15 Mar 2017 07:00
15 March 2017
ThinkSmart Limited
("ThinkSmart" or "the Company" which together with its subsidiaries
is the "Group")
Interim Results for the six month period ended 31 December 2016 (the "Relevant Period")
ThinkSmart Limited (AIM: TSL), a leading provider in the UK of retail point-of-sale lease finance for high-volume small-ticket electronic and commercial equipment, today announces its interim results for the Relevant Period. These interim results constitute the first interim period in a twelve month accounting period to 30 June 2017.
Highlights
· Revenues of £5.4m, £1.5m below the six month period ended 31 December 2015 ("1H 16") due to lower new business volumes as stated in the Admission Document
· Ongoing investment in the technology platform leaves the business well positioned for growth
· Group Operating NPAT1 was £0.04m (this was £1.7m in 1H 16) on the back of lower revenues and higher investment depreciation charge
· Cash and cash equivalents of £5.5m at 31 December 2016 up 13.9% on 30 June 2016
· Successful completion of £5m placement with Henderson Global Investors, buyback of c.10m shares at A$0.382 per share (£2.3m in total) and migration of the Company's listing from the Australian Securities Exchange ("ASX") to AIM of the London Stock Exchange
· Five year exclusive contract with Carphone Warehouse signed with point-of-sale integration developed and rolled out across approximately 1,000 stores in November 2016 in readiness for the anticipated launch of new premium smartphone handsets in the second half of the calendar year
· Entered into an additional financing facility of up to £20m with Secure Trust Bank to fund business volumes originated through the new Carphone Warehouse contract
· FCA consumer credit approval achieved and completion of the development of the customer account and online basket integration initiatives
· Appointment of David Adams and Roger McDowell as new Independent Non-Executive Directors and Peter Gammell who continues as an Independent Non-Executive Director having been appointed to the Board in May 2016 prior to Admission. Keith Jones became a Non-Executive Director (having previously been an Executive Director of the Company) and Gary Halton was appointed as Chief Financial Officer. We are delighted to have attracted such high calibre individuals to the ThinkSmart Board
Commenting on the results Ned Montarello, Executive Chairman said:
"During the period we continued to invest for growth and to build on our position as a leading provider in the UK of retail point-of-sale lease finance for high-volume small-ticket electronic and commercial equipment. We successfully migrated our stock market listing from the ASX to AIM, whilst continuing to invest in our people, operations and technology.
New business volumes in the period were in-line with the current trading update published in the Admission Document. New product launch timing delays are expected to unwind in the second half of the calendar year. Whilst these timing issues are frustrating, the Board believe that the longer term potential of our business remains exciting.
In 2016 we were delighted to extend our 14 year relationship with Dixons Carphone through to 2021. We believe there is a growing trend to lease rather than buy and our SmartCheck leasing platform, in which we have invested significantly, makes us well placed to benefit from this market trend. In particular we are focused on exploiting our position in the high-value smartphone market.
We are focused on delivering shareholder value. We are well positioned to scale the business, through opportunities with existing partners and diversifying into new sectors and categories. We look forward with confidence in our ability to deliver on our clear growth strategy."
For further information please contact:
ThinkSmart Limited | Via Instinctif Partners |
Ned Montarello | |
Canaccord Genuity (Nominated Adviser, Financial Adviser and Joint Broker) | +44 (0)20 7523 8350
|
Sunil Duggal David Tyrrell Andrew Buchanan Richard Andrews | |
Peel Hunt LLP (Joint Broker) | +44 (0) 20 7418 8900 |
Charles Batten Guy Wiehahn Rishi Shah | |
Instinctif Partners | +44 (0)20 7457 2020 |
Giles Stewart/Mike Davies | |
Cannings Corporate Communications (for Australian enquiries) | +61 (0)2 8284 9993 |
Michael Mullane |
Key:
1 Group Operating NPAT excludes non-operating strategic review and advisory expenses
2 Equivalent to 23 pence per share
Notes to Editors
About ThinkSmart Limited
ThinkSmart Limited is a leading provider in the UK of retail point-of-sale lease finance for high-volume small-ticket electronic and commercial equipment. The Group provides both B2B and B2C point-of-sale lease finance, primarily through its longstanding relationship with Dixons Retail and its new relationship with Carphone Warehouse. The Group's product offering is underpinned by a proprietary, innovative and scalable technology platform, SmartCheck. Since it commenced operations in the UK in 2003, the Group has processed in excess of 350,000 individual applications.
