TSL.L Regulatory News (TSL)

4 March 2020

ThinkSmart Limited

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

Interim Results for the six month period ended 31 December 2019

ThinkSmart Limited (AIM: TSL), a specialist digital payments platform operator and investor, today announces its interim results for the six months ended 31 December 2019.

Highlights

Holding in Clearpay drives ongoing value accretion and capital returns

· Profit after tax up 121% to £15.9 million (H1 FY19 restated(1): £7.2 million) driven by £16.4 million(2) non-cash fair value gain on independent valuation of the Group's retained shareholding in ClearPay Finance Ltd.

· Net assets are £29.1 million at 31 December 2019, equivalent to 27.32 pence per share (30 June 2019 restated(1): £16.5 million/15.47 pence per share).

· Special dividend and capital return of A$5.96 million (5.6 cents per share) equivalent to £3.2 million paid in December 2019 reflects sale of remaining holding of 125,000 shares in Afterpay Touch Group Ltd, received as part consideration in Clearpay sale.

· Cash and cash equivalents of £8.5 million at 31 December 2019.

· Investment of 10%(3) holding in ClearPay Finance Limited revalued to £16.5m(2) at 31 December 2019 (H1 FY19 £0.1m).

· Sale of Clearpay subsidiary has now generated cumulative profit of £26.1 million (including £16.4(2) million non-cash fair value gain) and £7.6 million of capital returns and special dividends, with the 10%(3) stake offering further upside potential.

Cashflow positive operating business with IP

· Operating business built on investment in proprietary digital payments platform and credit decision-making engine, SmartCheck.

· Optimised cash management with £0.99 million net cash generated from operating activities (H1 FY19 £1.49 million).

· Continuation of managed volume reduction yields revenue of £3.3 million, down 28% versus same period last year.

· Operating costs further reduced to £2.2 million (H1 FY19 restated(1): £2.3 million) and remain controlled, aligned to current volume performance.

· Legal proceedings by the Group against Carphone Warehouse for damages for losses estimated at £20 million for its breaches under the Flexible Leasing contract, and its predecessor Upgrade Everytime contract, as announced on 29 November 2019, remain ongoing.

(1) Restated for the adoption of AASB 15 and 16 in the current year applying the full retrospective transition approach with the date of initial application being 1 July 2018 for AASB 15 and 1 July 2019 for AASB 16.

(2) The Group engaged a third party global professional services firm to independently value its retained shareholding in Clearpay at 31 December 2019 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%(3) shareholding in Clearpay from which the Group has taken 10% below the mid-point. 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 at the time. Further detail is provided in Note 11(ii) to the 31 December 2019 Group interim financial report below.

(3) 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.

Commenting on the results, Ned Montarello, Executive Chairman of ThinkSmart, said:

"ThinkSmart's successful sale of 90% of its Clearpay subsidiary to Afterpay in 2018 continues to generate considerable value for shareholders as evidenced by the £3.2 million December 2019 special dividend/capital return and £16.4 million revaluation gain in the value of its retained shareholding in Clearpay.

"The operating performance of the Clearpay business since its launch in the UK in May 2019 on the Afterpay platform has been highly impressive. This momentum has a direct read through to the value of our Clearpay holding and we see significant future valuation upside potential.

"Within our wider core leasing business, we continue to review our diversification strategy and work to maximise our relationship with Dixons Carphone as we look to improve volume performance. The business continues to generate positive cashflow while rightsizing its operations to current volumes.

"ThinkSmart's legal claim against Carphone Warehouse for breaches of contract with regard to the Upgrade Everytime and Flexible Leasing products is ongoing."

For further information please contact:

Notes to Editors

About ThinkSmart Limited

ThinkSmart Limited is a specialist digital payments platform operator and investor. In 2018 ThinkSmart sold 90% of its Clearpay subsidiary to Afterpay Ltd and retains the 10% holding. ThinkSmart's operating business provides retail finance solutions for both consumers and businesses, underpinned by its innovative and scalable proprietary 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

A business transformed

Our business has undergone a rapid evolution in recent periods. Our deep knowledge of and long standing presence in the UK retail finance market enabled us to take first mover advantage in the burgeoning "buy now, pay later" market via Clearpay. With the sale of 90% of these operations to Afterpay in 2018 our balance sheet has been transformed by the carrying value of our remaining stake and our NAV at period end was £29.1m, even after cumulative dividends/capital returns of some £7.6m since the sale. I compare this to our restated NAV at 30 June 2018 of £12.2m to demonstrate clearly the value creation we have delivered for our shareholders. My expectation is that our holding in Clearpay will be the primary driver of value for shareholders in the near term.

