FSA : Appendix 4D and Half Yearly Report

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Appendix 4D

Preliminary financial statements for the half-year ended 31 December 2021

Name of Entity	FSA Group Limited
ABN	98 093 855 791
Details of the reporting period
Half-year Ended		31 December 2021
Previous corresponding reporting period	31 December 2020

Results for announcement to the market	$A'000	up/down	Movement %
Total operating income	30,534	down	4.6%
Net profit before tax	15,730	down	4.2%
Profit after tax from ordinary activities attributable to the
members of the parent	9,915	down	11.5%
Net profit for the period attributable to members of the parent	9,915	down	11.5%

		Amount per Franked amount	Tax rate for
Dividend information	share (cents) per share (cents)	franking credit
Final 2021 dividend per share (paid 31 August 2021)	3.00	3.00	30%
	Interim 2022 dividend per share determined	3.50	3.50	30%
	Interim dividend dates:
	Ex-dividend date			23 February 2022
	Record date			24 February 2022
	Payment date			10 March 2022
	There is no dividend reinvestment plan
			31-Dec-21	31-Dec-20
	Net tangible assets per security		49.7 cents	42.9 cents

Details of the entities over which control has been gained or lost	Note
during the period	Page 13
Associates and joint ventures	Page 13
Foreign entities	Not applicable
Independent audit report or review	Page 16

This information should be read in conjunction with the 2021 Annual Report.

Additional information supporting the Appendix 4D disclosure requirement can be found in the Directors' Report and the consolidated financial statements for the half-year ended 31 December 2021.

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DIRECTORS' REPORT

The Directors submit their report for the half-year ended 31 December 2021.

DIRECTORS

The names of the Directors of FSA Group Limited ("FSA Group") in office during the half-year and until the date of this report are shown below. All Directors were in office from the start of the half-year, unless otherwise stated.

David Bower	Non-Executive Chairman
Tim Odillo Maher	Executive Director
Deborah Southon	Executive Director

PRINCIPAL ACTIVITIES

FSA Group provides debt solutions and direct lending services to individuals and businesses.

EXECUTIVE DIRECTORS' REVIEW

COVID-19 impacted and continues to impact the number of new callers seeking our assistance for our Services segment. We expect demand will start to return during the 2023 financial year.

Our focus in on our Lending segment, developing a broker channel and growing our loan pools. During the first half, FSA Group acquired an asset finance lending business which lends to SMEs for vehicles and business-criticalequipment.

FINANCIAL OVERVIEW

For the half-year ended 31 December 2021, FSA Group generated $30.5m in operating income, a 5% decrease, and a profit after tax attributable to members of $9.9m, an 11% decrease compared to the half-year ended 31 December 2020. Our net cash inflow from operating activities was $14.6m, a 2% increase.

We advise that the Directors have declared a fully franked interim dividend of 3.50 cents per share, with a record date of 24 February 2022 and payable on 10 March 2022.

The Financial Overview below summarises our performance.

Financial Overview	1HFY 2021	1HFY 2022	% Change
Operating income	$32.0m	$30.5m	-5%
Profit before tax	$16.4m	$15.7m	-4%
Profit after tax attributable to members of the parent	$11.2m	$9.9m	-11%
EPS basic	8.96c	7.93c	-11%
Net cash inflow from operating activities	$14.3m	$14.6m	+2%
Dividend/share	3.00c	3.50c	+17%
Shareholder equity attributable to members	$66.9m	$86.2m	+29%
Return on equity	35%	25%

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DIRECTORS' REPORT continued

Operational Performance

Our business operates across the following key segments, Services and Lending. The operating income and profitability of each segment is as follows:

Operating income by segment	1HFY 2021	1HFY 2022	% Change
Services	$16.8m	$12.8m	-24%
Lending
Home loans and Asset finance	$8.1m	$9.7m	+20%
Personal loans	$7.1m	$8.2m	+16%
Other/unallocated	$0.0m	$0.1m
Operating income	$32.0m	$30.5m	-5%

Profit before tax by segment	1HFY 2021	1HFY 2022	% Change
Services	$6.9m	$5.1m	-26%
Lending
Home loans and Asset finance	$5.0m	$5.7m	+14%
Personal loans	$4.1m	$5.2m	+27%
Other/unallocated	$0.4m	-$0.2m
Profit before tax	$16.4m	$15.7m	-4%

Services

The Services segment offers a range of services to assist clients wishing to enter into a payment arrangement with their creditors. These include informal arrangements, debt agreements, personal insolvency agreements and bankruptcy. FSA Group is the largest provider of these services in Australia.

COVID-19 impacted and continues to impact the number of new callers seeking our assistance for our Services segment. We expect demand will start to return during the 2023 financial year.

During the first half, new client numbers for informal arrangements and debt agreements decreased by 52% and for personal insolvency agreements and bankruptcy increased by 39% compared to the previous corresponding period.

