TIDMTSL
RNS Number : 1002R
ThinkSmart Limited
04 March 2021
4 March 2021
ThinkSmart Limited
("ThinkSmart" or the "Company" which together with its
subsidiaries is the "Group")
Interim Results for the six month period ended 31 December
2020
Clearpay holding revaluation drives 237% profit uplift to
GBP53.7m
ThinkSmart Limited (AIM: TSL), the specialist digital payments
business with a 10%(1) equity shareholding in Clearpay Finance Ltd
("Clearpay"), today announces its Interim Results for the six
months ended 31 December 2020 (the "period" or "H1 2021").
Highlights
Clearpay shareholding revaluation continues to drive material
value
-- Profit after tax up 237% to GBP53.7 million (H1 2020: GBP15.9
million) driven by a GBP52.9 million non-cash fair value gain
on the independent valuation(2) of the Group's retained 10%(1)
shareholding in Clearpay
-- 10%(1) shareholding in Clearpay independently revalued to GBP106.6m(2)
at period end (FY 2020: GBP53.7 million)
-- Net assets at period end of GBP116.6 million are equivalent to
109.44 pence per share (FY 2020: GBP66.5 million/62.42 pence
per share)
-- Put/call option agreement with Afterpay Ltd ("Afterpay"), exercisable
in 2023/24, for the remaining 10%(1) shareholding in Clearpay
provides a clear and agreed legal mechanism to enable Clearpay
shareholding realisation
-- Proven delivery of shareholder return with special dividend and
capital return of A$6.5 million (6.1 cents per share), equivalent
to GBP3.7 million, paid in December 2020
-- Sale of 90% shareholding in Clearpay to Afterpay and retention
of 10%(1) shareholding has now generated cumulative accounting
profit of GBP116.7 million (including GBP106.5 million(2) of
non-cash fair value gains), with the 10%(1) stake offering further
upside potential subject to the ongoing performance of Clearpay
-- Cash and cash equivalents of GBP6.9 million at 31 December 2020
(FY 2020: GBP8.8 million)
Clearpay trading performance for the six months ended 31
December 2020
Figures are as announced to the Australian Stock Exchange by
Afterpay Ltd on Thursday 25 February 2021 in its half year results
to 31 December 2020 and the following is extracted from that
announcement. All currency figures are in Australian dollars unless
otherwise stated. Clearpay is 90% owned by Afterpay.
-- AUS$800m underlying sales reflects an increase of 288% on H1
2020 and represents 8.2% of Afterpay's global total. The proportion
of Clearpay's underlying sales to Afterpay's global sales total
has continued to increase, having stood at 5.4% at FY 2020
-- AUS$6.5m EBITDA represents 13.6% of Afterpay's EBITDA
-- 1.6 million active customers is 12.2% of Afterpay's global total
and an increase of 161% on H1 2020. The proportion of Clearpay's
active customers to Afterpay's global active customer total has
continued to increase, having stood at 10.1% at FY 2020
-- Contribution from returning customers - i.e. repeat business
- increased from 87% at 30 June 2020 to 90% at 31 December 2020
-- The number of active merchants increased by 812%. Strong growth
in merchant acceptance has continued into January and February
2021. New merchants include: Superdry UK, Signet Brands (Ernest
Jones and H Samuel), Pandora, RIXO, Goop, FaceGym, The Fragrance
Shop, Lounge Underwear, and Revolution Beauty
Managed wind down of legacy operations continues to generate
positive cash flow
-- ThinkSmart's operating business, powered by SmartCheck, a proprietary
digital payments platform and credit decision-making engine,
is in managed wind down, and options to realise the value of
this asset continue to be considered.
-- GBP1.45 million cash receipt and realised gain in the period,
as announced on 10 August 2020, from the settlement agreement
in relation to the legal proceedings issued by the Group against
Carphone Warehouse
-- Total revenue of GBP2.4 million (H1 2020: GBP3.3 million) includes
GBP0.4 million (H1 2020: GBP0.2 million) from the provision of
the outsourced call centre customer support service for Clearpay
-- Optimised cash management with GBP1.8 million net cash generated
from operating activities (H1 2020: GBP1.0 million) including
GBP1.45 million from settlement agreement in relation to legal
proceedings
-- Operating costs further reduced to GBP1.8 million (H1 2020: GBP2.2
million) and remain controlled, aligned to current volume performance
Commenting on the results , Ned Montarello, Executive Chairman
of ThinkSmart, said:
"The value of our shareholding in Clearpay is underpinned by the
rapid consumer acceptance and subsequent compelling growth of the
Buy Now Pay Later market coupled with the trading performance of
Clearpay. Clearpay's trading in the period has been outstanding,
and it has continued to accelerate rapidly. Importantly, Clearpay
continues to grow within Afterpay, reflecting its increasing
importance to Afterpay's group-wide metrics.
"Our investment in Clearpay has now generated over GBP116
million of profit for shareholders, with further upside potential
for our retained stake from Clearpay's ongoing progress. Our
agreement with Afterpay provides shareholders with a clear and
agreed legal mechanism for realisation of the value of our Clearpay
holding in 2023/24.
"While our strategic efforts are focused on further value
creation for shareholders via our holding in Clearpay, the managed
wind down of our legacy operations continues to generate positive
cash flow as we control costs while rightsizing the operations to
lower volumes. This leaves our balance sheet robust. There is
inherent, tangible value within our proprietary payments technology
and we are continuing to consider how best to optimise the value of
this asset.
