FSA GROUP LIMITED — AGM Information 2019

Nov 21, 2019

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FSA Group AGM Presentation 22 November 2019

Agenda

• Overview

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• Summary of the year “Challenges, change and progress”

• Segments

• Services

• Consumer Lending

• Financials

• Strategy and Outlook

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FSA Group Ltd AGM presentation 2019

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Overview

Overview

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Australia’s largest provider of debt solutions; direct lender to individuals

What we do

Segments

For over 19 years, FSA has helped thousands of Australians take control of their debt. Our large and experienced team of professionals offers a range of debt solutions and direct lending services, which we tailor to suit individual circumstances and to achieve successful outcomes for our clients.

Operates across 2 segments:

• Services - Consumer Lending

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FSA Group Ltd AGM presentation 2019

Overview

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Australia’s largest provider of debt solutions; direct lender to individuals & businesses

Founded with director loans of $50,000. Initial offering debt 2000 a reements then PIA’s and bankru tc then home loan brokerin g p y, g 2002 Back door listing raised $600,000 for shareholder spread 2006 Commenced home loan lending 2009 Raised $5.2m to underpin home loan pools 2015 Commenced car loan lending 2019 PAT $14.4m, Shareholder equity $51m, ROE 30% 2011 to 2019 $65m returned to shareholders in buybacks and dividends 2002 to 2019 Shareholder return of 14% pa assuming dividends are re-invested

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FSA Group Ltd AGM presentation 2019

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Summary of the year “Challenges, change and progress”

Challenges, change and progress

Royal Commission

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• As a consequence of the Royal Commission, banks and other financial institutions adopted a softer approach to debt collection.

• AFSA reported that bankruptcies for 2019 were at their lowest level in 24 years. These figures clearly reflect the outcome of a more benign collection environment.

• This temporarily slowed demand for our services in the second half of the 2019 financial year.

• Between July and November, the downward trend has stabilised and is reversing.

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FSA Group Ltd AGM presentation 2019

Challenges, change and progress

Amendments to the Bankruptcy Act

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• The amendments, which took effect from 27 June 2019, limit the time to repay debt under a debt agreement to:

• 3 years for non-home owners and

• 5 years for home owners.

• These amendments were not foreseen.

• As predicted non-home owners have been adversely affected.

• In July 2019 we formally launched our new service, an informal arrangement to assist non-home owners with their debt.

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FSA Group Ltd AGM presentation 2019

Challenges, change and progress

Amendments to the Bankruptcy Act (continued)

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• The launch has been successful with positive feedback from clients and creditors. From July to November we have assisted over 500 clients with informal arrangements.

• As previously stated, we do not see the amendments as having a material impact on the number of clients we are able to assist or the long term financial performance of FSA.

Consumer Lending growth strategy

• We allocated key management resources to develop a long term growth strategy for our Consumer Lending segment.

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FSA Group Ltd AGM presentation 2019

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Services

Services

Informal Arrangements and Debt Agreements PIAs and Bankruptcy

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FSA offers a range of services to assist clients wishing to enter into a payment arrangement with their creditors. These services include informal arrangements, debt agreements, personal insolvency agreements and bankruptcy.

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FSA Group Ltd AGM presentation 2019

Services - Clients

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Informals and Debt Agreements	FY2017	FY2018	FY2019	% Change
New clients	5,395	5,797	4,573	-21%
Clients under administration	20,194	21,885	21,725	-1%
Debt managed	$366m	$398m	$379m	-5%
Dividends paid	$81m	$82m	$88m	+7%
PIA's and Bankruptcy	FY2017	FY2018	FY2019	% Change
New clients	354	415	436	+5%
Clients under administration	1,404	1,253	1,290	+3%

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FSA Group Ltd AGM presentation 2019

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Consumer Lending

Consumer Lending

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Home Loans FSA offers home loans to assist clients with property who wish to consolidate their debt.

Personal Loans FSA offers personal loans to assist clients with the purchase of a motor vehicle.

