ThinkSmart Market Update
15/10/2008
THINKSMART MARKET UPDATE
· Forecast FY08 EBITDA of $12.1m compared to previous $14.2m (both figures exclude US start-up costs)
· Positive FY 2009 Earning Outlook
· Expands U.S. Operations into Texas and California
· Signs new three year agreement with Next Byte in Australia
· Forecasting in excess of 45% like-for-like growth in FY08
ThinkSmart Limited (ASX:TSM), an international computer and office equipment financing company, today announced a profit guidance for FY 2008 and outlook for 2009. The company is forecasting to achieve an EBITDA excluding U.S. start-up costs of $12.1m compared to the previous forecast of $14.2m.
“Our responsible credit criteria and processes have held up well in this environment and, while demand for our product has never been stronger, we have not compromised our credit standards in the drive for growth. This has seen approval rates decline by 8%,” said ThinkSmart founder and managing director, Ned Montarello.
“To this end our bad debt levels remain in line with expectations and continue to support our long-term funding relationships with the likes of Banco Santander, HBoS and Adelaide Bank.”
Mr Montarello said the business expected to achieve a like-for-like EBITDA increase in excess of 45% in FY08 with the growth of new business and its Inertia secondary rental book continuing to underpin EBITDA growth across the Group. The new Warranty income line in the Australian business is delivering to expectations.
“Our outlook for 2009 continues to be positive,” said Mr Montarello. “ThinkSmart has no debt and we expect to fund the U.S. expansion from operating cash flow. We will complete our first full year of trade across four new Territories, adding to the existing mature businesses in the UK, Australia and Spain and anticipate that we will also benefit from positive foreign exchange and interest rates.”
Key highlights for the last quarter of FY08 and the outlook for 2009 include:
- Expansion of U.S. operations - ThinkSmart expanded into Texas earlier this month and will open in California next month taking it to 430 stores across three States. Nationwide expansion across the U.S. remains on track for first half of 2009 and the business is expecting the negative EBITDA impact of the 2008 rollout to be reduced to circa AU$2.5m from the earlier estimate of US$2.5m.
- Continued growth in the UK - The UK business is expected to sustain its solid growth in new business, with Inertia revenues continuing to build and drive EBITDA.
- First full-year of trade in France, Italy & New Zealand - The business expects to see upside next year from its first full year of trade in France, Italy and New Zealand, whilst Spain is forecast to remain a challenging environment.
- Strong new business growth in Australia - The business expects the Australian market to sustain its strong new business growth path through 2009, with notable contributions from JB Hi-Fi and Dick Smith Electronics, and the continued reinvigoration of the Officeworks chain.
- Growth in Warranty Service Revenue – ThinkSmart will achieve further upside in 2009 from the first full year impact of the warranty services product provided with Dick Smith Electronics.
- Extension of Next Byte relationship - ThinkSmart has just signed a new three year agreement with Next Byte, Australia’s largest Apple computer retailer, further extending that established relationship. The 25 store Next Byte chain is part of Vita Group (ASX:VTG) which also owns Australia’s largest mobile communications specialist, Fone Zone.
