Heartland achieves forecast profit

Heartland New Zealand, seeking a banking license for the Heartland Bank, has achieved a full-year net profit of $7.1 million -- within the target $6 million- $8 million band.

The result was weighed down by the hefty one-off $6.8 million in costs associated with the January merger of former Pyne Gould Corporation (PGC) subsidiary Marac Finance and two buildings societies.

Revenue of $70.6 million was earned during the year to June 30, largely from the consumer finance business.

Business and rural divisions, in varying stages of development, were expected to make a greater contribution in the year ahead.

Given the significant transition, and only six months of trading as the new Heartland group, comparing the result to previous years was meaningless, managing director Jeff Greenslade said in a statement to the NZX.

Operating conditions during the last year were challenging and this had seen net receivables fall marginally with impaired assets making up $14.4 million or 0.94% of average net finance receivables.

"However, it is a considerable improvement over the combined positions of the three merged entities' impaired asset charges over the past two years, which totalled approximately $30 million per annum."

Strong support for Heartland was demonstrated in a stable retail book valued at $1.6 million, with reinvestment rates averaging 77% since the merger.

Mr Greenslade said quality of the retail deposit base had improved with the purging of 'hot money' or guarantee chases and is now significantly more loyal and stable.

"This purging will continue but growth in new depositors bodes well for the future.

Affirmation of the 'investment grade' credit rating of BBB- following Standard & Poor's review provided certainty for Heartland to proceed with its application for bank registration and the plans to buy PGG Wrightson Finance (PWF) next year.

Liquidity levels, which had increased to $634 million since balance date, were being kept high to ensure Heartland was well place to take advantage of opportunities in completing the PWF acquisition and to ensure smoothe transition beyond expiry of the Crown guarantee on term deposits.

Heartland has retained its forecast profit of between $20 million to $24 million for the year ahead, with another update due at the end of the September quarter.

Regular dividend payments were expected to begin on in the next financial year, starting July 2012.

Heartland is now among the country's top 50 listed companies. Its share price fell 1c to 55c following release of the result this morning.