That said, our core digital leasing operating business benefits from a number of positive value factors not least our long term association with Dixons Carphone, our proven expertise in point of sale finance and our significant investment in our proprietary digital payments platform and credit decision-making engine, SmartCheck. We remain focused on maintaining our standing in this market as we look to leverage these factors.

Summary

The interim period saw the revaluation of the Group's retained stake in Clearpay deliver an uplift in the value of its holding to £16.5m and a Profit After Tax for the period of £15.9m increasing the Group's net assets to £29.1m at 31 December 2019, equivalent to 27.32 pence per share.

The performance of the Clearpay business since its launch in May 2019 on the Afterpay platform has been impressive and by retaining a minority holding in Clearpay we see significant future upside potential through the call option for Afterpay to purchase ThinkSmart's remaining holding in Clearpay any time after 23 August 2023 at a price calculated on agreed principles based on market valuations at that time, with ThinkSmart's reciprocal put option 6 months later.

Within our wider core leasing business, we continue to review our diversification strategy and work to maximise our relationship with Dixons Carphone as we look to improve volume performance. The business continues to generate positive cashflow while rightsizing its operations to current volumes.

ThinkSmart's legal claim against Carphone Warehouse for breaches of contract with regard to the Upgrade Everytime and Flexible Leasing products is ongoing.

The Group has a robust financing position, with net cash of £8.5m at 31 December 2019 (after payment of £3.2m special dividend/capital return in December 2019).

Performance

As expected, leasing volumes fell 52% to £1.3m (H1 FY19: £2.7m) over the period, with the majority of this reduction experienced within our lower margin Flexible Leasing product. As announced on 29 November 2019, our discussions with our retail partner for this product, Carphone Warehouse ("CPW"), have proved unsuccessful which left us with no alternative but to issue formal legal proceedings for CPW's breaches in respect of its obligation to market and promote the Flexible Leasing product, and its predecessor Upgrade Everytime. This legal claim is ongoing and in the meantime we continue to fulfil our obligations under all of our contracts.

Revenues were 28% lower for the period at £3.3m (HY19 restated: £4.6m) 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.

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 position.

Operating costs decreased further to £2.2m (H1 FY19 restated £2.3m) over the period and remain controlled, aligned to current volume performance.

Profit after tax increased to £15.9 million (H1 FY19 restated £7.2 million), driven by the £16.4 million fair value gain on revaluation of the retained shareholding in ClearPay Finance Ltd

Statutory earnings per share of 14.95 pence (H1 FY19 restated 6.82 pence) is largely due to the fair value gain on the revaluation of the retained shareholding in Clearpay.

Position

As at 31 December 2019, lease receivables under management were £10.4m, with approximately 24,500 active customer contracts.

The Group held cash and cash equivalents of £8.5m at 31 December 2019, after the £3.2m payment of the special dividend/capital return in December 2019, up from £7.1m at 30 June 2019.

The Group has sufficient headroom available to support its current business volume.

Dividend/Capital Return

The Group paid a special dividend/capital return of £3.2m in December 2019.

Current Trading Update

Post the period end, business volumes have continued broadly in line with the performance reported for the interim period.

Looking ahead, the business is well positioned to further benefit from future growth in the value of its shareholding in Clearpay, and to create value for shareholders.

Key Performance Indicators:

Consolidated Statement of Profit or Loss and Other Comprehensive Income

for the six months ended 31 December 2019

The attached notes form an integral part of these consolidated financial statements.

Consolidated Statement of Financial Position

as at 31 December 2019

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 2019

The attached notes form an integral part of these consolidated financial statements.

Consolidated Statement of Cash Flows

for the six months ended 31 December 2019

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 2019 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 2019 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 sub-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 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 2020.

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.

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 2019 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.

AASB 16 Leases

The Group has adopted AASB 16 in the current year applying the full retrospective transition approach with the date of initial application being 1 July 2019. The standard introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The only operating lease held by the Group which is relevant to AASB 16 is for its office space at Oakland House, Manchester.

Under the full retrospective transition approach the Group has restated the prior year statement of financial position to recognise a right of use asset equal to the value of the lease liability at the inception of the lease, plus the initial direct costs incurred and the estimated costs for restoring the property to its original condition. The Group has simultaneously recognised accumulated depreciation on the right of use asset from the inception of the lease through to the reporting date. Depreciation on the right of use asset is charged on a straight-line basis over the ten year period of the lease.

