ASPEN GROUP — Annual Report 2019

Aug 19, 2019

ASPEN GROUP

Investor Update August 2019

Barlings Beach Holiday Park, NSW

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Residents at Four Lanterns Estate, NSW

Contents

1 Business Overview 2 FY19 Highlights & Financial Results

3

Operational Performance

4 Portfolio

5 Managed Funds

6

FY19 Statutory Accounts Extract 7 Appendices

Sweet Water Grove – marketing campaign, NSW

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Residence at Four Lanterns Estate, NSW
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Four Lanterns Estate, NSW
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Business
Overview [1]
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3

Aspen’s Business Model

1.1

• Aspen is a provider of quality accommodation on competitive terms in the residential, retirement and short stay sectors

• Fully integrated platform with strong operating, asset management, development and capital management capabilities that enables us to provide the broad spectrum of products and services that our target customer base needs:

ASPEN’S TARGET MARKET

$1 trillion

• Provider of capital under different ownership schemes and regulatory regimes: Rentals – Shared Equity (eg. land lease) – Sales

• Low to moderate level of ongoing services at an effective cost (not high care, aged care or social)

• Target market is enormous:

• Australia’s residential market is worth over $6.5 trillion

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ACCOMMODATION PRODUCTS
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• 70% of households either have a mortgage (37%) or rent (33%)

Sales – Rentals – Shared Equity

• Significant unsatisfied demand for suitable accommodation at below median price and rent

‘‘Downsizing” Retirees

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Owned With a Rented Rented
Owned Outright
Mortgage with
Commonwealth
Rent Assistance
Social
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Composition of Australia’s 9.3 Million Households by Tenure (source: ABS)

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4

1.2

Significant Unsatisfied Demand for More Affordable Accommodation

• About 1.5 million or 17% of households are considered “stressed” – ie. pay more than 30% of their gross income on housing costs:

• 57% are renters (despite Commonwealth Rent Assistance)

• 39% are owners with a mortgage (despite historically low interest rates)

• Commonwealth Rent Assistance (CRA) is the major policy tool to help make private (non-social) housing more accessible:

• Total expenditure of $4.4 billion per annum (growing at >5% pa)

• About 45% of renters of private housing receive a subsidy

• Not just for retirees:

HOUSING COSTS AND STRESS

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35%
30%
25%
20%
15%
10%
5%
0%
Owned Outright Owned with Mortgage Rented
Average Housing Cost as % of Household Income
Proportion of Households Paying More Than 30% of Income
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• 61% of recipients are under 50 years old

• 37% have dependent children (average of 2 per household)

• Subsidy is limited:

• About $65 per week average subsidy per household

• Subsidy caps out at $91 per week (for large families with 5+ members)

• Rent above $153 per week for a single person with no children and $240 per week for large families is not subsidised

CRA RECIPIENTS BY HOUSEHOLD STRUCTURE

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Couple - no
children
Couple -
children
Single - no
children
Single -
children
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Source: ABS

5

1.3

Aspen’s Product Offering Considers the Needs of its Target Market

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Land Dwelling
Aspen is highly selective and opportunistic when
Leases Rentals
acquiring and developing properties to ensure they
are suitable for the delivery of quality accommodation
on competitive terms to our customer base
Newstart (no children)
o Aspen’s accommodation products consider our
customers’ needs and the availability of government
Aged Pension (no children) Single
subsidies (eg. CRA, first-homeowner grant, pension
Person
loan scheme, stamp duty exemptions, land tax
exemptions) Minimum Wage (1-2 children)
o CRA incentivises the lower cost accommodation
products such as: AWOTE
▪ Land leases at around $150-225 per week –
LLCs (eg. Four Lanterns, Mandurah Gardens)
and park sites (eg. Highway 1)
Newstart (no children)
▪ Small, second-hand dwelling rentals (eg.
Darwin FreeSpirit Resort)
Couple
Aged Pension (no children)
o But there are significantly greater opportunities in
supplying customers who access other or no
government subsidies or are located where production Minimum Wage (1-2 children)
costs and land values, and therefore rents, are higher
than the CRA caps. They need: AWOTE
▪ Lower cost dwelling products with low land
value at around $300-500 per week – eg. high $100 $300 $500 $700 $900 $1,100 $1,300 $1,500 $1,700
density apartment rentals for singles/couples Affordable Rent per Week - Assuming 30% Rent / Income and Full
(eg. Lindfield Apartments) and house rentals CRA Subsidy (exept AWOTE earners)
that are suitable for families Gross Income per week
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• Lower cost dwelling products with low land value at around $300-500 per week – eg. high density apartment rentals for singles/couples (eg. Lindfield Apartments) and house rentals that are suitable for families