"Ultimately, the Company is well placed to continue accruing
material value for our shareholders, subject to Clearpay's ongoing
progress, and we thank them for their ongoing support of the
strategy."
For further information please contact:
ThinkSmart Limited Via Buchanan
Ned Montarello
Canaccord Genuity Ltd (Nominated Adviser
and Broker)
Sunil Duggal
Andrew Potts
Tom Diehl +44 (0)20 7523 8350
Buchanan
Giles Stewart
Chris Lane
Toto Berger +44 20 7466 5000
(1) A proportion of the 10% retained shareholding (up to 3.5% of
the total share capital of Clearpay) will be made available to
employees of Clearpay under an employee share ownership plan.
(2) The Group engaged a third party global professional services
firm to independently value its retained shareholding in Clearpay
at 31 December 2020 for accounting purposes under AASB 9 in
accordance with AASB 13 (Fair Value Measurement). This valuation
has been undertaken based on publicly available information,
reflecting the Afterpay call option (exercisable from 23 August
2023) and ThinkSmart put option (exercisable from 23 February 2024)
and including a discount for the lack of marketability of Clearpay
as a privately owned company, and has produced a range of values
for the Group's 10%(1) shareholding in Clearpay from which the
Group has taken at two thirds of the range. Under either the call
or put option, the sale of the 10%(1) shareholding in Clearpay to
Afterpay will be at a price calculated on agreed valuation
principles at the time. Further detail
is provided in Note 10(i) to the 31 December 2020 Group interim financial report below.
Notes to Editors
About ThinkSmart Limited
ThinkSmart is a specialist digital payments platform business.
It offers investors unique exposure to the UK 'Buy Now Pay Later'
payments sector which is undergoing exponential growth, driven by
ongoing digital transformation of consumer shopping habits and
financial services.
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014 as
amended by regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement,
this information is now considered to be in the public domain.
Chairman's Statement
Clearpay Drives Significant Value for Shareholders
Our six month period to 31 December 2020 has been beneficial for
our shareholders. Our business was founded on a deeply
entrepreneurial mindset and culture, always ready to move quickly,
in particular in relation to how digital transformation has and
continues to reshape consumer behaviour in the core retail markets
and the way in which retailers have needed to adapt their offerings
to stay relevant. Accordingly, in 2017/18 we developed and launched
Clearpay in the UK, taking first mover advantage in the nascent
'Buy Now, Pay Later' market. Our decision in 2018 to sell 90% of
Clearpay to Australian listed Afterpay, a highly capitalised,
well-funded global financial technology business, has delivered -
and I'm confident will continue to deliver - material value for
shareholders.
Our results for the half year reflect record profitability, with
profit after tax of GBP53.7m, driven by the revaluation gains
attributable to our remaining 10% (1) holding in Clearpay as a
result of the exceptional underlying performance of that business.
Our Net Asset Value stood at GBP116.6 million at the period end, or
109.44 pence per share. On a per share basis this is an uplift of
82 pence per share in the last 12 months, in addition to the 3.4
pence per share capital return and special dividend paid to
shareholders in December 2020. All in all, the sale of 90% of the
Clearpay business and our retained 10% (1) shareholding has now
generated cumulative profit of GBP116.7 million (including
GBP106.5(2) million of non-cash fair value gains), with the
10%(1) stake offering further upside potential subject to the performance of Clearpay.
As part of the agreement with Afterpay, made at the time of the
Clearpay sale, there is a put/call option mechanism which gives an
agreed, clear legal mechanism to a realisation of the stake in
2023/24. The price will be calculated on agreed principles based on
market valuations at that time. These principles are reflected in
the carrying valuation of the asset on our balance sheet.
The Board has consistently sought to return capital to
shareholders where appropriate and is mindful of maintaining a
prudent level of cash reserves in the business. In line with this,
the business paid a special dividend and capital return of A$6.5
million (6.1 cents per share), equivalent to GBP3.7 million (3.4
pence per share), in December 2020.
Turning to our legacy retail consumer and business finance
offerings, shareholders will be aware that this has been in managed
wind-down, reflecting our strategic focus on delivering value to
holders via the Clearpay asset, together with providing the
outsourced call centre customer support service for Clearpay. As
announced on 10 August 2020 we reached a settlement with Carphone
Warehouse for GBP1.45 million and as a result have now ceased
writing any new business. We are managing the wind-down by
adjusting the cost base accordingly and are continuing to deliver
net positive cash flows. Therefore, we expect our cash reserves to
continue to build over the next few years.
We do see tangible value, however, in the investment made in our
proprietary, highly robust credit origination and decision engine,
SmartCheck, which powers point-of-sale lease finance payments
solutions. The Board will continue to consider how best to optimise
the value of this asset.
The Group has a robust financial position, with net cash of
GBP6.9 million at 31 December 2020 (after the payment of GBP3.7
million special dividend/capital return in December 2020 and
including receipt of the GBP1.45 million settlement amount in
August 2020).
I'm very pleased to be reporting this level of value accretion
to our shareholders.
Operating Business Performance
As expected, leasing volumes fell 62% to GBP0.5 million (H1
2020: GBP1.3 million) in the period, and we expect this volume
reduction to continue as we manage the division's wind down.
Revenues were consequently 27% lower for the period at GBP2.4
million (H1 FY20: GBP3.3 million) as the lower volumes in the
period are partially offset by the majority of revenue for the
period being derived from higher volumes in previous years.
