Good morning, ladies and gentlemen. My name is Phoebe Gibbons, and I'm the Chief Legal Officer for the Group and the New Zealand Bank. A very warm welcome to shareholders and guests present both in person and online today at the 2025 Annual General Meeting of Heartland Group Holdings Limited. It is our great pleasure to be here in Ashburton, where Heartland's journey began 150 years ago as the Ashburton Permanent Building and Investment Society, just down the road on Tankred Street. For those in the room, to ensure your experience at Hotel Ashburton is both memorable and safe, we would like to make you aware of the following. This meeting is located in the Villetta and Arrowsmith Rooms. Bathrooms can be found in the foyer area near the main entrance to the building or just outside the room.
In the unlikely event of an emergency, please remain calm and leave the room immediately through the fire exit doors and head to the evacuation point, which is located in the car park at the front of the hotel. Smoking, including vaping, is permitted only outside the function entrance or by the garden. Finally, as a courtesy to everyone present today, please ensure your phone is on silent. For those joining the meeting in person today, we welcome you to please join the board and management for light refreshments after the conclusion of the meeting. For those joining online, I will shortly provide you with instructions on how to vote and ask questions. If you encounter any issues, please refer to the virtual annual meeting guide online or phone the helpline on 0800 200 220. Since the quorum is present, I declare the meeting open.
I will now outline the agenda of business for today's meeting. I will shortly introduce you to the boards of directors and the Chief Executive Officers of Heartland Group Holdings Limited, Heartland Bank Limited, and Heartland Bank Australia Limited, who are joining us in person today. I will then take you through the formalities of the meeting before inviting Greg Tomlinson, Chair of the Heartland Group Board, to chair the meeting and provide a high-level overview of Heartland's performance and activities in the 2025 financial year and its focus moving forward. This will be followed by an address from Heartland Group's Chief Executive Officer, Andrew Dixon. This will in turn be followed by an address from the New Zealand Bank Chief Executive Officer, Leanne Lazarus, and the Australian Bank Chief Executive Officer, Michelle Windsor. The chairs of each bank are also here today and available to answer any questions.
Following this, there will be an opportunity to answer any questions you may have about Heartland's performance, strategic direction, and operations. I encourage shareholders attending online to begin to submit their questions now, if they have not already done so. We will answer as many of these questions as we can at the appropriate time. Thereafter, we will move to the formal business of the meeting, including voting on the resolution posed to you today. I would now like to introduce the directors and Chief Executive Officers, Greg Tomlinson. Greg is the Chair of the Heartland Group Holdings Limited Board. Greg was appointed a director of Heartland in March 2013 and was appointed Chair of the Heartland Group Board in February 2023. Andrew Dixon. Andrew was appointed Chief Executive Officer of Heartland Group in October 2024.
That same month, he was appointed to the Heartland Bank Board, and in February 2025, he joined the Heartland Bank Australia Board. Michelle Windsor. Michelle was appointed Chief Executive Officer of Heartland Bank Australia in July 2024. Geoff Summerhayes. Geoff was appointed Chair of the Heartland Bank Australia Board on establishment in April 2024. Geoff had previously been a director of the Heartland Group Board. Kate Mitchell. Kate was appointed as a director of Heartland Group in October 2021. Kate is also a director of Heartland Bank New Zealand. John Harvey. John has been a director of Heartland Bank New Zealand since establishment in 2011, and he was appointed to the Heartland Group Board in April 2024. Leanne Lazarus. Leanne was appointed Chief Executive Officer of Heartland Bank New Zealand in August 2022. Leanne is also a director of Heartland Bank Australia. Bruce Irvine.
Bruce is the Chair of the Heartland Bank New Zealand Board, where he has been a director since its establishment in 2011. Bruce is also a director of Heartland Bank Australia. Simon Beckett. Simon was appointed as a director of Heartland Group in June 2024. Rob Bell. Rob was appointed as a director of Heartland Group in June 2024. Returning now to the business of the meeting, I advise that all valid proxies and postal votes received from shareholders within the prescribed time limits have been admitted. I can confirm that a total of 772 proxies and postal votes have been accepted. This represents some 310,608,790 shares, or 33% of total issued shares in Heartland Group. I can say that for the resolution before us today, approximately 91% of these proxy and postal votes are in favor. I would now like to outline the meeting procedures for today.
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 in shareholder discussion and the business of the meeting is confined to ordinary shareholders present in person, online, by proxy or by authorised representative. Regarding the voting procedures for today's meeting, the resolution 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 the resolution decided by way of a poll, we are counting all postal votes, proxy votes, votes online, and votes from the floor. The resolution will be put to the meeting. Shareholders joining us in the room should have received a voting card on registration.
Please keep your voting card with you until the resolution has been voted on. Our share registrar, MUFG Pension and Market Services, will then move through the room with the ballot boxes and collect all voting cards. If you need to leave the meeting before the end, you may place your voting card in one of the ballot boxes at the exit with an MUFG Pension and Market Services staff member. For shareholders attending the meeting online, when the online registration is validated, you will receive an electronic voting card, which you can use to cast your vote. To vote, you will need to click "Get Voting Card" within the online meeting platform. You'll be asked to enter your shareholder or proxy number to validate.
Please then mark your voting card in the way you wish to vote by clicking "For," "Against," or "Abstain." 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 guide or phone the helpline on 0800 200 220 if you require assistance. Voting will remain open for five minutes after the conclusion of the meeting. The notice calling this annual general meeting was published electronically on the 30th of September 2025, with hard copies subsequently sent to shareholders who requested a copy. That notice outlined the formal business for this meeting and also provided background information on the resolution to be voted on. The minutes of the last annual general meeting held on the 30th of October 2024 have been approved and confirmed by directors, as is our custom.
A digital version is also available on Heartland's website at heartlandgroup.info. I will now invite Heartland Group Chair Greg Tomlinson to address you. Following addresses by Andrew Dixon, Leanne Lazarus, and Michelle Windsor, we will then move to the shareholder discussion, which our Chair will facilitate. We invite online questions to be submitted now to allow us to answer these at that time. Thank you.
Thank you, Phoebe. Good morning, ladies and gentlemen. Thank you for joining us on this lovely day out there. It is a pleasure to be in Ashburton for this year's annual general meeting. 2025 marks 150 years since Heartland's earliest predecessor, the Ashburton Permanent Building and Investment Society, was established. The last time we gathered here was in 2012, making our return even more special as we mark this significant milestone. As we recognize our rich 150-year history, this is a moment to pause, reflect, and celebrate how far we have come. It is a tribute to the many people who have shaped the organization over the years, the founders of our predecessor institutions, the leaders who guided us through the times of change, the employees whose commitment and hard work have shaped our success, the customers who have placed the trust in us, and shareholders who have supported our vision.