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.
Chairman's Statement
Introduction and move to AIM
This is the Company's maiden set of interim results as an AIM listed company following its successful Admission to trading on AIM in December 2016. The move to AIM was timely and made strategic sense; we are now more closely aligned across our operations, trading market and listing venue.
As a Board we have placed great emphasis on ensuring that our shareholders have not been disadvantaged as a result of this move. We committed A$3.8m (£2.3m) to buying back shares in an off market tender and have implemented an arrangement with Computershare for shareholders to trade their shares in London by converting their ordinary shares into depositary interests.
As we move forward in this next step of our journey the Board's priority is to build on the Company's digital retail point-of-sale leasing proposition and its strong commercial relationships, and to broaden its distribution channels, funding and balance sheet to grow shareholder value and returns.
Performance
Whilst the structural growth drivers underpinning our demand outlook remain firmly in place, performance in the Relevant Period was in-line with the current trading update published in the Admission Document. Revenues were £5.4m compared to £6.9m in the first half of FY16. This reduction in revenue was principally due to constrained new business volumes across both SmartPlan and Upgrade Anytime products, lower by 33%. ThinkSmart Business Leasing ("TBL") on the other hand demonstrated a 46% increase to £0.3m albeit from a low base. Volumes were impacted by a number of factors including the timing of product launches and partner operational activity. The business will now look to leverage its digital point-of-sale footprint in existing relationships and diversify into new sectors and categories.
Group Operating NPAT1 fell from £1.7m to £0.04m, largely reflecting the drop in revenues. Operating cost levels reflect the significant investment made in people, processes and systems. This investment provides the foundation for our future growth.
Statutory earnings per share fell to -1.03 pence, down from 1.05 pence during the equivalent prior year period. Statutory EPS reflects the impact of £1.1m of non-recurring non-operating strategic review and advisory expenses relating to inter alia, the admission to AIM.
Position
At the end of the Relevant Period we had lease receivables under management of approximately £23m with approximately 52,900 active customer contracts (at 30 June 2016 this was £25m and 57,200, respectively). During the Relevant Period we entered into a finance facility agreement for up to £20m with Secure Trust Bank, one of our existing funding partners. This facility is earmarked for business volumes originated through our contract with Carphone Warehouse in relation to the lease of selected premium smartphones. At the end of the Relevant Period, we had funding of up to £90 million available to support our business activities, of which approximately £23 million was drawn.
Cash and cash equivalents stood at £5.5m at the end of the Relevant Period, increasing by £0.7m in the Relevant Period. The business raised £5m through a placing of shares with Henderson, with c.A$3.8m being returned to certain shareholders who participated in the buyback.
Partners
The Group has a 14 year exclusive relationship with one of the UK's leading electrical and mobile phone retailers, Dixons Carphone, in relation to the leasing of equipment including computers, laptops, tablets and televisions. During the Relevant Period we expanded on this relationship and signed an exclusive agreement with Carphone Warehouse through to 2021 in relation to the lease of selected premium smartphones. We continue to work closely with our retail partner to broaden the offer and expect volumes to start to build during the second half of the calendar year, with the launch of new premium smartphone handsets.
Regulatory Progress
RentSmart Limited, one of the Company's indirect subsidiaries, obtained full FCA authorisation in July 2015 for activities relating to entering into hire agreements and credit related activities. In June 2016 RentSmart Limited received FCA approval to enter into regulated credit agreements as a lender. The Group intends to offer restricted use, fixed sum loans to customers alongside its existing leasing products. This will enable ThinkSmart to offer both lease and credit point-of-sale finance to both consumers and businesses alike.
