FSA GROUP LIMITED

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25 June 2010

Revised Guidance FY2010 and Update on Loan Pools

FSA Group provides a trading update and revises its guidance for FY2010.

At the half year FSA Group was on track to achieve Profit before Tax of between $14.5m to $19m. The Company now expects Profit before Tax for FY2010 of between $12m to $14m, this compares with $13.9m for FY2009. The revised guidance reflects the Company’s expectation that Services will fall within the guidance range provided in September of 2009, however, Home Loan Lending will be below expectations.

*Divisions*	*September Guidance FY2010* *Updated Guidance FY2010*
Services Home Loan Lending Other	$8m to $12m $8m to $9.5m $5.5m to $6m $3 to $3.5m $1m $1m
Net Profit before Tax	$14.5m to$19m $12m to$14m

Services

In 1H FY2010, Services were affected by an historically low interest rate environment together with the effect of the Government stimulus package. This slowed demand for the Company’s services, as shown in the table below, and resulted in lower than expected client numbers for the sector as a whole. Notwithstanding, the Company was able to maintain its market share for debt agreements of approximately 50% and remains the market leader.

*Services -Client Numbers*	*FY2009* *FY2010*
DebtAgreements	Up 37% Down6%
PIA’s and Bankruptcy	Up22% Up2%

Home Loan Lending

Home Loan Lending client numbers were similarly affected. In 1H FY2010 the loan pool grew by $15m and as demand recovered in the second half the loan pool increased by a further $35m. The average weighted balance of the loan pool for FY2010 is now expected to be approximately $25m below initial forecast. The home loan lending loan pool is expected to grow to $195m by June 2010.

RBA rate increases totalling 150 bps during the later part of 1H and 2H FY2010 affected FSA Group’s cost of capital. The Company temporarily delayed passing certain RBA rate increases onto its borrowers to allow them time to adjust to higher repayments and therefore contain potential arrears. This reduced the Company’s target NIM (net interest margin) for the year impacting short term profitability. The Company has now passed all RBA rate increases onto its borrowers, restoring its NIM to target levels. Greater than 30 day arrears as at May were 3.34% compared to its competitors as measured by SPIN of around 12.3% as at March.

Outlook

Executive Director Tim Odillo Maher said “There has been no better environment to test our business model than the 2010 financial year. Looking ahead, high levels of consumer debt together with a higher interest rate environment are driving demand for our products and services. We expect this to increase in 2011”.

FSA Group Limited Head Office Level 3, 70 Phillip Street Sydney, NSW, 2000

Phone: (1300) 660 032 Fax: (1300) 660 050 info@fsaFSA Group.com.au

ASX Code: FSA

Funding

FSA Group’s loan pools represent the highest quality non-conforming home loan and factoring finance pools in the country. During FY2010 the Company’s limited-recourse factoring finance and non-recourse home loan funding facilities were both increased and renewed by Westpac Banking Corporation. FSA Group is currently in discussions to increase its funding capacity to support the future growth of its loan pools.

Loan Pools as at 31 May 2010

Loan Pools as at 31 May 2010
	*Home Loan* *Lending*	*Factoring* *Finance*

*Funding*
WestpacFundingFacility (Renewal Term)	$235m(July2011)	$15m(Dec2011)

*Loan Pool*
Loan PoolSize	$188m	$10m
Borrower Type	Individual	Small Business
Loan Term	30 years	Revolving
SecurityType	1~~st~~Mortgage	AssignedReceivables
AverageLoanSize	$202,000	$167,000
AverageWeightedLVR(LoantoValuation)	67%	Ranges 55% to 65%
%Full Documentation Borrowers	96%	-
%VariableRateBorrowers	100%	100%
GeographicalSpread	AustraliaWide	AustraliaWide

*Arrears*
>30DayArrears*	3.34%	-
>90DayArrears	2.03%	6.70%

* >30 Day Arrears of competitors as measured by SPIN is around 12.3% as at March 2010

*Capital Losses*
AssetInsured	No	Yes
Loss of Lenders Capitalsinceinception	$76,000	NIL

_Embedded Value_**
EmbeddedValuein Loan Pool	$18mto $24m	$4mto $6m

**“Embedded value in loan pool” is managements estimate of the future value that has been built into the respective loan pools that will contribute to FSA Groups Profit before Tax as the loan pools amortise over the next 5 (+/-) years subject to ongoing funding.

Loan Pool Target

*Loan Pool Target*
Loan Pool Target byFY2011	-	$20mto $25m
Loan Pool Target byFY2013	$600m	-

On behalf of the Board Duncan Cornish Joint Company Secretary

FSA Group Limited Head Office Level 3, 70 Phillip Street Sydney, NSW, 2000

Phone: (1300) 660 032 Fax: (1300) 660 050 info@fsaFSA Group.com.au

ASX Code: FSA

AI assistant

FSA GROUP LIMITED Capital/Financing Update 2010

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