As announced on 10 August 2020, ThinkSmart reached a settlement
agreement of GBP1.45 million in relation to the legal proceedings
issued by the Group against Carphone Warehouse. As part of the
settlement, the Group has agreed with Dixons Carphone ("DC") to the
orderly winding up of all of its agreements with DC including
Flexible Leasing, SmartPlan and Upgrade Anytime. In the period to
31 December 2020, all of ThinkSmart's new business volumes were
generated from its existing agreements with DC. The Group will
continue to service its existing customer base ensuring the fair
treatment of customers, along with any new volumes generated during
the orderly winding up of the three products and will continue to
benefit from cash generation in the meantime.
The Group continues to have a good mix of consumer and business
customers, in addition to being diversified by region and
demography. The quality of the Group's underwriting procedures, as
well as the small value of debt per customer and its high-quality
credit customer portfolio, continues to mitigate the risk to any
adverse impact on its existing customers' financial positions. As
at 31 December 2020, lease receivables under management were GBP4.5
million, with approximately 9,800 active customer contracts.
Operating costs decreased further to GBP1.8 million (H1 2020:
GBP2.2 million) over the period and remain controlled, aligned to
the volume performance of the division.
Group Financial Position
The Group's 10%(1) holding in Clearpay Finance Limited was
revalued to GBP106.6(2) million at 31 December 2020 (FY 2020:
GBP53.7 million). An asset valuation exercise was performed by an
independent third-party valuer, a leading global professional
services firm. The sale of the Group's holding is subject to a
put/call arrangement with Afterpay in 2023/24, based on agreed
valuation principles using the same valuation metrics, multiples
and methodologies, including those used by market participants and
with regard to sell-side analysts, to value the Clearpay business
within the Afterpay listed group. These valuation principles are
the same principles that the independent third-party valuer used to
determine the GBP106.6(2) million valuation of the Group's 10% (1)
stake in Clearpay as at 31 December 2020.
The Group held cash and cash equivalents of GBP6.9 million at 31
December 2020, after the GBP3.7 million payment of the special
dividend/capital return in December 2019 and including receipt of
the GBP1.45 million settlement amount in August 2020. This is down
from GBP8.8m at 30 June 2020.
Current Trading Update
ThinkSmart anticipates its cash reserves will continue to build
over the next few years, as the Group's operating division
continues to service its existing customer base alongside any
potential new volumes generated during the orderly winding up of
its existing agreements. ThinkSmart also provides an outsourced
call centre customer support service for Clearpay. As announced in
August 2020, following the settlement agreement with DC, the Group
has now ceased writing any new business.
Looking ahead, the business is well positioned to further
benefit from future growth in the value of its shareholding in
Clearpay subject to the ongoing performance of Clearpay, and
therefore to continue creating material value for shareholders.
Key Performance Indicators:
6 Months to
6 Months to 31 December 2019
31 December
2020
Business Volumes (ex VAT
cost of equipment acquired
in period and leased to
customers)
-------------- ------------------ ------
* SmartPlan GBP0.5m GBP1.0m -50%
-------------- ------------------ ------
* Upgrade Anytime - GBP0.2m -100%
-------------- ------------------ ------
* Flexible Leasing - GBP0.1m -100%
-------------- ------------------ ------
Total GBP0.5m GBP1.3m -62%
-------------- ------------------ ------
Revenue (Total) GBP2.4m GBP3.3m -27%
-------------- ------------------ ------
Net profit after tax GBP53.7m GBP15.9m +237%
-------------- ------------------ ------
Basic EPS in pence 50.39 14.95 +237%
-------------- ------------------ ------
As at As at
31 December 30 June 2020
2020
-------------- ------------------ ------
Lease Receivables Under
Management (Closing) GBP4.5m GBP6.5m -31%
-------------- ------------------ ------
Active Customer Contracts
(000) 9.8 15.4 -36%
-------------- ------------------ ------
ATV (Average Transaction
Value) GBP1,461 GBP1,216 +20%
-------------- ------------------ ------
Cash and Cash Equivalents GBP6.9m GBP8.8m -22%
-------------- ------------------ ------
Net Assets GBP116.6m GBP66.5m +75%
-------------- ------------------ ------
The following results have been extracted from the interim
financial statements
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
for the six months ended 31 December 2020
31 December 31 December
2020 2019
Notes GBP,000 GBP,000
Revenue 6(a) 2,342 3,052
Other revenue 6(b) 45 272
-------------- ------------
Total revenue 2,387 3,324
Customer acquisition costs 6(c) (175) (384)
Cost of inertia asset sold 6(d) (191) (345)
Other operating expenses 6(e) (1,832) (2,188)
Depreciation and amortisation 6(f) (864) (1,006)
Impairment gains 6(g) 39 4
Gains on financial instruments 6(h) 52,867 16,555
Other gains 6(i) 1,450 -
-------------- ------------
Profit before tax 53,681 15,960
Income tax (cost) 7 (10) (35)
-------------- ------------
Net Profit after tax - attributable to
owners of the Company 53,671 15,925
-------------- ------------
Other comprehensive profit/(loss)
Items that may be reclassified subsequently
to profit or loss (net of income tax):
Foreign currency translation differences
for foreign operations 62 (105)
Total items that may be reclassified subsequently
to profit/(loss), net of income tax 62 (105)
-------------- ------------
Other comprehensive profit/(loss) for
the period, net of income tax 62 (105)
-------------- ------------
Total comprehensive profit for the period,
net of income tax 53,733 15,820
-------------- ------------
Profit per share (pence)
Basic (pence per share) 24 50.39 14.95
Diluted (pence per share) 24 49.57 14.95
The attached notes form an integral part of these consolidated
financial statements.
