Lack of returns frustrates investors

23:22, Nov 30 2012
Bruce Irvine
ONWARD: Heartland New Zealand chairman Bruce Irvine, addressing shareholders at its annual meeting, said it could get bank registration by Christmas. Photo: STACY SQUIRES/FAIRFAX NZ

Would-be bank Heartland New Zealand has delivered a meagre first dividend to its hungry shareholders, who have not seen a return in the two years since it was formed.

Yesterday, it gave shareholders a 1.5-cent special dividend payable on December 21.

Heartland could not announce its banking licence at yesterday's annual meeting, but announced a commitment to act like a bank.

It also announced a policy to pay regular dividends based on good after-tax profits and prudent capital retention levels.

Heartland, a lender to the rural, business and consumer markets, was formed in January 2011 from the merger of Marac Finance with two building societies.

It was listed on the NZX in February that year at 88c and fell gradually to a low of 43c by March 2012, its lowest point.


Some shareholders at the meeting expressed frustration at large paper losses and lack of returns, particularly from the precursor company to Heartland, which was Pyne Gould Corporation (PGC), saying they were now too old to work to offset further stalls or setbacks with their investments.

One shareholder said his investment of $370,000 was now worth $200,000. He had not seen a dividend in more than two years.

"Put yourself in my position," he told Heartland chairman Bruce Irvine.

Irvine said he "was in your position", having bought PGC shares under a directors' share plan which were now worth a fraction of the outlay.

The shareholder replied: "But you're also drawing down very large directorship fees. I don't have that source of income. When will I see my $370,000 back and a reasonable return on that, because we are in business, too?"

Irvine earned $162,500 in chairman's fees from Heartland for the year to June.

Irvine said Heartland would be a regular dividend payer "and you will get a return on those shares".

A second shareholder said the firm had "cut the umbilical cord" between Heartland and PGC, but Heartland still had "the same DNA". "You still have the same people operating this business and a lot of us can't go back to work to retrieve our losses."

Irvine admitted he and managing director Jeff Greenslade had been with PGC, but said the other seven directors had not.

"None of the other directors have that DNA."

PGC shareholders were given shares in Heartland late in May last year, a few months after it was formed. They also kept their shares in a much smaller PGC.

"I can't deal with all the wounds of the past. I can only deal with what we've got now," Irvine told The Press after the meeting. "I understand their frustration. I've been through it all as well.

"We've created this new entity to make sure we've got something that can move forward, that can get the results."

New regulations meant small banking organisations would struggle to survive, which was why the conglomerate was formed, he said. It has $2.6 billion in assets.

One shareholder thanked the board for the "generous and timely" dividend.

Irvine replied that the dividend was timely, "but not that generous" because there was still an interim and final dividend to be paid.

The value of those dividends depended on whether the company managed to capture the opportunities in front of it, he said.

Heartland has been waiting for the Reserve Bank to grant it bank registration and had hoped to have secured it by the time of the annual meeting, which had been put back a month.

"I'm disappointed I can't tell you today," Irvine said.

"I'm still confident we'll get it. I believe we'll get it before Christmas, but we have to respect the Reserve Bank . . . We can't take anything for granted, and we're not."

Heartland's shares rose 2c yesterday to 70c.

The Press