TIDMTSL
RNS Number : 1076E
ThinkSmart Limited
09 March 2022
9 March 2022
ThinkSmart Limited
("ThinkSmart" or the "Company" which together with its
subsidiaries is the "Group")
Interim Results for the six month period ended 31 December
2021
Clearpay holding exchanged for 618,750 shares in Block, Inc
(NYSE: SQ)
ThinkSmart Limited (AIM: TSL), the specialist digital payments
business with a shareholding of 618,750 shares in NYSE listed
Block, Inc (NYSE: SQ) ("Block"), today announces its Interim
Results for the six months ended 31 December 2021 (the "period" or
"H1 2022").
Financial highlights:
Clearpay shareholding successfully exited, having delivered
cumulative accounting profit of GBP83.7 million, and exchanged for
618,750 shares in Block offering significant upside potential
-- 10%(1) shareholding in Clearpay revalued to GBP73.6m(2) at period
end (FY 2021: GBP125 million) reflecting fall in market value
of Afterpay Ltd ("Afterpay") and the announcement on 20 December
2021 of the sale of the Clearpay shareholding for Afterpay shares
-- Loss after tax of GBP51.6 million (H1 2021: GBP53.7 million profit)
driven by a GBP51.4 million non-cash fair value loss on valuation(2)
of the Group's retained 10%(1) shareholding in Clearpay, prior
to the post period end disposal
-- Disposal of 10%(1) stake in Clearpay in exchange for 1,650,000
Afterpay shares announced on 20 December 2021, which was after
Afterpay's shareholder approval for its share for share sale
to Block
-- Disposal of Clearpay shareholding approved by ThinkSmart shareholders
on 14 January 2022
-- Afterpay sale to Block completed post period end, on 1 February
2022, and the Group's 1,650,000 Afterpay shares were exchanged
for 618,750 Block shares
-- Sale of 90% shareholding in Clearpay to Afterpay and retention
of 10%(1) shareholding as at 31 December 2021 (prior to its disposal
on 14 January 2022) has generated cumulative accounting profit
of GBP83.7 million to 31 December 2021 (including GBP73.5 million(2)
of non-cash fair value gains). Based on the Afterpay closing
share price on 14 January 2022 of A$69.03, the 1,650,000 Afterpay
consideration shares had a fair value of GBP60.4 million (using
1.885 AUD: 1 GBP) generating a cumulative accounting profit,
on the sale of both the 90% and 10% shareholding in Clearpay
to Afterpay, of GBP70.5 million for ThinkSmart shareholders
-- The Directors believe that the holding of 618,750 Block shares
offers significant upside potential. 43 equity research analysts
have a target for the Block share price of on average US$182
(range from US$120 to US$250 and a median of US$179) (3)
-- Proven delivery of shareholder return with capital return and
special dividend of A$5.6 million (5.2 cents per share), equivalent
to GBP3.0 million, paid in December 2021
-- Net assets at period end of GBP79.8 million are equivalent to
74.89 pence per share (FY 2021: GBP134.5 million/126.20 pence
per share)
-- Cash and cash equivalents of GBP4.1 million at 31 December 2021
(FY 2021: GBP7.1 million)
-- Fall in value of Block share price since 31 December 2021 to
7 March 2022 of 40% per cent (from US$161.51 to US$97.51) (4)
Block trading performance for the year ended 31 December
2021
Figures are as announced to the market by Block on 24 February
2022 in its year end results to 31 December 2021 and the following
is extracted from that announcement. All currency figures are in US
dollars unless otherwise stated. ThinkSmart owns 618,750 shares in
Block. Therefore, ThinkSmart places emphasis on the public market
disclosures, financial results, share price, and general overall
operational performance of Block.
-- For the full year of 2021, total net revenue was $17.66 billion,
an increase of 86% from the full year of
2020. Excluding bitcoin, total net revenue for the full year
of 2021 was $7.65 billion, up 55% year over year
-- For the full year of 2021, gross profit was $4.42 billion, up
62% year over year, or 53% on a two-year CAGR basis
-- Cash App generated $2.07 billion in gross profit, up 69% year
over year and 113% on a two-year CAGR basis
-- The Square ecosystem generated $2.32 billion in gross profit,
up 54% year over year and 29% on a two-year CAGR basis
-- For the full year of 2021, net income attributable to common
stockholders was $166 million. Net income was $202 million when
excluding the gains on equity investments of $35 million and
the impairment losses recorded on investments in bitcoin of $71
million. For the full year of 2021, net income per share was
$0.36 and $0.33 on a basic and diluted basis, respectively, based
on 458 million basic and 502 million diluted shares outstanding.
