TSL.L Regulatory News (TSL)

11 November 2020

ThinkSmart Limited

 ("ThinkSmart" or the "Company" which together with its subsidiaries is the "Group")

2020 AGM Statement and Business Update

ThinkSmart Limited (AIM: TSL), a specialist digital payments platform business, will hold its Annual General Meeting at 8.30am (GMT) today Wednesday 11 November 2020 at which the Chairman of the meeting will make the following statement:

"Ladies and Gentlemen, I am very pleased to report that our financial year ended 30 June 2020 has been one marked by significant value accretion to our shareholders.

Our decision in 2018 to sell 90% of our Clearpay business to Australian listed Afterpay Ltd, a highly capitalised, well-funded global financial technology business, has delivered - and I'm confident will continue to deliver - material value for shareholders. This was undoubtedly a pivotal moment for the Company and you, its shareholders.

The Clearpay business allows leading retailers to offer a 'buy now, receive now, pay later' service that does not require customers to enter into a traditional loan or pay any upfront fees or interest to Clearpay.

The Buy Now Pay Later sector has witnessed very significant rates of consumer acceptance and merchant growth in recent years. The procession toward online consumerism favours the sector and indeed the impact of the global pandemic has accelerated the trend.

Afterpay is one of the pioneers and global leaders in the Buy Now Pay Later space. Its growth potential has been reflected in its share price performance. As at 10 November its market capitalisation was A$27b and its share price increased by 53% since the start of the financial year.

ThinkSmart's 10% shareholding in Afterpay's UK operations, inclusive of up to 3.5% of the share capital of Clearpay which is being made available to the Afterpay UK employee share ownership scheme, is a valuable asset for shareholders. The UK forms a substantial part of the Afterpay total business, representing in excess of 10% of its global active customer base and 7% of its underlying sales in the 3 months to 30 September 2020, a percentage we would expect to continue to increase as the business matures and repeat business flows through.

In addition, the Clearpay business is demonstrating outstanding trading momentum. In the 3 months to 30 September 2020, Clearpay transacted A$0.3bn of underlying sales, growing its active customer base to 1.2m. These numbers are very encouraging and importantly, growth in average frequency per customer is outperforming Afterpay's US and Australian businesses at similar stage of development.

ThinkSmart is carrying the Clearpay shareholding on its balance sheet at a value of £53.7m as at 30 June 2020. This asset valuation, carried out by an independent leading global accounting firm, is informed by the market valuation of the Afterpay business. At 30 June 2020 the Afterpay share price was A$60.99. That price has since increased by 53% to A$93.18 as at close of trading on 10 November 2020.

As a result we are confident that our holding in Clearpay will continue to deliver for shareholders. To 30 June 2020, the sale of 90% of the Clearpay subsidiary has generated cumulative accounting profit of £63.8 million (including a £53.7m million non-cash fair value gain). In addition, during the year we delivered to shareholders a special dividend and capital return of A$5.96 million (5.6 cents per share), equivalent to £3.2 million, paid in December 2019. Subject to shareholder approval, we will return a further A$6.5m this December.

ThinkSmart's remaining shareholding in Clearpay provides shareholders with future upside profit potential through an agreed call option for Afterpay to purchase ThinkSmart's remaining holding in Clearpay any time after August 2023 at a price calculated on agreed principles and 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 on the same valuation principles. Clearly, ongoing growth in Clearpay is beneficial for ThinkSmart shareholders.

Turning to our legacy retail consumer and business finance offerings, shareholders will be aware that this is 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 £1.45 million and, as a result, will now cease writing any new business. We are managing the wind-down via adjusting the cost base accordingly and in order to continue to deliver net positive cash flows. We expect our cash reserves to continue to build over the next few years, before capital return and dividend payments to shareholders. With net cash of approximately A$18 million at 15 October 2020, which includes the £1.45m settlement amount, the Group has a robust financing position

We do see tangible value 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 continues to consider how best to optimise the value of this asset.

We thank our Board, management and employees for their continued hard work and commitment to the business. Most of all, we thank our shareholders for their sustained support. Our share price has grown by over 250% in the 12 months to 10 November 2020, and we fundamentally believe further value will accrue as we execute on our strategy both this year, and in the years to come."

For further information please contact:

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 undergoing exponential growth, driven by ongoing digital transformation of consumer shopping habits and financial services.