One of those leaders was Graham Kennedy, who we will hear from shortly. Graham is a former chair of Ashburton Permanent, former director of Heartland Bank, and current trustee of the Heartland Trust, Heartland's registered charitable trust. While we can trace our history back to Ashburton in 1875, Heartland as a banking organization is still very young. Heartland emerged in 2011 in the wake of the GFC, with a clear ambition to build a bank that could thrive by doing things in a, you know, in another way. Heartland chose to concentrate on specific market segments. This strategy has served us well, and we have come a long way since formation. Receivables have grown from NZD 1.7 billion at the end of FY11 to NZD 7.2 billion at the end of FY25.
In the same period, Heartland's net profit after tax has increased from NZD 7.1 million to NZD 38.8 million, or NZD 46.9 million on an underlying basis. Building on the momentum achieved in the second half of FY25, Heartland delivered a solid performance for Q1 and is on track to deliver an underlying net profit after tax of at least NZD 85 million for FY 2026. We are still young and just at the beginning of our journey to achieve scale. In New Zealand, FY25 saw us renew our focus in certain asset classes, which provide an appropriate return. We are focused on growing our core product sets: reverse mortgages, rural finance, motor finance, and asset finance, and exiting assets that are no longer a strategic fit. Andrew Dixon will provide more information about our non-strategic asset progress, which is ahead of plan.
The reverse mortgage portfolio is our core product, and where effort has been placed in New Zealand. Our early mover advantage positions us to extract significant value from the segment. In other areas, business performance has been slower. In motor finance, we have made meaningful progress in arrears management and have achieved notable successes in recoveries and collections. We're also being more selective in terms of who we are partnering with to ensure we're writing quality business. While these improvements have contributed to the portfolio's contraction, they ensure Heartland remains well positioned in a changing market. Leanne Lazarus will provide a more detailed update. With regard to Australia, the ADI acquisition and the regulatory requirements associated with it placed increased costs on Heartland. The operational integration of existing Australian businesses into the ADI was a big change to the organization.
With access to retail deposits through the ADI license, we have strengthened our ability to compete and grow in Australia. The reverse mortgage book stands out as a significant area of opportunity, and our efforts here are already delivering promising results. While livestock finance has not performed as well as we would have hoped, we understand the challenges and remain committed to the sector. Michelle Windsor will provide a more detailed update on the Australian Bank. Moving now to the board and management updates. Since our AGM last year, a number of appointments have taken place to ensure Heartland's teams have the skills and support needed to deliver value for customers and shareholders. On the 3rd of February 2025, Andrew Dixon was appointed non-independent non-executive director of Heartland Bank Australia. In February this year, Michael Jonas was appointed to the role of Chief Strategy Officer of Heartland Group.
Within the New Zealand Bank, Peter Griffin was appointed to the role of Chief Commercial Officer, and we welcomed Alastair Scott as Chief Auto and Asset Finance Officer and Rebecca Thomas as Chief Digital Transformation Officer. As our renewed strategic focus beds in, we have seen improvements begin to flow through to key metrics essential to shareholder return. While Heartland's return on equity and earnings per share are below historical levels, we saw a strong rebound in the second half of 2025, with return on equity at 6% and earnings per share at $0.066 per share. We have seen this positive momentum continue in the first quarter of 2026, with underlying return on equity for the quarter of 7.6% and underlying earnings per share of $0.025 per share.
Regarding dividends, in September, we paid a final dividend of NZD 0.02 per share, bringing the total dividend for FY25 to NZD 0.04 per share. The payout ratio for the second half of FY25 of 52% was in line with Heartland's targeted dividend payout ratio of at least 50% of underlying net profit after tax. Our dividend policy reflects the realities of our growth strategy. Australia is a growth investment for Heartland, absorbing capital to support expansion and innovation. While this requires patience from shareholders, we are confident that our investments will deliver sustainable returns over time. We remain committed to balancing growth with the delivery of appropriate returns to our shareholders.
Our focus for FY 2026 is on maintaining a refined strategic focus, core lending growth, expanding further into reverse mortgages, where the addressable markets present a significant growth opportunity, operational cost control, leveraging technology to unlock efficiency, scalability, and future growth, and continuing to prioritize efficient use of capital. Heartland is well positioned to face the future with great confidence. We are investing in areas of opportunity and remaining agile in response to changing market conditions. Our renewed focus on our core product set reflects our beliefs in the value of these segments. With your continued support and patience, I am confident that Heartland will deliver on its promise of sustainable, profitable growth and enhanced shareholder returns. I would now like to invite Graham Kennedy to provide an update on the Heartland Trust charitable activities. Thank you, Graham.
Thank you, Greg. Good morning, everybody. The Heartland Trust is a registered charitable trust that is independent from but closely supported by Heartland Bank in New Zealand. The purpose of the trust is to give back to the communities in which Heartland operates through the areas of education and learning, arts and culture, mental health and well-being, and sport and physical well-being. Going back to when Heartland was formed, we found that Southern Cross Building Society had a large number of small shareholders that were gone no address. After an extensive search and the appropriate legal process, these shares were transferred into what is now the Heartland Trust. The trust now has 6.5 million shares in Heartland Group Holdings Limited. The trust is governed by four trustees: myself, Bruce Irvine, John Harvey, and Sir Christopher Mace.
The dividends received by the Heartland Trust have enabled the trustees to distribute grants to 17 community organizations in the year 2025. That totaled NZD 465,000. We have had a range of local beneficiaries this year, including the Ashburton Schools Music Festival, Ashburton Performing Arts Centre, Ashburton Age Concern, Christchurch Boys High School Rowing, the Mid-Canterbury Tennis Centre Charitable Trust, and the Christchurch Wood Festival. However, there are two main beneficiaries. The two main beneficiaries were Boost Literacy Programme and Tātai Whetū Waitaha and Athlete Support Programme. Boost is a child literacy programme delivered by the Ashburton Learning Centre, supporting primary school children across Mid-Canterbury, age seven to nine helping them develop essential reading and writing skills. This important initiative is jointly funded by the Mackenzie Charitable Foundation and Advanced Ashburton Community Foundation, reflecting a shared commitment to improving educational outcomes for young Kiwis.
Tātai Whetū Waitaha is an athlete support program delivered by the Canterbury Sports Development Academy. This program currently provides 38 aspiring Canterbury athletes with opportunities to develop their potential through access to tailored support, mentoring, and professional networks. They are supporting 10 high-achieving athletes in Mid-Canterbury alone. As a past Canterbury-based director of Heartland, and particularly as we are today acknowledging our 150-year milestone, I'm proud to see that the investment by the trust and community organizations across Canterbury. Thank you. Thank you, Greg. We look forward to those increasing dividends. We've still got work to do.
Good morning and welcome all, and thank you for joining us at this year's annual general meeting. FY25 presented a unique set of challenges and opportunities marked by a period of significant reset, change, and integration. We have deliberately recalibrated our strategy, sharpened our focus on core products, and taken decisive steps to ensure capital is allocated where it delivers the strongest returns. This reset has laid the groundwork for a more resilient and agile banking group and is something we will continue to test on an ongoing basis. Our net profit after tax for the year was NZD 38.8 million. On an underlying basis, NPAT was NZD 46.9 million, which, while meeting NPAT guidance of at least NZD 45 million, does not represent our desired performance for Heartland, following a challenging environment and the impact of necessary strategic changes.
