CENTURIA CAPITAL GROUP — Annual Report 2009

Aug 20, 2009

2009 Financial Year Results Presentation

August 2009 John McBain – Chief Executive Officer & Matthew Coy – Chief Financial Officer

Serving Generations of Australians

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Contents

Key Issues	Page 4
Key Financial Indicators	Page 5
Underlying Profit Analysis	Page 6
Reduction of Corporate Expenses	Page 7
Profit Sensitising	Page 8
Net Tangible Assets Per Share	Page 9
Brand Strength	Page 10
Property Funds Management Strategy	Page 11
Friendly Society Strategy	Page 12
Other Business Units	Page 13
Achievements	Page 14
Appendix 1: Profit & Loss for year ended 30 June 2009	Page 15
Appendix 2: Cash flow statement for year ended 30 June 2009	Page 16
Appendix 3: Balance sheet as at 30 June 2009	Page 18

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Key Issues

• Underlying NPAT $7.189 million after tax (2008: $8.017mill)

• 75% trend increase in underlying NPAT -

first half $2.5 mill second half $4.7 mill

• Focus Returned to Core Business Units - Property Funds Management

• Friendly Society Management

• Restructuring initiatives now paying off -

reduced corporate expenses

• strengthened executive team

• legacy balance sheet issues written down

• corporate debt reducing steadily

• Profit guidance to be reinstituted

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Key Financial Indicators

• Underlying $7.189 million after tax (2008: $8.017million)

• Reported net profit ($12.854) million after tax (2008: ($2.707 million))

• Funds under management

Friendly Society $0.781 Billion Property $0.878 Billion Reverse mortgages $0.215 Billion Total FUM $1.874 Billion (2008: $2.1 billion ) • Earnings per share - Reported -$0.21 (2008: -$0.05 & 2007: $0.11) Underlying $0.12 (2008: $0.13 & 2007: $0.12)

• Underlying NPAT over the last 2, 6 month periods FY09

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6 months to
30 June 2009
6 months to
Underlying 31 December 2008
NPAT $M’s
$4.7m
$2.5m
To 31 Dec 08 To 30 June 09
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Underlying Profit Analysis (excl. Benefit Funds)

% Change 2008 2009	% Change 2008 2009	% Change 2008 2009	% Change 2008 2009
$000’s $000’s
Underlying pre-tax profit by major division
Property Funds Management(1)	(271)	4,304
Property Investments	774	319
Reverse Mortgages(2)	3,673	(1,456)
Friendly Society	10,324	11,709
Commercial Mortgages(3)	450	4,213
Corporate	(5,265)	(5,978)
Other divisions (Insurance, Mortgageport)	826	1,625
Underlying EBIT	10,511	14,736	-28.7%
Finance costs Corporate Debt	(1,671)	(1,526)
Tax (expense) reported	6,938	(1,882)
Tax (expense) on one off adjustments	(8,589)	(3,311)
Underlying NPAT	7,189	8,017	-10.3%

Notes

1. No acquisition or success fee generated during the current period which are typical components of divisional revenue (refer page 8)

2. Division no longer selling new mortgages but actively managing existing book

3. Commercial mortgages in continual run down

(The information in this table is in summary form and has been derived from Over Fifty Group Limited’s statutory accounts)

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Reduction of Corporate Expenses

(major expense reduction for 12 months 30 June 2009 v 30 June 2008)

12 months to 30 June 2008 $000 % Change 12 months to 30 June 2009 $000	12 months to 30 June 2008 $000 % Change 12 months to 30 June 2009 $000	12 months to 30 June 2008 $000 % Change 12 months to 30 June 2009 $000	12 months to 30 June 2008 $000 % Change 12 months to 30 June 2009 $000
Staffing	6,888	8,862	(22.3%)
Consulting and Professional(1)	2,579	4,259	(39.4%)
Corporate Operating Expenses	923	979	(5.7%)
Marketing, Sales and Advertising	1,141	1,935	(41.1%)
Information Systems Expense	480	585	(18%)
Rental Expense – operating leases(2)	534	603	(11.5%)
Other	1,065	1,588	(33%)
18,811 (27.7%) 13,610 TOTAL

Notes

1. 2008 includes one-off corporate action expenses incurred prior to the 2007 AGM

2. 2009 rental includes only 5 months sub tenancy of Melbourne office. The annualised benefit would result in a further reduction in cost by $203,500.