During the first half, informal arrangement and debt agreement clients under administration decreased to 13,485, down 23% and for personal insolvency agreements and bankruptcy decreased to 969, down 16%. FSA Group manages $153m of unsecured debt under informal arrangements and debt agreements and during the first half paid $35m in dividends to creditors.

Informal and Debt Agreements	1HFY 2020	1HFY 2021	1HFY 2022	% Change
New clients	2,175	724	351	-52%
Clients under administration	20,512	17,520	13,485	-23%
Debt managed	$359m	$261m	$153m	-41%
Dividends paid	$42m	$43m	$35m	-19%

PIA's and Bankruptcy	1HFY 2020	1HFY 2021	1HFY 2022	% Change
New clients	225	38	53	+39%
Clients under administration	1,352	1,151	969	-16%

The Services segment achieved a profit before tax of $5.1m, a 26% decrease. COVID-19 will start to negatively impact our Services earnings during the 2023 financial year. We expect this to be offset by increased Lending earnings.

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DIRECTORS' REPORT continued

Lending

The Lending segment offers home loans and personal loans to assist clients wishing to purchase a property or consolidate their debt or to purchase a motor vehicle. During the first half, FSA Group acquired an asset finance lending business which lends to SMEs for vehicles and business-criticalequipment. During the first half our loan pools increased from $443m to $507m, a 14% increase.

Loan Pool Data	Home loans	Personal loans	Asset finance
Weighted average loan size	$374,714	$21,996	$21,917
Security type	Residential home	Motor vehicle	Equipment
Weighted average loan to valuation ratio	67%	100%+ on settlement	100%+ on settlement
Variable or fixed rate	Variable	Fixed	Fixed
Geographical spread	All states	All states	All states

Loan Pools	1HFY 2020	1HFY 2021	1HFY 2022	% Change
Home loans	$386m	$380m	$383m	+1%
Personal loans	$63m	$63m	$70m	+11%
Asset finance*			$54m
Total	$449m	$443m	$507m	+14%
*Asset Finance was acquired on 1 September 2021 with a loan pool of $43m. Asset Finance's loan pool at 30 June 2021 was $37m.
Arrears > 30 day	1HFY 2020	1HFY 2021	1HFY 2022
Home loans	2.47%	1.70%	1.39%
Personal loans	4.04%	2.83%	2.11%
Asset finance			1.93%
Losses	1HFY 2020	1HFY 2021	1HFY 2022
Home loans	$107,440	$152,902	$111,134
Personal loans *	$687,262	$305,762	$308,996
Asset finance **			$166,233

• The loss of $687,262 was distorted by a loss of $371,350 from the discontinued pilot product offering which we ran during the 2018 calendar year. ** Asset finance losses are for the entire 6 month period.

Borrowings	Facility type	Provider	Limit	Maturity date	Drawn
	Non-recourse warehouse	Westpac	$350m	Oct-23	$251m
Home loans	Non-recourse warehouse	Institutional	$20m	Oct-23	$19m
	Securitised	Institutional		Mar-51	$107m
Personal loans	Limited recourse warehouse	Westpac	$75m	Apr-26	$44m
Corporate	Westpac	$15m	Mar-24	-
	Non-recourse warehouse	Bendigo	$50m	Jul-22	$43.0m
Asset finance	Non-recourse warehouse	Institutional	$3.5m	Jan-23	$3.5m
	Non-recourse warehouse	Institutional	$6.0m	Jun-23	$4.3m

The Lending segment achieved a profit before tax of $10.9m, a 20% increase.

Historically our Lending segment operated as a direct-to-consumer business. Going forward our focus will be on developing a broker channel and growing our loan pools. The addition of a broker channel will significantly enhance our Lending segment.

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DIRECTORS' REPORT continued

Our plan for our Lending segment, over the next 3 to 5 years is as follows:

Home loans - Increase origination from around $10m to $40m per month. Grow loan pool from $383m to around $1.2b.

Personal loans - Increase origination from around $3m to $7m per month. Grow loan pool from $70m to around $200m.

Asset finance - Increase origination from around $4m to $12m per month. Grow loan pool from $54m to around $300m.

Net cash inflow from operating activities

During the first half, FSA Group maintained strong cash inflow driven by long term annuity income from clients. Net cash inflow from operating activities for the first half was $14.6m, a 2% increase.

	1HFY 2020	1HFY 2021	1HFY 2022	% Change
Net cash inflow from operating activities	$7.9m	$14.3m	$14.6m	+2%

Strategy and Outlook

Our focus over the 2022 financial year will be as follows:

Services - Regrow as demand returns.

Lending - Develop a broker channel and grow our loan pools.

Earnings - Expect earnings for the 2022 financial year to be in line with the 2021 financial year. Capital Management - Expect our full year dividend to be 7.00 cents per share.

AUDITOR'S INDEPENDENCE DECLARATION

The auditor's independence declaration under Section 307C of the Corporations Act 2001 is attached to this Directors' report on page 6.

Signed in accordance with a resolution of Directors made pursuant to section 306(3) of the Corporations Act, on behalf of the board of Directors.

Tim Odillo Maher

Director

Sydney

17 February 2022

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