Importantly, we restored our net interest margin to near historic levels, with each bank delivering strong exit margins. This positive trend has continued into the first quarter of FY2026, as Heartland delivered a solid performance, improving profitability and return on equity across the quarter. Overall, net interest margin continued to expand, and cost growth remained stable. The strong reverse mortgage momentum experienced within both banks has continued through FY2025 into the first quarter, while subdued markets and usual seasonal contractions impact growth in Heartland's other core lending portfolios. Capital optimization was a key priority for us in FY2025 and a critical part of our reset. This was reflected in several initiatives undertaken, including the run-off of unsecured lending and the accelerated realization of non-strategic assets, which has enabled the redeployment of capital into higher-return core lending portfolios. I will speak more about this shortly.
A substantial increase in impairment expense was incurred in the first half of FY25 in response to ongoing economic deterioration in New Zealand and to de-risk and reposition some of the New Zealand Bank's lending portfolios. Necessary changes made to collections, recoveries policies, processes, and leadership have delivered early tangible improvements, with the recovery efforts outperforming expectation and total motor finance arrears now outperforming the industry average. As Greg discussed, we also completed the operational integration of our Australian businesses into Heartland Bank Australia, creating a new and unique bank. The Australian funding transition has continued to be very successful, as deposits now form 86% of the bank's funding, providing it a deep, stable, and diverse platform to efficiently fund the significant lending opportunity we have ahead of us.
As a condition of the ADI acquisition, Heartland required an evolution in its role as the listed parent company of two banks, and a number of responsibilities shifted from Heartland into those banks, with Heartland's operations now focused on group strategy, investor relations, corporate finance, capital allocation, and strategic and risk management oversight of each bank. We have made extremely strong progress in the realisation of NSAs in FY25, and I'm pleased to report that in the first quarter of FY 2026, our NSA realisation has not only continued at pace but has exceeded our own quarterly estimates. This momentum has carried into the second quarter. Key highlights include the accelerated exits from rural and business relationship borrowers, primarily through the sale of security and refinancing. Notably, the largest relationship exposure was partially settled in the first quarter, with the remaining refinance settled in October 2025.
The third largest relationship exposure also went unconditional in September and was repaid in early October. Home loans, which closed to new business in March 2025, continue to run off ahead of expectations, driven by early repayments. We also achieved the unconditional sale of one of the two dairy farms with settlement in October 2025. We completed the exit of Heartland's shareholding in Harmony as well, achieving a sale price significantly above carrying value as at 30 June 2025. This generated a fair value gain of NZD 3.1 million, which was the key difference between our underlying reported results for the first quarter. We expect this to remain the key difference for the results for the remainder of FY 2026. Additionally, the sale of Heartland Bank Australia's shareholding at Alex Bank was also settled in October 2025.
By the end of this calendar year, we estimate the value of NSAs will be a little under NZD 180 million, a reduction of NZD 358 million, or nearly 67% since 30 June 2024. Looking ahead to FY 2026, Heartland expects to deliver an underlying return on equity of at least 7% and an improved underlying net profit after tax of at least NZD 85 million. While Greg mentioned several areas of focus for FY 2026, two critical themes are, firstly, increasing process automation to improve customer experience and deliver true operating leverage. Secondly, ensuring capital is deployed efficiently into return on equity accretive activity against a backdrop of continued regulatory change. Regarding technology uplift, targeted investments in technology and automation will enable sustainable growth and operational excellence into the future. In late 2023, Heartland Bank completed its upgrade to a modern core banking system.
Since then, Heartland has focused on executing and integrating strategic acquisitions made in Australia. With these complete, in FY 2026, Heartland will invest in a targeted technology uplift to resume and reinvigorate digital transformation in each bank. Leanne and Michelle will discuss this further in their addresses. This technology uplift will modernize our existing infrastructure and deliver new capability within the respective banks, resulting in greater efficiency and enhanced customer, intermediary, and employee experience and positioning both banks to be able to meet customer demand at scale. Regarding capital efficiency, Heartland welcomes and will continue to participate in the Reserve Bank of New Zealand's review of key capital settings. We see this as a critical pathway to support Heartland Bank's ability to remain competitive, reduce the cost to the end customer, and deliver a significantly improved return on equity.
Heartland Bank made a submission as part of the Reserve Bank of New Zealand's consultation process, with a particular focus on capital levels, asset risk weights, and the composition of regulatory capital. We remain fully supportive of the Reserve Bank of New Zealand's objective to ensure a resilient and stable financial system that protects depositors and the broader economy. We will present our updated long-term ambitions at an investor day, which is now scheduled to take place in March 2026, following Heartland's interim financial results, due to take place on Thursday, 26 February 2026. This timing will allow each bank to complete its contract negotiations with its preferred vendor for its respective technology initiatives and also takes into account investors' availability over the festive period.
At the investor day, we will share the key metrics and growth drivers that will underpin our ambitions through to FY2030, including our continued focus on return on equity, core lending growth, and operational efficiency. In closing, I want to acknowledge the resilience and commitment of our people, the support of our shareholders, and the trust of our customers. We have faced into a number of issues, made the necessary changes, and are beginning to see the benefits. We have made significant progress, and the early signs of positive change are encouraging. I am confident that we can deliver on our promise of sustainable, profitable growth and enhanced shareholder return. I will now hand over to Leanne Lazarus, followed by Michelle Windsor, to provide updates on our respective New Zealand and Australian banks. Thank you.
Hello everyone. Good morning. It is a privilege to join you in Ashburton for this year's annual general meeting, marking 150 years since Heartland's beginning in this community, a testament to our lasting partnership and heritage. As a region, Canterbury hosts 13% of New Zealand's population but provides 26% of Heartland's deposits, so punching twice above its weight in funding Heartland's assets. Turning to the financial year that has been, as mentioned, financial year 2025 was a year of reset and change for the New Zealand Bank. At the beginning of financial year 2025, we faced some challenges, including the need to respond decisively to a changing economic environment. We took proactive steps to de-risk and reposition parts of our lending portfolio, resulting in a NZD 49.6 million impairment expense.
While this impacted our first half-year results, it was in the long-term interests of our business, our customers, and you, Heartland's shareholders. Since then, we have refined our core product sets. These are reverse mortgages, which continues to experience strong growth, rural finance, which we are highly committed to, motor finance, asset finance, and savings and deposits. We also focused on improving asset quality. We committed to greater cost discipline and accelerating non-strategic asset realisation to enable capital to be reallocated to high-return core lending products. Today, Heartland Bank remains strong, stable, and well-capitalized. We have also made changes to our leadership team to ensure we have the right expertise to drive sustainable growth within our core product sets and accelerate digitalization and automation, also to deliver an outstanding customer and originator experience.