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• *AWOTE: Average Weekly Ordinary Time Earnings

6

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Barlings Beach Holiday Park, NSW
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2

Four Lanterns Estate, NSW FY19 Highlights & Financial Results

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7

2.1

FY19 Highlights

• Successfully integrated the management teams of Aspen and Mill Hill Capital, and appointed David Dixon and John Carter as Joint Chief Executive Officers in March 2019

• Aspen’s stock produced a total return of 15.7% including a 5.2% distribution yield and 10.5% increase in price

• Portfolio increased by 20% to $128m, mainly through the acquisition of Highway 1 Tourist Park in Adelaide for $23m on a cap rate of 9.25%, and the addition of new manufactured housing product at our Four Lanterns Estate in Sydney which to date has cost $6m and achieved over 30% development margin

• Recently contracted to acquire two mixed use retirement and residential apartment buildings at Lindfield on the North Shore of Sydney for $8.65m, equating to only $206,000 per apartment. The low entry price enables us to provide affordable and highly competitive accommodation product to our customers, and also generate outsized investment returns through various value-enhancing initiatives over time

• In FY19 Aspen Group produced underlying earnings per security (EPS) of 5.15 cents which was up 8% on FY18

• Distributions per security (DPS) totaled 5.00 cents which was up 19% on the prior year

• Portfolio is currently attractively valued on a weighted average capitalisation rate (WACR) of 8.9% and an average of $66,300 per site including land and dwellings (including Lindfield Apartments)

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8

2.2

Financial Performance

Key Metrics	FY19 $m	FY18 $m	Change	o Accommodation revenue increased mainly due to the acquisition of Highway 1 Tourist Park in Oct
Statutory (loss)/profit for the year	(7.92)	0.77		2018, and full year contributions from Darwin FreeSpirit Resort (DFR) and Koala Shores, both
Accommodation Revenue	22.29	17.53	27%	acquired during FY18
Other gross operating profit1	1.79	1.42		o Other gross operating profit is the gross margin from selling food & beverage and other items
Gross Operating Income	24.08	18.95	27%	o Operating margin reduced slightly in FY19 due
Operating expenses	(12.85)	(9.69)	33%	mainly to the acquisition of DFR which is our
Net Operating Income	11.23	9.26	21%	lowest margin property
_Operating Margin_2	47%	49%		o Development activity increased and the sale of
				houses at Four Lanterns Estate commenced with
Development revenue (incl. churn)	1.69	0.51		5 settling in FY19 at over $100k margin per house
Cost of sales	(1.11)	(0.29)		as expected
Development Profit	0.58	0.22	164%	o The discontinued operations for FY18 relates to
Development Margin3	34%	43%		Spearwood South Industrial property which was sold
Discontinued operations profit	-	0.86		o Corporate overheads increased 13% - they have
Operating & Development Net Income	11.81	10.34	14%	reduced post the changes in management
Corporate overheads	(5.92)	(5.25)	13%	o Net interest expense increased due to an
EBITDA	5.89	5.09	16%	increase in debt. The change in Responsible
				Entity freed up $9.85 million of low-yielding cash
Net Interest expense	(0.93)	(0.31)	200%	that was held for regulatory purposes and is now
Tax	-	-		being used in the rest of the business
Underlying Earnings4	4.96	4.78	4%	o Underlying earnings per security increased 8%
Underlying Earnings per security (cents)	5.15	4.78	8%	and distributions increased 19%
Ord. distribution per security (cents)	5.00	4.20	19%

• Development activity increased and the sale of houses at Four Lanterns Estate commenced with 5 settling in FY19 at over $100k margin per house as expected

• Other gross operating profit includes other revenue of $5.25m (FY18: $3.70m) and cost of goods sold including direct labour of $3.46m (FY18: $2.28m)

• Calculated as Net Operating Income divided by Gross Operating Income

Calculated as Development Profit divided by Development Revenue

• Non-IFRS measure used by management to assess the underlying performance of the company which excludes depreciation and amortisation, and one-off and non-operating items