(The information in this table is in summary form and has been derived from Over Fifty Group Limited’s statutory accounts)

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Property Funds Management – Underlying NPAT

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Underlying
Note
NPAT $m’s
1. 100% history of combined
EPG & CFM
3.112m 4.16m 4.19m
1.416m
0
0.3m
Year 2005 2006 2007 2008 2009
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Underlying Group NPAT

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FY09 NPAT sensitised
for potential ongoing
5.0m
PFM NPAT
3.75m
1.5
10.95m
1.13
2.5m
0.75
2.6 3.5
Base Case
1.75
2009 OFG
Underlying NPAT - $7.2m
0.3m
Scenario (Sc) Sc1 Sc2 Sc3 Sc4
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Key

Century Funds Management (CFM) Underlying NPAT Eclipse Property Group (EPG) Underlying NPAT

Notes

• Scenario 1 is 2009 actual result

• Scenario 2 - 4 are a range of profit estimates based upon historical performance of combined EPG & CFM (refer above)

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Net Tangible Assets Per Share (excl. Benefit Funds)

2008 2009	2008 2009	2008 2009	2008 2009
$000’s $000’s
Reported Net Tangible Assets (NTA)(1)	25,867	45,472
NTA / Ordinary share	0.43	0.76
Plus: Tested Goodwill at 30 June 2010
Century Funds Management	42,369	42,369
Eclipse Property Group	10,202	4,787
Lifetime planning	-	26
Total Tested Goodwill	52,571	47,182
Net Assets including Tested goodwill	78,438	92,654
Net Assets per Share including Tested Goodwill	1.30	1.55

• (1) Result of impairments, write downs and write offs during FY2009

Corporate Debt Program

• In the past 12 months corporate debt has reduced by $4.2 million (from $24m to $19.8m). Further reductions from operating cash flow, forecasted by 30 June 2010, of at least $2.1 million plus funds from land sales from legacy residential mortgages on OFG’s balance sheet (terms have been agreed on 64 of the 101 lots).

• Terms extended to 28 February 2010 with positive ongoing relationship with financier.

The information in this table is in summary form and has been derived from Over Fifty Group Limited’s statutory accounts

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Brand Strength STRONG BRANDS IN BOTH CORE BUSINESS AREAS

Property Funds Management - $878 million F.U.M.

• Century Funds Management - established 1995

• 26 unlisted trusts, 1800 investors

Eclipse Property Group

• established 1995

• 11 unlisted trusts, 300 investors

• acquired 100% interest in FY09

Friendly Society - $781 million F.U.M.

Over Fifty Mutual Friendly Society

• established in 1980, demutualised/listed 2001/2002

• approximately 110,000 bond and general insurance policy holders

• very strong recurring revenues and valuable APRA license

• new bond products launching e.g. education bond

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Property Funds Management Strategy

• Property Funds Management is a core business

• Two wholly owned subsidiaries – Century Funds Management and Eclipse Property Group

• F.U.M. as at 30.6.09 was $878 million ($920 million as at 30.6.08)

• During FY09 no property was acquired and one property was sold ($15.8 million)

• Both Century and Eclipse have significant pent-up demand for new direct property trusts

• Property Funds Management Business a significant growth driver due to;

• • Increased competitiveness in a market with fewer competitors
• • High quality investment property entering fair value range
• • Interest rates likely to be in acceptable range
• • Opportunity for intergroup lending to property funds (unique)
• • Extremely loyal direct investor base and continued financial planner support
• • Now marketing through platforms to wider investor base
• • Century/Eclipse have maintained a high quality, experienced executive team + History of growth well documented and will continue on

