Heartland Group Holdings Limited, Annual Meeting 2025

31 October 2025

Heartland Group Holdings Ltd (HGH)

The company will hold its Annual Shareholders Meeting at 10.00am Thursday 13 November 2025.

The location is Hotel Ashburton, Ashburton.

You can also join the meeting online at this link.

To celebrate Heartland’s 150-year history, which began with the founding of the Ashburton Permanent Building & Investment Society in 1875, the meeting will be held in Ashburton.

Company Overview

The company first listed on the NZX in February 2011 and the ASX in 2018. It has a long history dating back to 1875 as the Ashburton Permanent Building & Investment Society. Heartland came together through the merger of Southern Cross Building Society, CBS Canterbury, MARAC Finance and PGG Wrightson Finance. In 2014, it also acquired Australian Seniors Finance.

Now, Heartland is the listed holding company for two banks – Heartland Bank in New Zealand and Heartland Bank Australia in Australia.

Each bank provides specialist banking products, including Reverse Mortgages, Livestock Finance and Savings and Deposits. In New Zealand, Heartland Bank also offers Motor Finance and Asset Finance.

Current Strategy

In FY2025, the company refined its strategic focus to concentrate on core products capable of delivering threshold return on equity (ROE).

Previous Year Shareholder Meeting

NZSA recorded the following key items at last year’s annual shareholder meeting:

1. The death of Chair Geoff Ricketts, the retirement of CEO Jeff Greenslade, a poor result and the Challenger Bank acquisition, resulted in a significant revamp of the Board and senior management.
2. The redirection of non-core assets is to be part of the revised capital management programme.
3. NPAT reduced 22% to $74.5 million.

The meeting report is available at this link.

Disclaimer

To the maximum extent permitted by law, New Zealand Shareholders Association Inc. (NZSA) will not be liable, whether in tort (including negligence) or otherwise, to you or any other person in relation to this document, including any error in it.

Forward looking statements are inherently fallible.

Information on www.nzshareholders.co.nz and in this document may contain forward-looking statements and projections. For any number of reasons, the future could be different – potentially materially different. For example, assumptions may be wrong, risks may crystallise, unexpected things may happen. We give no warranty or representation as to any future financial performance or any other future matter. We may not update our website and related materials for changes.

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Key

The following sections calculate an objective rating against criteria contained within NZSA policies.

Governance

NZSA assessment against its key policy criteria are summarised below.

Directors Fees:  Not disclosed if retirement benefits are offered (a position not favoured by NZSA) or if special exertion payments are made. We note the comment on page 73 of the Annual Report that “Heartland’s policy is to pay directors’ fees in cash, rather than in shares or share options. Non-executive directors are not eligible for participation in Heartland’s LTI scheme.”

Director Share Ownership:  Directors are not required to own shares, a position supported by NZSA.

CEO Remuneration:  The company discloses its remuneration policy and framework within the Annual Report, which includes an overview of the remuneration philosophy applicable to the company. As of July 1st 2025, there is no Remuneration Committee, with remuneration governance now falling within the remit of the whole Board. Heartland Bank NZ and Heartland Bank AU each operate their own Remuneration Committees on their respective Boards.

Incentives: The CEO is paid a short-term incentive (STI) in cash. Formerly, the company also operated a long-term incentive (LTI) by way of Performance Share Rights – the last issuance under this plan was made in FY22. The company intends to establish a new LTI plan in the coming financial year.

NZSA encourages fulsome disclosure in relation to any incentive payments made to the CEO, including disclosure of measures (or measure ‘groups’), weightings, targets, and the level of achievement versus target for each component associated with any awards. This methodology is supported by the NZX Remuneration Reporting Template.

The maximum STI award is 100% of base salary. The measures, but not the weightings and level of achievement against each component, are disclosed, with the overall STI award being made at 56% of target. We encourage greater disclosure in this area.

The former LTI awarded shares up to 100% of base salary. Vesting then occurred after a three-year performance assessment period. No vesting occurred in FY25.

For the new plan, with issuances expected in FY26, measures include total shareholder returns (TSR) which is favoured by NZSA, in addition to ROE targets, a risk and compliance gate and individual conduct. The company notes that TSR is the key measure under the new plan determining the level of vesting, with non-achievement of the other targets considered at the Board’s discretion.

