HGH - Heartland Group Holdings

[entrep]

Very impressive Beagle.

You certainly weren't just wagging your tail
You put management on a short leash with those questions
You were barking up the right tree and management knew it
Those were tough questions - all bite, no bone!
You definitely gave management paws for thought
You weren't rolling over for their excuses
You weren't there to play fetch, that's for sure
With a nose for nonsense, you've sniffed out many dodgy details
Your marked your territory with some pointed questions and management felt it
You didn't just scratch the surface, you dug deep, and management were left with their tails between their legs

(in all seriousness though, very impressive!)

[BlackPeter]

They said they were but shut down my questioning and any further questioning from the floor from anyone else in a huge hurry.  I really wanted to ask the auditor publicly if they had been through those dodgy assets with a fine-tooth comb but was not allowed the opportunity to do so.
The way questioning was shut down was an absolute crock of s@#t.  Plenty of things to try and hide is the clear impression I got.
Not sure if there's a recording anywhere of the meeting?  I wouldn't mind hearing their so-called answers again.  Hard to take everything in when you are Johnny on the spot thinking how to phrase the next question.

Here is a recording of the meeting:

https://www.youtube.com/watch?v=bFPQJtET6UM

Related to catching and remembering everything in AGM's when this service is not available: I got used to recording the meetings I attend with my cell phone (particularly when I am afterwards supposed to write a report - e.g. for NZSA). Technology these days is quite amazing.

[Basil]

LOL thanks Entrep.  Nothing makes a dividend hound want to growl and bite more, than less food going into his dog bowl     

Some good chatter over on the other channel too created by Rawz about concerns about problem customers being concealed with the Heartland "Extend" product facility. Have a read guys, should give you more "paws" for thought.  $1.6 billion in vehicle lending at present, (Leanne Lazurus shared that info with me after the meeting). As mentioned previously, she has no issues with lending with no deposit despite the current economic conditions and forecasted higher unemployment rate.

Like I said yesterday, I think somewhere in the range of 1-2% of their total lending of $9.6 Billion is problematic concealed arrears and Heartland extend is one of the main ways they are sweeping a lot of problem loans under the carpet so people don't see them and they don;t need to be provisioned.  What could possibly go wrong with unemployment forecast to increase to a decade high of 5.5% next year ?  Hmmm

[winner (n)]

At AGM the shareholder question when they expect to become EPS accretive post cap raise was mine.

Question was abbreviated as it was F24 guidance prior to cap raise was 15 cents EPS so when are going to br eps accretive from that

Got the spiel about Ll fiis things blah blah and that FY26 should see improved result but nothing about eos accretive

Never mind ...couldn't expect much more

For the record EPS accretive in F26 implies npat of $160m .....just proves it was all words and hollow promises eh.

[BlackPeter]

At AGM the shareholder question when they expect to become EPS accretive post cap raise was mine.

Question was abbreviated as it was F24 guidance prior to cap raise was 15 cents EPS so when are going to br eps accretive from that

Got the spiel about Ll fiis things blah blah and that FY26 should see improved result but nothing about eos accretive

Never mind ...couldn't expect much more

For the record EPS accretive in F26 implies npat of $160m .....just proves it was all words and hollow promises eh.

OK - so, it appears they either can see the future and they are a bunch of liars (because they didn't tell us the truth about it) - or, if we assume that they can't predict the future either, maybe they are just human as well. I think we need to get used to not trusting any future pointing statements, no matter who produces them.

Lessons learned - never trust EPS forecasts made by humans;

The other question is, if we assume for a moment that they move their EPS by 2028 to something like 15 cents EPS (which would be the median between the current "sad" state of affairs - 10 cents EPS for a nearly $1 share and their 2028 Pie in the sky forecast (which would be roughly 20 cents EPS), would they be at the current share price an interesting investment?

I think they would be, but hey ... maybe I am just too easy to please ;

[Basil]

My view BP is it's increasingly looking like 15 cps for FY28 is the best-case scenario, (which means no growth in eps since FY22 so no longer a growth company) but the real problem is this.  Is that FY28 eps of 15 cps before or after the ~ 5 cps of losses recognized that year on their previous bad bank lending? I think reported, (not normalized) eps, could stay fairly close to 10 cps for several years, possibly even in FY28.
I think Geoff's legacy is his loose lending policies will dog this company for many years.  Worse, I don't see any indication Leanne Lazurus is learning anything from legacy problems experienced in the past.   For example, go on to their car loan application page on their website.  The default loan period is set at 5 years and the default deposit set in the system is $0.  They make it quite clear in their system the payment of a deposit is entirely optional.

[winner (n)]

Another step diwn underway

May go below 90 cents this time

[mike2023]

Another step diwn underway

May go below 90 cents this time

100-26 apparently. Add in A CR possibility which someone will possibly have prior? Is there a barge pole long enough? Used to be one of my favorites. The board looked so uncomfortable.

[BlackPeter]

My view BP is it's increasingly looking like 15 cps for FY28 is the best-case scenario, (which means no growth in eps since FY22 so no longer a growth company) but the real problem is this.  Is that FY28 eps of 15 cps before or after the ~ 5 cps of losses recognized that year on their previous bad bank lending? I think reported, (not normalized) eps, could stay fairly close to 10 cps for several years, possibly even in FY28.
I think Geoff's legacy is his loose lending policies will dog this company for many years.  Worse, I don't see any indication Leanne Lazurus is learning anything from legacy problems experienced in the past. 