Investment in the business
Over the past two years the Company has invested approximately £3.5m in developing its digital solutions, including its SmartCheck platform. Online basket technology has been further developed following the successful integration on the PC World Business website in July 2016 and our new mobile app is set to launch this year. This new app will facilitate the Group's customer account facility (which is live with Dixons Retail), allowing customers to make a single credit application to obtain a pre-approved credit limit which they can use to lease multiple pieces of equipment without the need to make additional credit applications.
Growth Strategy
We have a clear and executable growth strategy in place. We will look to continue to develop our relationships with existing retail partners whilst seeking to diversify through new partner relationships and customer acquisitions. Our technology platform is sector neutral and its application has been designed to enable an offering which integrates cross-sector and cross-retailer. As a result, we are well placed to build on our achievements to date.
Board Appointments
David Adams and Roger McDowell were appointed as new Independent Non-Executive Directors during the Period, joining Peter Gammell who continues as an Independent Non-Executive Director having been appointed to the Board in May 2016 prior to Admission.
Keith Jones became a Non-Executive Director (having previously been an Executive Director of the Company) and Gary Halton was appointed as Chief Financial Officer.
We are delighted to have attracted such high calibre individuals to the ThinkSmart Board.
Current Trading Update
Current trading including volumes remain in-line with the Relevant Period. New product launch timing delays are expected to unwind in the second half of the calendar year. Whilst these delays are frustrating, the Board believe that the longer term potential of our business remains exciting.
Key Performance Indicators:
6 Months to 31 December 2016
| 6 Months to 31 December 2015 | ||
Business Volumes
| |||
· SmartPlan/Upgrade Anytime | £6.2m | £9.3m | -33% |
· TBL | £0.3m | £0.2m | +46% |
Total | £6.5m | £9.5m | -31% |
Revenue (Total) | £5.4m | £6.9m | -22% |
Group Operating NPAT1 | £44k | £1.7m | -97% |
Statutory (Loss) / Profit After Tax | £(1.1m) | £0.8m | -226% |
Basic EPS (pence) | (1.03) | 1.05 | -198% |
| |||
As at 31 December 2016 |
As at 30 June 2016
|
| |
Lease Receivables Under Management (Closing) | £23m | £25m | -10% |
Active Customer Contracts (,000) | 52.9 | 57.2 | -8% |
ATV | £819 | £784 | +4% |
Cash and Cash Equivalents | £5.5m | £4.9m | +14% |
Net Assets | £19.2m | £17.9m | +8%
|
1 Group Operating NPAT excludes non-operating strategic review and advisory expenses
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the six months ended 31 December 2016
6 months to 31 December 2016 | 6 months to 31December 2015 | |
£,000 | £,000 | |
Revenue | 4,842 | 6,188 |
Other revenue | 574 | 712 |
Total revenue | 5,416 | 6,900 |
Customer acquisition costs | (672) | (771) |
Cost of inertia asset sold | (1,078) | (1,045) |
Other operating expenses | (2,861) | (2,740) |
Depreciation and amortisation | (518) | (286) |
Impairment losses | (276) | (181) |
Non-operating strategic review and advisory expenses | (1,097) | (874) |
(Loss)/Profit before tax | (1,086) | 1,003 |
Income tax credit/(expense) | 33 | (165) |
(Loss)/Profit after tax | (1,053) | 838 |
Other comprehensive (loss)/income | ||
Items that may be reclassified subsequently to profit or loss (net of income tax): | ||
Foreign currency translation differences for foreign operations | (26) | 58 |
Total items that may be reclassified subsequently to profit or loss, net of income tax | (26) | 58 |
Other comprehensive (loss)/income for the period, net of income tax | (26) | 58 |
Total comprehensive (loss)/income for the period, net of income tax | (1,079) | 896 |
Earnings per share (pence) | ||
Basic (pence per share) | (1.03) | 1.05 |
Diluted (pence per share) | (1.03) | 1.03 |
The attached notes form an integral part of these consolidated financial statements.