Consolidated Statement of Financial Position
as at 31 December 2020
31 December 30 June
2020 2020
Notes GBP,000 GBP,000
Current Assets
Cash and cash equivalents 6,886 8,805
Trade receivables 44 129
Finance lease receivables 8 97 431
Other current assets 9 461 924
Total Current Assets 7,488 10,289
------------ ----------
Non-Current Assets
Finance lease receivables 8 2 15
Plant and equipment 13 421 460
Intangible assets 14 878 1,433
Financial assets at fair value through
profit and loss 10 106,600 53,733
Contract assets 11 1,149 1,430
Other non-current assets 12 2,119 2,147
------------ ----------
Total Non-Current Assets 111,169 59,218
------------ ----------
Total Assets 118,657 69,507
------------ ----------
Current Liabilities
Trade and other payables 15 (612) (1,195)
Lease liabilities 16 (98) (94)
Contract liabilities 17 (543) (648)
Provisions 15 (234) (255)
Total Current Liabilities (1,487) (2,192)
------------ ----------
Non-Current Liabilities
Lease liabilities 16 (98) (148)
Contract liabilities 17 (507) (679)
Total Non-Current Liabilities (605) (827)
------------ ----------
Total Liabilities (2,092) (3,019)
------------ ----------
Net Assets 116,565 66,488
------------ ----------
Equity
Issued Capital 18 10,407 13,164
Reserves (2,770) (2,832)
Accumulated profits 108,928 56,156
------------ ----------
116,565 66,488
------------ ----------
The attached notes form an integral part of these consolidated
financial statements.
Consolidated Statement of Changes in Equity
for the six months ended 31 December 2020
Foreign Attributable
Fully paid currency to equity
ordinary translation Accumulated holders
shares reserve Profit of the parent
GBP,000 GBP,000 GBP,000 GBP,000
----------- ------------- ------------ ---------------
Balance at 1 July 2019 15,211 (2,978) 4,242 16,475
----------- ------------- ------------ ---------------
Profit for the period - - 15,925 15,925
Exchange differences arising on translation
of foreign operations, net of tax - (105) - (105)
----------- ------------- ------------ ---------------
Total comprehensive profit for the period - (105) 15,925 15,820
----------- ------------- ------------ ---------------
Transactions with owners of the Company,
recognised directly in equity
Distributions to owners of the Company (2,047) - (1,158) (3,205)
Recognition of share-based payments - - 9 9
----------- ------------- ------------ ---------------
Balance at 31 December 2019 13,164 (3,083) 19,018 29,099
----------- ------------- ------------ ---------------
Balance at 1 July 2020 13,164 (2,832) 56,156 66,488
----------- ------------- ------------ ---------------
Profit for the period - - 53,671 53,671
Exchange differences arising on translation
of foreign operations, net of tax - 62 - 62
Total comprehensive profit for the period - 62 53,671 53,733
----------- ------------- ------------ ---------------
Transactions with owners of the Company,
recognised directly in equity
Distributions to owners of the Company (2,757) - (899) (3,656)
Balance at 31 December 2020 10,407 (2,770) 108,928 116,565
----------- ------------- ------------ ---------------
The attached notes form an integral part of these consolidated
financial statements.
Consolidated Statement of Cash Flows
for the six months ended 31 December 2020
31 December 31 December
2020 2019
GBP,000 GBP,000
Cash Flows from Operating Activities
Receipts from customers 2,310 2,746
Payments to suppliers and employees (2,374) (2,353)
Receipts in respect of lease receivables 431 1,867
Proceeds/(Payments) from other interest
bearing liabilities, inclusive of related
costs 23 (1,608)
Interest received 35 65
Interest and finance charges (86) (215)
Receipts/(payments) from security guarantee 26 (17)
Income tax (payment)/repayment (10) 506
Receipts from settlement of legal proceedings 1,450 -
------------ --------------
Net cash provided by operating activities 1,805 991
------------ --------------
Cash Flows from Investing Activities
(Payments)/proceeds for plant and equipment (16) 3
Payments for intangible assets - software (68) (61)
Receipts from realisation of investing
financial instruments - 3,806
Net cash (used in)/generated from investing
activities (84) 3,748
------------ --------------
Cash Flows from Financing Activities
Payment of lease liabilities (46) (42)
Dividends paid (899) (1,158)
Return of capital (2,757) (2,047)
Net cash used in financing activities (3,702) (3,247)
------------ --------------
Net (decrease)/increase in cash and cash
equivalents (1,981) 1,492
Effect of exchange rate fluctuations on
cash held 62 (86)
Cash and cash equivalents from continuing
operations at beginning of the financial
period 8,805 7,099
Total cash and cash equivalents at the
end of the financial period 6,886 8,505
------------ --------------
Restricted cash and cash equivalents at
the end of the financial period (62) (58)
------------ --------------
Net available cash and cash equivalents
at the end of the financial period 6,824 8,447
------------ --------------
The attached notes form an integral part of these consolidated
financial statements.
1. General Information
ThinkSmart Limited (the "Company" or "ThinkSmart") is a limited
liability company incorporated in Australia. These consolidated
interim financial statements ("interim financial statements") as at
and for the six months ended 31 December 2020 comprise the Company
and its subsidiaries (the "Group"). The Group is a for profit
entity and its principal activity during the period was the
provision of lease and rental financing services in the UK. The
consolidated annual financial statements of the Group as and for
the year ended 30 June 2020 are available upon request from the
Company's registered offices at Suite 5, 531 Hay Street Subiaco,
West Perth, WA 6008 or at www.thinksmartworld.com.