In addition to the right of use asset AASB 16 also requires the Group to recognise a lease liability in respect of the lease payments due to the lessor. Again, the prior year financial statements have been restated to reflect the position as if AASB 16 had always been in effect. The lease liability has been recognised at the present value of all future lease payments due. As the interest rate implicit in the lease is not readily determinable the discount rate of 9.14% used is the Group's incremental borrowing rate being the STB cost of funds using an estimated 10 year interest rate swap at February 2013.

As at 31 December 2019 the effect of the adoption of AASB 16 is that the Group now holds a right of use lease asset with a value of £218,514 and a corresponding lease liability with a value of £287,417. Including the elimination of accruals and prepayments held under AASB 117 the overall impact as at the reporting date is a reduction to Net Assets of £96,694. Right of use assets are detailed in note 14 and lease liabilities are detailed in note 17 below. The interest and depreciation charged on the lease are included in the Consolidated Statement of Profit or Loss with the interest charged disclosed in note 6 and the depreciation charge disclosed in note 14 below.

Reconciliation of operating lease commitments: £,000

Operating lease commitments disclosed as at 30 June 2019 359

Add: release of initial rent free period benefit deferred under AASB 117 29

Less: discount using Group's incremental borrowing rate of 9.14% at lease inception (58)

Lease liabilities recognised at 1 July 2019 (Note 17) 330

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 2019 except for the following additions or changes.

Fair Value of Investments

The valuation of the Group's retained holding in ClearPay Finance Limited ("Clearpay"), following the sale of 90% of Clearpay to ASX listed Afterpay Ltd (formerly Afterpay Touch Group Ltd)("Afterpay") on 23 August 2018, is based on the agreed valuation principles for the purpose of the Afterpay call option to purchase and the Group's put option to sell the Group's holding in Clearpay to Afterpay at any time after 23 August 2023 and 23 February 2024 respectively. The key judgements that are critical to the valuation are the interpretation of the agreed valuation principles, market valuation of Afterpay Ltd and the relevant proportion of this that relates to Clearpay, and the discount to be applied for minority holding and lack of marketability of Clearpay as a standalone entity. In order to support these judgements, management have appointed independent valuation experts to advise on this matter.

Right of use lease asset and lease liability - AASB 16

The Group has adopted AASB 16 - Leases in the current accounting period with the date of adoption being 1 July 2019. The Group has implemented the full retrospective transition approach. The adoption of AASB 16 has introduced related estimates and judgements in respect of the term of the lease and the discount rate used where it is not possible to determine the interest rate implicit in the lease. At the reporting date it is reasonably certain that the Group will not terminate the lease before the minimum term while there is also no indication that it is reasonably certain that the lease will be extended beyond that date. As it is not possible to determine the interest rate implicit in the lease management have estimated the discount rate equivalent to the borrowing rate available to the business over the same period as the lease term.

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 2019. 

6. Consolidated Statement of Profit or Loss

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 11(ii)). In the period to 31 December 2018 realised gains arose on disposal of the full tranche 1 of 750,000 Afterpay Touch Group Limited (APT) shares on 24 August 2018. Unrealised losses arose on revaluation of 250,000 shares in APT as at 31 December 2018 to a share price of AUD $12.40 per share. These amounts are shown above.

7. Income tax expense

The consolidated entity's consolidated effective tax rate in respect of continuing operations for the six months ended 31 December 2019 was 0.22% (31 December 2018: 21.63%).

8. Profit/(Loss) after tax from discontinued operations

In June 2018, management committed to a plan to sell one of the subsidiary companies, ClearPay Finance Limited. The sale was completed on 23 August 2018. ClearPay Finance Limited has previously been classified as held for sale or as a discontinued operation. The comparative consolidated statement of profit and loss shows the discontinued operation separately from continuing operations.

The sale of ClearPay Finance Limited did not result in a tax charge for ThinkSmart Limited by virtue of the Substantial Shareholding Exemption. ThinkSmart Limited are exempt from the charge to tax gains or losses accruing on the disposal by companies of shares as they meet the conditions of this exemption.

At 31 December 2019 the disposal group was stated at fair value and comprised £nil assets and liabilities (30 June 2019 £nil).

9. Finance lease receivables

10. Other current assets

11. Financial assets at fair value through profit or loss

12. Contract assets

(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.

13. Other non-current assets

14. Plant and Equipment

15. Intangible Assets

16. Trade, other payables and provisions

17. Lease liabilities

18. Contract liabilities

19. Other interest bearing liabilities

20. Issued capital

* 1,781,250 shares of the Company were granted to Ned Montarello as remuneration.