Our strategy is clear and well-defined, with the vision to be New Zealand's leading specialist bank, underpinned by the three pillars of quality, efficiency, and growth. We are already beginning to see the benefits of this strategic reset. As mentioned, we have refined our core lending strategy to support quality, sustainable growth within our core product sets. We have introduced new credit decisioning scorecards for our motor finance and have shifted motor finance focus from lending that is originated primarily through brokers to lending through higher quality direct-to-consumer channels known as motor direct, also with our franchise dealers and branded distribution partners. The introduction of a more prescriptive collections, recoveries, and write-off strategies has had a positive effect on asset quality, as both Greg and Andrew have described. We are still on track to have no motor finance arrears greater than 180 days past due by 30 June 2026.
For our business finance customers, trading conditions have been challenging. This was reflected in arrears which increased throughout financial year 2025 and into the first quarter of this financial year. However, we are starting to see an improvement early into the second quarter of the financial year. At the end of October, total business finance arrears were down NZD 2.9 million, with non-performing loans down NZD 5.9 million. Our teams are still working closely with customers to support them through this period, and we expect to see further reduction in non-performing loans as we near the end of this calendar year. The portfolio remains well-provisioned, reflecting the secured nature of this lending. Our focus on efficiency is about disciplined cost management and efficient use of capital. It also describes our focus on automation to increase speed and ease for both our customers and our employees.
Costs did increase in financial year 2025, primarily due to non-repeating benefits in financial year 2024, investment in core functions to enable higher quality growth, and to address additional regulatory oversight responsibilities arising from owning an Australian authorised deposit-taking institution, and then the amortization of our core banking upgrade, which completed in 2023. Cost growth has stabilized in the second half of 2025 and remained stable throughout the first quarter of this financial year. We have actively managed our cost of funds to the end of financial year 2025 with a strong margin. Net interest margin was 3.87%, with an exit margin of 4.13%. We are pleased to see this positive trend continue through to the first quarter of this year, with 4.06% as our margin and an exit margin of 4.08%.
Leveraging the completion of our core banking system upgrade late in 2023, we will be continuing to invest in technology and automation to reduce manual ways of working. This limits how quickly and easily we can convert demand into new business. It is absolutely imperative that we do this. This investment means that we will be able to deliver an even better experience for our customers and originators and enable scalable growth within our core lending portfolios. The New Zealand Bank's growth focus is on our specialist lending portfolios, where our customer value proposition is strongest. We are continuing to see great momentum in reverse mortgages, with receivables up 14% in the first quarter of this financial year, reflecting solid ongoing demand. Excluding livestock finance, which experienced the usual seasonal contraction, the rural portfolio grew by 6.1% in the first quarter.
Subdued markets impacted growth within motor finance and asset finance. The recent motor finance retraction also reflects our shift to a higher quality distribution channel, better positioning the portfolio for quality growth. Building on our strength as the reverse mortgage market leader, we launched village access loans, expanding our offering to better serve older New Zealanders. We also leveraged our vehicle lending expertise by introducing Merrick Marketplace, a new online platform that simplifies vehicle purchasing and financing, further strengthening our presence in the motor vehicle finance market. As earlier covered, during financial year 2025 and 2026, the New Zealand Bank's focus was and is on winding down assets that no longer are a strategic fit. This is progressing ahead of schedule, with several large exposures settled in full.
This accelerated progress, together with holding firm on the quality of the business that we are willing to write, contributed to a retraction in Heartland Bank's lending portfolio over the year. These decisions were made with prudence, prioritizing quality, stability, and resilience. We have a very clear focus for this financial year of building our strengths across our core portfolios. We are committed to helping older New Zealanders achieve financial freedom through our reverse mortgages, supporting growth for our farmers, making it easier for our customers to get on the road or invest in new assets, offering competitive deposit rates, and investing in technology to enhance efficiency, scalability, and customer experience. Finally, I want to extend a heartfelt thanks to you and this community and to our shareholders for standing with us as we navigate a change to position Heartland for continued success.
Your commitment has been foundational to our success. From multiple building societies to a trans Tasman banking group, we are proud to call Ashburton home. I will now hand over to Michelle Windsor to discuss the Australian Bank. Thank you.
Thank you, Leanne, and good morning, everyone. It is wonderful to be here with you in Ashburton today. I'm very proud of the way that we finished our first full year of operation in the Australian business and the enterprise value that we created in FY25. Our strong performance has continued in the first four months of FY 2026, and we are well-positioned to deliver on our commitments for the current financial year. Our vision is to be Australia's leading specialist bank with a focus on enriching customers' lives through financial freedom. We are committed to our core specialist areas: reverse mortgages, livestock finance, and deposits. Retaining this focus and deepening our expertise in these markets will ensure we deliver optimal value for our customers. FY25 was a year of reset for us, consolidating a bank with Heartland's two existing non-bank finance companies to form Heartland Bank Australia.
We focused intensely on integration, strengthening our leadership, and uplifting capability and processes to meet APRA regulations and protect our customers. We have improved our risk capability and formed partnerships to ensure the business can achieve prudent growth into the future. The work completed in FY2025 has been critical to establish a solid baseline for us to achieve prudent growth. As we said in our recent results announcements in the last AGM, our key areas of focus in the business remain business growth, service excellence, and diversifying distribution. As our financial results demonstrated, we improved business momentum half-on-half during FY2025, and this has continued in FY2026. Our reverse mortgages achieved a new record level of funding in October at over AUD 51 million, taking our book to over AUD 2.1 billion year-to-date.
Our pipeline of new business is at record levels, putting us in a good position to achieve our FY 2026 growth aspirations. Livestock has returned to positive growth with a record result in October, post the seasonally colder months in the first quarter. Purchases for both cattle and sheep are at record levels and significantly higher than the prior 12-month rolling average. We continue to have strong demand for our deposit products, which is funding organic growth and saw the repayment of our final outstanding NZD 100 million medium-term note before its contractual maturity date in October 2027. The bank is now 86% deposit-funded within 18 months of its acquisition.
In relation to service excellence, our key focus areas have been significantly reducing our application turnaround time from over 60 days turnaround time to eight days, the implementation of a new customer satisfaction survey, providing real-time insights to continually improve the service that we provide. We've enhanced our customer engagement and retention activity through insightful communications, and this ensured repayment volumes held steady at approximately NZD 23 million per month, enabling new business to consistently surpass runoff and drive net portfolio growth. We established new leadership to guide our customer service teams to deliver exceptional customer service to our direct channel. In relation to diversifying distribution, our key areas of focus have been deepening relationships and working closely with our accredited partners and brokers.
This is evidenced by more than half of our new reverse mortgage business coming from the broker network and underscoring its pivotal role in our distribution strategy. Expanding partnerships and sponsorships in the livestock business to now include agents. The agent network gives us access to farming communities across Australia wide. Similarly, our expansion of our partners in the deposit business has provided us with access to broader customer segments and enabled us to achieve the growth required to fund our lending. The work completed to set the business up in FY25 has provided a strong platform for growth. We executed a comprehensive and successful reset, consolidating our business and taking strong momentum into FY 2026. Our reverse mortgages are achieving accelerated growth, and our livestock business is recovering robustly, already showing double-digit growth in applications in October.