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Friendly Society Strategy

Friendly Society Benefit Funds

• Funds under management as at 30 June 2009 were $781 million ($899 – FY08)

• Government guarantee of bank deposits increased redemptions during Sept/Oct 08

• Three important areas of focus;

• introducing products and services to range of generations thereby leveraging our 110,000 client contact list

• retaining policyholders by offering more relevant and/or tax effective products

• improving total F.U.M. retention by marketing investment products to new investors

• Examples of new products being launched include – Education bond, relevant to grand children; Imputation Bond, relevant for taxation reduction

• Recent restrictions to superannuation contributions enhance competitiveness of Friendly Society Bonds. This trend is likely to continue which is favourable to OFG

• Key appointment of Sean Webster as Investment Manager in 2009

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Other Business Units

OFG Insurance

• White labelled general and vehicle insurance policy holders now exceed 30,000

• Plans to leverage wide range of OFG products to this client base for 1[st] time

• Profit contribution $470K (pre tax) FY09, budgeted to increase significantly in FY2010

Reverse Mortgages

• Lending suspended and existing book of $215 million being managed

• Loan agreement re warehouse funding from ANZ executed and current

• Profit contribution $910K (pre tax) (underlying $3.673m – difference due to non-cash impairment re swap ineffectiveness)

• Expenses attributable to this business reduced dramatically

Mortgageport

• Mortgageport is a 50% owned associate of OFG

• Operates in highly competitive residential mortgage manager market

• In house credit approval authorities from Interstar and Adelaide Bank

• Mortgage book $820 million as at 30.6.09 with strong performance in customer retention

• Final FY09 NPAT of $749,000 exceeded budget

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Achievements

During FY09 the major focus of the corporate team has been to clean up legacy balance sheet and debt issues as well as focus the group on its core activities and reduce expenditure;

• Renew corporate debt facility with NAB and agree reduction programme which will see corporate debt reduced to approximately $10m by 30 June 2010.

• Clean up on–balance sheet residential development loans which now stand at $9.1 mill ($16.0 mill FY08) over two projects.

• Write down or sell inherited on-balance sheet properties. A conditional contract has been entered into in respect of the Chisholm, Canberra property at $19.0 million.

• Acquire the remaining interest in Eclipse Property Group which allows OFG to consolidate the Eclipse profit (Eclipse performed ahead of budget in FY09)

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Appendix 1: Profit & Loss for year ended 30 June 2009

	Statutory accounts	Benefit funds	Corporate accounts
	$m	$m	$m
Interest and dividends	53.9	33.3	20.6
Management fees	21.0	-	21.0
Rental income	4.4	-	4.4
Other income	(12.0)	(14.9)	2.9
Share of profit/ (loss) in associate	(2.8)		(2.8)
Total revenue	64.5	18.4	46.1
Employee benefits expense	(7.4)	-	(7.4)
Marketing and advertising expenses	(1.1)	-	(1.1)
Consulting and Professional fees	(2.7)	-	(2.7)
Administration and Fund expenses	(18.6)	(12.9)	(5.7)
Finance costs – other	(21.5)	-	(21.5)
Other expenses	(38.4)	(11.2)	(27.2)
Total profit before tax:	(25.2)	(5.7)	(19.5)
Tax	12.6	5.7	6.9
Profit from Discontinued Operations	0.2	-	0.2
NPAT	(12.4)	-	(12.4)
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Appendix 2: Cash flow statement for year ended 30 June 2009

