FSA GROUP LIMITED — Investor Presentation 2013

Sep 5, 2013

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FSA Group Investor Presentation 6 September 2013

Agenda

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• Overview

• Core division – Services

• Growth divisions – Home Loans and Small Business

• Financial results

• Outlook

• Why invest in FSA?

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Overview

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Overview

Australia’s largest provider of debt solutions; direct lender to individuals & businesses	Australia’s largest provider of debt solutions; direct lender to individuals & businesses
2000	Founded with director loans of $50,000
2002	Back door listing raised $600,000
2009	Raised $5.2m to underpin loan pools
2011 to 2013	$6.2m share buy back and $10.5m in dividends
2013	PAT $10.8m Operating Cash Flow $14.0m Dividend $6.3m NTA $53m Market Cap $122m

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Overview

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3 Non‐executive directors ‐ 11, 7, 3 years Board 2 Executive founding directors ‐ 14 years each Shareholdings Substantial shareholdings of founding directors ‐ 46% Founding directors ‐14 years each Long Serving CFO ‐ 12 years Executive Team 6 key executives ‐ 13, 11, 8, 8, 6, 3 years 183 staff in total FSA operates across 3 key divisions ‐ Services Divisions ‐ Home Loans ‐ Small Business

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Core Division Services

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What drives demand? Levels of debt and ability to service

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Credit Card Debt $bn Debt to Disposable Income %
$ bn Total Balances Repayments %
180%
$60
150%
$50
120%
$40
$30 90%
$20 60%
$10 30%
$0 0%
Source: RBA Source: RBA
Aug-2002 Apr-2003 Dec-2003 Aug-2004 Apr-2005 Dec-2005 Aug-2006 Apr-2007 Dec-2007 Aug-2008 Apr-2009 Dec-2009 Aug-2010 Apr-2011 Dec-2011 Aug-2012 Apr-2013 Mar-1977 Sep-1979 Mar-1982 Sep-1984 Mar-1987 Sep-1989 Mar-1992 Sep-1994 Mar-1997 Sep-1999 Mar-2002 Sep-2004 Mar-2007 Sep-2009 Mar-2012
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How does FSA assist?

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FSA assists individuals wishing to enter into a formal payment arrangement with their creditors through:

1. Debt Agreement

2. Personal Insolvency Agreement 3. Bankruptcy

FSA is Australia’s largest provider of debt solutions

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FSA’s Services division

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Largest provider – market share 48%* Over 17,500 clients, owing $301m Debt Agreements Low arrears, $79m paid to creditors in 2013 Superior returns to creditors compared to market Fee for service income, delivering annuity cash flow Personal Insolvency One of the largest providers Agreements and Over 1,500 clients Bankruptcy Fee for service income, delivering annuity cash flow

• Calculated using ITSA statistics

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FSA is the leader in debt agreements
FSA’s Market Share Market Size
FSA’s Market Total Number of
Share % Agreements
60%
12,000
50%
10,000
40%
8,000
30%
6,000
20%
4,000
10%
2,000
0% 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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FSA’s competitive advantage

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Direct client acquisition model	Via web and TV – controlled, selective and low cost No third party referral channels
Clients are micro managed	Understand and assess debtor and creditor clients’ needs Tailor solutions which are affordable, sustainable and viable Manage relationship for debt repayment and rehabilitation
Proprietary systems	Support multiple product offerings Scale to process large volumes a low transaction cost Strong risk management and compliance

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Growth Divisions Home Loans and Small Business

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Home Loans

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FSA assists individuals with property, who are unlikely to conform to the lending criteria of banks, wishing to consolidate their debt

FSA is one of the few remaining non‐conforming home loan lenders in the market

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Small Business

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FSA assists small to medium businesses with cash flow management by providing finance secured against invoices

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Loan Pools

Home Loans	Home Loans
Loan Pool Size	$221m
Average Loan Size	$233,000
Average Weighted LVR	67%
Variable Rate Borrowers	100%
Geographical Spread	Australia Wide
>30 day arrears	3.22%

Funding

• Non‐recourse funding of $250m

• WBC Senior $230m

• Institutional Mezzanine $20m

• Renewed to October 2016

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Small Business

Loan Pool Size	$20m
Average Loan Size	$256,000
Average Weighted LVR	Ranges 55% to 65%
Variable Rate Borrowers	100%
Geographical Spread	Australia Wide
>90 day arrears	4.75%

Funding

• Funding of $35m from WBC

• Renewed to June 2015

• FSA 15% equity

• Lender’s margin, delivering annuity cash flow

• FSA’s balance sheet risk limited to 3% equity

• Lender’s margin, delivering annuity cash flow

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Strategy: Home Loans & Small Business

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Develop a track record in lending Previously Limit growth in loan pools until conditions improve Today Focus on growing loan pools

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Financial Results

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PBT by division

		FY2011	FY2012	FY2013	%
	Services	$10.6m	$11.6m	$11.7m	1%
	Home Loans	$4.2m	$4.1m	$5.1m	24%
	Small Business	$0.6m	($0.7m)	$0.8m	211%
	Other	($0.1m)	($0.1m)	$0.1m	‐
	Profit before tax	$15.3m	$14.9m	$17.8m	19%
	Home Loans pool	$229m	$232m	$221m
	Small Business pool	$12m	$25m	$20m

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Group financials

		FY2011	FY2012	FY2013	%
	Revenue and income	$54.1m	$59.0m	$64.4m	9%
	Profit before tax	$15.3m	$14.9m	$17.8m	19%
	Profit after tax1	$9.0m	$8.5m	$10.8m	26%
	Operating cash flow2	$5.6m	$9.4m	$14.0m	49%
	NTA backing/share	34.9c	37.8c	42.3c	12%
	EPS basic	6.51c	6.27c	8.51c	36%
	Dividend/share	1.0c	2.2c	5.0c	127%

1. Profit after tax attributable to members

2. Net cash inflow from operating activities

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PAT compared with Operating cash flow
16
14
12
10
8
6
4
2
-
2008 2009 2010 2011 2012 2013
Net profit after tax attributable to members Net cash inflow from operating activities
Millions
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What's driving operating cash flow? Long-term annuity income from an increased number of clients

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		FY2010	FY2011	FY2012	FY2013	Avg client life (years)
	Operating cash flow	$2.5m	$5.6m	$9.4m	$14.0m
	Debt Agreement clients	11,050	14,394	16,681	17,751	4.5 to 5
	PIA/Bankruptcy clients	909	1,119	1,316	1,515	3
	Home Loans pool	200m	229m	232m	221m	3 to 4
	Small Business pool	10m	12m	25m	20m	2.5 to 3.5

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Capital requirements for growth

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Operating cash flow ‐ $9.4m in 2012 and $14.0m in 2013

Investing cash flow ‐ CAPEX around $500k pa (stable)

Business now generating around $12m a year in free cash flow

Future capital requirements to support loan pool growth

• Home Loans ‐ $3.0m capital required for $100m increase in pool

• Small Business ‐ $1.5m capital required for $10m increase in pool

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Balance sheet summary

Assets		Liabilities
Cash	11.0m	Payables	11.5m
Receivables1	62.1m	Borrowings	3.6m
Intangibles	3.4m	Deferred Tax Liability1	13.3m
Other	1.5m	Provisions and Other	7.0m
Loan Pool Assets		Loan Pool Liabilities
Cash – Factoring2	2.9m	Borrowings factoring3	22.3m
Factoring assets3	19.6m	Borrowings mortgages4	217.7m
Cash – Mortgages2	9.2m	Total Liabilities	275.4m
Mortgage assets4	224.5m	Net Assets	58.8m
Total Assets	334.2m

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1. DA,PIA/B,Other net receivables ‐ 29m current, 33.1m non‐current, DTL relates primarily to DA’s

2. Restricted cash for factoring and mortgages

3. Borrowings from WBC secured against net factoring assets (gross assets 51.6m)

4. Non‐recourse borrowings from WBC secured solely against mortgage assets

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Return on Equity
Return on Equity
35%
30%
32%
25%
20%
20% 19%
15%
13% 18%
15%
10%
5%
0%
2008 2009 2010 2011 2012 2013
ROE expected to increase – targeting > 20%
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Outlook and Why invest in FSA?

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3 year outlook

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Services Maintain our leading position in a niche market Home Loans Growth in loan pool Small Business Growth in loan pool Opportunities New products to our existing client base Earnings, Earnings and dividend growth Dividends and To continue with on market buy back, subject to price Buyback

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Why invest in FSA?

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1. Largest provider of debt solutions

2. One of the few remaining non‐conforming home loan lenders

3. Established track record in factoring finance to small businesses

4. Business performs well across economic cycles

5. Experienced, long serving executive team with ownership

6. Track record of financial performance

7. Well positioned for growth

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Investor Relations Contacts

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Mr. Tim Odillo Maher Ms. Deborah Southon Executive Director Executive Director FSA Group Limited FSA Group Limited Level 3, 70 Phillip Street Level 3, 70 Phillip Street Sydney NSW 2000 Sydney NSW 2000 T: 02 9293 6054 T: 02 9293 6058 F: 02 9293 6032 F: 02 9293 6032 E: tmaher@fsagroup.com.au E: dsouthon@fsagroup.com.au

Further information can be accessed from

fsagroup.com.au

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Disclaimer

• This presentation is designed to provide a general overview of the activities and financial position of FSA Group Limited. The material set out in the presentation is current as at the date of this presentation . It is information in summary form and does not purport to be complete.

• This presentation includes forward looking statements about estimates and outcomes which may be affected by internal and external factors and involve known and unknown risks which may cause actual results and business performance to differ from those expressed or implied in such statements. No assurance or guarantee is, or should be taken to be, given in relation to the future business performance or the likelihood that the assumptions, estimates or outcomes will be achieved.

• Whilst management has taken every effort to ensure the accuracy of the material in this presentation, it is provided for information only. FSA Group Limited, its officers and management exclude and disclaim any liability in respect of anything done in reliance on this presentation.

• It is not intended that the material in this presentation be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered with or without professional advice, when deciding if an investment is appropriate.

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