9

2.3

Reconciliation of Statutory Profit to Underlying Earnings

	FY19	FY18	FY19 statutory net loss primarily impacted by:	FY19 statutory net loss primarily impacted by:
	$m	$m	Depreciation and amortisation
			o	Increase due to contribution from new acquisitions
Statutory net (loss) / profit	(7.92)	0.77	Asset revaluations – recorded in the P&L
Depreciation and amortisation	2.63	1.74	o	Goodwill impairments of $9.58m
			o	Partially offset by PPE revaluations of $0.25m
Asset revaluations	9.33	(0.90)	Transaction costs and other
Transaction costs and other	0.92	3.17	o	Costs related to change in responsible entity, cust
				investment manager of $0.79m
Underlying Earnings	4.96	4.78	o	Acquisition costs of $0.24m
Net interest expense	0.93	0.31
EBITDA	5.89	5.09
Corporate overheads	5.92	5.25
Operating and Development Net Income	11.81	10.34

• Costs related to change in responsible entity, custodian and investment manager of $0.79m

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10

2.4

Financial Performance

Net Operating Income (NOI) by Asset

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Price
Increasingly diversified portfolio – reducing asset concentration risk Acquisitions Date
($m)
FY18
Lindfield
DFR
BIG4 Koala Shores Sep-17 10.2
KSH Darwin FreeSpirit Resort Dec-17 19.5
AKV
AKV AKV FY19
Highway 1 Tourist Park Oct-18 23.0
HWY 1
FY20 (YTD)
FY18 NOI: $9.3m FY19 NOI: $11.2m FY20 Guidance NOI: $12.4m Lindfield Apartments Aug-19 8.65
Operating Margins
Low margin seasonal parks Metro parks Rentals LLC
70%
60%
50%
40%
30%
20%
10%
N/A N/A N/A
0%
Darwin Tween Waters Koala Shores Barlings Beach Portfolio Highway 1 Adelaide Tomago AKV Four Lanterns Mandurah
FreeSpirit Average Caravan Park Gardens
Resort
AKV operations are outsourced - estimate only FY18 FY19
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Operating Margins

11

2.5

Balance Sheet and Capital Management

Key Metrics		FY19	FY18
Property Assets	$m	128.0	106.4
Total Assets	$m	141.7	127.9
- Cash	$m	6.5	13.4
- Gross Debt	$m	24.5	4.7
Net Debt / (Cash)	$m	18.0	(8.7)
Gearing1	%	13.3	n/a
Loan to Value Ratio2	%	16.4	3.9
Interest Cover Ratio3	x	5.8	9.7
Net Asset Value (NAV)	$m	108.8	114.9
Securities at year end	m	96.3	96.3
Net Asset Value per security	$	1.13	1.19

Movement in NAV ($m)

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6.6%
121.00 0.1 4.9 5.4% discount to
1.3 NAV
101.00
81.00
61.00 114.9 108.8 101.6
41.00
21.00
1.00
FY18 NAV Retention of Net Devaluation Transaction costs & FY19 NAV FY19 Market
Underlying Earnings of Properties Other Capitalisation
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Strong Financial Capacity for Growth

• Balance sheet gearing of 13.3%

• The Group has a $55.0m finance facility that expires in August 2020. At 30 June 2019, undrawn capacity under the facility was $30.2m (after allowing for bank guarantees of ~$0.3m)

• Aspen expects to be able to increase its finance facility as future opportunities arise

• Additionally, Aspen can seek access to 3rd party equity if it makes sense for both parties and can access customer equity under Shared Equity schemes

Movement in NAV

• Reduction in NAV to $108.8m largely attributable to the net devaluation of properties of $4.9m:

• $2m devaluation of Darwin FreeSpirit Resort (directors valuation) due to net operating income being below expectation since acquisition

• $2.25m devaluation of Tomago Village (external valuation), reflecting the decline in operating income while the property is being repositioned from short-stay workers / tourist accommodation into longer term retirement / residential accommodation

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1. Net Debt divided by Total Assets less Cash

2. Facility covenant is 50%

12

2.6

Earnings & Distribution Guidance – FY20

FY20 Guidance remains unchanged:	FY20 Guidance remains unchanged:		FY20
		Underlying Earnings	Guidance
▪	Underlying Earnings per security expected to be in the		$m
	range of 6.75-7.00 cents - an increase of 31% on FY19	Property net operating income	12.4
	• Darwin Freespirit Resort performing under expectations
	for first 7 weeks of FY20	Development profit	1.0
	• Offset by better performance of rest of portfolio and business	Operating and Development Income	13.4
▪	Distribution guidance of 6.00 cents per security – an	Corporate overheads	(5.2)
	increase of 20% on FY19	EBITDA	8.2
Major assumptions for FY20 guidance:
		Net interest expense	(1.6)
▪	Continuation of current general trading and market
	conditions	Tax	0.0
▪	Current portfolio only – no acquisitions or dispositions, except Lindfield	Underlying Earnings	6.7
▪	Development margin from existing inventory of 12 dwellings	Underlying EPS guidance (cps)	6.75 - 7.00	up 31-36%
	at Four Lanterns only – no other development activity in forecasts	DPS guidance (cps)	6.00	up 20%

o FY20 Guidance remains unchanged:

o Major assumptions for FY20 guidance:

