Heartland Group Holdings Limited (HGH) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Geoff Ricketts, and I am privileged to be the Chair of Heartland Group Holdings Limited, our parent company. A warm welcome to shareholders and guests present online today at the 2022 Annual General Shareholder Meeting, shall I say, of Heartland Group Holdings Limited. I will provide you with instructions on how to vote and ask questions as we progress through the meeting. If you encounter any issues, please refer to the virtual annual meeting online portal guide or phone the helpline 0800-200-220. Since a quorum is present, I'll declare the meeting open. I will now outline the agenda of the business for today's meeting. As Chair of the Board, I will shortly introduce you to the Board of Directors and the strategic management group who are joining in person and online from various locations. I will then take you through the formalities of the meeting before I provide you with a high-level overview of Heartland's performance and activities in the 2022 financial year. This will be followed by address from Heartland's Chief Executive Officer, Jeff Greenslade, who will provide you with a more detailed performance overview of Heartland's business and an update on Heartland's current strategic objectives. Following this, there will be an opportunity to answer any questions you may have concerning Heartland's performance, strategy and operations. I encourage shareholders attending online to begin to submit their questions now if you have not already done so. We will answer as many of these as we can at the appropriate time. Thereafter, we will move to the formal business of the meeting, including voting on the resolutions posed to you today. I would now like to introduce our directors. As directors are joining from various locations, I will begin by introducing Heartland Group and bank directors who are with me today, followed by those joining us online. Greg Tomlinson is the Deputy Chair of Heartland Group Board. Greg was appointed a Director in March 2013. Jeff Greenslade, our Chief Executive Officer. Jeff has held this role since Heartland Bank establishment in January 2011 and is a Director of both Boards. Ellie Comerford, one of our Australian directors was appointed as a Director of Heartland in January 2017. And Kate Mitchell has been a Director of the bank since March 2019 and was appointed to the Heartland Group Board on October '21. Geoff Summerhayes, a new Australian Director, was appointed a Director of Heartland Group Board on October 2021. Bruce Irvine, our Chair and Heartland Bank Board -- of Heartland Bank Board. Bruce has been a Director since establishment. John Harvey, has also been a Director of Heartland Bank establishment. Shelley Ruha, Shelley was appointed a Director of Heartland Bank in January 2020. And Simon Taylor joins us today as an incoming director of Heartland Bank effective from the conclusion of this meeting. For myself, I have been a Director of Heartland since the establishment of the bank, and I am on both boards. In addition to Jeff Greenslade, other members of Heartland's strategic communication and Execution Committee, previously known as the Strategic Management Committee are also present today. Chris Flood, Deputy Group Chief Executive Officer; Leanne Lazarus, Heartland Bank, Chief Executive Officer; Andrew Dixson, Chief Financial Officer. The committee also includes Michael Drumm, who was unable to be here today; Monique Forbes, Group Chief Marketing Officer; Mike Grenfell, Chief Operating Officer, Heartland Bank; Aleisha Langdale, Head of Strategic Analysis and Execution. Doug Snell, over here from Australia for the Board meetings, StockCo Australia, Chief Executive Officer; Lana West, Chief People and Culture Officer; Andy Wood, Chief Risk Officer, Heartland Bank. Also joining us today is Phoebe Gibbons, our General Counsel; and Sir Christopher Mace, our Kaumatua. Proxies and postal votes returning to the business of the meeting, I advise that all valid proxies and postal votes received from shareholders within the prescribed time have been admitted. I can confirm that the total of 826 proxies and postal votes have been accepted. This represents some approximately 224 million shares or 31.75% of the total issued shares of Heartland Group Holdings Limited. I can say that all resolutions before us today, approximately 85% of those proxy or postal votes are in favor of the resolutions. Turning to meeting procedures. I'd like to outline those procedures. This is a meeting of Heartland Group Holdings Limited shareholders. Accordingly, while our guests are very welcome to witness the proceedings of the meeting, participation and the shareholder discussion and the business of the meeting is confined to ordinary shareholders present online by proxy or by authorized representative. Voting procedures. In regard to voting procedures for today's meeting, all resolutions will be decided by way of a poll. This is in line with the practice increasingly adopted by listed companies and is the preferred method of the NZX and the New Zealand Shareholders' Association. By having resolutions decided by way of poll, we are counting all postal votes, proxy votes and votes online, each resolution will be put to the meeting. For those shareholders attending the meeting online, when your online registration is validated, you will receive an electronic voting card, which you can use to cast your vote. To vote, you'll need to click the get voting card with the online meeting platform. You will be asked to enter your