Excluding the gains on equity investments and the losses from
investments in bitcoin, net income per share was $0.44 and $0.40
on a basic and diluted basis, respectively, for the full year
2021
-- As of December 31, 2021, the fair value of Block's investment
in bitcoin was $371 million based on observable market prices,
which is $222 million greater than the carrying value of the
investment
Operational highlights:
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,
continues to generate positive cashflow through its managed wind
down
-- Total revenue of GBP1.9 million (H1 2021: GBP2.3 million) includes
GBP0.5 million (H1 2021: GBP0.4 million) from the provision of
the outsourced call centre customer support service for Clearpay
-- Optimised cash management with GBP0.1 million net cash generated
from operating activities (H1 2021: GBP1.8 million - including
GBP1.45 million from settlement agreement in relation to legal
proceedings)
-- Operating costs further reduced to GBP1.4 million (H1 2021: GBP1.8
million) and remain controlled, aligned to current volume performance
-- Post period end, and as announced on 3 February 2022, the Group
terminated its Operating Agreement with STB Leasing Ltd ("STB")
and purchased the portfolio of leases, funded under the Operating
Agreement, from STB for GBP1.2m. In return STB refunded the GBP2m
Credit Support Balance deposit which has resulted in a net GBP0.8m
increase in the Group's cash in February 2022
-- The lease portfolio purchased has a minimum term gross receivable
balance of GBP1.25m and an average term outstanding of 10 months.
ThinkSmart will continue to be entitled to all rental income
and revenue from sales of leased equipment following the end
of the initial term of the leases, and is managing its cost base
accordingly so that its operating business continues to deliver
net positive cashflows
Commenting on the results , Ned Montarello, Executive Chairman
of ThinkSmart, said:
"ThinkSmart has a proven track record of delivering shareholder
value by developing proprietary technology, operating and investing
within the global payments space. To date our strategy has
crystalised material shareholder value to the tune of GBP83.7m. As
a long-term backer of the global payments sector, we are confident
that ThinkSmart is well positioned to continue to deliver material
shareholder value.
"Today, we retain a shareholding in what we consider to be a
premier global technology and payments business. Block is
performing extremely well in the face of a challenging
macro-economic environment and is firmly exerting itself as a
global leader in payments. Its most recent financial performance
was above market expectations, giving us added confidence in its
future prospects and ability to continue to successfully execute on
its growth strategy.
"We look forward to continuing to update shareholders on the
progress of Block, alongside the cash generating progress within
our ongoing operating business, and thank our shareholders and
other stakeholders for their sustained support in ThinkSmart's
strategy and direction."
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) On 20 December 2021 the Group announced that it had agreed
terms with Afterpay Ltd ("Afterpay") to sell its retained
shareholding in Clearpay in exchange for 1,650,000 shares in
Afterpay, subject to the approval of ThinkSmart shareholders. In
addition, the Group agreed with Afterpay that it had no obligation
to share any of the 1,650,000 shares in Afterpay with Clearpay ESOP
employees, as the ESOP obligations would instead be satisfied by a
further issue of new shares by Afterpay. ThinkSmart shareholders
approved the sale on 14 January 2022 with the sale completing on 17
January 2022. Subsequent to the sale agreement of 20 December 2021,
the value of the Clearpay holding is derivable from the price of
the 1,650,000 shares in Afterpay on 31 December 2021 which were
publicly listed. Further detail is provided in Note 10 to the 31
December 2021 Group interim financial report below.
(3) Source: www.wsj.com/market-data/quotes/SQ/research-ratings
on 7 March 2022.
(4) Source: www.finance.yahoo.com/quote/SQ/history?p=SQ
Notes to Editors
About ThinkSmart Limited
ThinkSmart's roots are as a specialist digital payments platform
business. Following the sale of its remaining 10% shareholding in
Clearpay in January 2022, the Group now holds shares in NYSE listed
Block, Inc (NYSE: SQ). The Group also provides an outsourced call
centre customer service and support service to Clearpay and is
managing the wind-down of its leasing business.
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 shareholding exchanged for 618,750 shares in Block
The six month period to 31 December 2021 was a challenging time
for the market valuations of global technology stocks, depressing
the share price of Afterpay. This coincided with a change of
control in Afterpay following the takeover by Block, which
completed on 1 February 2022 AEDT, in turn enabling Block to choose
to effect the early exercise of Afterpay's call option to acquire
ThinkSmart's remaining minority shareholding in Clearpay at a price
calculated on agreed principles based on market valuations at the
time of exercise.