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13

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BIG4 Merimbula Tween Waters Holiday Park, NSW
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Aspen Karratha Village, WA
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3 Operational Performance

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14

Operational Performance and Opportunities

3.1

Four Lanterns Tomago Village Koala Shores Barlings Beach Tween Waters Trading • Land rents continue to grow in real terms and good expense control • New home sales slowed into the election, but enquiries are picking up slightly as conditions (liquidity) improve in the residential markets • Development: 28 new land sites and 2 churn sites developed, 17 houses installed, 5 sales settled in FY19, 12 houses in inventory at 30 June • 2 sales settled since 1 July • NOI down 12% due to a deliberate shift to long term residents in preparation for redevelopment. Occupancy was up 3%, but average rate was down 5% • Reduced costs aligned to extended stay occupancy • Some recent pickup in demand from workers for short stay • Achieved DA to increase long term sites to 212 (previously 204) • Relocation arrangements in place for existing residents to allow new development • Subdued in FY19 after disappointing FY18. Occupancy was flat, average rate was down • Regional marketing focus on Port Stephens for international visitation providing no growth to the ongoing weak business levels outside peak seasons • 2 water view cabin upgrades completed • Performed well in FY19 with total occupancy up 2%, average rate up 5% and NOI up 9% • Refurbished cabins have helped rate growth • Continued strong demand for long term sites with churn of 2 sites and re- sale of another • Performed reasonably in FY19 with total occupancy up 16%, but average rate was down 4% and NOI was up only 2% • Expense management has improved over the current low season Opportunities • Reclaim a further 2 sites for churn • Construction of van storage area • Site is approved for higher density residential and local vacant land prices are materially higher than current book value • We have the flexibility to provide our entire product range (short stay through to land lease) • Expect to be able to produce new housing product for less than $225k (including land and all other costs) which is highly competitive in the Newcastle region • Planning in place for upgrade of facilities • Reconfiguration of 12 short term camp sites to long term casual expected to double revenue on these sites • On site caretaker residence conversion to tourism cabin • Potential to tier long term site fees in accordance with location • Review of utilities re- charges prior to water reticulation upgrade requires installation of water meters for all long term and annual sites for recoupment of usage • Infrastructure upgrade to reduce water leakage • Attract more customers in low season and reduce operating costs • Property is well located and approved for higher density with 10m height limit – potential apartment development in future

15

3.2

Operational Performance and Opportunities

Adelaide CP Highway One Mandurah Gardens AKV Darwin FSR Trading • Performed reasonably in FY19 with total occupancy up 1%, but average rate was down 4%. There was a shift in demand from higher priced cabins to lower priced sites. NOI was down 5% at a reasonable margin of 53% with good cost control • Upgrade of entrance completed and heritage church completed • BIG4 reservations agreement providing marginal growth in off season • Patchy performance since acquisition in October 2018 – NOI about 10% below expectations • Improved since change in management several months ago • Reallocated 5 short stay cabins with low occupancy to rental pool – now leased • Land rents continue to grow in real terms and good cost control lead to 8% NOI growth • Home resale enquiries low due to poor sales volumes and prices in the region • Continues to perform very well as it offers attractive product and service • Activity in the Karratha region picking up • Another 1 year extension of the lease agreed with Woodside to January 2021 • Strong demand for rooms not occupied by Woodside at materially higher rates • Performing poorly since acquisition in December 2017 - NOI about 25% below expectations • Past 6 month occupancy about 30% down on pcp and average rate was flat. We have had to reduce rate over the past 2 months to recapture market share • Expenses only brought into line with lower revenue over the past few months • Commenced renting cabins to offset poor peak season • Solar installed Opportunities • Lease church for the first time • Improve labour processes in housekeeping to reduce labour cost • Site is zoned for higher density residential • Expanding affordable long term cabin rental and land lease product • Reallocate more low occupancy cabins to rental pool • Aspen has option to acquire adjoining land (4.6Ha) • Could be opportunities to acquire dwellings and offer rental product If resale prices decline sufficiently • Increase re-sales in FY20 • Extension of lease for a longer term with 100% Woodside occupancy • Current book value is around 1/3rd replacement cost • Introducing affordable long term rental and land lease product • Introducing gaming machines • Being more dynamic with rates in the short shoulder periods • Operating cost reductions - have so far stripped out over $250k in labour and introducing self-collect in F&B in August