Fair enough. I guess most of us used to respect the previous board and management team for a long time - and clearly, we got it wrong, and they clearly didn't act as much in our interest as we would have liked.

They have now a somewhat changed board and a quite significantly changed management team, and we don't trust them - clearly, they first would need to earn our trust.

The question is - if we got it wrong the first time (by trusting them), did we get it wrong the second time (by not trusting them) as well?

I don't know - yet.

[Basil]

BP, let me answer that by saying I just amended that post to include a little interesting anecdote.
Leanne Lazurus sees no issue with risky no deposit car loans, in fact as I suggested in that anecdote, their system is set up to sell the maximum possible debt for the maximum possible term.  Further, one of their key goals is to automate and digitize everything as much as possible.  You have to wonder how much scrutiny if any goes in behind the scenes with their loan approval process if everything is being automated.

They have now a somewhat changed board and a quite significantly changed management team, and we don't trust them - clearly, they first would need to earn our trust. The question is - if we got it wrong the first time (by trusting them), did we get it wrong the second time (by not trusting them) as well?

You've answered your own question.  The new team need to earn our trust.  I see no evidence they are taking steps to do that.  The way my questioning was abruptly shut down, they do not respect basic shareholders rights to ask questions.  We only get once chance per year and they are paying lip service to shareholder's rights to communicate with them.  Although several directors came over to talk to me after the meeting, (which surprised me a bit), none gave me a business card to open up the lines of communication.  Good communication is the basis upon which trust can be built and without it...

The way I see it, somewhere around 15 cps in FY28, less a few cents per share, perhaps as much as 5 cps for amortizing bad bank losses is the good-case scenario, maybe reported earnings of about 12 cps for FY28 ?  But there are other not so positive scenarios too.
Clearly my view is the new management team have a long road ahead to earn shareholder's trust.  There are far more trustworthy companies out there on attractive metrics, is how I see it.  Why take a chance on the new management team at HGH when there's well proven management doing exceptional work growing shareholders wealth at for example, TRA and HLG ?

[winner (n)]

Three Boards and three CEOs

Australia Board and CEO you could call new

Most of NZ Bank and Group Board members been there for years. NZ Bank not exactly new blood.


Group CEO / Chief Administrator been there over 10 years .....hardly new blood

So talk of new management getting our trust a bit misguided .....they've had their chance

[Red Baron]

Like I said yesterday, I think somewhere in the range of 1-2% of their total lending of $9.6 Billion is problematic concealed arrears and Heartland extend is one of the main ways they are sweeping a lot of problem loans under the carpet so people don't see them and they don't need to be provisioned.  What could possibly go wrong with unemployment forecast to increase to a decade high of 5.5% next year ?  Hmmm

Leanne Lazurus from one hour into the youtube 2024 AGM meeting recording:
"The receivables and assets that we have pulled together is a combination of and some business lending and rural lending that no longer fit the business writing strategy of what we have.  Some of the lending is large lending that we would no longer write that business.  They are preforming loans.  Where there are some non-preforming loans those were provisioned prior to that.  This is the receivables component.  There are equity investments.  There are property investments.  Those will take longer to sell down.  Andrew mentioned some farms.  We will need to get that production back up so we get a good price for valuation.  This is not about creating a good bank and a bad bank.  It is about removing distraction to say that we can free up a pool of capital that we can then release and put back into asset classes that will generate a better return."

Zo "our Leanne" did answer ze question did she not?  The 'non-strategic book' vas provisioned vhere necessary BEFORE those assets vhere ring venced off eento 'Heartland Extend'.

RB

[Basil]

I took no comfort from her words.  If you are happy to accept what she said at face value, that's fine but this dog's corporate B.S. meter, which I have refined over several decades, gave a solid reading of those are just "weasel words".  There's $188m of receivables in there they presently don't know how to collect or realize if they do try and realize them at today's market value, there will be a bloodbath in terms of the percentage recovered.   That's how I see it and I was there to see the body language.

Separate layers of boards and senior management will do "wonders" for the cost to income ratio going forward eh Winner. 

[winner (n)]

The presentation said those NSA receivables were 'excluding provisions'

I sense some bull shit creative accounting coming up

The old CFO who knows these things in now the Group CEO ...hmmmmm

[Red Baron]

I took no comfort from her words.  If you are happy to accept what she said at face value, that's fine but this dog's corporate B.S. meter, which I have refined over several decades, gave a solid reading of those are just "weasel words".  There's $188m of receivables in there they presently don't know how to collect or realize if they do try and realize them at today's market value, there will be a bloodbath in terms of the percentage recovered.   That's how I see it and I was there to see the body language.

Yes, but zhat is ze whole point.   There eez no need to realise zhese assets in 'today's market'.    Heartland have just done a capital raising to meet 'today's need'.    There eez no need to zell in 'today's market'.   Vhy try to zell a varm (vor example) at ze bottom of ze market, eff there eez no need?

RB