Given the depressed valuation of Afterpay and continued market
volatility, the Board was keen to retain its ability to negotiate
the disposal of its 10% stake in Clearpay ahead of the Block
takeover completing, from when the Board would have had no power to
negotiate as the value of the 10% holding would have been
determined by the pre-agreed, and therefore non-negotiable,
principles as set out in put and call option in the August 2018
Clearpay SPA with Afterpay. Therefore, following an approach by
Afterpay we engaged in negotiations and agreed to dispose of our
remaining holding in Clearpay in exchange for 1,650,000 shares in
Afterpay, which were valued at GBP78.1 million based on the Block
closing share price on 17 December 2021, and the agreed ratio of
0.375 Block shares for every Afterpay share (and using 1.3239 USD:1
GBP).
The Directors believed that this represented a compelling
outcome, particularly in the circumstances of a volatile market,
and this ongoing volatility has certainly proved to be the case
given the ongoing market nervousness of the macro economic
environment and resultant reduction in valuations of many
technology stocks including Block where its share price has fallen
from a peak of US$282. ThinkSmart's shareholders approved the
disposal on 14 January 2022. Subsequent to this, on 1 February 2022
and following the completion of the Block takeover, the 1,650,000
Afterpay shares were exchanged for 618,750 shares in Block.
The Board of ThinkSmart believes that there is significant
potential for future value accretion via its holding in Block. It
is clear that - from its most recent financial results announcement
- Block is performing extremely well and is positioned to be able
to mitigate inflationary pressures while executing on its growth
strategy. That strategy and financial performance is viewed
positively by the wider market, with 43 analysts targeting on
average a US$182 share price for Block (range from US$120 to US$250
and a median of US$179) (3) . At the Block share price on 7 March
2022 of US$97.51(4) (using 1.31 USD: 1 GBP) ThinkSmart's holding of
618,750 Block shares has a market value of GBP46.1 million. If the
Block share price were to increase to US$182(3) , as targeted on
average by analysts, the market value of ThinkSmart's Block shares
would increase by GBP39.9 million to GBP86.0 million (using 1.31
USD: 1 GBP), an increase of 87%. Given this potential, ThinkSmart
will continue to primarily focus its strategy on the delivery of
shareholder value via its holding in Block (as it did with
Clearpay), while supplementing this with cash generated from the
successful execution of the managed wind down of its operational
activities and provision of the Clearpay call centre outsourced
services.
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$5.6
million (5.2 cents per share), equivalent to GBP3.0 million (2.8
pence per share), in December 2021.
Operating Business Performance
The Board is also focused on ThinkSmart's legacy retail consumer
and business finance offerings, which have been in managed
wind-down, together with providing the outsourced call centre
customer support service for Clearpay. We ceased writing any new
business in February 2021 in our legacy retail consumer and
business finance offerings, as previously reported, and 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.
As expected, leasing volumes were nil (H1 2021: GBP0.5 million)
in the period following the cessation of new business and revenues
were consequently 21% lower for the period at GBP1.9 million (H1
2021: GBP2.4 million) as the lower volumes in the period were
partially offset by the majority of revenue for the period being
derived from higher volumes in previous years together with the
increased revenue in the period of GBP0.5 million from the
provision of the outsourced call centre customer support service
for Clearpay.
The Group will continue to service its existing customer base
ensuring the fair treatment of customers during the orderly winding
up of its legacy leasing business and will continue to benefit from
cash generation in the meantime.
Post period end, and as announced on 3 February 2022, the Group
terminated its Operating Agreement with STB Leasing Ltd ("STB") and
purchased the portfolio of leases, funded under the Operating
Agreement, from STB for GBP1.2m. In return STB refunded the GBP2m
Credit Support Balance deposit which has resulted in a net GBP0.8m
increase in the Group's cash in February 2022.
The lease portfolio purchased has a minimum term gross
receivable balance of GBP1.25m and an average term outstanding of
10 months. ThinkSmart will continue to be entitled to all rental
income and revenue from sales of leased equipment following the end
of the initial term of the leases, and is managing its cost base
accordingly so that its operating business continues to deliver net
positive cashflows.
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 2021, lease receivables under management were
GBP1.3m million, with approximately 5,000 active customer
contracts.
Operating costs decreased further to GBP1.4 million (H1 2021:
GBP1.8 million) over the period and remain controlled, aligned to
the volume performance of the business.
Group Financial Position
While the Group's 10%(1) holding in Clearpay was revalued to
GBP73.6(2) million at 31 December 2021 (FY 2021: GBP125 million)
based on the Afterpay closing share price on that day, the Group
agreed terms with Afterpay to sell it in exchange for 1,650,000
shares in Afterpay, subject to the approval of ThinkSmart
shareholders. ThinkSmart shareholders approved the sale on 14
January 2022 with the sale completing on 17 January 2022.