16

3.3

Operational Performance and Opportunities

We believe there are ample opportunities to increase returns from Aspen’s existing portfolio:

• More intensive management

• Deployment of capital across:

• Cost saving initiatives (eg. labour, power, water)

• Refurbishment (eg. landscaping, facilities, cabins)

• Development (eg. new dwellings)

Furthermore, the portfolio has the potential to be profitably repositioned and developed into higher value uses over time

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Recently refurbished Seabreeze Villas at Barlings Beach, NSW

Recently installed solar panels: Darwin FreeSpirit Resort, NT

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17

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Darwin FreeSpirit Resort, NT
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Mandurah Gardens Estate, WA
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Portfolio[4]

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18

4.1

Portfolio Summary

Portfolio Aggregates	Aspen Group	Funds / Projects	Combined
Properties (#)	12	3	15
Value ($m)	$1391
Land Area (Hectares)	58	577	635
Approved Sites (#)	2,099	983	3,082
Dwelling Stock Owned (#)	688	91	779
Sites per Hectare	36	2	5
Dwelling / Sites Ratio	33%	9%	25%
Value per Hectare	$2.40m
Value per Approved Site	$66,300

• Aspen currently has a portfolio of 12 properties valued at $139m[1]

• Aspen manages 3 major projects and earns project management fees

• General traits that Aspen seeks in properties it acquires:

• Desirable locations

• Large land parcels that are under-utilised

• Existing dwellings priced at well below replacement cost that can be refurbished / repurposed

• Land and development cost at the low end of (or below) local competition

• Competitive operating costs (e.g. tax incentives / subsidies)

• Flexibility / optionality

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1. Includes Lindfield Apartments ($8.65m) and Four Lanterns manufactured house inventory ($2.47m)

19

4.2

Portfolio Summary

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||||||||||
|---|---|---|---|---|---|---|---|---|
|Land Area|
|NT|Sites|
|WA|Land Area|Sites|(Hectares)|PORTFOLIO COMPOSITION BY|
|(Hectares)|11|Darwin FreeSpirit|10.8|467|
|VALUE|
|9|Mandurah|6.8|158|
|10|Karratha Village|2.9|180|11|NT|
|13%|
|Sydney|
|Basin|
|40%|
|WA|
|17%|
|10|
|Adelaide|Far South Coast|
|25%|NSW|
|5%|
|Land Area|
|NSW|Sites|
|(Hectares)|
|9|4|1|Four Lanterns|3.9|130|
|8|2|
|7|i|ii|1|3|2|Tomago|13.9|212|
|iii|3|Lindfield Kiah|0.2|20|
|5|
|Land Area|3|Lindfield|Kalinda|0.16|22|
|SA|Sites|6|
|(Hectares)|
|4|Koala Shores|5.1|141|
|7|Adelaide CP|1.5|94|
|8|Highway One|9.9|320|5|Barlings Beach|8.8|259|
|i|CREST|[1]|23|141|6|Tween Waters|1.9|96|
|ii|Rockleigh|[1]|329|7|
|iii|Coorong Quays|[1]|225|835|

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1. CREST, Rockleigh and Coorong Quays are owned by Funds managed by Aspen Group

