ASX
ANNOUNCEMENT
(ASX:
TSM)
26
October
2015
Company
Announcements
Australian
Securities
Exchange
20
Bridge
Street
SYDNEY
NSW
2000
Dear
Sir
/
Madam
2015
Annual
Report
Attached
please
find
the
ThinkSmart
Limited
(“the
Company”)
2015
Annual
Report.
The
abovementioned
document
will
be
available
on
the
Company’s
website
www.thinksmartworld.com
Yours
faithfully
Neil
Hackett
Company
Secretary
ThinkSmart
Limited
ABOUT
THINKSMART:
ThinkSmart
Limited
(ASX:
TSM)
a
Financial
Technology
company
and
leader
in
digital,
paperless,
retail
point
of
sale
finance
which
processes
high
volumes
of
transactions
quickly
and
efficiently
through
its
SmartCheck
proprietary
technology.
This
enables
online
credit
approval
in
just
a
few
minutes
whether
customers
are
online
or
in
store.
Our
products
are
executable
throughout
today’s
complex
retail
channel,
creating
additional
revenue
and
enhanced
margin
performance
–
on
and
off
line.
For
over
12
years,
ThinkSmart
has
been
an
exclusive
partner
to
Dixons
Retail,
now
the
newly
merged
Dixons
Carphone
Group
Plc,
where
we
have
developed
compelling
Business
and
Consumer
lease
finance
propositions,
most
recently
introducing
Upgrade
Anytime
–
a
first
to
market
offer
which
enables
consumers
to
upgrade
to
the
very
latest
computing
and
vision
products,
bringing
more
technology
to
more
customers
more
often.
ThinkSmart Limited
ABN 24 092 319 698
Australian Registered
Office
Suite 5, 531 Hay Street
Subiaco, 6008
WESTERN AUSTRALIA
P +61 8 9380 8333
F +61 8 9380 8300
European Head Office
7th Floor, Oakland House
Talbot Road, Old Trafford
Manchester, M16 0PQ
UNITED KINGDOM
P +44 161 333 2400
F +44 161 333 2426
www.thinksmartworld.com
SUPERIOR PERFORMANCE
in retail finance
THINKSMART LIMITED
ANNUAL REPORT
2015
ABN 24 092 319 698
Annual Report 2015
ThinkSmart is a financial technology company and leader in digital,
paperless, retail point of sale finance in the UK, since 2003.
CONTENTS
Highlights
Chairman and Chief Executive Officer Report
2015 Financial Report
Shareholder Information
Corporate Information
4
5
28
74
76
ThinkSmart United Kingdom Office:
7th Floor, Oakland House, Talbot Road
Manchester M16 0PQ, UNITED KINGDOM
Australian Registered Office:
Suite 5, 531 Hay Street Subiaco
Perth WESTERN AUSTRALIA 6008
www.thinksmartworld.com
3
Annual Report 2015
HIGHLIGHTS FOR THE FINANCIAL PERIOD ENDED
30 JUNE 2015
•
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•
•
•
•
•
•
•
•
•
•
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•
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•
•
•
•
$3.5m NPAT for period in line with updated market guidance issued on 5th June 2015 and up 23% on
previous 12 months
53% growth in EPS to 2.73 cents from 1.78 cents for the previous 12 months from continuing activities
UK delivered $7.6m Net Profit before Tax with 33% growth in volumes and 14% growth in assets under
management and active customers
Strong balance sheet with total cash reserves as at 30 June 2015 of $16.8m
Declares fully franked Dividend of 3.5 cents per share
2016 FY Guidance anticipating continued strong double digit year on year percentage growth in Group
Operating NPAT
A total of $32m Surplus Capital has now been returned to Shareholders, by way of Special Dividend and
Share Buy-Backs, following the sale of the Australian and New Zealand business and completion of the
$21m Off-Market Buy-Back Tender, completed 27 January 2015
Post Buy-Back there are 96.2m shares in issue
33% growth in UK business volumes on 12 months to 30 June 2014
Assets under management grew by 14% on a constant FX basis in the last 12 months to $56.5m
Active customer base grew by 14%
UK net assets increased by 38% to $36.4m
15% Reduction in Group corporate costs on the 12 months to 30 June 2014
ThinkSmart has extended its contract with the recently expanded and market leading Dixons Carphone
Group, which builds on the 12 - year mutually beneficial partnership. The agreement extends
ThinkSmart’s B2B (SmartPlan) and B2C (Upgrade Anytime) contract with Dixons Carphone, subject to
usual terms and conditions, to at least January 2019
Dixons Carphone plc is Europe’s leading specialist electrical and telecommunications retailer and services
company, with over 2,300 stores in 9 countries, employing over 40,000 people
ThinkSmart is committed to extending the model to new sectors, categories and distribution partners
where consumer leasing has wide appeal, as supported by national surveys and insight
Our propositions leverage ThinkSmart’s unique sector leading software and processing IP together with
paperless transactions, online basket integration and a planned mobile smartphone application later this
year
Development of a new multi leasing account proposition is currently in advanced stages and will be
launched in 2015
ThinkSmart has been approved by the Financial Conduct Authority to operate a leasing business under
the new regulatory requirements, one of the first companies to be authorised in the UK
£10m Additional funding facility now completed with Santander complementing existing £60m Secure
Trust Bank facility, providing a multi funder platform
A new multi-leasing customer account proposition is in development which will enable customers to
make a single application and receive a credit limit which will enable them to lease multiple products
over time, without making additional applications. The new account proposition is planned for launch in
2015
Funding in place to support growth initiatives
Strong UK economy and a positive outlook for continued growth in retail sales, building consumer
confidence and further reductions in unemployment
Appointed Canaccord Genuity as strategic advisor to the Board, to assist in continuing to unlock value for
the UK business
4
Annual Report 2015
CHAIRMAN AND CHIEF EXECUTIVE OFFICER REPORT
Welcome to all our shareholders reading our 2015 Annual Report.