Subsequent to the sale agreement of 20 December 2021, the value of
the Clearpay holding is derivable from the price of the 1,650,000
shares in Afterpay which were publicly listed at 31 December 2021.
Further detail is provided in Note 10 to the 31 December 2021 Group
interim financial report below.
The Group held cash and cash equivalents of GBP4.1 million at 31
December 2021 (GBP7.1m at 30 June 2021), after the GBP3.0 million
payment of the special dividend/capital return in December
2021.
Current Trading Update
ThinkSmart anticipates its cash reserves will continue to build
as the Group's operating division continues to service its existing
customer base alongside providing an outsourced call centre
customer support service for Clearpay.
At the Block share price on 7 March 2022 of US$97.51 (4) (using
1.31 USD: 1 GBP) ThinkSmart's holding of 618,750 Block shares has a
market value of GBP46.1 million. If the Block share price were to
increase to US$182 (3) , as targeted on average by analysts, the
market value of ThinkSmart's Block shares would increase by GBP39.9
million to GBP86.0 million (using 1.31 USD: 1 GBP), an increase of
87%.
Looking ahead, the business is well positioned to further
benefit from the expected future growth in the value of its
shareholding in Block, subject to the ongoing performance of Block
and the valuation of technology stocks generally, and therefore to
continue creating value for shareholders.
Key Performance Indicators:
6 Months to
6 Months to 31 December 2020
31 December
2021
Revenue (Total) GBP1.9m GBP2.4m -21%
-------------- ------------------ -----
Net (loss)/profit after GBP(51.6)m GBP53.7m n/a
tax
-------------- ------------------ -----
Basic EPS in pence (48.43) 50.39 n/a
-------------- ------------------ -----
As at As at
31 December 30 June 2021
2021
-------------- ------------------ -----
Lease Receivables Under
Management (Closing) GBP1.3m GBP2.6m -50%
-------------- ------------------ -----
Active Customer Contracts
(000) 5.0 6.9 -28%
-------------- ------------------ -----
Cash and Cash Equivalents GBP4.1m GBP7.1m -42%
-------------- ------------------ -----
Net Assets GBP79.8m GBP134.5m -41%
-------------- ------------------ -----
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 2021
31 December 31 December
2021 2020
Notes GBP,000 GBP,000
Revenue 6(a) 1,875 2,342
Other revenue 6(b) 4 45
-------------- ------------
Total revenue 1,879 2,387
Customer acquisition costs 6(c) (60) (175)
Cost of inertia asset sold 6(d) (150) (191)
Other operating expenses 6(e) (1,440) (1,832)
Depreciation and amortisation 6(f) (467) (864)
Impairment gains 6(g) 5 39
(Losses)/gains on financial instruments 6(h) (51,367) 52,867
Other gains 6(i) - 1,450
-------------- ------------
(Loss)/Profit before tax (51,600) 53,681
Income tax (cost) 7 (6) (10)
-------------- ------------
Net (loss)/profit after tax - attributable
to owners of the Company (51,606) 53,671
-------------- ------------
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 (27) 62
Total items that may be reclassified subsequently
to profit/(loss), net of income tax (27) 62
-------------- ------------
Other comprehensive (loss)/profit for
the period, net of income tax (27) 62
-------------- ------------
Total comprehensive (loss)/profit for
the period, net of income tax (51,633) 53,733
-------------- ------------
(Loss)/Profit per share (pence)
Basic (pence per share) 24 (48.43) 50.39
Diluted (pence per share) 24 (47.67) 49.57
The attached notes form an integral part of these consolidated
financial statements.