20

4.3

Portfolio Summary

	New South Wales	South Australia	South Australia	WA	NT
	Four Lanterns Lindfield Kiah Lindfield Kalinda Tomago Village Koala Shores Barlings Beach Tween Waters	Adelaide CP Highway One CREST @ Woodside1 Rockleigh1 Coorong Quays1		Mandurah Gardens AKV	Darwin FSR
Region	Sydney Metro Sydney Metro Sydney Metro Newcastle Newcastle South Coast South Coast	Adelaide Metro Adelaide Metro	Adelaide Hills Rural South Coast	South Coast Pilbara	Darwin Metro
Land Tenure	Freehold Freehold Freehold Freehold Free/Lease hold Freehold Freehold	Freehold Freehold	Freehold Freehold Freehold	Freehold Freehold	Freehold
Total Land Area (HA)2	3.9 0.20 0.16 6.0 5.1 8.8 1.9	1.5 9.9	22.6 329.4 225.0	6.8 2.9	10.8
Approved Sites3	130 20 22 212 141 259 96	94 320	141 7 835	158 180	467
- per Ha	33 100 140 35 28 30 49	63 32	6 0.02 4	23 62	43
Owned Inventory4	12 20 22 69 38 32 32	47 85	82 2 5	1 180	150
- per Approved Site	9% 100% 100% 33% 27% 12% 33%	50% 27%	58% 29% 1%	1% 100%	32%
Book Value5 ($m)	14.71 4.12 4.53 10.50 9.75 13.50 7.30	11.00 23.00		12.25 11.00	17.50
Valuation Cap Rate6	6.50% 3.74% 3.97% 8.50% 8.85% 8.75% 9.00%	8.50% 9.25%		8.50% 15.00%	10.00%
Value Per HA ($m)	3.7 20.7 28.9 1.8 1.9 1.5 3.7	7.3 2.3		1.8 3.8	1.6
Value per approved Site ($k)	113 206 206 50 69 52 76	117 72		78 61	37

Notes:

1. CREST @ Woodside, Rockleigh and Coorong Quays properties are owned by Funds managed by Aspen Group

2. Tomago Village land area excludes "Environmental Conservation" land, and Koala Shores land area excludes leasehold and licensed land, that can not currently be developed

3. Approved Sites is the total number of underlying units or land sites currently permitted on the property under planning, licence or other conditions

4. Owned inventory are houses, apartments, cabins, vans etc. that Aspen or the Fund own that can be sold or leased on short to long term basis to customers

5. Book value are a mixture of Directors’ and external valuations. Four Lanterns includes manufactured house inventory of $2.47m.

6. Valuation cap rate that has been applied to assumed net operating income by external valuers

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21

4.4

Portfolio Summary

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Approved Sites
500
450
400
350
300
250
200
150
100
50
0
Land Sites Sites with Dwelling owned by Aspen
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Value per Hectare ($m)
30
25
20
15
10
5
0
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Value per Approved Site ($k)
250
200
150
100
50
0
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Valuation Cap Rate
16%
14%
12%
10%
8%
6%
4%
2%
0%
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22

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Alexandrina Cove Lifestyle Village, SA
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Coorong Quays, SA
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5 Managed Funds

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23

5.1

Funds Managed by Aspen

Coorong Quays

• Upgrades to the facilities continue including a new Coorong Quays Club for residents and visitors

• Long term viability of the site has been secured with an agreement to transfer waste water services to Alexandrina Council who will upgrade the facilities, ensuring the masterplan can be fully developed out

• Future land development stages and lifestyle village are planned for this financial year

• In FY19, across the estate:

• median house prices increased 15%

• house sales volumes increased 21%

• land sales volumes increased 60%

• Capital expenditure expected to be in the range of $1.5m - $2.0m in FY20

CREST @ Woodside

• Civil works at Woodside are progressing towards an expected completion in November 2019

• Sales are steady with 6 lots already contracted. Continued sales should enable the next stage of civils to commence in the second half of FY20 or first half of FY21

• Capital expenditure expected to be approximately $2.0m in first half of FY20

Rockleigh

• Almost Sold Out

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Residence Design Image: Tomago Village Redevelopment, NSW

6 Aspen Group Limited: FY19 Statutory Accounts Extract

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Statutory Accounts Extract: Statement of Profit and Loss 6.1

2019 2018 $'000 $'000 Continuing Operations Revenue 29,228 21,745 Cost of sales (17,449) (12,418) Gross profit 11,779 9,327 Expenses and other items Corporate overheads (5,821) (5,503) Property depreciation, fair value adjustments and other (12,736) (3,224) (18,557) (8,727) Earnings/(loss) before interest and income tax expense (EBIT) (6,778) 600 Finance income 207 369 Finance costs (1,284) (868) (Loss)/profit before income tax (7,855) 101 Income tax expense - - (Loss)/profit from continuing operations (7,855) 101 Discontinuing Operations (Loss)/profit for the year from discontinued operations (67) 671 (Loss)/profit for the year (7,922) 772 (Loss)/profit attributable to ordinary equity holders of the parent entity (7,811) 825 Loss attributable to non-controlling interest (111) (53) (Loss)/profit for the year (7,922) 772