2. Basis of Preparation
(a) Statement of compliance
The Company is listed on the Alternative Investment Market
("AIM"), a market of the London Stock Exchange. The financial
information has been prepared in accordance with the AIM Rules for
Companies and in accordance with this basis of preparation,
including the significant accounting policies set out below. The
interim results are unaudited but have been reviewed by the
auditors and their review statement is on page 21.
The consolidated financial statements are general purpose
financial statements which have been prepared and approved by the
Directors in accordance with Australian Accounting Standards
(AASBs) adopted by the Australian Accounting Standards Board (AASB)
and the Corporations Act 2001. The consolidated financial
statements comply with International Financial Reporting Standards
(AASB) adopted by the International Accounting Standards Board
(AASB) as well as International Financial Reporting Standards as
adopted by the EU ("Adopted AASBs").
The consolidated financial statements were authorised for issue
by the Board of Directors on 3 March 2021.
This interim report does not include all the notes of the type
normally included in annual financial statements. Accordingly,
these statements should be read in conjunction with the most recent
annual financial report, but additional notes have been included
where such notes are deemed relevant to the understanding of the
half-year financial report.
(b) Basis of measurement
The financial report has been prepared on the basis of
historical cost, except for financial instruments measured at fair
value. Cost is based on the fair values of the consideration given
in exchange for assets. All amounts are presented in British Pounds
("GBP") unless otherwise noted.
(c) Functional and presentation currency
These consolidated financial statements are presented in British
Pounds, which is the Group's functional currency. The Group is of a
kind referred to in ASIC Corporations (Rounding in Financial/
Directors' Reports) Instrument 2016/191b and in accordance with
that instrument, amounts in the consolidated financial statements
and directors' report have been rounded off to the nearest thousand
pounds, unless otherwise stated.
(d) Going Concern
The consolidated interim financial statements are prepared on a
going concern basis, as the Directors are satisfied that the Group
has the resources to continue in business for the foreseeable
future (which has been taken as 12 months from the date of approval
of these consolidated interim financial statements). In making this
assessment, the Directors have considered a wide range of
information relating to present and future conditions, including
the current state of the statement of financial position, future
projections of profitability, cash flows and resources and the
longer term strategy of the business. The Directors have assessed
the impact of COVID-19 on the current and forecast position of the
Group. As the Group has only been minimally impacted the Directors
are satisfied that the Group has more than adequate resources to
meet its liabilities as they fall due even when stressed to
reasonable worst case scenarios.
3. Significant accounting policies
The accounting policies applied by the consolidated entity in
this interim financial report are consistent with those disclosed
in the consolidated annual financial report for the year ended 30
June 2020 other than as detailed below.
New accounting policies adopted in the financial year
The Group has adopted all new or amended Australian Accounting
Standards that are mandatory for adoption in the current reporting
period. Any new or amended Accounting Standards or Interpretations
that are not yet mandatory have not been early adopted.
4. Critical accounting estimates and judgements
The preparation of interim financial reports requires management
to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may
differ from these estimates. In preparing the consolidated interim
financial report, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those disclosed in the
consolidated annual financial report for the year ended 30 June
2020.
5. Financial risk management
The consolidated entity's financial risk management objectives
and policies are consistent with those disclosed in the
consolidated annual financial report for the year ended 30 June
2020.
6. Consolidated Statement of Profit or Loss
Profit/(loss) is arrived at after crediting/(charging)
the following items:
6 months 6 months
to to
31 December 31 December
2020 2019
GBP,000 GBP,000
a) Revenue
Extended rental income 775 1,102
Commission income 620 1,284
Outsourced services 409 -
Income earned from sale of inertia equipment 355 363
Services revenue - insurance commission 136 198
Interest revenue - other entities 35 65
Fee revenue - customers 12 40
2,342 3,052
------------- --------------
b) Other revenue
Finance lease income 45 74
Other revenue - 198
------- -------
45 272
------- -------
Total Revenue 2,387 3,324
------- -------
All revenue is generated in the UK from
the following products:
SmartPlan 1,817 2,618
Upgrade Anytime 75 334
Flexible Leasing 51 108
Other/non-product specific 444 264
------- -------
2,387 3,324
------- -------
c) Customer acquisition costs
Customer acquisition costs relate to commissions payable to
our retail partners together with sales and marketing expenses
incurred during the ongoing promotional activity of the finance
contracts to new and existing customers.
d) Cost of inertia asset sold
Cost of inertia assets sold is the write-off of inventory, including
that transferred from PPE Operating Lease when end customer terminates
their lease agreement during secondary period, upon sale of inertia
equipment.
6. Consolidated Statement of Profit or
Loss (continued) 6 months 6 months
to to
31 December 31 December
2020 2019
GBP,000 GBP,000
e) Other operating expenses
Employee benefits expense
* Payments to employees (871) (921)
* Employee superannuation costs (53) (43)
* Share-based payment expense - (9)
------------- --------------
(924) (973)
Occupancy costs (81) (88)
Lease interest charge (11) (15)
Professional services (432) (355)
Finance charges (86) (215)
Credit losses arising from financial guarantee
contract (54) (183)
Other costs (244) (359)
(1,832) (2,188)
------------- --------------
f) Depreciation and amortisation
Depreciation (242) (383)
Amortisation (622) (623)
(864) (1,006)
------------- --------------
g) Impairment gains
Impairment gains on finance leases and
receivables 39 4
39 4
------------- --------------
h) Gains on financial instruments
Realised gains - 162
Unrealised gains 52,867 16,393
52,867 16,555
------------- --------------
In the period to 31 December 2020 unrealised gains arose from
the revaluation of the Group's investment in 10% of ClearPay
Finance Limited (see note 10(i)). In the period to 31 December 2019
realised gains arose on disposal of the remaining holding of
125,000 shares in APT at a share price of AUD $27.73 per share.
