ThinkSmart 2011 Full Year Results Announcement

ThinkSmart 2011 Full Year Results Announcement

ThinkSmart Announces Full Year Results And Fully Underwritten Equity Raising

ThinkSmart Limited (ASX:TSM), a leading provider of point of sale financing, today announced a full year net profit after tax (NPAT) of $6.8 million and normalised full year net profit after tax of $7.4 million for the year ended 31 December 2011. In addition, ThinkSmart today launched a fully underwritten accelerated non-renounceable entitlement offer to raise approximately $9 million (“Entitlement Offer”).

Key highlights:

  • Normalised NPAT up 13% to $7.4 million and up 20% on a constant currency basis
  • Strong UK performance with pre-tax profit increasing 61% to $7.0 million
  • Australian pre-tax profit decreased by 9% to $8.7 million, however, business revenue was up 8% to $29.5 million, despite difficult trading conditions in electrical retailing
  • Transformation to re-align business model and transition to new funding platform now complete
  • Expanded management team in place to support growth agenda
  • Strategy to diversify business and expand addressable market well underway

Normalised net profit after tax of $7.4 million has been calculated after adjusting NPAT of $6.8 million for one off costs arising predominantly from the closure of businesses in Spain and Italy. Total revenue of $45.5 million was an increase of 8% on last year, and up 11% on a constant currency basis. Importantly, the company lowered its cost of doing business to 21%, down from 22% in 2010, whilst at the same time increasing its investment in systems and product innovation.

Assets under management in the Australian business fell 5% to $87.3 million during the year, driven by a 17% reduction in new originations. The decline in new originations was due to a combination of factors, including a reduction in average transaction value, a prudent tightening of credit approval standards and weak consumer sentiment impacting the electrical retail environment.

In the UK, the launch of ThinkSmart’s Infinity product helped propel new originations to £10.8 million, up 47% on FY10. Highlighting the favourable growth trajectory of the business, pre-tax profit contribution from the UK increased 61%, or 74% on a constant currency basis, to $7.0 million. Whilst the challenging economic conditions in the UK have negatively impacted the electrical retail sector as a whole, the relative strength of ThinkSmart’s retail partner in the UK, Dixons, had a positive impact on the business.

ThinkSmart Executive Chairman and CEO Ned Montarello said the overall performance of the business was particularly pleasing and the business transformation is complete. “Post the GFC ThinkSmart has significantly re-aligned its business model to adapt to the changing retail and funding environment and that transformation is now complete. ThinkSmart has in place today an exceptional management team, substantial funding facilities and a scalable operating platform, positioning the business to materially increase earnings over the medium term. To ensure ThinkSmart has the resources to maximise our potential growth a final dividend will not be paid for the 2011 financial year, however, we expect to pay a final dividend for the 2012 financial year,” said Mr Montarello.

Entitlement Offer

ThinkSmart also announced today that it will raise approximately $9 million in equity to fund new growth opportunities. Eligible shareholders will be entitled to subscribe for 1 new ordinary ThinkSmart share (“New Share”) for every 5 existing ThinkSmart shares held as a 7.00pm (AEDT) on Monday, 27 February 2012. The offer price of $0.35 per New Share represents a 21.5% discount to the theoretical ex-rights price (“TERP”) of $0.446 per share. New Shares will rank equally with existing ordinary shares. The Entitlement Offer is fully underwritten by J.P. Morgan Australia Limited.

The proceeds of the Entitlement Offer will be deployed within the business to support the launch of the two recently announced new products:

  • Fido, a consumer payment plan product for the Australian market; and
  • ThinkSmart Business Leasing, a business to business leasing product for the UK market, and for general working capital purposes.

The new products are supported by committed facilities from ThinkSmart’s existing funding partners, with the proceeds of the Entitlement Offer used to fund capital expenditure associated with the respective product launches, including sales and marketing support and IT infrastructure, in line with ThinkSmart’s “growth through cash not debt” policy.

“The decision to undertake this equity raising highlights management’s confidence in the success of our new product initiatives and the transformation we have undertaken,” Mr Montarello said. “By equity funding these new growth opportunities, ThinkSmart retains its conservative approach to funding future growth through cash rather than debt, reducing the risks to the business and allowing the company to smoothly transition across into its new funding facilities and leverage its superior operating platform.”

Mr Montarello has committed to subscribe for his full entitlement via the accelerated institutional component of the Entitlement Offer (“Institutional Entitlement Offer”), amounting to a further investment in ThinkSmart by Mr Montarello of approximately $1.5 million.

The Institutional Entitlement Offer is open today, 22 February 2012 and the retail component of the Entitlement Offer (“Retail Entitlement Offer”) is open from 29 February 2012 to 16 March 2012. Further details of the Retail Entitlement Offer will be despatched to all eligible retail shareholders on 29 February 2012. Existing retail shareholders will have the opportunity to apply for additional shares above their entitlement as part of the Retail Entitlement Offer.

As the Entitlement Offer is non-renounceable, the entitlements will not be tradeable or otherwise transferable, and shareholders who do not take up their entitlement will not receive any value in respect of those entitlements.

Indicative Timetable

Institutional Entitlement Offer opens Wednesday, 22 February 2012
Institutional Entitlement Offer closes Wednesday, 22 February 2012
Trading halt lifted, existing shares recommence trading Thursday, 23 February 2012
Record date to determine eligibility to participate in the entitlement offer 7.00pm (AEDT) Monday, 27 February 2012
Retail Entitlement Offer opens Wednesday, 29 February 2012
Settlement of Institutional Entitlement Offer Wednesday, 29 February 2012
Allotment and trading of new shares issued under Institutional Entitlement Offer Thursday, 1 March 2012
Retail Entitlement Offer closes 5.00pm (AEDT) Friday, 16 March 2012
Allotment of new shares issued under the Retail Entitlement Offer Tuesday, 27 March 2012
Trading of new shares issued under the Retail Entitlement Offer Wednesday, 28 March 2012

Note: All dates are indicative only and subject to change

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