The 2015 financial year has continued to be a successful period in shaping and executing the Group’s strategy
as reflected in our financial performance.
ThinkSmart is a leading financial technology company providing digital and paperless retail point of sale
finance products to both B2B and B2C customer segments via UK national retail distribution, pre-dominantly
with the Dixons Carphone Group through a 12-year relationship now extended to 2019. Dixons Carphone plc
is Europe’s leading specialist electrical and telecommunications retailer.
During the year we have invested significantly in our proprietary systems, people, and funding platforms to
further leverage our sector leading software and processing IP together with paperless transactions, online
basket integration and market innovative new customer account and mobile application products and services.
We continue to execute our strategy of building long term value in the UK with a focus on the release and
distribution of our leading integrated online basket and mobile finance solutions for retailers and continual
optimisation of our credit scoring and decision engine capabilities to maximise volumes and manage risk.
ThinkSmart’s business continues to perform well supported by a strong UK economy with a continuing positive
outlook for growth in retail sales, consumer confidence and further reductions in unemployment.
ThinkSmart remains focused on positioning the business for growth and profitability through the ongoing
development and execution of our strategy to build long-term value in the UK through our 3 Pillars of Growth:
1. Organic growth with current and new product with existing partners
2. Diversification
in product and market development by extending the model with new
3.
distribution, sectors and products, and
Investment in strategically aligned businesses with the opportunity to unlock value through
synergies and leveraging the platform through products and distribution
We continue to look to build long term, distribution agreements and entrenched partnerships which deliver
value for retailers and their customers. Our products are executable throughout today’s complex retail
channel, creating additional revenue and enhanced margin performance for our retail partners both on and
offline.
We strongly believe the UK is the place to be to grow our business. ThinkSmart has a strong long term
relationship with Dixons, UK’s leading electrical retailer and the UK market is nearly three times the size of
Australia with 62 million consumers. ThinkSmart has secured access to many of these consumers through its
strong relationship with Dixons. ThinkSmart’s sector leading intellectual property delivers capability for point
of sale financing solutions and facilitates the rapid development of innovative products into other retail sectors
allowing us to create financing solutions with various partners at relatively low cost and in rapid timeframes.
5
Annual Report 2015
The 2015 financial period enabled ThinkSmart to reshape its balance sheet with the successful on market buy-
back of up to 10% of issued shares being completed on 30 September 2014 and an off market tender share
buy-back purchasing 63m shares being implemented during January 2015 at a cost of $20m. As part of the off
market share buy-back a $6m special dividend, composing a fully franked amount at 4 cents per share and an
unfranked amount at 8 cents per share, was declared on 27 January 2015 and paid on 30 January 2015. As a
result the company now has approximately 96.2m fully paid ordinary shares on issue.
Further unlocking shareholder value
Following this transformational and successful year, and to further assist in unlocking value in the UK business,
the Board has appointed Canaccord Genuity, a global full-service investment banking and financial services
group, as its strategic advisor to explore options open to the company to continue to maximise value for
shareholders.
Finally, on behalf of the Board of Directors, we would like to thank all of ThinkSmart’s customers, partners,
funders and shareholders for their continuing support. We especially want to thank the entire team at
ThinkSmart for their ongoing commitment and enthusiasm, and their hard work and contribution in
developing and delivering our plans. We look forward to implementing the initiatives ahead for the benefit of
all our stakeholders.