Unrealised gains arose from the revaluation of the Group's
investment in 10% of ClearPay Finance Limited (see note 10(i)).
These amounts are shown above.
i) Other gains
Fair value gain on financial asset through
profit and loss 1,450 -
1,450 -
------
In the period to 31 December 2020 other gains arose on the
settlement of legal claims against Carphone Warehouse as announced
on 10 August 2020.
7. Income tax expense
The consolidated entity's consolidated effective tax rate in
respect of continuing operations for the six months ended 31
December 2020 was 0.02% (31 December 2019: 0.22%).
6 months 6 months
to to
31 December 31 December
2020 2019
GBP,000 GBP,000
Current income tax expense
Current income tax (charge) (10) (35)
Total income tax (charge) (10) (35)
------------- ----------------
Accounting profit before tax 53,681 15,960
Statutory corporation rate 30% 30%
Tax (charge) at the statutory income tax
rate (16,104) (4,788)
Effect of tax rates in foreign jurisdictions 5,905 1,756
Non-deductible (expenses) (11) (161)
Non-taxable gain 10,042 3,113
Deferred tax asset not recognised 163 45
Irrecoverable withholding tax (5) -
Total income tax (charge) (10) (35)
------------- ----------------
8. Finance lease receivables
31 December 30 June
2020 2020
GBP,000 GBP,000
Current (no later than 1 year)
Gross investment in finance lease receivables 67 207
Unguaranteed residuals 58 331
Unearned future finance lease income
on finance leases (14) (43)
------------ --------
Net lease receivable 111 495
Allowance for losses (14) (64)
------------ --------
97 431
------------ --------
Non-current (later than 1 year, no later
than 5 years)
Gross investment in finance lease receivables 1 7
Unguaranteed residuals 1 11
Unearned future finance lease income
on finance leases - (1)
------------ --------
Net lease receivable 2 17
Allowance for losses - (2)
------------ --------
2 15
------------ --------
Balance at 1 July 446 3,445
Receipts in respect of lease receivable (431) (3,244)
Finance lease income 45 247
Impairment gain/(loss) 39 (2)
------------ --------
99 446
------------ --------
All finance leases detailed above have a minimum lease term at
inception of the lease of 2 years.
9. Other current assets
31 December 30 June
2020 2020
GBP,000 GBP,000
Prepayments 195 233
Insurance prepayments 18 55
Accrued income - insurance commission
(i) 207 290
Sundry debtors 41 346
-------------- ---------
461 924
-------------- ---------
i) Accrued income reflects brokerage commission earned from making
insurance arrangements on behalf of leaseholders and is net of
a clawback provision.
10. Financial assets at fair value through profit or loss
31 December 30 June
2020 2020
GBP,000 GBP,000
Investment in ClearPay Finance Ltd (i) 106,600 53,733
106,600 53,733
------------ --------
10. Financial assets at fair value through profit or loss (continued)
i) On 23 August 2018 the Group sold 90% of Clearpay Finance Limited
to Afterpay Ltd (formerly Afterpay Touch Group Ltd)(ASX:APT).
The Group retains a 10% shareholding in Clearpay which is held
as an investment at fair value through profit or loss under AASB
9. A proportion of the 10% shareholding (up to 35%) will be made
available by the Group to employees of Clearpay under an employee
share ownership plan ("ESOP"). Afterpay has a call option to purchase
the remaining shares held by the Group, exercisable at any time
after 23 August 2023. The Group has a reciprocal put option to
sell the remaining shares held by the Group to Afterpay, exercisable
after 23 February 2024. Under either the call or put option, the
sale of the Clearpay shares to Afterpay will be at a price calculated
on agreed valuation principles. The Group engaged a third party
global professional services firm to value its retained shareholding
in Clearpay at 31 December 2020 for accounting purposes under
AASB 9 in accordance with AASB 13 (Fair Value Measurement). The
independent valuation process, in accordance with the agreed valuation
principles, uses the same valuation metrics, multiples and methodologies,
including those used by market participants and with regard to
sell-side analysts, to value the Clearpay business within the
Afterpay listed group. This valuation has been undertaken based
on publicly available information, reflecting the above and including
a discount of 20% to be applied for minority holding and the lack
of marketability of Clearpay as a privately owned company, and
has produced a range of values for the Group's 10% shareholding
in Clearpay. Reducing the discount for lack of marketability to
10% would increase the fair value by GBP13.3m; increasing the
discount for lack of marketability to 30% would reduce the fair
value by GBP13.3m. Since March 2020 the Afterpay share price has
been on an upward trajectory which has continued since the half
year end indicating continued growth in the value of the Group's
10% shareholding. Further, the Afterpay FY20 accounts reflect
that initial growth in active customers is followed by increases
in the transaction value and underlying sales metrics as the customer
base matures and repeat spend increases. In FY20 Afterpay's Australia
and New Zealand business, which is their most mature market, represented
59.5% of underlying sales but only 33.3% of active customers.