We have extensive market data to support our view on the potential opportunity in Australia, and we've utilised these insights to develop a clearer go-to-market strategy. While reverse mortgages' competition is increasing, with non-banks and fintechs demonstrating interest in our specialist markets, our response remains disciplined and evidence-based, and our market leadership positions us well to meet the significantly untapped potential available to us. Our Australian market share grew from 36% to 40% in FY25. Regarding our technology uplift, FY 2026 will be a year of transformation for Heartland Bank Australia. After completing a market search and selecting a preferred vendor, we have embarked on a technology initiative to implement a new unified origination and servicing platform. This initiative will support us with our growth ambitions and digitisation. Costs related to this technology initiative are expected to be elevated in Q2 as vendor negotiations and program planning continues.
We are now in the final contract stages, and we'll present further detail on the initiative at the investor day that Andrew spoke about early in the calendar year. In summary, we have the talent, the clarity, and the discipline to succeed. Our focus is now singular: to maintain this momentum, simplify our business, and strengthen the partnerships that will ensure we deliver exceptional sustained value for our customers and Heartland's shareholders. Thank you for your time today, and I'll now hand back to Greg.
Not the easiest. Excuse me. Right, thank you. I think I'm organized at last. Right, so shareholder discussions, I'll open that, please, to the floor. Right, thank you, Michelle. Ladies and gentlemen, before opening the meeting for questions, I advise that Karen Shires of PwC, the company's auditor, is present today and can answer any questions relevant to the conduct of the audit and the preparation and content of the auditor's report and the year ending 30 June 2025. Shareholders joining online who wish to ask a question on Heartland's performance, strategy, or operations can submit their questions through the online meeting platform now. We will aim to answer as many of those questions as possible. Any comments, questions, or matters raised for discussion during the meeting must be relevant to the business before the meeting.
If you have matters you would like to raise as a customer, the board and management can answer your questions during refreshments after the meeting. For those online, please submit any customer questions, and we will respond after the meeting. Shareholders, we are also invited to submit questions prior to our annual general meeting. We received three questions, which I'll address now. The first question was, what is the progress on selling non-core assets and realising cash from them? Andrew provided more detail on his address. Significant progress was achieved in the realisation of non-strategic assets during FY25. This has continued into FY 2026. First quarter results exceeded our own projections, with strong momentum earlier in the second quarter. By the end of this calendar year, we'll be a little bit more specific than that. Excuse me, Mike?
Yeah, look, we'll come to that at the end of this. Thank you. By the end of this calendar year, we anticipate the total value of non-strategic assets will be approximately NZD 179.5 million, reflecting a reduction of NZD 358.1 million, or 66.6% since June 2024. I hope that's got it answered for you, Mike. The next question asked, the share price took a dive last financial year through poor performance and has moved up slightly lately. What decisions have been made to arrest this situation arising again? Look, we recognize that performance and key metrics important to shareholder return have been below historical levels. Our priority is to maximize shareholder value through prudent capital management and by concentrating on asset classes where Heartland can compete and deliver exceptional customer value while providing an appropriate return. That means keeping things simple, increasing efficiencies, and a particular focus on improved return on equity.
We're seeing encouraging asset quality improvements flows from the changes made to collections and recoveries strategies in New Zealand and from refining our core product set. We're also seeing encouraging signs with return on equity and earnings per share both improving in the second half of FY25. That momentum has continued into the first quarter of FY 2026. Underlying guidance and a, sorry, we're on track to meet our FY 2026 underlying guidance and are confident in Heartland's ability to deliver enhanced shareholder return. The final question came from shareholders in Melbourne. The question asked, what services does Heartland provide in Australia? How do we access these? Are term deposits available, and are they competitive? Response here. Heartland Bank Australia was formed in May last year after Heartland acquired the bank and integrated its existing Australian businesses into it. Heartland Bank Australia offers three core products: reverse mortgages, livestock finance, and deposits.
More information and access to these products can be found from the bank's website. Its offerings do include term deposits, which are competitive. I will now open the meeting for questions, starting with those in the room, followed by questions online. Yes, Oliver.
Thank you, Greg, and thank you for the presentation and discussion so far. My name is Oliver Mander from the New Zealand Shareholders' Association. Look, we have noticed in the accounts obviously there was a significant payment made to the former CEO on his departure. It's always a tricky conversation for a board. I'm well aware of that. I guess in the interest of looking forward, would Heartland be prepared to make disclosures in terms of severance arrangements for the current CEO just to avoid any future surprise for shareholders?
Okay, thank you, Oliver. I know I suspect that's on other shareholders' minds, so that's a good question. I just think, yeah, we've got to put it into context. This business has been a startup, and we're just getting through the startup phase. We've managed an amalgamation of a number of assets that were troubled through the GFC. We've managed to attain a New Zealand banking licence and laterally the Australian ADI. This is quite a big shift. You think about what the value that Geoff Greenslade brought to this business over that period was nothing but outstanding. We've got to put it into perspective. We don't think that that's unfair. In Geoff's exit payment on his retirement. Now, does that set a precedent for the future? Of course, no. This was a special situation under special times with special results. Thank you.
Thank you for the clarity. To get back to the question, would the bank—sorry, would the group be prepared to disclose the severance arrangements for the current CEO just as a matter of course, and that provides greater clarity in terms of those expectations?
I'm sure we can, yes, as the answer.
Thank you.
Thank you. Although it's a bit of an unusual request.
Sorry, just to clarify that there are many index companies that do that as a matter of course, and it's something that we do encourage.
Noted. Right, thank you for the call.
Yeah, Mike Bensman, shareholder. I think in your presentation you talked about achieving a desired level of underlying profit. I just wondered what you thought a desired or minimum or target level of underlying profit and return on equity would be. I guess what is the target moving out beyond next year?
I mean, we've provided a plan for—we've got a plan for FY28, and I mean, we've worked pretty hard to achieve that. Of course, it's been quite tough in this current environment, but there is—we will be getting back to our historical levels of returns. You have to bear in mind we've got—we are growing strongly in Australia, which is a drag on capital. Andrew, is there anything else you'd like to add there?
Hi, yes, this is on. The reference to desire was really just getting back to above $100 million, which is where we were over the last couple of financial years before the most recent financial year, and getting that return on equity up and above at least 10% in the near term. Those will be our desires. Obviously, there is a longer-term ambition, which we will be presenting back next year, which will be well in excess of those numbers.
Thanks for that.
Yes,
from— Colin Cameron from Telpo, just driven through the night, so I've got a bit of a fuzzy brain at the moment. First off, with most world economists saying the way the economy is and geopolitical situations, why doesn't the bank stop paying out a dividend and actually build up a lot of cash to keep safe and make certain that we are going to be able to progress further down the line? Secondly, not to actually have a dividend reinvestment plan. Thirdly, have a buy set at a share set at, say, $1, that any time it goes under $1, the bank steps in and buys the shares at that minimum amount. Fourthly, which is—now, I've just totally forgotten what it was going to be. Sorry, I'll pass it off.