Consolidated Statement of Financial Position
as at 31 December 2021
31 December 30 June
2021 2021
Notes GBP,000 GBP,000
Current Assets
Cash and cash equivalents 4,078 7,067
Trade receivables 67 55
Finance lease receivables 8 13 38
Other current assets 9 261 380
Total Current Assets 4,419 7,540
------------ ----------
Non-Current Assets
Plant and equipment 13 221 302
Intangible assets 14 355 590
Financial assets at fair value through
profit and loss 10 73,633 125,000
Contract assets 11 545 777
Other non-current assets 12 2,031 2,069
------------ ----------
Total Non-Current Assets 76,785 128,738
------------ ----------
Total Assets 81,204 136,278
------------ ----------
Current Liabilities
Trade and other payables 15 (607) (728)
Lease liabilities 16 (98) (103)
Contract liabilities 17 (318) (410)
Provisions 15 (179) (202)
Total Current Liabilities (1,202) (1,443)
------------ ----------
Non-Current Liabilities
Lease liabilities 16 - (46)
Contract liabilities 17 (180) (332)
Total Non-Current Liabilities (180) (378)
------------ ----------
Total Liabilities (1,382) (1,821)
------------ ----------
Net Assets 79,822 134,457
------------ ----------
Equity
Issued Capital 18 7,862 10,413
Reserves (2,902) (2,875)
Accumulated profits 74,862 126,919
------------ ----------
79,822 134,457
------------ ----------
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 2021
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 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
----------- ------------- ------------ ---------------
Balance at 1 July 2021 10,413 (2,875) 126,919 134,457
----------- ------------- ------------ ---------------
Loss for the period - - (51,606) (51,606)
Exchange differences arising on translation
of foreign operations, net of tax - (27) - (27)
----------- ------------- ------------ ---------------
Total comprehensive profit for the period - (27) (51,606) (51,633)
----------- ------------- ------------ ---------------
Transactions with owners of the Company,
recognised directly in equity
Share options exercised 8 - - 8
Distributions to owners of the Company (2,559) - (451) (3,010)
----------- ------------- ------------ ---------------
Balance at 31 December 2021 7,862 (2,902) 74,862 79,822
----------- ------------- ------------ ---------------
The attached notes form an integral part of these consolidated
financial statements.
Consolidated Statement of Cash Flows
for the six months ended 31 December 2021
31 December 31 December
2021 2020
GBP,000 GBP,000
Cash Flows from Operating Activities
Receipts from customers 1,672 2,310
Payments to suppliers and employees (1,622) (2,374)
Receipts in respect of lease receivables 34 431
Proceeds/(Payments) from other interest
bearing liabilities, inclusive of related
costs - 23
Interest received 48 35
Interest and finance charges (1) (86)
Receipts/(payments) from security guarantee 7 26
Income tax (payment)/repayment (6) (10)
Receipts from settlement of legal proceedings - 1,450
------------ ------------
Net cash provided by operating activities 132 1,805
------------ ------------
Cash Flows from Investing Activities
(Payments)/proceeds for plant and equipment (41) (16)
Payments for intangible assets - software - (68)
Net cash (used in)/generated from investing
activities (41) (84)
------------ ------------
Cash Flows from Financing Activities
Payment of lease liabilities (51) (46)
Dividends paid (451) (899)
Proceeds from share issue net of costs 8 -
Return of capital (2,559) (2,757)
Net cash used in financing activities (3,053) (3,702)
------------ ------------
Net (decrease)/increase in cash and cash
equivalents (2,962) (1,981)
Effect of exchange rate fluctuations on
cash held (27) 62
Cash and cash equivalents from continuing
operations at beginning of the financial
period 7,067 8,805
Total cash and cash equivalents at the
end of the financial period 4,078 6,886
------------ ------------
Restricted cash and cash equivalents at
the end of the financial period (59) (62)
------------ ------------
Net available cash and cash equivalents
at the end of the financial period 4,019 6,824
------------ ------------
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 2021 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 2021 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 UK ("Adopted AASBs").
The consolidated financial statements were authorised for issue
by the Board of Directors on 8 March 2022.
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 2021 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
2021.
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
2021.
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
2021 2020
GBP,000 GBP,000
a) Revenue
Extended rental income 713 775
Commission income 309 620
Outsourced services 461 409
Income earned from sale of inertia equipment 290 355
Services revenue - insurance commission 48 136
Interest revenue - other entities 48 35
Fee revenue - customers 6 12
1,875 2,342
------------- -------------
b) Other revenue
Finance lease income 4 45
Other revenue - -
------------- --------------
4 45
------------- --------------
Total Revenue 1,879 2,387
------------- --------------
All revenue is generated in the UK from
the following products:
SmartPlan 1,318 1,817
Upgrade Anytime 48 75
