Heartland Bank seeks $59m through rights issue, posts 12% quarterly profit rise & reiterates forecast for annual profit growth of up to 12%

Heartland Bank has unveiled a 12% increase in September quarter profit, plus plans to raise about $59 million of new equity through a share issue to help fund lending growth.

The bank, which focuses on niche markets such as reverse mortgages, vehicle loans and livestock finance, is offering eligible shareholders the chance to participate in a pro-rata 1 for 15 rights issue at $1.70 per share. Heartland shares closed at $1.88 on Wednesday.

“To support continued growth in its loan portfolio and maintain a strong balance sheet, Heartland is seeking to raise up to approximately $59 million of new equity under a pro rata rights issue,” the bank says.

Additionally Heartland says its September quarter unaudited net profit after tax was $16 million, 12% higher than in the 2016 September quarter.

“The result was driven by continued growth in net finance receivables across all divisions. Net finance receivables grew $138 million to $3.684 billion, which equates to 16% annualised growth, or 4% growth for the three month period,” Heartland says.

Heartland says underlying asset growth is expected to continue during the remainder of its 2018 financial year which ends next June 30, and reaffirmed its forecast range for annual net profit after tax of between $65 million and $68 million. That’s an increase of up to 12% from $60.8 million in the June year this year.

Below are details of the rights issue provided by Heartland. And here’s an investor presentation from the bank. 
• 1 for 15 pro rata rights issue 
• Issue price of $1.70 per share, being a 10.1% discount to the closing price on 8 November 2017 and a 9.5% to the theoretical ex-rights price (TERP) 
• Open to New Zealand and Australian shareholders, as well as institutional shareholders in Hong Kong, Singapore, the United Kingdom and Norway 
• Open from 23 November 2017 to 8 December 2017 (unless extended) 
• Any rights not taken up will be sold under a shortfall bookbuild 
• Shareholders who take up their rights in full may participate in the shortfall bookbuild 
• The offer is not underwritten 
• Rights will not trade on the NZX Main Board

Under the offer, eligible shareholders are entitled to subscribe for 1 new share for every 15 existing shares held, as at 5pm on Friday 17 November 2017, at an issue price of $1.70 per share.

The issue price is a 10.1% discount to the closing price of Heartland’s shares as traded on the NZX Main Board on 8 November 2017, and a 9.5% discount to the theoretical ex-rights price (TERP) of $1.88 per share (based on the 8 November 2017 closing price).

The offer will open on Thursday 23 November 2017 and will close at 5.00pm on Friday 8 December 2017 (unless extended).

The offer is open to all shareholders with a New Zealand or Australian address recorded in Heartland’s share register, as well as those shareholders who constitute institutional investors (in accordance with applicable legal requirements) with an address recorded in Heartland’s share register in Hong Kong, Singapore, the United Kingdom or Norway.

The rights will not be tradable on the NZX Main Board. Instead, any rights not exercised, including those attributable to ineligible shareholders, will be sold under a shortfall bookbuild conducted by the Lead Manager, First NZ Capital Securities Limited, after the offer has closed.

Heartland is pleased to provide eligible shareholders with an opportunity to participate in the shortfall bookbuild, provided they first take up their rights in full. To participate, shareholders need to apply for a dollar amount of additional shares which are attributable to any rights not taken up. The price for those shares will be determined by Heartland and the Lead Manager, but will be no less than the issue price of $1.70 per share and no greater than the closing price on the NZX Main Board on the day prior to the bookbuild. Any premium above the issue price that is achieved in the bookbuild will be shared between those shareholders who did not, or were unable to, take up their rights, in proportion to the number of rights not taken up.

The offer is not underwritten. Given the size of the offer and the intended use of proceeds – which is to support continued strong asset growth over time – Heartland did not consider that underwriting provided value for shareholders.

Full details of the offer will be sent to eligible shareholders by 22 November 2017, and will also be available at heartlandshareoffer.co.nz from 16 November 2017.