shareholder or proxy number to validate. Please then mark your voting card and the way you wish to vote by clicking for, against or abstain on the voting card. Once you have made your selection, please click submit vote on the bottom of the card to lodge your vote. Please refer to the virtual meeting online portal or phone to helpline 0800-200-220, if you require assistance. Voting will remain open for 5 minutes after the conclusion of the meeting. The notice calling this Annual Shareholder Meeting was published electronically on the 28th of September 2022 with hard copies currently sent to all shareholders. The notice outlined the formal business of the meeting and also provided background information on each resolution to be voted on. The minutes of the last Annual Shareholder Meeting held on the 28th of October 2021 have been approved and confirmed by directors as is our customer. A digital version is also available on Heartland's shareholder website at shareholders.heartland.co.nz. I will now share with you my Chair's address before inviting Jeff Greenslade to address you. We will then move into the shareholder discussion. Please ensure you submit your questions now to allow us to answer those in time. I'll now move to my shareholder address. The financial year 2022 certainly had its challenges. However, the Board and I are proud of the way in which Heartland and its customers have continued to respond to the uncertainties presented to them. After another year hampered by the ongoing effects of the pandemic, and with increasing challenges presented by the economic environment, and I'm pleased to be standing here today confirming yet another positive financial result for Heartland. In the financial year ended 30 June 2022, Heartland achieved a record net profit after tax of $95.1 million. On an underlying basis, which excludes the impacts of one-offs and the acquisition of StockCo Australia, this net profit after tax was $96.1 million, an increase of $8.2 million over the prior year. This is another strong result of Heartland as it continues to deliver against the best and only strategy, as follows: Heartland grew its finance receivables during the year by 15.3% or to $6.2 billion during the year as a result of a strong performance from rural lending, online home loans, motor and reverse mortgages. On an underlying basis, the return on equity was up 59 basis points to 12.6%. Further Heartland's net interest margin of 4.16% in 2022 has been consistently higher than other banking peers. During 2022, Heartland received a significant milestone against the strategy for growth in Australia through the acquisition of StockCo Australia. StockCo specializes in the livestock finance for Australian cattle and sheep farmers. Proceeds from Heartland's recent equity raise have been used to repay the outstanding debt from that acquisition and will also support our future growth ambitions. As you may know, Heartland also recently announced its intention to purchase the Australian Bank, Challenger Bank, conditional only on regulatory approvals. Jeff Greenslade will discuss this in more detail in his address. Heartland continued to advance the digitalization of its products and platforms. Achievement included a 120% increase in the number of Heartland Mobile apps users in New Zealand and the digital -- development of a digital platform to allow Australian reverse mortgage customers to view their balance and their cash review online or draw facilities from their mobile phone, tablet or computer. Progress has been made against Heartland's sustainability framework, which I will discuss shortly. Equity raise. In order to repay the StockCo Australian acquisition debt funding and to fund future growth of Heartland's existing business in New Zealand and Australia, Heartland announced a $200 million equity raise on the 23rd of August 2022. This was Heartland's first equity raise since 2017. The equity raise comprised $130 million fully underwritten placement and a non-underwritten share purchase plan offered to shareholders in New Zealand and Australia to raise up to a further $70 million. The share purchase plan included the ability of Heartland to accept oversubscriptions at its discretion. Heartland chose this offer structure due to the very volatile market conditions and its objective to further diversify its share register. Our diversified share register should promote increased liquidity on both the NZX and the ASX. This is important in the 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 today as shareholders. The share purchase plan had a raise of $68.6 million from shareholders. Thank you for your ongoing support and contribution to Heartland's strategic ambitions. Moving to sustainability. Significant progress has been made against each of Heartland's sustainability pillars. These are environmental conservation, social equity and economic prosperity. Partners embedding sustainability as a strategic focus throughout the business ensuring that it is operating in a way that is sustainable for customers, communities, shareholders and importantly, the planet. In respect of environmental conservation, Heartland's most recent green (sic) [ greenhouse ] gas emissions reporting period relates to financial year 2021. Pleasingly, Heartland achieved a 31% absolute reduction in emissions for this period. 