Issuances of performance rights will be made at 100% of the CEO’s base remuneration.

The company is one of very few that discloses both the gender pay gap and CEO/employee remuneration ratio.

Golden Parachutes: In the interests of transparency, NZSA believes there should be explicit disclosure around the severance terms and notice periods associated with the CEO, including whether specific termination payments are offered. There is no disclosure around the terms associated with new CEO Andrew Dixson.

The Annual Report discloses the former CEO Jeff Greenslade received a retirement payment, including non-cash benefits as follows:

• a cash payment of $3,983,647, which included $807,326 in lieu of notice; and
• non-cash benefits of $144,750.

No other details are provided.

Director Independence:  A majority of the Directors are independent.

Board Composition:  The Annual Report includes a collective skills matrix. For transparency, NZSA prefers a matrix that attributes skill sets to individual Directors to demonstrate how they add value to the company.

Directors’ other governance roles are not disclosed in the Annual Report. Only any changes during the year are disclosed.

We note the Chair, Greg Tomlinson, is a non-independent Director, by virtue of his related 8.86% shareholding, the largest holding in the company. Both NZSA and the NZX Corporate Governance Code recommend the Chair is an Independent Director.

We believe that Tomlinson is likely to remain in the Chair role until such time as the integration of Challenger is completed. While we do not consider this best practice, we note in mitigation the two “subsidiary” boards that govern the operations of each of the banks in New Zealand and Australia, a required standard in both countries.

The nature of the company’s boards (both HGH, Heartland Bank NZ and Heartland Bank Australia) indicates a commitment to thought, experiential and social diversity, with relevant experience for Heartland.

NZSA continues to challenge the current composition of the Heartland Bank NZ Board, given the difficulties that have since come to light associated with the NBZ banking business during their service.

Director Tenure:  NZSA looks for evidence of ongoing succession or ‘staggered’ appointment dates that reduce the risks associated with effective knowledge transfer in the event of succession. We also prefer a term maximum of 9-12 years, unless there are exceptional circumstances that may apply.

Director appointment dates range from 2018 to 2024.

ASM Format: Heartland Group Holdings Ltd is holding a ‘hybrid’ meeting, (i.e., physical, and virtual), a format preferred by NZSA as a way of promoting shareholder engagement while maximising participation.

Independent Advice for the Board & Risk Management: NZSA looks for evidence, through disclosures, that a Board has access to appropriate internal and external expertise to support board assurance activities. We also look for evidence that Boards are across their risk management responsibilities.

The Board Charter clearly states that Directors are able to seek independent advice to support their decision-making (with the permission of the Chair). The Annual Report notes that the internal audit function, reporting directly to the Board, has unfettered access to information required to support its activities.

As noted above, the Annual Report describes the Internal Audit governance and management process. This includes separate internal audit teams within Heartland Australia and Heartland New Zealand. Their role is to provide “independent, objective assurance over the internal risk control framework and compliance with policies.”

Within the respective businesses, the company also operates a separate risk management function manages the day-to-day operational and compliance risk management function within Heartland. Heartland’s Internal Audit function.

The company offers good disclosure of financial risks and health and safety risks. Given the nature of Heartland’s business, many of the financial risks and mitigations disclosed are the same as core operational risks. The company has published a separate 63-page Climate Report.

Audit

NZSA assessment against its key policy criteria are summarised below.

Audit Independence:  Good disclosure.

Audit Rotation:  The company ensures the Lead Audit Partner is rotated at 5 years as required by the NZX Listing Rules. There is no disclosure as to the tenure of the current audit firm. NZSA also expects disclosure of the appointment dates of the Lead Audit Partner and Audit Firm in the Annual Report to improve transparency for investors.

Environmental Sustainability

Overall approach: In FY25, Heartland Group Holdings (HGH) has made progress with a detailed transition plan, updated science-aligned targets, and disclosures of risk, opportunity, and exposure across its lending portfolios. The company has undertaken waste audits to reduce landfill diversion. While Heartland still applies adoption provisions, the company shows evidence of gradually building its capability towards full disclosure. NZSA notes that climate change remains the key environmental risk for HGH, given its exposure to rural borrowers, reverse mortgages, and vehicle lending.