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FSA Group Ltd AGM presentation 2019

Consumer Lending - Loan Pools

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Loan Pool Data	Home Loans	Personal Loans
Weighted average loan size	$356,370	$22,261
Security type	Residential home	Motor vehicle
Weighted average loan to valuation ratio	67%	91%
Variable or fixed rate	Variable	Fixed
Geographical spread	All states	All states

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FSA Group Ltd AGM presentation 2019

Consumer Lending - Loan Pools

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Loan Pools	FY2017	FY2018	FY2019	% Change
Home loans	$306m	$360m	$382m	+6%
Personal loans	$35m	$48m	$59m	+25%
Total	$342m	$408m	$441m	+8%
Arrears > 30 day	FY2017	FY2018	FY2019
Home loans	2.21%	1.40%	1.42%
Personal loans	1.56%	1.55%	3.36%
Losses	FY2017	FY2018	FY2019
Home loans	$ 340,465 $ 501,494		$ 278,405
Personal loans	$ 199,594 $ 263,251		$ 564,022

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FSA Group Ltd AGM presentation 2019

Consumer Lending - Funding

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Funding	Facility Type Provider Limit Availability End Date Maturity Date
Home Loans	Non-recourse senior Westpac $350m Jul-21 Oct-21
	Non-recourse senior Westpac $25m Jul-21 Oct-21
	Non-recourse mezzanine Institutional $30m Jul-21 Oct-21
Personal Loans	Limited recourse senior Westpac $75m Apr-21 Apr-23

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FSA Group Ltd AGM presentation 2019

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Financials

PBT by segment

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Profit before tax by segment		FY2018	FY2019	% Change
Services		$10.2m	$11.6m	+13%
Consumer Lending	Home Loans Personal Loans	$6.0m $3.5m	$5.9m $5.3m	-1% +51%
Other/unallocated		($0.1m)	($0.7m)
Profit before tax		$19.7m	$22.2m	+13%

Other/unallocated Includes the before tax mark to market unrealised gain of $0.2m in 2018 and unrealised loss of $0.6m in 2019 on our 5 year interest rate swap agreements.

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FSA Group Ltd AGM presentation 2019

Group financials

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Financial Overview	FY2018	FY2019	% Change
Operatingincome	$66.2m	$69.7m	+5%
Profit before tax	$19.7m	$22.2m	+13%
Profit after tax attributable to members	$12.6m	$14.4m	+14%
EPS basic	10.08c	11.52c	+14%
Net cash inflow from operatingactivities	$14.5m	$17.1m	+18%
Dividend/share	7c	5c	-29%
Shareholder equityattributable to members	$44.0m	$51.0m	+16%
Return on Equity	30%	30%

PBT, PAT, EPS

Impacted by the before tax mark to market unrealised gain of $0.2m in 2018 and unrealised loss of $0.6m in 2019 on our 5 year interest rate swap agreements.

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FSA Group Ltd AGM presentation 2019

What's underpinning operating cash flow

Long-term annuity income

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Net cash inflow from operatingactivities	FY2017 FY2018 FY2019 % Change	FY2017 FY2018 FY2019 % Change	FY2017 FY2018 FY2019 % Change
	$11.1m $14.5m $17.1m +18%
		No of clients / loan pool size	Average client life inyears
Services	- Informals/ Debt Agreements	21,725	4.5 to 5.5
	- PIA/Bankruptcy	1,290	3
Consumer Lending	- Home Loans	$382m	3 to 4
	- Personal Loans	$59m	4 to 5

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FSA Group Ltd AGM presentation 2019

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Strategy and Outlook

Strategy and Outlook Agenda

• Services

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• Consumer Lending – Home Loans

• Consumer Lending – Personal Loans

• Earnings and Capital Management

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FSA Group Ltd AGM presentation 2019

Services

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We now offer a debt agreement (DA) and an informal arrangement (IA).

The IA offering is more automated than a DA.

During FY2020:

1. Continue to improve our IA offering, based on client and creditor feedback;

Strategy

1. Implement the IA offering across the entire team, with ongoing training and support;

2. Remove circa $3m of annual cost, we are well advanced on this through automation and off-shoring; and

3. Focus on assisting an increasing number of clients across combined DAs and now IAs:

4. FY2017 to 2019 average 438 clients per month (100% DAs)

5. FY2019 average 381 clients per month (100% DAs)

6. FY2020 average to date 386 clients per month (70% DAs)

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FSA Group Ltd AGM presentation 2019

Services (continued)

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Strategy

Based on current call volumes/spend we believe the IA offering, once points 1 and 2 are actioned, will see us assist on average 450 to 500 clients per month.