21% of this can be attributed to new ways of Heartland operating, while the remainder was a result of the impact of the COVID-19 shutdown. Work is underway to ensure Heartland is in a position to report its greenhouse gas emissions for 2023 as part of its 2023 financial reporting. For that year, Heartland greenhouse emissions reporting will be to -- also include emissions attributed to customer activity through our lending to those customers. The installation of electric vehicle charging stations at our key office locations has commenced, and Heartland continues to replace its vehicle fleet with hybrid alternatives. Through 2022, Heartland also saw an increasing number of electric and hybrid vehicles also been financed through its Motor portfolio. Turning to social equity. This includes ensuring good conduct and culture practices are maintained to drive fair outcomes for customers, together with fostering a work environment that promotes diversity and inclusion and making a positive difference in the community. For financial year 2022, Heartland implemented processes and controls to prevent any connection to modern day slavery, whether through business practices, customers' practices or supply chain connections. Heartland remains committed to doing the right thing for its customers, and we are pleased to receive the Consumer Trusted accreditation award for its New Zealand reverse mortgages for the fifth year in a row. As part of its commitment to providing fair pay to its people, Heartland introduces pay gap reporting as part of the reporting register launched in March 2022. Heartland was 1 of only 7 organizations to disclose its gender, Maori and Pasifika pay gap measures on the first day of the registry's launch. This is more to be done and Heartland's pay gaps and work is underway and continuing in this regard. Heartland Bank was also proud to achieve the Rainbow Tick in line with considered efforts by its people to focus on diversity, equity and inclusion. Heartland has a strong history in New Zealand, dating back to 1875. So it is our pleasure to be able to support the communities we operate in through the Heartland Trust. The Heartland Trust is an independent registered charitable trust, which is closely supported by Heartland and is a holder of Heartland shares. During the year, Heartland Trust made grants totaling more than $500,000 to support our communities, including in areas of education, arts and culture and mental health. The Trust continued its funding and support of the InZone Education Foundation, the Auckland City Mission, Auckland University's Kupe Leadership Scholarship, the Auckland Writers Festival, WORD Christchurch Festival, Lifeline and a number of high-school and club first XVs across the country. Economic prosperity. Economic prosperity was delivered through Heartland's products and ongoing digitalization efforts. Heartland Bank was once again named Canstar's 2022 Bank of the Year Savings for the fifth consecutive year with awards also given to its Direct Call and Notice Saver accounts. More than 40,000 New Zealanders and Australians and have been able to live more comfortable retirements through access to the Heartland Reverse Mortgages. Furthermore, over 20,000 Heartland Bank customers are now using Heartland's mobile app, which allows Heartland to pass cost savings on to its customers in the form of competitive rates. For our shareholders, we are pleased to be able to pay a final of $0.055 per share, bringing the total dividend for 2022 to $0.11 per share. The full year payout ratio of 68% was consistent with the average payout ratios over the last 3 years. The total shareholder return was 66.9% for the 5-year period from the 19th of August 2017 to the 19th of August 2022. This compares with the total shareholder return of 56.7% for the NZX50 in the same period. So a margin of 10%. In terms of the outlook, the Heartland Board is confident in Heartland's ability to generate strong growth and profitability as it continues to deliver against the strategy to provide best and only products through our scalable digital platforms, with further expansion expected in Australia. While Heartland released its $9.6 million COVID-19 Overlay taken in 2020, it was considered prudent to create an economic overlay of $8 million due to the current volatility and uncertainty and the economic pressures facing business as a result of the pandemic. The economic overlay will provide more resilience in areas such as business relationship lending and asset finance, which have larger loan sizes. Noting the ongoing volatility in the market and the challenges of rapidly rising interest rates, Heartland affirms for the year ending 30 June 2023 its profit will be in the range of $109 million to $114 million. This excludes any impact of fair value changes on equity investments held or the impact of dedesignation of derivatives. Finally, in my address, I wish to conclude this afternoon by expressing my thanks and gratitude to my fellow directors for their wise counsel and support. Thank you to Jeff Greenslade, Chris Flood, and the executive team who continue to provide strong leadership for Heartland through their diverse set of skills. I would also like to extend a very warm welcome to Leanne Lazarus who joined the executive team of Heartland at Heartland Bank as a CEO in August 2022. On behalf of the Board and executive team, I wish to thank our Heartland employees for their hard work and resilience, which has enabled a successful and exceptional result this year. Last but not least, I'd like to thank you our shareholders and customers for supporting Heartland. We appreciate the confidence you place in us, and we look forward to continuing the delivery of strong shareholder returns. Thank you again. I will now ask Jeff Greenslade to address you.