Sustainability Governance: HGH now publishes a Board skills matrix, which includes climate and sustainability capability. Governance is further supported by a dedicated Sustainability Committee, which meets quarterly. The governance framework for environmental sustainability is clearly disclosed, with climate risks integrated into the board’s and management’s oversight.

Strategy and Impact: During FY25, Heartland developed its first detailed transition plan, positioning the business on a pathway to net zero by 2050. Climate-related risks and opportunities are analysed through scenario analysis. Strategic emphasis remains on integrating climate risk into lending decisions and funding low-emissions assets, such as through EV finance.

Risk and Opportunity: HGH provides comprehensive disclosure of climate-related risks and opportunities, with scenario modelling extended to its Australian operations. Physical risks (e.g., drought, flooding, severe weather) and transition risks (e.g., electrification of transportation, regulatory change) are described with quantified exposures. Opportunities, such as financing clean assets and supporting customer transitions, are also detailed, along with capital deployment figures.

Metrics and Targets: Heartland discloses its Scope 1 and 2 GHG emissions and includes partial Scope 3 disclosures, although certain categories remain exempt. The company reports progress against milestones, achieving a 42% absolute reduction in operational emissions since the FY2019 baseline. The company has updated its short-term science-based target to reduce operational Scope 1 and 2 emissions by 37.8% by FY2030 (from a FY2025 base year). Comparative data is included.

Assurance: The company has obtained an independent limited assurance (PwC) over its Scope 1 and 2 GHG emissions inventory. NZSA encourages the company to extend assurance coverage to Scope 3 and to other material climate-related disclosures.

Ethical and Social

NZSA assessment against its key policy criteria are summarised below.

Whistleblowing:  Good disclosure.

Political Donations:  No donations are made.

Financial & Performance

Heartland’s share price rose from $1.04 to $1.07 (as of 22^nd October 2025) over the last 12 months – a 3% increase. This compares unfavourably with the NZX 50 which rose 4% in the same period. The capitalisation of HGH is $1b placing it 35^th out of 115 companies on the NZX by size and makes it a large company.

¹ per share figures based off actual shares at balance date (not weighted average)

² Net Operating cashflows before changes in operating assets and liabilities

2025 continued a difficult year for HGH and although Net Interest Income rose substantially, operating expenses also rose leading to a lower profit

Interest Income was up 7% to $701m as interest rates continued to fall. Net interest income was also up 11% to $307m, as the interest margin halted its decline and rose slightly to 44%. This is still well off the 73% achieved in 2022.

NPAT fell by 48% to $38.8m and this delivered EPS of $0.041 and places HGH on a high P/E of 26.

The debt-equity ratio decreased further to 6.09 and this may still seem high. However, for the industry that HGH operates in, high debt equity ratios are the norm.

HGH have NTA of $1.01 per share and shares trade at about NTA.

Following on from this disappointing result, the company reduced their dividend to $0.04, although dividends remain fully imputed.

Pages 37-40 of an investor presentation provides some forward-looking guidance and HGH expects FY2026 underlying NPAT to be at least $85 million. They also “expect that during the period to FY2030, investors will see a significant increase in underlying ROE and underlying NPAT”.

We note that the Balance Sheet may be difficult to assess for investors not accustomed to reviewing finance or banking industry accounts.   The traditional breakdown of Current Assets (ie, readily ‘liquid’) and Current Liabilities (due on demand or within 12 months) is not shown on the Balance Sheet, although there is strong disclosure of the nature of each item in the notes to the accounts.  Investors should use their judgement or take appropriate advice around assessing relevant liquidity and funding metrics for Heartland.

On the 23^rd October a 1^st quarter FY26 trading update was provided.

Harrogate Trustee Limited (which is owned by Gregory Tomlinson) is the largest holder with a 8.86% shareholding.

Resolutions

This is an administrative resolution.

We will vote undirected proxies IN FAVOUR of this resolution.

Proxies

You can vote online or appoint a proxy at https://vote.cm.mpms.mufg.com/HGH/

Instructions are on the Proxy/voting paper sent to you.

Voting and proxy appointments close 10.00am Tuesday 11 November 2025.

Please note you can appoint the Association as your proxy. We will have a representative attending the meeting.

The Team at NZSA