Flexible Leasing 4 51
Other/non-product specific 509 444
------------- --------------
1,879 2,387
------------- --------------
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
2021 2020
GBP,000 GBP,000
e) Other operating expenses
Employee benefits expense
* Payments to employees (780) (871)
* Employee superannuation costs (56) (53)
(836) (924)
Occupancy costs (77) (81)
Lease interest charge (16) (11)
Professional services (247) (432)
Finance charges (1) (86)
Credit losses arising from financial guarantee
contract (62) (54)
Other costs (201) (244)
(1,440) (1,832)
------------- --------------
f) Depreciation and amortisation
Depreciation (232) (242)
Amortisation (235) (622)
(467) (864)
------------- --------------
g) Impairment gains
Impairment gains on finance leases and
receivables 5 39
5 39
------------- --------------
h) (Losses)/Gains on financial instruments
Unrealised (losses)/gains (51,367) 52,867
(51,367) 52,867
------------- --------------
Unrealised gains or losses arose from the revaluation of the
Group's investment in 10% of Clearpay Finance Limited (see note
10). 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
Amounts recognised in profit and loss:
6 months 6 months
to to
31 December 31 December
2021 2020
GBP,000 GBP,000
Current income tax expense
Current income tax (charge) (6) (10)
Total income tax (charge) (6) (10)
------------- ----------------
Accounting (loss)/profit before tax (51,600) 53,681
Statutory corporation rate 30% 30%
Tax (charge) at the statutory income tax
rate 15,480 (16,104)
Effect of tax rates in foreign jurisdictions (5,676) 5,905
Non-deductible (expenses) (1) (11)
Non-taxable (losses)/gain (Substantial
Shareholdings Exemption) (9,760) 10,042
Deferred tax asset not recognised (43) 163
Irrecoverable withholding tax (6) (5)
Total income tax (charge) (6) (10)
------------- ----------------
8. Finance lease receivables
31 December 30 June
2021 2021
GBP,000 GBP,000
Current (no later than 1 year)
Gross investment in finance lease receivables 10 29
Unguaranteed residuals 3 24
Unearned future finance lease income
on finance leases - (6)
------------ --------
Net lease receivable 13 47
Allowance for losses - (9)
------------ --------
13 38
------------ --------
Balance at 1 July 38 446
Receipts in respect of lease receivable (34) (511)
Finance lease income 4 62
Impairment gain/(loss) 5 41
------------ --------
13 38
------------ --------
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
2021 2021
GBP,000 GBP,000
Prepayments 159 222
Insurance prepayments 1 4
Accrued income - insurance commission
(i) 101 154
261 380
-------------- ---------
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
2021 2021
GBP,000 GBP,000
Investment in Clearpay Finance Ltd 73,633 125,000
73,633 125,000
------------ --------
10. Financial assets at fair value through profit or loss (continued)
On 23 August 2018 the Group sold 90% of Clearpay Finance Limited
to Afterpay Ltd (formerly Afterpay Touch Group Ltd) (ASX:APT).
The Group retained a 10% shareholding in Clearpay which is held
as an investment at fair value through profit or loss under AASB
9. On 20 December 2021 the Group announced that it has agreed
terms with Afterpay for ThinkSmart's subsidiary, ThinkSmart Europe
Ltd, to sell its 10% holding in Clearpay in exchange for 1,650,000
shares in Afterpay, subject to the approval of ThinkSmart shareholders.
ThinkSmart shareholders approved the sale at a General Meeting
on 14 January 2022 with the sale completing on 17 January 2022.
At both 31 December 2021 and 30 June 2021 the financial asset
held by the Group is the 10% shareholding in Clearpay. For the
year ended 30 June 2021 the investment in Clearpay was a level
3 financial instrument with the value of the Clearpay shares at
a price calculated on the agreed valuation principles specified
under the call and put options included in the sale agreement
of 23 August 2018. The valuation at 30 June 2021 also provides
that 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"). For periods up to 30 June
2021 the Group engaged a third party global professional services
firm to value its retained shareholding in Clearpay 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, used 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 was 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. As the Group had 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 further discounted the valuation
by 35% to determine the accounting fair value of its retained
shareholding in Clearpay to give a fair value at 30 June 2021
of GBP125m. Subsequent to the sale agreement of 20 December 2021,
the investment in Clearpay is a level 2 financial instrument at
31 December 2021 with the value of the holding derivable from
the price of the 1,650,000 shares in Afterpay which are publicly
listed and represent the price that would be paid to transfer
the asset in an orderly sale at the measurement date. The sale
agreed on 20 December 2021 removes the obligation for the Group
to make any shares available to Clearpay employees under the ESOP.
At 31 December 2021 the closing share price of Afterpay was AUD
$83.01 and the closing AUD/GBP foreign exchange rate was 0.5376
giving a fair value for the Group's 10% holding in Clearpay of
GBP73.6m.