Thank you for that questioning. I think in simple terms, we're not capital constrained in this business. We're very focused on returns to the shareholders and growth. Now, we have—we've been very, very clear on what we're providing to our shareholders. Now, on the buyback issue, we don't buy back shares. We don't need to. There's not a desire or a requirement.
Orphan, you just remember it. With the way the four big banks in Australia and New Zealand are, and then previously, like ANZ buying Trust Bank and all that, do you foresee in the very near future the four big banks are looking for an edge in the market? Heartland has got that edge that any one of them may come a-knocking. Thank you.
I can't answer for the other major players, but yes. We're just carrying on with our business. We're focused on our areas of expertise, and we're not worrying about the others. Thank you. I'll just open up Mike, if you've got a question.
With the AI situation in the marketplace, maybe Andrew could give us a feel.
Hello. Maybe Andrew could give us a feel on what benefits that, or otherwise, that might have on Heartland's activities in the marketplace going forward.
Thanks for the question. We're very much at the early stages of AI adoption, it's fair to say. We've been partnering with industry leaders to ensure that AI in Heartland is responsibly designed and well governed. For us, the next stage of AI links to our technology programs in both countries. We will be looking to significantly enhance and get further up that curve with AI.
Andrew, is that a cost or is that a saving?
It's initially going to be a cost. These technology programs, unfortunately, cost money. There will be upfront costs. We will be removing a lot of cost from existing technology and subscriptions that we already have, and we'll be saving a lot from removing the manual processes that we currently have. We'll be looking to adopt AI through the loan process as much as we can throughout that.
Thank you.
If I can—can you hear me? Okay, if I can just add to what Andrew has said. At present, we do use some components of AI within our business, but we have to make sure that it is safe and secure for our people and also our customers because fraud and scams are on the rise as well as cyber threats. Security is absolutely key. The technology we are looking at investing in does have components of AI. What it will do is make our people more efficient. It will make the way in which we deliver products to our customers faster for them to access. That is what we are working on.
As Andrew said, whilst it is a cost to invest in some of that, this is not a large cost. It will unlock opportunity for us to deal with the demand for growth because at present, we have components of our business that are manual that you have to add people. The technology we are looking at, and we do have components of that, just helps our staff be more efficient. Hopefully that's answered a bit more.
Thank you again.
Yes, stay on the back.
Yeah, look, it's Philip Bean, and I'm a shareholder of Heartland. I've been sort of for 25 years, so I've been able to watch the progression of CBS and then going on through into Heartland. Now, I've listened to the talks here, and it's very rosy going forward, but I would just point out that Heartland Bank, for the last two years, has been negative 34% return to the shareholders. Comparing it to other banks, four other banks that I've just got here as representative examples, they've done a positive 47%-123% in that same period. It is fair to say that Heartland has destroyed shareholder value. Anyone who's bought shares in Heartland since 2018, even allowing for the dividends, has actually gone backwards in a cash sense. They have not got a return on their investment. They've actually gone backwards if they were to sell today.
Now, for a number of years there, I watched the Heartland results. They went up quite steadily. It was good returns. Then all of a sudden, out of the blue, it seemed to just about tip over a cliff. First words of disgruntlement were having some issues getting staff for collecting of debts. Then the bad debts started to come through. From what I was sort of looking at, and I sort of wonder, had there been some carrying forward of bad debts that were being sitting in the balance sheet that weren't being adequately provisioned or written off at the time? I would wonder at what stage the auditors sort of perhaps looked at that, who picked it up. Given that the departing CEO got a very handsome reward, I sort of it would appear that it perhaps wasn't sitting on his desk.
The question is, and it's really one for the board of directors, is were the systems in place for bad debt reporting, for the collection of bad debts, has that changed, has that improved? Because the last thing I'd want to see is for the bank to continue to report increased profits over the forthcoming years and then have a drop-off again, saying, "Whoops, we've got a problem here. The eyes dropped off the ball," so to speak. Are the directors confident that the appropriate reporting is in place for the collection of debts going forward?
Yes, look, we will give you confidence on that with the changes. I think just let's put it into perspective. We've gone through the GFC. We have supported customers, possibly to the extent that we've been overgenerous. I think we'd be better off to pass this on to Leanne, and she can answer it in a deeper.
I'll start.
Context. You're going to do it, Bruce.
To answer the last question first, are we confident about our collection processes and the discipline that we have now? The answer is absolutely yes. You will have seen there have even been articles about what we are doing around repossessions and what we are doing around all of that discipline. If you look at the issue of the returns that the shareholders have in the holding company, those returns obviously were significantly impacted by the write-offs that we had at the beginning of this year. You look back at those write-offs and you go, "Why did not we know about those? Where did they come from?" The answer is there are a number of elements, I guess, of what I would describe as the old perfect storm.
The first thing was that when COVID hit, we offered to extend a lot of our debt, and NZD 170 million of our debt was extended. A lot of that was in the motorbook. We had three-year motor loans. We extended them to five to six years. We then worked to remediate with those customers who had asked for that extension, and we worked with them to remediate those accounts and so on. It was on the basis that what would happen is post-COVID, with an improvement in the economy, they would then be able to pay back the extended debt that we had allowed. We have not had that improvement in the economy through 2024 and early 2025. What we did was we then went and did a deep dive into those books.
A lot of that additional write-off that we did at the beginning of last year was in the motorbook, which were loans that we extended from the COVID period. It was as a result of that that we then also have gone, instead of trying to remediate some of these loans, we've actually taken a far more disciplined approach in terms of collection and recovery of those loans. That is a transformation that has happened in the current last 12 months. I don't know if that answers your question for you.
Yeah, no, thank you. That does answer the question. I was going to sort of go on a bit further and say that I've noted that when there's a liquidation that comes out in the paper, Heartland's name seems to appear with frequency. In the revenue department, it's always there as a creditor, but Heartland seems to be coming through a little bit too often as well. That would be a reflection of perhaps.
It's a result of that increased focus. Yep, correct.
Correct. Again, as a shareholder, that's my money or the shareholders' money going out for the goodwill of the customer or the person who's borrowed. I'd certainly like to see a few more of them being tipped upside down, shaken up, and perhaps taken through the next year.
I think it's also fair to say that although you might see that in the paper a lot more, those loans are all adequately provisioned as well now. Okay.
Thank you.
To close that question off, we do not write that business today. We have changed our business writing strategies in recent years. These are loans that predate 2019.
Okay, thank you.
Yes. Can I congratulate the board on the fact that you've managed, in very difficult circumstances, to not only stay in business, but to pay a dividend. I think it's a quite spectacular result. Congratulations.
Thank you. Yeah, as I'd say, we will bank that one. Keen on the bank.
Shareholder, my question is relating to you've got 612 staff according to your annual report, but I'm looking at the number of executive salaries you're paying out compared to similar banks and similar size. We've got $4 million salaries. We've got 10 or more with $500,000 salaries, and that has continued over the last few years. It doesn't seem to show much evidence of really controlling the issue and making sure we're getting good return for our money.
I mean, you've got a few questions there, really. Number one, the $4 million, please don't focus on that. That was a one-off. Now, in terms.
Are you talking about the individual salaries of your four senior executives?