[Foreign Language] Welcome and greetings to everybody. I am Jeff Greenslade, the Chief Executive of Heartland Group. To say that these times are trying seems glib and inadequate when faced with both the daily flow of negative headlines and the complexities that work behind them. The post-pandemic world is fraught with not for a decade levels of economic turmoil. Escalating inflation has impacted interest rates and created uncertainty and volatility. At the same time, sovereign debt yields have pushed up, raising this discount on future cash flows, reducing asset values. Despite all this, thus far, conditions are not as bad as the post global financial crisis of 2009 to 2011. There is very low unemployment, and there has been no liquidity or balance sheet crisis. We got through the GFC, and I'm sure we'll get through this. However, we must be realistic and we do not expect our customers to be immune from the economic pressures. And as we did in the first 2 years of the pandemic, we will continue to support them. But above all, as a growth business, we must keep our eyes on the long term while ensuring we are able to meet the short-term challenges. Heartland after all has a strong pedigree in successfully navigating uncertainty in hardship. Heartland was forged in the aftermath of the GFC. From difficult times, we emerged and flourished and along the way, we have learned lessons. The first is the value of having portfolio positions in markets that are either immune to the macroeconomic stress or are resilient. And the best example of this is the reverse mortgage book. And to give you an example of this, growth in New Zealand for the first quarter of this financial year 2023 was $44 million or just under 25%. In Australia, it was $55 million, just under 19% in an annualized sense. And [ all ] whilst we grew, our loan-to-value ratios remained at very conservative levels. Indeed, we model all sorts of scenarios and even a 20% decline in property prices still leaves our loan-to-value ratio sitting in the mid-20% at a very conservative level. We also expect resilience in livestock lending where demand for protein remains constant despite the conditions, and we hope for good growth over this financial year, especially in Australia. We anticipate some stress in our motor loans recalling that during the GFC, motor loans arrears and losses increased, but they were at absorbable levels. And it is pleasing to see Motor growth is returning to pre-CCCFA levels. The second learning is that it's vital to be agile and to adapt, to be constructive, to resist despairing at every negative headline and seek out opportunities in adversity. The recent announcement of our intention to acquire Challenger Bank is an example of the securing -- as it did at a time which is opportune for values. Through this turmoil, the cost of purchasing a bank in Australia has moved in our favor. From where we started, the price we're paying is around about 1/4 of the market price when we started looking and still sits around about 1/3 of what it would cost us to start up a bank from scratch. So despite the short-term economic uncertainty, Heartland is positioned for a significant leap forward. We will continue to challenge operating models remaining true to our best or only strategy, extracting the benefits of digitalization, generating efficiencies and delivering market differentiation. But the big game changer for us is the opportunity to purchase a bank in Australia. This will drive a quantum shift in growth opportunities, and I'll talk to that in a moment. But first, I'll update you on the 4 pillars, which underpins our best or only strategy. Firstly, business as usual growth; secondly, frictionless service at the lowest cost; thirdly, expansion in Australia; and fourthly, acquisitions. So starting with business as usual growth. As the chair outlined, Heartland achieved earnings of $95.1 million in FY '22, being at the top end of the guidance range. This was based on 15% growth in gross financial receivables, excluding the impact of the StockCo Australia acquisition, and this level of growth evidences the resilience of Heartland's market position. At the same time, Heartland's portfolio mix has moved towards higher-quality assets. This is due to 4 factors: firstly, higher aggregate growth in higher-quality reverse mortgages and online mortgages; secondly, the introduction of lower impairment livestock loans; thirdly, a shift in the Motor book towards higher-quality borrowers; and finally, the runoff of higher risk personal lending. Reverse mortgages have consistently performed well and are expected to continue to do so in this environment where rising costs puts pressure on household budgets, increasing demand for the product. In FY '22, Reverse Mortgages New Zealand helped their 20,000th customer and saw an almost 20% increase in receivables compared with the previous year. Australian Reverse Mortgages saw a 15% increase in receivables and grew market share from 29% to 33%, cementing its position as the largest active lender in Australia. The potential addressable market for reverse mortgages in Australia, it shouldn't be forgotten is somewhere in the realms of $10 billion to $15 billion. And this demonstrates what a clear countercyclical opportunity for growth we have. In FY '22, Heartland Bank's Livestock business enjoyed record growth from an increase in customers and facility utilization rates reached an historic high. We expect the global demand for protein to drive further growth for livestock, both in New Zealand and particularly in our newly acquired business in Australia, StockCo. Supply chain disruptions and the unintended impacts of the CCCFA changes made in December 2021 caused ebbs and flows in our Motor book, with some normalization coming into the last quarter. The book's 7% increase in receivables for FY '22 was not as strong as we would typically expect. However, the last quarter alone produced an almost doubling in the rate of increase on the previous quarter, so augurs well. Online home loans were also affected by the CCCFA changes and more recently by a slowdown in house sales. However, the refinance market is attractive and a book size in excess of $400 million by the end of FY '23 is targeted. A more cautious approach will be taken in personal and small business lending, given the current environment. And whilst this might impact on growth in NIM, it is a prudent risk management measure to take. Turning now to frictionless service at the lowest cost. There is a famous Maori saying, [Foreign Language] which means a struggle without end. And the pathway to delivering frictionless service is a never-ending journey. Technology moves quickly, faster than people, though behaviors are changing, driven by pandemic necessity. The trend is moving [ inelectively ] towards self-service. This capability via digital platforms and apps has been delivered on both sides of the Tasman and more is on the way. Telephone wait times are constantly rising, reflecting the ultimate redundancy of this channel. Self-service is the logical alternative. It removes friction and hassle from our clients, whilst we're creating scale and efficiencies. And those scale and efficiencies flow through to our cost-to-income ratio. In an underlying sense, the cost-to-income ratio reduced from 42.5 -- reduced to 42.5% in FY '22. While this ratio might wobble in the short term due to investment, we are committed to reducing this further over the long term. Ultimately, a lower cost-to-income ratio allows us to be more competitive. Turning now to expansion in Australia and acquisitions, which in the course of the last 12 months, went hand in hand. Starting with expansion, and this was really exemplified again by the reverse mortgage growth. The loan book was just $377 million in April 2014 when we -- it was acquired by Heartland and now is more than $1 billion. The acquisition of StockCo Australia in May extends our best or only strategy in the Australian livestock market. But in order to realize the full potential of our Australian businesses, we require access to deep and efficient pools of funding. And in August, we announced our intention to establish or acquire an authorized deposit-taking or ADI license in Australia. As confirmed recently, we have now entered into an agreement for the acquisition of Challenger Bank from ASX-listed investment management firm Challenger Limited. Challenger Bank is an established ADI, which offers customers a range of savings and lending products, including government-guaranteed retail deposits and home loans. It has invested in systems and in particular, has a very efficient and scalable deposit platform. Subject to regulatory approvals and the transaction complete -- completion, Heartland's existing businesses in Australia will be transferred into or under Challenger Bank. This will be Heartland's vehicle for growth in Australia. The consideration payable by Heartland on completion is expected to be AUD 36 million subject to the normal adjustments for net assets delivered at completion, and we intend to cover this cost out of existing resources. And it's really important just to pause for a moment and consider the opportunity we have as operating as a bank in Australia. It is not just the very significant potential to lift our margin through lower cost of funds, but critically, we also have available to a much larger market into which to project our best or only strategy. Think of the growth we achieved in New Zealand, then apply that to a much larger market like Australia, which is several times larger. In New Zealand, Heartland's best or only strategy has driven a tripling of our size in the 10 years since we became a bank. Comparable New Zealand banks were unable to even achieve a doubling of their size in the same period of time. So made to what is possible for Australia, given the leading market positions we have in reverse mortgages and livestocks already in that market, and the strategy of differentiation via our product and delivery of best or only strategy. So to conclude, I would just support the Chair's comments in terms of confirmation of our guidance. I'd also like to pay tribute to our Heartland employees. They are critical to us meeting our targets and the journey that we are on, delivering against the strategy. And they have delivered extremely well in what has been a very challenging year. I'd like to thank our employees for their exceptional efforts and commitments to our customers. [Foreign Language] Thank you also to our shareholders [Foreign Language].

Thank you, Jeff. Ladies and gentlemen, before opening the formal meeting for questions, I advise that Graeme Edwards of KPMG, the company's auditor, is present today and is available to answer any questions relative to the conduct of the audit and the preparation and content of the auditor's report for the year ended 30 June 2022. Shareholders who wish to ask a question on Heartland's performance, strategy or operations can submit their questions through the online meeting platform, and I will aim to ensure that as many of those questions as possible are addressed. Any comments, questions or matters raised for discussion during the meeting must be relevant to the business of the meeting. If you have matters you wish to raise as a customer, please submit those online, and we will endeavor to respond to you after the meeting. Shareholders were also invited to submit questions prior to the Annual Meeting. I'll address those that we received. The first one is a question about Heartland's current shareholding of about 10% in Harmoney Group Limited (sic) [ Harmoney Corp Limited ] and our position on this holding given Harmoney's performance since listing. As I said, Heartland has a 10% shareholding in Harmoney and holds a historic book of personal loans, which were originated by Harmoney and funded by Heartland. This book is closed to new business and in runoff. No decision has been made on the future of Heartland's Harmoney's shareholding and any changes to the fair value of its investment do not impact underlying net profit after tax. We also received a question regarding shareholder value of the recent and future capital raises. The answer to that is Heartland carefully considers all options when raising capital to strengthen its balance sheet. The Board's underlying objective is to increase shareholder value. The funds raised under the recent equity raising were used to repay the acquisition finance facility outstanding in relation to StockCo and to provide additional growth capital for Heartland's existing business, both in Australia and New Zealand. This means that these funds will be used to support Heartland's future growth, which is a key consideration for investors in the share price. The other important factor with regard to the recent decline in share prices is that global macroeconomic conditions continue to be highly volatile and the NZX and global markets have traded downward. Since Heartland's equity raise, the conditions -- these conditions have been also impacting on Heartland's share price. These factors are outside Heartland's control. The metrics which Heartland is focused on, which are within its control are return on equity, earnings per share, both of which are up in financial year 2022 and the dividend. These metrics are all considered when deciding whether to or not proceed with growth opportunities and two, to raise equities. The third question relates to dividends, and we have been asked if Heartland will maintain an $0.11 dividend per annum. Heartland really determines dividends, both interim and final, based on the net profit after tax subject to maintaining a prudential level of capital for its needs, which will vary from time to time depending on a range of factors. We are pleased to this year, be able to pay a full year dividend of $0.11 per share. This resulted from a full year payout ratio of 68% comparable to the average over the last 69 years. For shareholders who have held shares for a few years, you will know the trend. Finally, we were asked when we will resume physical AGM. Next year should be the year. We intend to run a hybrid meeting next year, allowing shareholders to join in person or online. I will now move to online questions. Are there any further questions? Okay. Please explain why -- we have one here. Please explain by -- why the share placement was pitched at a level of $1.80 when the pre-announcement price was significantly higher than that, other than the reasons already given by the Board? I think new shares under a fully underwritten placement were issued at a price of $1.80. This price represented a discount of 12.8% to the ex dividend adjusted last close price of $2.06 per share on the 22nd of August and a discount of 13.7% of the 5-day volume-weighted average ex dividend adjusted price of $2.08, up to and including $0.22 -- 22nd of August 2022. So I hope that explains it. Are there any other questions?

No further questions that haven't been answered through the speeches so far.

Thank you. All right. Moving on to voting. We now move on to the formal business of the meeting, which is to vote on the resolution set out in the notice of meeting. As mentioned earlier, if you are attending the meeting online, you can cast your vote using the electronic voting card received when your online registration was validated. If you have any questions related to any of the resolutions, please submit these online now so that they may be addressed within discussion of each resolution. As the first resolution relates to my election, I will pass the chair to Greg Tomlinson, our Deputy Director. And in doing so, I will say that this is my last hurrah as a Director of Heartland Bank. And I presume during the next while of that, I will be passing over to Greg, probably as Chairman.

Thank you, Geoff. Thank you all. Just -- just coming back to the item of general business here, just as the first item of business is the reelection of Geoff Ricketts to the Board of Heartland Group. Details regarding Geoff's background, qualifications and experience were included in the Notice of Meeting. Geoff stands for reelection with the full support of the Board. The resolution to reelect Geoff Ricketts as an ordinary resolution requiring approval by the majority being more than 50% of the votes of those shareholders entitled to vote and voting. I move that Geoff Ricketts, who retires by rotation and is -- sorry, is [ eligible ] for reelection, be reelected as a director of Heartland Group. Are there any questions online?

No questions related to this resolution.

Thank you. So please mark your intention on your voting card by selecting for, against or abstain at Item 1. Please click submit vote on the bottom of the voting card to lodge your vote. I now will pass the chair back to Geoff Ricketts.

Thank you, Greg. The second resolution for today is the reelection of Jeff Greenslade to the Board of Heartland Group. Details regarding Jeff's background, qualifications and experience were included in the Notice of Meeting. Jeff stands for reelection with the full support of the Board. The resolution to reelect Jeff Greenslade as an ordinary resolution requiring approval of a majority being more than 50% of the votes of those shareholders. Jeff will now address the meeting.

Thank you. As a Managing Director, I occupy a unique position. I am both an executive and a director, and I hasten to add that I've been standing for reelection as a director. And just to be very clear, the perspective I have through occupying those 2 roles, I think, provides some invaluable insights for management to the Board. I can convey what management are thinking, what the operational realities are to the Board. And secondly, I'm in a great position to then convey the Board's thinking around strategic themes and direction and oversight. So I think that occupies a very useful perspective. The second thing is that I think it's only reasonable that the Chief Executive shares in the same obligations and duties as the directors that he or she sits next to. Thank you.

Thank you, Jeff. I move that Jeff Greenslade, who retires by rotation and is eligible for reelection, be reelected as a Director of Heartland Group. He has the full support of the Board and I think, has done a great job since he took over being CEO of the group. Now are there any questions?

No questions.

We have no questions. So please mark the intention of your voting card by selecting for, against or abstain at item 2. Please click submit vote on the bottom of the voting card to lodge your vote. The next resolution is a proposed increase in the directors' remuneration. Before putting the resolution forward, I have had a number of queries in relation to this matter and accordingly, would like to make some further comments. To begin with, I should point out that none of the existing directors other than the new director, Geoff Summerhayes, will receive any increase in directors' fees. Notwithstanding, they were last reviewed 6 years ago in 2016, and the net profit that year was $54.2 million which compares with today's underlying profit of $96.1 million for the 2022 year. The shareholders' dividend in that time has increased from $0.085 to $0.11 per share. Heartland is also subject to an increasing degree of regulation in New Zealand and Australia, which results in an increase in need for independent directors by the regulators. Today's proposed increase of directors' fees are targeted and result in 2 new director roles being appointed for the group. Firstly, appointing Simon Tyler as an additional Independent Nonexecutive Director to the Board of Heartland Bank New Zealand. Given the size of the bank, we consider an additional independent director as appropriate, as fee being the same as existing bank directors' remuneration, which, as I've said before, has been in place for 6 years. Secondly, the director fee increases to finalize Geoff Summerhayes as appointment and fees. Geoff Summerhayes will be the Chair of our Australian businesses on completion of the Challenger Bank acquisition. As he is a new appointment, Heartland sought independent benchmarking and settling his director's fees and consulted with Insight Consulting, an experienced independent consulting business in Australia. The data provided by Insight Consulting was referenced to a comparator set of ASX small cap financial services companies. Included in our businesses will be Challenger Bank, the licensed Australian bank we have recently announced Heartland is acquiring from Challenger Group, subject to the regulatory approvals which we need to get. In terms of Geoff's role, he will be a Director of Heartland Group Holdings Limited. That's today's meeting as the parent company. But in addition to that, he will also chair the Australian group and initially will also commit the time required in developing and establishing the broader role of the Challenger Bank in Australia. I am more than confident he will undertake the job he is paid for effectively and will add significant value to the Group. Geoff is a seasoned Australian executive and before joining APRA, he was a senior executive in the Suncorp Group. Overall, the increase sought today is to fund these 2 new targeted roles, which I believe are necessary to support the governance of the Group going forward. Details regarding the rationale for the increase of remuneration including a table of current fees was included in the Notice of Meeting. The proposed increase of directors' remuneration to support these 2 appointments has the full support of the Board. The resolution to increase remuneration is an ordinary resolution requiring approval of a majority being more than 50% of the votes of those shareholders entitled to vote. I move that the annual remuneration available to all nonexecutive directors be increased from $1,200,000 to $1,600,000 million or Australian dollars equivalent of AUD $1,400,000 million, whichever is the greater from time to time. And it totaled an increase of NZD 400,000 effective for financial year 2023 and onwards, which such sum to be divided amongst nonexecutive directors as the Board may determine from time to time. Are there any questions online?