For the same period, the US market represented 36% of underlying
sales but 57% of active customers, and the UK market represented
5.4% of underlying sales but 10% of active customers. To reflect
the relationship between maturity of customer base and underlying
sales the Directors believe that greater weighting should be assigned
to active customers. In line with this the Group has taken the
valuation of the 10% shareholding at two thirds of the range produced
by the independent valuation. As the Group has limited control
over the setting of the price that it will receive for the transfer
of the ESOP shares to the Clearpay employees, the Group has further
discounted the valuation by 35% to determine the accounting fair
value of its retained shareholding in Clearpay to be GBP106.6m
at 31 December 2020. The investment in Clearpay is a level 3 financial
instrument.
11. Contract assets
31 December 30 June
2020 2020
GBP,000 GBP,000
Brought forward 1,430 2,032
Recognised as revenue in period (i) 299 858
Recognised as customer acquisition cost
(ii) (53) (145)
Transferred to Plant & Equipment Operating
lease additions (527) (1,315)
------------ --------
1,149 1,430
------------ --------
Contract asset revenue to be recognised
less than 1 year 349 479
Contract asset revenue to be recognised
between 1 and 2 years 132 180
Contract asset revenue to be recognised
between 2 and 3 years 29 42
Contract asset revenue to be recognised
between 3 and 4 years 1 2
------------ --------
511 703
------------ --------
11. Contract assets (continued)
(i) A contract asset is recognised where the Group act as agent
for the lessor (STB) during the minimum lease term and have a
contractual right to the inertia asset at the end of the minimum
lease term. Contract assets are recognised as revenue accruing over
the minimum lease term building up inertia asset (non-cash
consideration) over the minimum lease term.
(ii) Customer acquisition costs are capitalised as an asset
where such costs are incremental to obtaining a contract between
the funder and the end customer, for which the Group receives
commission under the funder contract, and are expected to be
recovered. Customer acquisition costs are amortised on a straight
line basis over the term of the contract.
12. Other non-current assets
31 December 30 June
2020 2020
GBP,000 GBP,000
Insurance prepayments 1 5
Accrued income - insurance commission
(i) 88 86
Deposits held by funders (ii) 2,030 2,056
2,119 2,147
-------------- ---------
(i) Accrued income reflects brokerage commission earned from
making insurance arrangements on behalf of lessee's and is net
of a clawback provision. The clawback provision for each reporting
period has been estimated to be 30% based on historical experience
and is calculated on the gross commission receivable.
(ii) Deposits held by funders for the servicing and management
of their portfolios in the event of default. The deposits earn
interest at market rates of return for similar instruments. See
note 19 for further information.
13. Plant and Equipment
Plant &
Equipment Plant &
Plant & Right of Equipment
Equipment Use Lease Operating
(UK) Asset Lease Total
GBP,000 GBP,000 GBP,000 GBP,000
----------- ----------- ----------- ---------
Gross Carrying Amount
Cost or deemed cost
Balance at 30 June 2020 152 690 360 1,202
Transferred from contract
assets - - 527 527
Transferred to inventory/cost
of inertia assets sold - - (2) (2)
Additions 16 - - 16
Disposals - - (534) (534)
Balance at 31 December 2020 168 690 351 1,209
----------- ----------- ----------- ---------
Accumulated Depreciation
Balance at 30 June 2020 (102) (506) (134) (742)
Depreciation expense (19) (35) (188) (242)
Disposals - - 196 196
Balance at 31 December 2020 (121) (541) (126) (788)
----------- ----------- ----------- ---------
Net Book Value
At 30 June 2020 50 184 226 460
----------- ----------- ----------- ---------
At 31 December 2020 47 149 225 421
----------- ----------- ----------- ---------
14. Intangible Assets
Contract Intellectual
rights Software Property Total
GBP,000 GBP,000 GBP,000 GBP,000
--------- --------- ------------- ---------
Gross carrying amount
At cost
Balance at 30 June 2020 441 4,369 359 5,169
Effect of movement in exchange
rate - - 4 4
Additions 5 63 - 68
Balance at 31 December 2020 446 4,432 363 5,241
--------- --------- ------------- ---------
Accumulated amortisation and
impairment
Balance at 30 June 2020 (75) (3,303) (358) (3,736)
Effect of movement in exchange
rate - - (5) (5)
Disposals - - - -
Amortisation expense (74) (548) - (622)
Balance at 31 December 2020 (149) (3,851) (363) (4,363)
------ -------- ------ --------
Net book value
At 30 June 2020 366 1,066 1 1,433
------ -------- ------ --------
At 31 December 2020 297 581 - 878
------ -------- ------ --------
15. Trade, other payables and provisions
31 December 30 June
2020 2020
GBP,000 GBP,000
Trade and other payables 110 220
VAT/GST payable 146 92
Other accrued expenses 356 883
------------ --------
612 1,195
------------ --------
Provisions
Annual leave 138 159
Long service leave 89 86
Risk Transfer cancellation and claims 7 10
------------ --------
234 255
------------ --------
16. Lease liabilities
31 December 30 June
2020 2020
GBP,000 GBP,000
Balance brought forward 242 330
Rental paid in period (57) (114)
Interest charged 11 26
196 242
------------ --------
Lease liabilities due within 12 months 98 94
Lease liabilities due greater than 12 months 98 148
------------ --------
196 242
------------ --------
16. Lease liabilities (continued)
Undiscounted maturity analysis
Lease liabilities due up to 1 year 113 113
Lease liabilities due between 1 and 2 years 103 113
Lease liabilities due between 3 and 5 years - 47
---- ----
216 273
---- ----
17. Contract liabilities
31 December 30 June
2020 2020
GBP,000 GBP,000
Balance brought forward 1,327 1,993
Recognised as revenue in period (277) (666)
1,050 1,327
------------ --------
Contract liabilities due within 12 months 543 648
Contract liabilities due greater than 12 months 507 679
------------ --------
1,050 1,327
------------ --------
18. Issued capital
31 December 30 June
Fully Paid Ordinary Shares 2020 2020
Number GBP,000 Number GBP,000
Balance at beginning of financial
period 106,509,994 13,164 106,509,994 15,211
Issue of ordinary shares - - -
Return of capital to shareholders - (2,757) - (2,047)
Balance at end of the financial
period 106,509,994 10,407 106,509,994 13,164
------------ -------- ------------ --------
19. Commitments and contingent liabilities
31 December 30 June
2020 2020
GBP,000 GBP,000
Leases where Group acts as agent (off
statement of financial position) 4,389 6,029
Deposits held by funder 2,030 2,056
Under the terms of the UK current funding agreement with Secure
Trust Bank (STB), the Group is obliged to purchase delinquent
leases (contracts in arrears for 91 days) from the funder at the
funded amount. The Group has entered into a financial guarantee
contract with STB for which the Group has provided a deposit to
support future delinquent leases.