Yes. Okay. We've got growing businesses, and they've got high levels of complexity over two jurisdictions. Look, there's got to be cost. I've tried to re-stress, these businesses are pretty much startups. Although they're maturing, look at what we have actually managed to deliver, everybody, over this period. Now, sure.
You've delivered a halving of the asset value of the company. You haven't actually delivered anything.
Give us some time. We're all investors here. Mike.
I think we as shareholders should realize that Greg is relatively new in the chair. He's got 88 million shares of his own to look after. I think he's made pretty darn good progress with the rest of Heartland Bank towards getting the ship back on its feet again. I think that's relevant. I think we'll give you another year, Geoff.
Yeah. I might end up as Geoff, so. All right. Thank you, Mike. Yes. Are there any further questions?
Sorry?
Oliver.
Thank you, Greg. Just in terms of the new corporate structure and the risk function that supports that, you've clearly got risk functions in both Australia and New Zealand. The first linked question to that is, is there any sort of overarching framework that ties those together to leverage any learnings on both sides of the Tasman while also satisfying the independence requirements on each side in each jurisdiction? The second is relating to the audit of how that is covered through the audit. Just talk a little more around some of the structure around how the audited accounts are put together. Is there a separate audit for the Australian Bank, New Zealand Bank? How are the risks looked at? Yeah, how does that start to flow through as a process? Also, just as an aside, how long have PwC been the auditor for?
Okay. So firstly, yeah, the businesses are run separately. They've all got their own structures. They've all got—I’ve got to say, yeah, we've got a bit of a strange situation here. Not strange, but it's a unique situation where, for the first time in history, a New Zealand bank owns an Australian bank. All right? Do not underestimate the challenge of that. With that has come—we're dealing with two sets of rules, and they're not necessarily the same, particularly in the Australian market where there is a higher level of regulatory burden. Now, we've got boards set up purposely with the skill sets, board and management, to be able to focus and not only grow the business, but keep us as shareholders and customers, keep us all safe. Hence, you've seen an elevated growth there.
In the New Zealand business, again, we have the competencies there, which were very opaque. Now, in terms of the auditors, we had a change of auditors. Now, Karen, I just might get this wrong. Was it 2023? PwC have not been with us that long. It is a focus on meeting best practice.
Thank you, Oliver.
Can I—sorry, Greg. Just one thing, I think, just to—I think I'm answering the first part of your question, which is, while we have different legal structures and different regulatory environments, our risk function across the Tasman works very closely. Our finance function works very closely. We are actually benefiting from each other's skills and expertise in those areas. We are not isolating each business from a practical and commercial perspective in terms of how they operate. Okay.
All right. Thank you, Bruce. I missed that piece. Thank you. We've got one other question, please. That'll be the last question in the room. Thank you.
This will be my last question too. It's a question that won't arise next year because I do have faith that you'll get it right going forward. I just put the shot across the bows, and it follows on a wee bit from Lindsay's question. I was looking at the director's fees of Heartland Bank and, it's fair to say, various other companies as well. I'll leave you to go and do your own research on the relative sizes of the companies and the fees. I've got them here. Is there an extra cost in having directors in Australia? They seem to be twice what they are in New Zealand.
Yeah. I mean, yeah, look, I'm pleased you raised that because that's the variation of the markets, number one. Just to give you some more comfort around that, and that'll be again, that'll be around FY 2023. We did a benchmarking exercise in the Australian market, understanding the data sets. That was—and remind me if I've got it wrong, but I think it was EY was the consultants there. When you're looking at what we were—if you look at their plan, it needed certain expertise to get ourselves an ADI. We had to take into account the specialist nature of what we were setting out to achieve. Now, we've done that. It might sound expensive, but in context, it's cheap to the shareholders.
I should speak on behalf of the Australian board. I chair the Australian board. I mean, we have had businesses in Australia for some time. We've had the reverse mortgage business in Australia since 2014. We bought the livestock business in Australia in 2022, but they operated as finance companies. In fact, they had management boards. There were no independent directors on those boards. There was not an additional cost for managing those businesses. They were also wholesale funded. That is, we borrowed from the financial institutions to fund our growth. With the acquisition of the approved deposit-taking institution, the bank in Australia, 18 months ago, which is prudentially regulated by the Australian Prudential Regulation Authority, there is a requirement that you have a majority of independent non-executive directors and indeed an independent chair.
I was required to step down from the group board and become independent in the context of chairing the Australian board. We had to recruit a range of Australian directors as well. We do have New Zealand executives and the Chair of the New Zealand Bank, Bruce Irvine, on our board, but we have to have a majority of Australian directors. That is because we operate with a government guarantee. The Australian government guarantees what we do, guarantees the depositors, and there is a cost and a high bar with that privileged position and the license that we hold. I mean, they do not hand out banking licenses that often. We were successful in obtaining one.
I think in these first couple of years, you draw out the point about the cost of that, and that is fair, and that applies with every aspect of setting up a new bank. The metal is on us to, in fact, create value for you as shareholders over the foreseeable future. If that bank ticks along at nominal growth, then it's not a good idea. That bank is growing. In our first year of operation, we grew in excess of 20%. We're on track to do that again. We're growing at that sort of level on a monthly basis. Out into the future, we expect, and we're the market leader in our chosen segments that we're operating, very narrow, targeted focus. I think to your question, I think it's a fair challenge.
I would hope at this meeting in a couple of years' time, you would say, "Well, that was a really worthwhile investment." We sort of feel we've created a lot of value there that perhaps is not recognized currently in the valuation of the company. That is on us to prove over subsequent reporting periods.
I've just sat down. Thank you, Geoff. Yeah, you could have gone a couple of minutes longer. It would have helped me, but. All right. Look, we will now move to the online questions. There will be an opportunity to ask further questions as the meeting progresses or after the conclusion of the meeting. Are there any questions online?
Thanks, Greg. We have a few. The first one here, "Are there too many shares? What about a share buyback?
Yeah. Look, that's not what we believe. There are too many shares, and we won't be doing a share buyback.
The next question, "Is there a board policy regarding director and chair succession? If not, why not?
Just repeat that.
Is there a board policy regarding director and chair succession? If not, why not?
Yes, there is. Thank you.
The next question.
Central. I'm sorry. That's on our—yeah, it's on our website.
The next question, "How many full-time equivalent staff do we currently have? Is this likely to fall over the coming 12 months with the rapid rollout of AI? Which parts of our business operations are the most prospective for AI productivity gains, and how energetically are we embracing those opportunities?
I might just pass it over to you, Leanne. Thank you. Then I can have a seat.
Our full-time employees over this next year are stabilizing. We had a cost uplift last year. This year will stabilize. We are preparing for growth. As we embark on our automation journey, we are going to focus on automating our business first. We are going to look at unlocking AI, and where we can use AI, we will. We are all learning, and we need to make sure that it is safe. The middle and back office presents a great opportunity for efficiency. What we believe is that the front office as well unlocks opportunity for growth. We will be looking across all of our businesses. Michelle, you can answer for Australia as well.