Ned Montarello
Executive Chairman
Fernando de Vicente
Chief Executive Officer
6
THINKSMART LIMITED
DIRECTORS’ REPORT
Your Directors present their report on the consolidated entity (referred to hereafter as the “Group”) consisting of ThinkSmart
Limited (“the Company” or “ThinkSmart”) and the entities it controlled at the end of, or during, the 12 months ended 30 June 2015,
and the auditor’s report there on.
DIRECTORS
The following persons were Directors of the Company during the financial year and until the date of this report.
Names, qualifications, experience and special responsibilities
Ned Montarello
Executive Chairman
Ned was appointed Executive Chairman on 22 May 2010 and stepped down as Chief Executive Officer on 31 January 2014. Ned has
over 28 years’ experience in the finance industry. He founded ThinkSmart in 1996 and through this vehicle has been credited with
elevating the Nano-Ticket rental market sector in Australia, receiving the Telstra and Australian Government’s Entrepreneur of the
Year Award in 1998. Ned led the development of the Group’s Australian distribution network by building partnerships with key
retailers, including JB Hi-Fi and Dick Smith. Ned also steered the expansion of the business into Europe, establishing agreements
with DSG International and a joint venture with HBOS to launch in the UK. In 2007 Ned successfully listed, via IPO, the business
in Australia. In 2010 he led the development of the “Infinity” product with Dixons to move into the “Business to Consumer” market
for the first time in the UK. Ned continued to drive the business to maintain its sector leading IP in point of sale finance with the
introduction of e-sign to its process ensuring that it maintained its relevance to the fast moving retail environment.
Fernando de Vicente B. Econ, MBA Bus
Chief Executive Officer
Fernando joined the Board on 7 April 2010 and the Audit and Risk Committee on 18 August 2013. Fernando was then subsequently
appointed group Chief Executive Officer from 1 January 2015. Fernando has a Degree in Economics (International Development)
from the University Complutense in Madrid, and an Executive MBA from IESE Business School in Madrid.
Fernando spent nine years at Dixons Retail, one of Europe’s largest electrical retailers. His latest role in Dixons was International
Managing Director, with responsibility for Dixons Central & Southern European operations, a A$3 billion business with 350 stores
across six countries. Fernando started his career with Dixons in 2001 as Finance Director for the Spanish subsidiary, and became the
MD of the subsidiary in 2003. In 2006 he was promoted to Regional Managing Director for South-East Europe based in Greece,
before assuming the role of International Managing Director in 2008.
In March 2010, Fernando left Dixons to become the Executive Chairman of BodyBell Group, one of Spain’s largest speciality
retailers. On 15 February 2012, Fernando was appointed Non-Executive Director of Levantina, a leading multinational company
dealing with natural stone products.
Keith Jones MBA Bus
Group Strategy and Development Director
Keith joined the Board on 24 May 2013 and was appointed Chief Executive Officer on 1 February 2014 through to 31 December
2014. Keith has since moved to the role of Group Strategy and Development Director from 1 January 2015 whilst at the same time
ensuring a smooth hand over with the current CEO, Fernando. Keith has 30 years of retail experience in Europe including roles as
Chief Executive Officer of JJB Sports plc and Group Retail Director of Dixons Retail plc, one of Europe’s largest electrical retailers.
At Dixons, Keith was a member of the Group Executive Committee with responsibility for all UK and Ireland fascia’s including PC
World and Currys. Previously he was Managing Director of PC World Stores Group with responsibility for stores in the UK, Spain,
France, Italy and Nordics in addition to Group Service Operations. Keith has a MBA from the Manchester Business School.
7
THINKSMART LIMITED
DIRECTORS’ REPORT
David Griffiths B. Ec (Hons), M. Ec, D. Ec (Hon), FAICD
Non-Executive Director, Deputy Chairman
David joined the Board on 28 November 2000 and was appointed Deputy Chairman on 22 May 2010. David has over 14 years’
experience in investment banking at Macquarie Bank Limited and previously as Executive Chairman of Porter Western Limited.
Prior to that he held a number of senior financial positions across a wide range of industries. He holds an Honours Degree in
Economics and an honorary Doctor of Economics from The University of Western Australia, a Masters Degree in Economics from
Australian National University and is a Fellow of the Australian Institute of Company Directors. David is a Director of the
Contemporary Dance Company of Western Australia. He is Chairman of Automotive Holdings Group Limited. David is Chair of the
Audit and Risk Committee of ThinkSmart.
Steven Penglis (Retired 26 November 2014)
B. Juris and B. Law
Non-Executive Director
Steven joined the Board on 1 July 2000 and stepped down as Chairman on 6 May 2007. