I had a look at FSA recently - the initial appeal to me is its...

I had a look at FSA recently - the initial appeal to me is its counter-cyclical model, particularly as i'm more bearish than most on Australia's macro-economic outlook over the next 2-3 years (i think the potential for a residential construction-led downturn is significantly underestimated by most mainstream institutions, and the consequences could be rather severe given the eye-popping household debt levels, and the consequences will be magnified if global long bond rates really take off). Seems like FSA is well-managed by a shareholder friendly CEO who's aligned with minorities given his very large stake in the business, so that's another tick.

The issues i found were:

1) complete lack of operating leverage in the debt services division - employee costs as % of revenue have gradually increased since 2009, despite solid revenue growth around 5% p.a. Does anyone have a view as to whether FSA are potentially running their employee expenses a little heavy at the moment, i.e. there is slack in the business to grow revenue without growing employee expenses?

2) if the services division is completely reliant on hiring and retaining staff to grow its revenues given apparent lack of operating leverage as point 1) appears to demonstrate, then the "staffing issues" mentioned in FY16 (which led to a services division revenue drop) are a cause for concern. Are these issues resolved? Are they losing staff to competitors?

3) net impairments as % of revenue in the services division have fallen every year since 2012 after shooting up post the 2008-2010 slowdown. This is natural enough - revenue rises in a downturn as more people require debt agreements, but those some people are also more likely to default on the fees owed to FSA due to lack of economic resources. Has FSA learnt anything from this last cycle, i.e. does anyone think they can keep their net charge-offs to its current ~10% of revenue level while growing revenues, or is just natural that with more revenue written in macro downturns, there'll be an increase in net charge-offs to the ~15% levels averaged over 2009-2012? Maybe their new electronic bill payment system, still in trialing mode but soon to be launched, will help them keep a lid on net impairments during the next macro downturn?

Regards