The above strategy will allow us to hold the Services PBT at historical levels.

As previously stated

We do not see the amendments as having a material impact on the number of clients we are able to assist or the long term financial performance of FSA.

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FSA Group Ltd AGM presentation 2019

Consumer Lending – Home Loans

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Currently exploring options to:

Growth Strategy

• Enlarge our management team ;

• • Further develop our product offering; and

• Expand our external origination and distribution channels,

in order to grow our loan pool and PBT.

Funding/RMBS

To diversify our funding and de-risk our business we plan to utilise the debt capital markets. We are exploring a $150m to $200m RMBS private bond issue.

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FSA Group Ltd AGM presentation 2019

Consumer Lending – Personal Loans

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Growth Strategy Increasing our sales team during FY2020.

By FY2021 aiming to grow our:

Loan pool/PBT

• Loan pool from $59m to around $100m - PBT from $5.3m to around $10.5m.

We are planning a $20m mezzanine facility to support the $75m Westpac senior facility, this will free up capital and improve ROE.

Funding/ Mezzanine

$100m Pool without Mezzanine $100m Pool with Mezzanine Westpac $70m Westpac $70m Mezzanine - Mezzanine $20m FSA $30m FSA $10m

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FSA Group Ltd AGM presentation 2019

Earnings and Capital Management

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Earnings FY2020 expect earnings growth of 5% to 15%

FY2020 expect our full year dividend to be 5c per share with the Capital balance of earnings to be: - Management Re-invested to support the growing loan pools; and - Used for an on market share buyback On market share The board is of the current opinion that our shares are trading at a price buy back which represents a material discount to intrinsic value

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FSA Group Ltd AGM presentation 2019

Investor Relations Contacts

Mr. Tim Odillo Maher Executive Director FSA Group Limited Level 3, 70 Phillip Street Sydney NSW 2000 T:02 8985 5090 F:02 8985 5310 E:tmaher@fsagroup.com.au	Ms. Deborah Southon Executive Director FSA Group Limited Level 3, 70 Phillip Street Sydney NSW 2000 T:02 8985 5091 F:02 8985 5333 E:dsouthon@fsagroup.com.au

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Further information can be accessed from fsagroup.com.au

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FSA Group Ltd AGM presentation 2019

Cautionary Statements and Disclaimer Regarding Forward-Looking Information

This release may contain forward-looking statements, including statements about FSA Group Limited’s ( Company ) financial condition, results of operations, earnings outlook and prospects. Forward-looking statements are typically identified by words such as “plan,” “aim”, “focus”, “target”, “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions.

The forward-looking statements contained in this release are predictive in character and not guarantees or assurances of future performance. These forward-looking statements involve and are subject to known and unknown risks and uncertainties many of which are beyond the control of the Company. Our ability to predict results or the actual effects of our plans and strategies is subject to inherent uncertainty.

Factors that may cause actual results or earnings to differ materially from these forward-looking statements include general economic conditions in Australia, interest rates, competition in the markets in which the Company does and will operate, and the inherent regulatory risks in the businesses of the Company, along with the credit, liquidity and market risks affecting the Company’s financial instruments described in the Company’s latest Annual Report.

Forward-looking statements are based on assumptions regarding the Company’s financial position, business strategies, plans and objectives of management for future operations and development and the environment in which the Company will operate. Those assumptions may not be correct or exhaustive.

Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on any forward-looking statements.

Forward-looking statements are based on current views, expectations and beliefs as at the date they are expressed. The Company disclaims any responsibility to and undertakes no obligation to update or revise any forward-looking statement to reflect any change in the Company’s circumstances or the circumstances on which a statement is based, except as required by law.

The Company disclaims any responsibility for the accuracy or completeness of any forward-looking statement to the extent permitted by law. Unless otherwise stated, the projections or forecasts included in this release have not been audited, examined or otherwise reviewed by the independent auditors of the Company.

This release is not an offer or invitation for subscription or purchase of, or a recommendation of securities.

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FSA Group Ltd AGM presentation 2019