No questions.

No questions. All right, please mark your intention on your voting cards for selecting for, against or abstain on item 3. Please click submit vote at the bottom of the voting card to lodge your vote. Now we now move to the fourth resolution, is for the approval and ratification of the fully paid ordinary shares issued under the placement announced on the 23rd of August 2022. Details regarding the placement and the rationale for ratification were included in the notice of meeting. Again, this resolution has the full support of the Board, a resolution to approve and ratify the placement as an ordinary resolution requiring approval by a majority being more than 50% of the votes of whose shareholders are voting. As Chair, I move that the shareholders of Heartland approve and ratify for all purposes including NZX listing Rule 4.5.1(c), the previous issue of NZX Listing Rule 4.5.1 of 72,222,222 fully paid ordinary shares in Heartland to investors at an issue price of $1.80 share on the 29th of August 2022. Are there any questions?

No questions.

No questions. If not, please mark your intention on the voting card by selecting for, against or abstain on item 4. Please click submit vote to the bottom of the voting card to lodge your vote. The fifth resolution is the ratification of the share purchase plan. This resolution is for approval and ratification of the fully paid ordinary shares issued to existing shareholders under the share placement plan announced on the 23rd of August. Details regarding the share purchase and rationale for ratification were included in the notice of meeting. This resolution again has the full support of the Board. The resolution to approve and ratify the shareholder [ per share ] purchase plan as an ordinary resolution, as I've stated, of votes. I move that 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 the 23rd of August 2022, including the issue under the NZX listing rule 4.5.1 of 14,989,825 fully paid ordinary shares and the issue under NZX listing 4.3.1(c) of 23,832,633 fully paid ordinary shares in Heartland to the investors at an issue price of $1.76 or AUD $1.5857 in respect of eligible shareholders who applied in Australian dollars per share on the ninth of September. Are there any questions?

No questions.

No questions. Given there are no questions, please mark your intention on the voting card by selecting for, against or abstain at Item 5. Please click submit vote on the bottom of the voting card. Thank you. The next resolution 6 is auditor's remuneration. The final resolution is to record the automatic appointment of KPMG as a company's auditor and to pass the following resolution. This resolution also has full support of the Board. I move that the Board be authorized to fix the remuneration of Heartland's auditor KPMG for the year ending June -- 30 June 2023. Are there any questions?

No questions.

Please, mark your intention on your voting card by selecting for, against or abstain for item 6. Please click submit vote at the bottom of your voting card. Ladies and gentlemen, that concludes the formal business of the meeting. You should now submit your votes. Voting will be open until the close of the meeting. The results of the poll will be advised on the NZX and the ASX after the conclusion of the meeting. There is now an opportunity for any other matters that may properly be raised before this annual general meeting to be considered. Are there any such matters that shareholders wish to raise? Yes, there's one. So far, as U.S. interest rates continue to rise, interest rates in New Zealand and Australia will also rise for the time being. Is Heartland's Reverse Mortgage business ready for this? For you, Jeff.

The books in both countries have very conservative loan-to-value ratios. So they sit around about 20% in both countries. And when you think about it compared with normal mortgages, that can be as high as 80% loan-to-value ratios. So we are very well placed in terms of being able to withstand a period of interest rates at these levels.

So we see the portfolios as resilient for increasing is interest rates.

Yes. As I said in my speech, we've modeled a downturn in say Sydney, Melbourne and Auckland in the order of 20%, and it only shifts the dial up to about the mid-20% in terms of loan-to-value ratios.

Are there any other questions.

No further questions that haven't already been answered. And I think that's all we have time for.

Thank you for that. This brings an end to Heartland's 2022 Annual Shareholders Meeting. Accordingly, I declare the meeting closed, and thank you for your attendance and participation here today. Thank you.