21. Commitments and contingent liabilities

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 13).

22. 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 2019 the Group held one financial instrument at fair value through profit or loss:

· 10% holding in ClearPay Finance Limited with a fair value of £16,453,125 (2018: £60,000). The holding in Clearpay is a Level 3 financial instrument. See Note 11(ii).

23. 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

- SmartCheck Finance Spain SL

- ThinkSmart Inc

24. Related party disclosures

As at 31 December 2019 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

The Key Management Personnel remuneration included in 'employee benefits expense' in Note 6(e) is as follows:

25. 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.

26. Earnings per share

27. Effects of changes in accounting policies

The Group adopted AASB 15 in the financial year ended 30 June 2019 applying the full retrospective transition approach with the date of adoption being 1 July 2018. The main changes have arisen in respect of the accounting for the revenue, and related assets and liabilities, under the operating agreement with STB Leasing Limited (STBL) where the Group act as agent for STBL in the brokering and servicing of lease agreements where STBL is the lessor. In return, the Group receives an upfront cash transaction fee from STBL together with the non-cash consideration between STBL and the end customer (for the contract or inertia asset) which is allocated under AASB 15 between the inception/brokerage of the lease arrangement, a financial guarantee contract premium over the lease term, a contract liability reflecting the reversal constraint for the potential refund of the transaction fee, and the non-cash consideration contract asset accruing over the lease term. This has the following impact:

a. The recognition of the contract asset non-cash consideration means that it is no longer appropriate to recognise an inertia intangible asset and related deferred service income together with inventory of inertia stock.

b. The recognition of the financial guarantee contract premium eliminates the need for an additional loss pool provision.

c. A contract liability is recognised reflecting the reversal constraint for the potential refund of the transaction fee in the event that an end customer lessee defaults on their lease.

d. The cost of acquiring new end customer lease contracts is capitalised and spread over the term of the end customer lease.

e. At the end of the minimum term of the end customer lease, the Group becomes the lessor of an operating lease at which point the contract asset is transferred to plant & equipment and depreciated over the expected secondary term. Once the lessee terminates the lease the equipment is transferred to inventory at book value and expensed as a cost of inertia asset sold against the income earned from the sale of the inertia equipment.

This has resulted in the following restatement of comparatives for the statement of profit or loss and other comprehensive income for the six months ended 31 December 2018, and the statement of financial position as at 30 June 2018:

· Restatement of the 30 June 2018 financial position, which is the restated opening position for the six months to 31 December 2018, results in a reduction to net assets and accumulated profit at 30 June 2018 of £1,122,000.

· The restatement of the profit or loss for the six months ended 31 December 2018 (H1FY19) results in a £303,000 lower loss for that period resulting in a cumulative reduction to net assets and accumulated profit at 31 December 2018 of £819,000 as follows:

o Inertia intangible assets of £2,814,000, inventories of inertia stock of £287,000, deferred service income liabilities of £1,276,000 and accrued inertia rental income of £107,000 were derecognised resulting in a reduced H1FY19 loss of £228,000 (after allowing for the 30 June 2018 restatement of financial position impact of £2,160,000 reduction).

o Loss pool bad debt provisions of £679,000 were derecognised resulting in an increased H1FY19 loss of £47,000 (after allowing for the 30 June 2018 restatement of financial position impact of £726,000 increase).

o Contract assets (non-cash consideration) of £2,351,000 were recognised resulting in an increased H1FY19 loss of £388,000 (after allowing for the 30 June 2018 restatement of financial position impact of £2,739,000 increase).

o Contract liabilities in respect of the financial guarantee and refundable transaction fee reversal constraint of £2,263,000 were recognised resulting in a reduced H1FY19 loss of £404,000 (after allowing for the 30 June 2018 restatement of financial position impact of £2,667,000 reduction).

o Plant and equipment in respect of operating leased equipment has been recognised with an NBV of £346,000 resulting in a reduced H1FY19 loss of £106,000 (after allowing for the 30 June 2018 restatement of financial position impact of £240,000 increase).

27. Effects of changes in accounting policies (continued)

In addition, the Group adopted AASB 16 in the current year applying full retrospective transition approach with the date of initial adoption being 1 July 2019 (see Note 3 above for an explanation of the main changes resulting from this). This has resulted in the following restatement of comparatives for the statement of profit or loss and other comprehensive income for the six months to 31 December 2018, and the statement of financial position as at 30 June 2018 and as at 30 June 2019.

The following tables show the adjustments recognised for each line item of the financial statements affected.

27. Effects of changes in accounting policies (continued)