11. Contract assets
31 December 30 June
2021 2021
GBP,000 GBP,000
Brought forward 777 1,430
Recognised as revenue in period (i) 91 370
Recognised as customer acquisition cost
(ii) (41) (110)
Transferred to Plant & Equipment Operating
lease additions (282) (913)
------------ --------
545 777
------------ --------
Contract asset revenue to be recognised
less than 1 year 137 215
Contract asset revenue to be recognised
between 1 and 2 years 32 71
Contract asset revenue to be recognised
between 2 and 3 years 2 10
Contract asset revenue to be recognised
between 3 and 4 years - -
------------ --------
171 296
------------ --------
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
2021 2021
GBP,000 GBP,000
Accrued income - insurance commission
(i) 17 48
Deposits held by funders (ii) 2,014 2,021
2,031 2,069
-------------- ---------
(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 2021 91 690 283 1,064
Transferred from contract
assets - - 283 283
Transferred to inventory/cost
of inertia assets sold - - 31 31
Additions 41 - - 41
Disposals - - (399) (399)
Balance at 31 December 2021 132 690 198 1,020
----------- ----------- ----------- ---------
Accumulated Depreciation
Balance at 30 June 2021 (59) (575) (128) (762)
Depreciation expense (17) (35) (180) (232)
Disposals - - 195 195
Balance at 31 December 2021 (76) (610) (113) (799)
----------- ----------- ----------- ---------
Net Book Value
At 30 June 2021 32 115 155 302
----------- ----------- ----------- ---------
At 31 December 2021 56 80 85 221
----------- ----------- ----------- ---------
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 2021 408 1,729 348 2,485
Additions - - - -
Balance at 31 December 2021 408 1,729 348 2,485
--------- --------- ------------- ---------
Accumulated amortisation and
impairment
Balance at 30 June 2021 (173) (1,374) (348) (1,895)
Disposals - - - -
Amortisation expense (72) (163) - (235)
Balance at 31 December 2021 (245) (1,537) (348) (2,130)
------ -------- ------ --------
Net book value
At 30 June 2021 235 355 - 590
------ -------- ------ --------
At 31 December 2021 163 192 - 355
------ -------- ------ --------
15. Trade, other payables and provisions
31 December 30 June
2021 2021
GBP,000 GBP,000
Trade and other payables (50) (79)
VAT/GST payable (116) (132)
Other accrued expenses (441) (517)
------------ --------
(607) (728)
------------ --------
Provisions
Annual leave (88) (111)
Long service leave (87) (86)
Risk Transfer cancellation and claims (4) (5)
------------ --------
(179) (202)
------------ --------
16. Lease liabilities
31 December 30 June
2021 2021
GBP,000 GBP,000
Balance brought forward (149) (242)
Rental paid in period 67 112
Interest charged (16) (19)
(98) (149)
------------ --------
Lease liabilities due within 12 months (98) (103)
Lease liabilities due greater than 12 months - (46)
------------ --------
(98) (149)
------------ --------
Undiscounted maturity analysis
Lease liabilities due up to 1 year (103) (113)
Lease liabilities due between 1 and 2 years - (47)
------ ------
(103) (160)
------ ------
17. Contract liabilities
31 December 30 June
2021 2021
GBP,000 GBP,000
Balance brought forward 742 1,327
Recognised as revenue in period (244) (585)
498 742
------------ --------
Contract liabilities due within 12 months 318 410
Contract liabilities due greater than 12 months 180 332
------------ --------
498 742
------------ --------
18. Issued capital
31 December 30 June
Fully Paid Ordinary Shares 2021 2021
Number GBP,000 Number GBP,000
Balance at beginning of financial
period 106,542,814 10,413 106,509,994 13,164
Issue of ordinary shares 45,000 8 32,820 6
Return of capital to shareholders - (2,559) - (2,757)
Balance at end of the financial
period 106,587,814 7,862 106,542,814 10,413
------------ -------- ------------ --------
19. Commitments and contingent liabilities
31 December 30 June
2021 2021
GBP,000 GBP,000
Leases where Group acts as agent (off
statement of financial position) 1,326 2,583
Deposits held by funder 2,014 2,021
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 2021 the
Group held one financial instrument at fair value through profit or
loss:
-- 10% holding in Clearpay Finance Limited with a fair value of GBP73,633,190 (30 June 2021: GBP125,000,000). At 31 December 2021 the holding in Clearpay is a Level 2 financial instrument. At 30 June 2021 the holding in Clearpay was a Level 3 financial instrument. See Note 10.