	Statutory accounts	Benefit funds	Corporate accounts
	$m	$m	$m
Cash flows from operating activities
Interest received	14.1	13.7	0.4
Dividends received	0.7	-	0.7
Rent and other income received	29.5	19.6	9.9
Management fees received	27.7	2.2	25.5
Redemption paid from bonus funds (with DPF)	(100.1)	(100.1)	-
Redemption paid from unit linked funds (no DPF)	(17.8)	(17.8)	-
Applications received by unit linked funds (no DPF)	3.1	3.1	-
Applications received by bonus funds (with DPF)	15.3	15.3	-
Cash paid to suppliers and employees	(44.6)	(16.8)	(27.8)
Income tax paid	(11.6)	(8.0)	(3.6)
Net cash flows from/(used in) operating activities	(83.7)	(88.8)	5.1
Cash flows from investing activities
Interest payments on mortgage loans	(11.5)	-	(11.5)
Payment for investment properties	(1.6)	-	(1.6)
Payment for plant and equipment	(0.1)	-	(0.1)
Proceeds from sale of investments	0.1	-	0.1
Acquisition of subsidiaries net of cash acquired	0.1	-	0.1
Proceeds from investment in other financial assets	16.4	14.8	1.6
Payment for investment in associate entities	(0.3)	-	(0.3)
Other investments	84.7	84.8	(0.1)
Net cash flows from/(used in) investing activities	87.8	99.6	(11.8)
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Appendix 2: Cash flow statement for year ended 30 June 2009 (cont)

	Statutory accounts	Benefit funds	Corporate accounts
	$m	$m	$m
Cash flows from financing activities
Loans from/(to) related entities	2.4	1.6	0.8
Dividends paid	(1.8)	-	(1.8)
Proceeds from borrowings – Reverse mortgages *	18.8	-	18.8
Proceeds from borrowings – other	14.2	-	14.2
Funds provided to Reverse Mortgage customers *	(25.7)	-	(25.7)
Repayment of borrowings - other	(4.2)	-	(4.2)
Net cash flows from/(used in) financing activities	3.7	1.6	2.1
Net increase/(decrease) in cash and cash equivalents	7.8	12.4	(4.6)
Cash and cash equivalents at the beginning of the period	20.5	7.2	13.3
Cash and cash equivalents at the end of the period	28.3	19.6	8.7
*** Note for Appendix 2 and 3 The flow of funds in this cash flow statement and values highlighted as assets and liabilities in the following balance sheet in respect of reverse mortgages have no recourse against the assets of OFG**

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Appendix 3: Balance sheet as at 30 June 2009

	Statutory accounts ($m)	Benefit funds ($m)	Corporate accounts ($m)
Assets:
Cash and equivalents	28.3	19.6	8.7
Trade and other receivables	5.8	0.8	5.0
Income Tax Receivable	13.5	12.0	1.5
Financial assets at fair value	556.7	509.9	46.8
Other financial assets	9.1	44.7	(35.6)
Reverse Mortgage Loans_(non_ recourse to OFG group) *	215.0	-	215.0
Investment property	27.0	-	27.0
Investment property – held for sale	19.0	-	19.0
Investment in associates – equity method	13.2	-	13.2
Plant & equipment	1.3	-	1.3
Deferred tax assets	16.1	7.1	9.0
Intangible assets	52.6	-	52.6
Other assets	2.7	-	2.7
Total Assets	960.3	594.1	366.2
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Appendix 3: Balance sheet as at 30 June 2009 (cont)

	Statutory accounts ($m)	Benefit funds ($m)	Corporate accounts ($m)
Liabilities:
Trade and other payables	6.1	0.1	6.0
Borrowings	52.7	-	52.7
Borrowings - Reverse Mortgages (non recourse to OFG group) *	202.3	-	202.3
Policyholders funds	594.0	594.0	-
Other financial liabilities	12.4	-	12.4
Other liabilities	14.4	-	14.4
Total Liabilities	881.9	594.1	287.8
Net Assets	78.4	-	78.4
Equity:
Issued capital	89.0	-	89.0
Reserves	(4.0)	-	(4.0)
Retained earnings	(6.6)	-	(6.6)
Total Equity	78.4	-	78.4

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