Consolidated Statement of Financial Position
as at 31 December 2016
31 December 2016 | 30 June 2016 | |
£,000 | £,000 | |
Current Assets | ||
Cash and cash equivalents | 5,530 | 4,854 |
Trade receivables | 240 | 295 |
Finance lease receivables | 2,713 | 2,796 |
Other current assets | 2,390 | 2,623 |
Total Current Assets | 10,873 | 10,568 |
Non-Current Assets | ||
Finance lease receivables | 1,572 | 1,525 |
Plant and equipment | 248 | 263 |
Intangible assets | 7,440 | 7,213 |
Goodwill | 2,332 | 2,332 |
Deferred tax assets | 88 | - |
Tax receivable | 277 | 53 |
Other non-current assets | 3,007 | 3,309 |
Total Non-Current Assets | 14,964 | 14,695 |
Total Assets | 25,837 | 25,263 |
Current Liabilities | ||
Trade and other payables | 1,622 | 1,717 |
Deferred service income | 1,167 | 1,297 |
Other interest bearing liabilities | 1,602 | 2,182 |
Provisions | 258 | 192 |
Total Current Liabilities | 4,649 | 5,388 |
Non-Current Liabilities | ||
Deferred service income | 722 | 819 |
Deferred tax liabilities | 13 | 14 |
Other interest bearing liabilities | 1,205 | 1,190 |
Total Non-Current Liabilities | 1,940 | 2,023 |
Total Liabilities | 6,589 | 7,411 |
Net Assets | 19,248 | 17,852 |
Equity | ||
Issued Capital | 17,332 | 14,376 |
Reserves | (2,506) | (2,480) |
Accumulated profits | 4,422 | 5,956 |
19,248 | 17,852 |
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 2016
Fully paid ordinary shares | Foreign currency translation reserve | Accumulated Profit | Attributable to equity holders of the parent | ||
£,000 | £,000 | £,000 | £,000 | ||
Balance at 1 July 2015 | 14,376 | (2,826) | 7,750 | 19,300 | |
Profit for the period | - | - | 838 | 838 | |
Exchange differences arising on translation of foreign operations, net of tax | - | 58 | - | 58 | |
Total comprehensive income for the period | - | 58 | 838 | 896 | |
Transactions with owners of the Company, recognised directly in equity | |||||
Contributions by and distributions to owners of the Company | |||||
Dividends paid | - | - | (1,546) | (1,546) | |
Recognition of share-based payments | - | - | 50 | 50 | |
Balance at 31 December 2015 | 14,376 | (2,768) | 7,092 | 18,700 | |
Balance at 1 July 2016 | 14,376 | (2,480) | 5,956 | 17,852 | |
Loss for the period | - | - | (1,053) | (1,053) | |
Exchange differences arising on translation of foreign operations, net of tax | - | (26) | (26) | ||
Total comprehensive income for the period | - | (26) | (1,053) | (1,079) | |
Transactions with owners of the Company, recognised directly in equity | |||||
Contributions by and distributions to owners of the Company | |||||
Issue of ordinary shares | 5,000 | - | - | 5,000 | |
Share buyback | (1,721) | - | - | (1,721) | |
Costs associated to capital raising and buyback | (323) | - | - | (323) | |
Dividends paid | - | - | (531) | (531) | |
Recognition of share-based payments | - | - | 50 | 50 | |
Balance at 31 December 2016 | 17,332 | (2,506) | 4,422 | 19,248 |
The attached notes form an integral part of these consolidated financial statements.