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
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
2021 2020 2021 2020 2021 2020
GBP,000 GBP,000 GBP,000 GBP,000 GBP,000 GBP,000
Revenue 1,875 2,342 - - 1,875 2,342
Other revenue 4 45 - - 4 45
Total revenue 1,879 2,387 - - 1,879 2,387
Customer acquisition cost (60) (175) - - (60) (175)
Cost of inertia assets sold (150) (191) - - (150) (191)
Other operating expenses (1,144) (1,517) (296) (315) (1,440) (1,832)
Depreciation and amortisation (467) (864) - - (467) (864)
Impairment gains 5 39 - - 5 39
Gain on Financial Instruments (51,367) 52,867 - - (51,367) 52,867
Other gains - 1,450 - - - 1,450
Reportable segment profit/(loss)
before income tax (51,304) 53,996 (296) (315) (51,600) 53,681
--------- ----------- ---------- ----------- --------- -----------
December June December June December June
2021 2021 2021 2021 2021 2021
GBP,000 GBP,000 GBP,000 GBP,000 GBP,000 GBP,000
Reportable segment current
assets 4,094 4,181 325 3,359 4,419 7,540
Reportable segment non-current
assets 76,785 128,738 - - 76,785 128,738
Reportable segment liabilities 1,152 1,575 230 246 1,382 1,821
Capital expenditure 41 139 - - 41 139
22. Related party disclosures
As at 31 December 2021 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
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
2021 2020
GBP,000 GBP,000
Short-term employee benefits 208 228
Post-employment benefits 7 7
Other long-term benefits 1 1
216 236
-------------- ------------
23. Events occurring after the reporting date
Disposal of Clearpay 10% shareholding in exchange for 1,650,000
Afterpay shares
On 14 January 2022 ThinkSmart shareholders voted to approve the
sale by ThinkSmart Europe Ltd (ThinkSmart's wholly owned
subsidiary) ("ThinkSmart Europe") of its 10% holding in Clearpay
Finance Ltd ("Clearpay") in exchange for 1,650,000 shares in ASX
listed Afterpay Ltd ("Afterpay") (ASX: APT) ("Disposal"). The
Disposal completed on 17 January 2022 at which point ThinkSmart
Europe received 1,650,000 shares in Afterpay. On 1 February 2022
Block, Inc ("Block")(NYSE: SQ) acquired Afterpay per a Scheme of
Arrangement ("Scheme") which was announced on 2 August 2021. Under
the terms of the Scheme Block has acquired all of the issued shares
in Afterpay in exchange for common stock in Block. As a result of
this acquisition the 1,650,000 Afterpay shares received by
ThinkSmart Europe as a result of the Disposal have been exchanged
for 618,750 Block shares.
On 14 January 2022 the Group de-recognised the 10% holding in
Clearpay and simultaneously recognised the 1,650,000 shares in
Afterpay. The shares in Afterpay are a level 1 financial
instrument. On 1 February 2022 the Group de-recognised the
1,650,000 shares in Afterpay and simultaneously recognised 618,750
shares in Block. The Block shares are a level 1 financial
instrument. At 31 December 2021 the closing share price of the
Block shares was USD $161.51 per share, and at 7 March 2022 the
closing price of the Block shares was USD $97.51.
Purchase of leases from STB
On 31 January 2022 the Group purchased from STB Leasing Ltd
("STB") the portfolio of Hiring Agreements held by STB as specified
in the Operating Agreement of 16 February 2011 (the "Operating
Agreement"). Under the terms of the Operating Agreement the Group
was required to purchase the portfolio once the value of the
portfolio had fallen below GBP2m, being the floor value of the
credit support balance placed by the Group with STB, and a
specified termination event. The purchase price of the portfolio
was the amount equal to the balance of primary period rentals for
the portfolio at the date of transfer and payable up to the minimum
term for each Hiring Agreement in the portfolio discounted to their
net present value ("NPV") using the NPV formula and applicable
interest rate used to calculate the transaction fee for each of the
Hiring Agreements in the Portfolio. On the transaction date the
Group recognised a Finance Lease Receivable for the purchased
portfolio and simultaneously de-recognised the deposits held by
funder with the difference between the portfolio price and credit
support balance being settled in cash. The Group will continue to
collect the rentals due under the Hiring Agreements and recognise
finance lease income over the remaining term of the Portfolio.
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
2021 2020
GBP,000 GBP,000
------------ --------------
(Loss)/profit after tax attributable
to ordinary shareholders (51,606) 53,671
------------ --------------
31 December 31 December
2021 2020
Number Number
------------ --------------
Weighted average number of ordinary
shares (basic) 106,567,787 106,509,994
Weighted average number of ordinary
shares (diluted) 108,267,346 108,267,346
------------ --------------
31 December 31 December
Earnings per share 2021 2020
------------ --------------
Basic (loss)/earnings per share (pence) (48.43) 50.39
Diluted (loss)/earnings per share (pence) (47.67) 49.57
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR SSWESAEESEED
(END) Dow Jones Newswires
March 09, 2022 02:00 ET (07:00 GMT)
Thinksmart (LSE:TSL)
Historical Stock Chart
From Jun 2024 to Jul 2024
Thinksmart (LSE:TSL)
Historical Stock Chart
From Jul 2023 to Jul 2024