The deposit held by funders is recognised as an asset on the
Group's statement of financial position within other non-current
assets (see note 12).
20. Fair value of financial instruments
The carrying amounts of financial assets and financial
liabilities recorded in the financial statements are not materially
different to their fair values.
Fair value hierarchy
The financial instruments carried at fair value have been
classified by valuation method.
The different levels have been defined as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
- Level 2: inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices)
- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs)
Key assumptions in the valuation of the instruments were limited
to interpolating interest rates for certain future periods where
there was no observable market data. The majority of the financial
instruments are measured at amortised cost. At 31 December 2020 the
Group held one financial instrument at fair value through profit or
loss:
-- 10% holding in ClearPay Finance Limited with a fair value of
GBP106,600,000 (2019: GBP16,453,125). The holding in Clearpay is a
Level 3 financial instrument. See Note 10(i).
21. Segmental information
The Group currently has one reportable segment which comprise
the Group's core business unit (UK). Head office and other
unallocated corporate functions are shown separately. For the
segment, the Board and the CEO review internal management reports
on a monthly basis. The composition of the reportable segment is as
follows:
UK:
- ThinkSmart Europe Ltd
- RentSmart Ltd
- ThinkSmart Insurance Services Administration Ltd
- ThinkSmart Financial Services Ltd
- ThinkSmart UK Ltd
Corporate and unallocated:
- ThinkSmart Limited
- ThinkSmart Finance Group Limited
- ThinkSmart Inc
21. Segmental information
(continued)
Operating Segments
Information about reportable Corporate and
segments UK unallocated Total
For the six months ended:
December December December December December December
2020 2019 2020 2019 2020 2019
GBP,000 GBP,000 GBP,000 GBP,000 GBP,000 GBP,000
Revenue 2,342 3,032 - 20 2,342 3,052
Other revenue 45 272 - - 45 272
Total revenue 2,387 3,304 - 20 2,387 3,324
Customer acquisition cost (175) (384) - - (175) (384)
Cost of inertia assets sold (191) (345) - - (191) (345)
Other operating expenses (1,517) (1,800) (315) (388) (1,832) (2,188)
Depreciation and amortisation (864) (1,006) - - (864) (1,006)
Impairment losses 39 4 - - 39 4
Gain on Financial Instruments 52,867 16,555 - - 52,867 16,555
Other gains 1,450 - - - 1,450 -
Reportable segment profit/(loss)
before income tax 53,996 16,328 (315) (368) 53,681 15,960
--------- ----------- ---------- ----------- --------- -----------
December June December June December June
2020 2020 2020 2020 2020 2020
GBP,000 GBP,000 GBP,000 GBP,000 GBP,000 GBP,000
Reportable segment current
assets 5,132 6,162 2,357 4,127 7,488 10,289
Reportable segment non-current
assets 111,168 59,218 - - 111,169 59,218
Reportable segment liabilities 1,845 2,695 247 324 2,092 3,019
Capital expenditure 84 509 - - 84 509
22. Related party disclosures
As at 31 December 2020 the following were Key Management
Personnel of the Group:
Executive Chairman
N Montarello
Executive Directors
G Halton (Chief Financial Officer)
Non-Executive Directors
P Gammell
D Adams
R McDowell (resigned 11 November 2020)
22. Related party disclosures (continued)
The Key Management Personnel remuneration included in 'employee
benefits expense' in Note 6(e) is as follows:
31 December 31 December
2020 2019
GBP,000 GBP,000
Short-term employee benefits 228 220
Post-employment benefits 7 8
Other long-term benefits 1 -
Share-based payments - 6
-------------- ------------
236 234
-------------- ------------
23. Events occurring after the reporting date
There has not arisen, in the interval between the end of the
financial period and the date of this report, any other item,
transaction or event of a material and unusual nature likely, in
the opinion of the directors of the Company, to affect
significantly the operations of the Group, the results of those
operations, or the state of affairs of the Group, in future
financial years.
24. Earnings per share
31 December 31 December
2020 2019
GBP,000 GBP,000
------------ --------------
Profit after tax attributable to ordinary
shareholders 53,671 15,925
------------ --------------
31 December 31 December
2020 2019
Number Number
------------ --------------
Weighted average number of ordinary
shares (basic) 106,509,994 106,509,994
Weighted average number of ordinary
shares (diluted) 108,267,346 106,509,994
------------ --------------
31 December 31 December
Earnings per share 2020 2019
------------ --------------
Basic earnings per share (pence) 50.39 14.95
Diluted earnings per share (pence) 49.57 14.95
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