(Alliance News) - ThinkSmart Ltd on Thursday swung to a profit in its most recent financial year thanks to the sale of a 90% interest in Clearpay Finance Ltd, as well as a reduction in expenses and impairment losses.
Shares in ThinkSmart were up 2.9% at 9.00 pence in London in late morning trade.
The digital payment solutions firm's pretax profit for its year was GBP534,000, swinging from a GBP4.5 million loss the year before.
This was caused mainly by sale of 90% of its interest in Clearpay to Afterpay Touch Group Ltd, which generated GBP7.7 million of profit.
ThinkSmart also booked a 90% reduction in impairment losses to GBP272,000, as well as a 26% drop in other operating expenses to GBP4.8 million.
Revenue fell 19% to GBP7.2 million from GBP8.9 million due to a 86% drop in leasing volumes to GBP4.3 million from GBP13.4 million.
Executive Chair Ned Montarello said: "Our shareholders will be encouraged with the early growth of the Clearpay business in the UK, as announced by Afterpay in August 2019, given the stake we hold in the business.
"Continuing to trade as Clearpay post acquisition by Afterpay, the Clearpay UK business on-boarded more than 200,000 active customers in the first 15 weeks of trading - higher than the Afterpay US operation achieved at the same time post-launch, which has since grown to over 2.1 million active US customers in just over a year."
Montarello added: "ThinkSmart's remaining holding in Clearpay provides shareholders with future upside profit potential through the 5 year call option for Afterpay to purchase ThinkSmart's remaining holding in Clearpay any time after August 2023 at a price calculated on agreed principles based on market valuations at the time of option exercise.
"ThinkSmart has a reciprocal put option six months later to sell its remaining holding in Clearpay to Afterpay. Clearly, ongoing growth in Clearpay is beneficial for ThinkSmart shareholders."
"We continue to look at options to leverage ThinkSmart's established technology platform across the core leasing business," he concluded.
On March 5, ThinkSmart announced an AUD8.0 million distribution to shareholders, around GBP4.4 million. This took the form of a 3.772 AUD cents per share capital reduction plus a special dividend of the same amount. These were paid March 29.
By Anna Farley; annafarley@alliancenews.com
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