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6.2

Statutory Accounts Extract: Balance Sheet

2019 2018 $'000 $'000 Assets Current assets Cash and cash equivalents 6,466 13,370 Trade and other receivables 3,913 1,950 Assets classified as held for sale - 4,157 Inventories 2,760 1,566 Total currentassets 13,139 21,043 Non-current assets Property, plant and equipment 112,934 81,996 Intangible assets 15,212 24,250 Other 450 373 Total non-current assets 128,596 106,619 Total assets 141,735 127,662 Liabilities Current liabilities Trade and other payables 6,485 5,841 Liabilities classified as held for sale - 43 Provisions 1,984 2,402 Total current liabilities 8,469 8,286 Non-current liabilities Interest bearingloans and borrowings 24,500 4,700 Total non-current liabilities 24,500 4,700 Total liabilities 32,969 12,986 Net assets 108,766 114,676 Equity Equity attributable to equity holders of the parent Issued capital 490,348 490,361 Reserves 14,092 7,129 Accumulatedlosses (375,531) (362,782) Total equity attributable to equity holders 128,909 134,708 Non-controlling interest (20,143) (20,032) Total equity 108,766 114,676

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6.3

Statutory Accounts Extract: Cash Flow Statement

2019 2018 $’000 $’000 Cash flows from operating activities Receipts from customers (inclusive of GST) 30,098 26,140 Payments to suppliers and employees (inclusive of GST) (26,249) (20,816) Interest received 225 377 Net cash flows from operating activities 4,074 5,701 Cash flows (used in)/from investing activities Proceeds from sale of assets held for sale, net of selling costs 2,542 31,082 Deposit paid for business acquisition (865) - Acquisition of property, plant and equipment and goodwill (27,047) (35,030) Net cash flows used in investing activities (25,370) (3,948) Cash flows (used in)/from financing activities Proceeds from borrowings 28,800 4,700 Repayment of borrowings (9,000) - Payments for securities buy-back and transaction costs - (5,568) Distributions paid (4,232) (4,669) Payment of financing costs (336) (556) Borrowing costs (840) (20) Capital return - (5,094) Net cash flows used in financing activities 14,392 (11,207) Net decrease in cash and cash equivalents (6,904) (9,454) Cash and cash equivalents at beginning of year (including cash assets classified as held for sale) 13,370 24,451 less: cash included in assets of disposal group held for sale - (1,627) Cash and cash equivalents at end of year 6,466 13,370

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6.4

Statutory Accounts Extract: Segment Information

Residential / Retirement / Tourism Corporate Non-core Other Consolidated 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Segment revenue1 20,734 13,665 8,494 8,080 - 1,013 - - 29,228 22,758 Operating EBITDA2 8,264 5,709 3,550 3,775 - 862 (5,920) (5,252) 5,894 5,094 Finance income - - - - - - 207 369 207 369 Finance costs - - - - - - (1,140) (678) (1,140) (678) Operating profit/(loss) before income tax 8,264 5,709 3,550 3,775 - 862 (6,853) (5,561) 4,961 4,785 Depreciation and amortisation (2,270) (1,265) (322) (355) - - (40) (117) (2,632) (1,737) Non-underlying items3 (9,979) (2,083) 253 866 - (191) (525) (868) (10,251) (2,276) Income tax benefit/(expense) - - - - - - - - - - Profit/(loss) after tax (3,985) 2,361 3,481 4,286 - 671 (7,418) (6,546) (7,922) 772 Other segment information Segment assets 121,628 97,254 12,554 11,808 407 4,522 680 708 135,269 114,292 Cash and cash equivalents - - - - - - 6,466 13,370 6,466 13,370 Total assets 121,628 97,254 12,554 11,808 407 4,522 7,146 14,078 141,735 127,662 Segment liabilities 2,737 2,885 207 387 31 436 5,494 4,578 8,469 8,286 Interest bearing loans and borrowings - - - - - - 24,500 4,700 24,500 4,700 Total liabilities 2,737 2,885 207 387 31 436 29,994 9,278 32,969 12,986 Net assets 118,891 94,369 12,347 11,421 376 4,086 (22,848) 4,800 108,766 114,676 Share of net profit or loss of associates included in profit - - - - - - - - - -

1. Operating EBITDA represents earnings before interest, tax, depreciation and amortisation and excluding non-underlying items

2. All segment revenues are derived from external customers

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1. Non-underlying items include gains and losses on fair value movements and disposals, and non-reoccurring items which are not part of ordinary operating performance

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BIG4 Koala Shores Holiday Park, NSWBIG4 Koala Shores Holiday Park, NSW
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7 Appendices

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7.1

Market Conditions

TourismTourism Sector

Overall conditions generally weakened in the markets in which Aspen operates over the past year, despite continued growth in tourism demand.

