vote will take priority over your
proxy appointment.
blue
2022 Annual Meeting
Due to the continuing COVID-19 situation and prevalence of other illnesses, Heartland advises that its Annual Meeting will be held online
on Tuesday 8 November 2022 at www.virtualmeeting.co.nz/hgh22
How to lodge your postal vote/proxy appointment:
Online:
http://vote.linkmarketservices.com/HGH
Email: meetings@linkmarketservices.com
Mail: Use the enclosed reply paid envelope or send to:
Link Market Services Limited PO Box 91976,
Auckland 1142, New Zealand
Deliver: Link Market Services Limited, Level 30, PwC Tower,
15 Customs Street West, Auckland 1010
Scan this
QR Code with your
smartphone and vote online
Voting and proxy form
Appointing a proxy
If you are entitled to vote at the meeting, you may appoint a
proxy by completing the Appointment of Proxy and Resolutions
sections and signing and returning this form. Alternatively, you
can appoint a proxy online. If you return this form without
appointing a proxy, it will be treated as a postal vote.
A Proxy does not have to be a Heartland shareholder. If your
Proxy does not attend the meeting, your vote will not be counted
(unless you have cast a postal vote before the meeting).
If you appoint a proxy to vote on your behalf and tick the “Proxy’s
Discretion” box for a resolution, or do not direct your proxy how
to vote on a resolution, your proxy will vote as he/she sees fit
on that resolution. If you wish, you may appoint the Chair of
the meeting as your proxy. To do so, please write “Chair of the
meeting” in the Appointment of Proxy section. The Chair will vote
according to your instructions. If the Chair is not instructed how
to vote, he will vote as he thinks fit.
You may still attend the meeting virtually should you appoint a
proxy noting that you will not be able to vote if a proxy has
been appointed.
Voting restrictions
Voting restrictions apply in relation to resolutions 3, 4, and 5 in
accordance with NZX Listing Rule 6.3.1 as follows:
Heartland will disregard any votes cast in favour of Resolution
3 (Directors’ Remuneration) by any director who is intended to
receive directors’ fees (and their respective Associated Persons),
unless such shareholder is casting a vote under an expressly
directed proxy of a person who is not disqualified from voting.
Heartland will disregard any votes cast in favour of Resolution
4 (Ratification of Placement) by any shareholder who acquired
shares under the Placement (and their respective Associated
Persons), unless such shareholder is casting a vote under an
expressly directed proxy of a person who is not disqualified
from voting.
Heartland will disregard any votes cast in favour of Resolution
5 (Ratification of Share Purchase Plan) by any shareholder who
acquired shares under the SPP (and their respective Associated
Persons), unless such shareholder is casting a vote under an
expressly directed proxy of a person who is not disqualified
from voting.
Postal vote
Complete this section if you will not attend the meeting but wish to cast a postal vote
I/We wish to vote by Postal Vote (please tick the box).
Appointment of proxy
Complete this section if you will not attend the meeting but wish to appoint someone to attend on your behalf
I/We being a shareholder/s of Heartland hereby appoint:
Full name E-mail address
as my/our proxy (or representative, if a body corporate) to attend the meeting on my/our behalf and any adjournment of the meeting
and to vote on my/our behalf at the meeting and any adjournment of the meeting in accordance with my/our directions below, and to
vote on any resolutions to amend any of the resolutions, on any resolution so amended and on any other resolution proposed at the
meeting (or any adjournment thereof).
Resolutions
Cast a postal vote, or instruct a proxy to vote, by placing a tick in the relevant box.
If you have appointed a proxy and want him/her to decide how to vote on the resolution, tick the box “Proxy’s discretion”.
Proxy’s discretion is not applicable for a postal vote.
ForAgainst
Proxy’s
discretionAbstain
1. That Geoffrey Ricketts, who retires by rotation and is eligible for re-election, be re-elected
as a director of Heartland Group.
2.
That Jeff Greenslade, who retires by rotation and is eligible for re-election, be re-elected
as a director of Heartland Group.
3.
That the total annual remuneration available to all non-executive directors be increased
from NZ$1,200,000 to NZ$1,600,000 or AUD$1,400,000 (whichever is the greater
amount from time-to-time), an increase of NZ$400,000 (33%) effective for the financial
year ending 30 June 2023 and onwards, with such sum to be divided amongst the non-
executive directors as the Board may from time-to-time determine.
4.
That the shareholders of Heartland approve and ratify for all purposes, including
NZX Listing Rule 4.5.1(c), the previous issue under NZX Listing Rule 4.5.1 of 72,222,222
fully paid ordinary shares in Heartland to investors at an issue price of NZ$1.80 per share
on 29 August 2022.
5.
That the shareholders of Heartland approve and ratify for all purposes, including NZX
Listing Rule 4.5.1(c), the Share Purchase Plan announced by Heartland on 23 August
2022, including the issue under NZX Listing Rule 4.5.1 of 14,989,825 fully paid ordinary
shares, and the issue under NZX Listing Rule 4.3.1(c) of 23,832,633 fully paid ordinary
shares, in Heartland to investors at an issue price of NZ$1.7674 (A$1.5857 in respect of
eligible shareholders who applied in Australian dollars) per share on 9 September 2022.
6.
That the board be authorised to fix the remuneration of Heartland’s auditor, KPMG,
for the financial year ending 30 June 2023.
Shareholder questions
Shareholders present at the Annual Meeting will have the opportunity to ask questions during the meeting. If you cannot attend but
would like to ask a question, you can submit a question online by going to https://vote.linkmarketservices.com/HGH and completing
the online validation process or complete the question section below and return to Link Market Services. Questions will need to be
submitted by 2pm on Friday 4 November 2022. The Board will address and answer questions during the meeting.
Signature of shareholder(s)
Signature(s) of shareholder(s) Signature(s) of shareholder(s) Signature(s) of shareholder(s)
Date of signing Day time contact phone number
Electronic investor communication
If you received the Notice of Meeting and this form by mail and would like to receive all future shareholder communications
electronically (by email) where possible, please write your email address below.
Email
Voting and proxy form
/ / 2022
Question:
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.