For the New Zealand Bank, across all parts of our business, but I see our employee numbers stabilize because we're also going to utilize our staff to embark on the automation journey. We are not going to bring an external resource to develop what we're about to do. There will be a limited external resource, but that will be around software development. Our staff, we will repurpose them to develop the work we need.
Thank you, Leanne.
Greg, I might just add—sorry, I was going to give you a little bit more of a seat there. I am too late. It is very similar for the Australian business. We currently have around 120 FTE. As we embark on the technology investment and the improvement, there will be changes to the roles that we have in the business. There will be several processes that we are able to automate to make life easier and faster for our customers and certainly for our people. We will be reinvesting a lot of those people into different ways to help our customers and have more direct customer contact. That is our preferred approach, that we want to be there for our customers. The easy things or some of the processes that do not need people involvement, we were able to automate those. We don't believe that our FTE will be increasing. It will certainly be stabilizing.
Thank you, Michelle.
The next question. Sorry, Greg. There are a couple more here. An AGM with the only item of business being the approval of the auditor fees is pretty boring. Why are not any directors up for election? Why did not we put up a remuneration report for a non-binding advisory vote complying with the legal system in Australia? Seeing as we are making such a big push into Australia, should not we embrace their governance standards? If not, do not we risk New Zealand being viewed by international investors as a governance backwater, given that REM report voting has become standard in many countries?
Look, I'll pass it on to Phoebe, our Head of Legal Counsel, please.
Thanks, Greg. Shareholders might remember last year we had four of the five Heartland Group Holdings Limited directors stand for re-election. Our directors are required to re-stand every three years, or if they're appointed by the board, the year after that appointment or the next AGM. That is really a timing issue in terms of voting for director reappointment. In the future, you'll see directors standing again when they need to with reference to the NZX listing rules requirements. In terms of governance, we are an NZX listed issuer. We are required to comply with the NZX listing rules, but we also take into account the NZX corporate governance code on a comply and explain basis. We include detailed reporting on that in our annual report. We also consider the remuneration template.
We hold ourselves to the standards applicable to NZX listed issuers as do our contemporaries across the market. I'd just comment that our ASX listing is a foreign exempt listing. It is the New Zealand listing rules that we need to comply with. Thank you.
Greg, can I just add to that two things? Firstly, I do not think the meeting's particularly boring at the moment. Secondly, my understanding is that the NZX is moving closer towards meeting the standards in Australia around REM and REM reporting, and we will obviously comply with that at that time.
Thank you, Bruce.
The two more. Could you please clear up the FY 2026 outlook? On some slides, you mention it is above $85 million. However, on others, it is same or greater than $85 million.
All right. Okay. Next question.
Final question. I have mixed feelings about your commitment this morning that you are targeting future profit levels in excess of $100 million. This was, of course, prior to your recent substantial capital raise. I would have expected you to have been much more aspirational than simply returning to $100 million. Why aren't you?
I think we have got to be conservative and we are just—we do not want to give a message of something that we may see hard to achieve in this environment. Look, it would be nice to be bigger, and at some point, it will be. Let us hope it is next year. That is all I can say on that. Thank you. All right. Are there any further questions?
No further questions online.
All right. So thank you for your questions. I will now invite Phoebe to take us through the formal business of the meeting, please. Thank you, Phoebe.
Thank you, Greg. We will now move to the formal business of the meeting, which is to vote on the one resolution set out in the notice of meeting. As mentioned earlier, if you're attending online, you can cast your vote using the electronic voting card. Those online with questions about the resolution can submit these online now so they can be addressed with questions from the floor within the discussion of the resolution. The only resolution for this meeting is to record the automatic reappointment of PwC as the company's auditor and to pass the following resolution. This resolution has the full support of the board. I move that the board be authorized to fix the remuneration of Heartland's auditor, PwC, for the financial year ending 30 June 2026. Are there any questions from the floor?
How long before it's up for someone else to be reviewed as auditor? Two years, three years?
I might hand over to Andrew to answer that question, but it is in accordance with our auditor appointment policy.
Yeah, so it'll be a five-year process. So we are now approaching three years into it. So it'll be another couple of years.
Are there any questions online?
When did we last put the external audit out to tender, and when are we most likely to run a full competitive tender for the external audit job?
PwC was appointed in 2023, as we commented on earlier. As Andrew mentioned, we have a five-year policy in terms of auditor rotation and considering the appointment of the auditor.
Just with 2023, is that competitive?
Yeah. Just cover that. I was going to say 2023 was a competitive process, and the incumbent at that time was KPMG, and we had a competitive process. Yeah.
Thank you. If you can now please mark your intention on your voting card by selecting for, against, or abstain at item one. For those online, please click submit vote on the bottom of the voting card to lodge your vote. Voting cards in the room will now be collected. Please place your voting cards in the ballot boxes as they are passed around. If you need help, please raise your hand. Online vote should now be submitted. 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 end of the meeting. Ladies and gentlemen, that concludes. I'll just pause while voting cards are collected. That now concludes the formal business of the meeting. I will now invite our Chair, Greg Tomlinson, to address the meeting.
Thank you, Phoebe. This is now an opportunity for any other matters that may properly be brought before the annual general meeting to be considered. Are there any such matters that shareholders wish to raise? Okay. In the interest of—oh, sorry, we have got one.
We have some online. There's nothing in the room. The first one here, in light of the strong performance in reverse mortgages and the improving asset quality in vehicle finance and livestock, what new quality loan products is Heartland considering to diversify revenue streams and drive future receivables growth?
Right. The product that we have been working on is in the, sorry, is in the reverse mortgage space, but it's helping elderly into aged care. By terms of a, I just can't think of the name of the product. What are we?
Access.
Yeah, sorry.
Access.
Yeah, an access loan, which is—we think there's—we believe there's a lot of opportunity and growth aspirations for that sector.
Greg, maybe just to explain how that works. Just essentially, if you own a house and you're looking to go into a retirement village, the issue is about how you pay for the retirement village and the timing of selling your own house. The whole idea is that it is a short-term loan, effectively to allow you to get into the retirement village and then take your time. I think we give them two years or something like that, three years to sell your house before you move into the retirement village. It is called a village access loan, and it is just designed to make the transition from home ownership into a retirement village easier.
Thank you.
Final question in the interest of time. Thank you for offering our best practice hybrid AGM today and for your past practice of publishing a full copy of the AGM webcast on your website dating back many years. The video quality is also excellent. I was just puzzled why the notice of meeting was not lodged with the ASX this year. Also, what is the split between Australian and New Zealand shareholders, and is it worth maintaining both listings?
Right. Actually, I can't answer the split, but maybe Phoebe, have you got—but I think we can—no, but we can come back to that.
No.
All right. That's it? Yeah. Okay. So that brings us to the end of the Heartland Group 2025 annual meeting. Accordingly, I declare the meeting closed. Thank you, and you all, for your attendance and participation here today. You're invited to join the directors and management team for refreshments, which are being served at the back of the room. Thank you all, and thank you to those that are joining virtually. We appreciate your support. Thank you.