Consolidated Statement of Cash Flows
for the six months ended 31 December 2016
6 months to 31 December 2016 | 6 months to 31 December 2015 | |
£,000 | £,000 | |
Cash Flows from Operating Activities | ||
Receipts from customers | 5,198 | 7,260 |
Payments to suppliers and employees | (4,366) | (5,671) |
Payments relating to strategic review and advisory expenses | (1,097) | - |
Receipts/(payments) in respect of lease receivables | 561 | (1,214) |
(Payments)/proceeds from other interest bearing liabilities, inclusive of related costs | (264) | 1,516 |
Interest received | 50 | 79 |
Interest and finance charges | (162) | (144) |
Income tax paid | (110) | (339) |
Net cash provided by operating activities | (190) | 1,487 |
Cash Flows from Investing Activities | ||
Payments for plant and equipment | (67) | (111) |
Payments for intangible assets - Software | (1,164) | (771) |
Payments for intangible assets - Contract rights | (117) | (56) |
Net cash from investing activities | (1,348) | (938) |
Cash Flows from Financing Activities | ||
Proceeds from share issue net of costs | 4,747 | - |
Payment for establishing financing facilities | (180) | - |
Dividends paid | (531) | (1,546) |
Share buyback net of costs | (1,791) | - |
Net cash used in financing activities | 2,245 | (1,546) |
Net (decrease) / increase in cash and cash equivalents | 707 | (997) |
Effect of exchange rate fluctuations on cash held | (33) | (38) |
Cash and cash equivalents from continuing operations at beginning of the financial period | 4,856 | 8,222 |
Total cash and cash equivalents at the end of the financial period | 5,530 | 7,187 |
Restricted cash and cash equivalents at the end of the financial period | (124) | (120) |
Net available cash and cash equivalents at the end of the financial period | 5,406 | 7,067 |
The attached notes form an integral part of these consolidated financial statements.
1. Reporting entity
ThinkSmart Limited (the "Company") is a company domiciled in Australia. The interim financial report of the Company as at and for the six months ended 31 December 2016 comprises the Company and its subsidiaries (together referred to as the "consolidated entity" or "the Group"). The Group is a for profit entity and its principal activity during the six months was the provision of lease and rental financing services in the UK. The annual financial report of the consolidated entity as at and for the period ended 30 June 2016 is available upon request from the Company's registered office at Suite 5, 531 Hay Street, Subiaco, West Perth, WA 6008 or at www.thinksmartworld.com.
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 balance sheet, future projections of profitability, cash flows and resources and the longer term strategy of the business.
2. Statement of compliance
The Company listed on the AIM of the London Stock Exchange, from 2 December 2016 and delisted from the Australian Stock Exchange on 6 December 2016. The Group financial information consolidates those of the Company and its subsidiaries which operate in the UK and Europe.
The condensed set of consolidated interim financial statements for the interim accounting period ended 31 December 2016 has been prepared and approved by the Directors in accordance with AASB143 Interim Financial reporting and Corporations Act 2001 and with International Financial Reporting Standards (IAS 34) as adopted by the EU ("Adopted IFRSs"). They do not include all of the information required for a full annual financial statements, and should be read in conjunction with the consolidated annual financial report for the period ended 30 June 2016 and the 'Historical Financial Information' prepared and published ahead of the AIM listing.
The Company is of a kind referred to in ASIC Corporations (Rounding in the Financial and Directors report) Instrument 2016 / 191 and in accordance with the instrument, amounts in the interim financial report have been rounded to the to the nearest thousand pounds, unless otherwise stated.
These consolidated financial statements are presented in Pounds, which is the Group's functional currency. Previous to the AIM listing the financial statements were presented in Australian Dollars. The following AUD/GBP exchange rates were used in these consolidated interim financial statements:
0.5905 - average rate for period 1 July 2016 to 31 December 2016
0.5892 - spot rate for 31 December 2016
0.5549 - spot rate for 30 June 2016
0.4713 - average rate for period 1 July 2015 to 31 December 2015
This interim financial report was approved by the Board of Directors on 14 March 2017.
3. Adoption of new standards
The following new standards and interpretations are mandatory for the year beginning 1 January 2016:
· Accounting for acquisitions of interests in joint operations (amendments to IFRS 11)
· Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38)
· Equity method in separate financial statements (amendments to IAS 27)
· Annual improvements to IFRSs 2012-2014 cycle
· Disclosure initiative (amendments to IAS 1)
These standards and interpretations are not deemed to have a material impact on the results of the Company.
4. Significant accounting policies
The accounting policies applied by the consolidated entity in this interim financial report are consistent with those applied by the 'Historical Financial Information' prepared and published ahead of the AIM listing and with that disclosed in the consolidated annual financial report for the year ended 30 June 2016 as amended for the change in presentation currency to Pounds as referenced above.
5. 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 that applied to the 'Historical Financial Information' prepared and published ahead of the AIM listing and with that disclosed in the consolidated annual financial report for the year ended 30 June 2016.