• Austrade estimates that in the year to March 2019, overnight stays by domestic visitors grew at an impressive 10%, however growth in international visitor numbers has slowed to around 3% and their nights stayed has slowed even further to around 1%.

• Total demand (by nights stayed) is estimated to have increased by 4% at commercial caravan parks, 10% at hotels, 12% at rented apartments/houses (eg. Airbnb), and 18% in privately owned holiday properties.

• However, in most major locations, total accommodation supply has increased materially, occupancy rates have declined, and operators have been reducing room rates in response.

• CBRE estimates that in the hotel segment Australia-wide occupancy declined 1.7%, average room rate declined 0.3% and REVPAR declined 2% over the year.

Overnight Trips and Spend by State – YE Mar 2019[1]

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International Visitors and Spend by State – YE Mar 2019[1]

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1. Source: Austrade - Tourism Research Australia, March 2019

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7.2

Market Conditions

FY19 Hotel Industry Performance (By City)

Adelaide[1]

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• Rooms Sold: -1% (25% decline in international offset by 7% increase in domestic)

• Occupancy: -0.2%

• ADR: -1.8%

Darwin[1]

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• Rooms Sold: +5%

• Occupancy: -18.3%

• ADR: +0.9%

• REVPAR: -17.6%

• REVPAR: -1.9%

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Credit: Tourism South Australia
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Darwin FreeSpirit Resort, NT

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1. Source: CBRE

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7.3

Market Conditions

Australia’s Residential Property Market

• Prices declined about 5-10% on average and sales volumes fell due to pockets of oversupply, tightening credit conditions, Labor’s proposals to tax the industry more, and other issues.

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• Sentiment and activity have improved mildly post the election and the recent reduction in interest rates.

Housing Prices Housing Loan Approvals Year-ended growth, seasonally adjusted Excluding refinancing

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7.4

Distribution & Tax History

Period / Quarter Ended	Date Paid	Date Paid	Distribution Type	Distribution Type	Aspen Group Ltd	Aspen Property Trust1	Aspen Property Trust1	Total Amount Paid cents
					Cps	Cps	Tax Deferred / Non assessable income
Dec-17 28/02/2017 Ordinary					- 2.1 - 2.1
Jun-17 29/08/2017 Ordinary					- 2.5 - 2.5
Oct-17 20/10/2017 Special Capital					- 5.0 100.0% 5.0
Dec-17 27/02/2018 Ordinary					- 2.1 31.4% 2.1
Jun-18 30/08/2018 Ordinary					- 2.1 30.5% 2.1
Dec-18 26/02/2019 Ordinary					- 2.3 TBA 2.3
Jun-19 30/08/2019 Ordinary					- 2.7 TBA 2.7
Year Ended 30 June 2019		Aspen Group Ltd		Aspen Property Trust
		Gross ($m)		Gross ($m)
Revenue tax losses
Capital tax losses
Franking credits
APT h ld d h Aib

1. APT has elected to adopt the Attribution Managed Investment Trust regime from 1 July 2016

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Disclaimer

This presentation has been prepared by Aspen Group Limited on behalf of Aspen Group Limited and Aspen Property Trust (“Aspen”) and should not be considered in any way to be an offer, invitation, solicitation or recommendation with respect to the subscription for, purchase or sale of any security, and neither this document nor anything in it shall form the basis of any contract or commitment. Prospective investors should make their own independent evaluation of an investment in Aspen. Nothing in this presentation constitutes investment, legal, tax or other advice. The information in this presentation does not take into account your investment objectives, financial situation or particular needs. The information does not purport to constitute all of the information that a potential investor may require in making an investment decision.

Aspen has prepared this presentation based on information available to it. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of Aspen, its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising from fault or negligence on the part of any of them or any other person, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it.

This presentation contains forward looking information. Indications of, and guidance on, future earnings, distributions and financial position and performance are forward looking statements. Forward looking statements are based on Aspen’s current intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties and other factors which could cause actual results to differ materially. Aspen and its related bodies corporate and their respective directors, officers, employees, agents, and advisers do not give any assurance or guarantee that the occurrence of any forward-looking information, view or intention referred to in this presentation will actually occur as contemplated. All references to dollar amounts are in Australian currency.

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