Heartland New Zealand has reported a 34% boost to full-year profit and expects larger gains in the coming year, having increased its assets base by $342million to $3.35billion.
Its households division lending underpinned the gains. Net operating income was up 29% to $75.7million, rural gained 19% to $24million and business lending was up 18% to $42million.
While carrying a 40% exposure to dairying in its rural loan book, Heartland New Zealand (HNZ) is confident it can support borrowers through the payout downturn.
Overall revenue for the year to June rose 18% to $144.8million, earnings before interest and tax (ebit) were up 27% to $64.2million and after-tax profit was up 33.6% to $48.1million on a year ago.
HNZ shares gained slightly, to $1.13, following the announcement.
Craigs Investment Partners broker Peter McIntyre said the $48.1million profit was in line with Craigs' forecast and at the top end of guidance range. As expected, it included a $1.8million tax credit.
The 27% ebit improvement on a year ago was due to an 18.5% increase in net operating income, which was partly offset by higher operating expenses, up 6%, and higher impairment charges, up 70%, the latter largely due to a Court of Appeal loss costing $1million.
HNZ's presentation showed its rural loan book had a 40% total exposure to dairying, or $218million, with an average loan of $244,000, with dairying representing 7% across all HNZ's loans.
Its dairy loans are split 61.6% South Island and 38.4% North Island, with nine dairy loans worth more than $5million and three more than $10million.
HNZ said yesterday while it was actively working with dairy clients to fund working capital shortfalls, it signalled it had made ''adequate provisions'' for the dairy sector, on expectations of booking a higher level of impairments for 2016.
''Heartland is well positioned to support its dairy customers in the forthcoming year,'' HNZ said.
It released financial guidance for full year 2016, with a forecast after-tax profit of $51million to $55million.
The households loans would account for 45.7% of the portfolio, business 37.9% and rural loans 16.4%.
The household lending included a surge in income from its reverse mortgage business, which lets older people borrow against the equity in their home, to $20.3million from $4.1million, BusinessDesk reported.
Net receivables from reverse mortgages rose by $20.7million to $755.6million, although much of this growth reflected foreign exchange gains.
The company's residential mortgage net receivables dropped by $43.3million to $78.6million.
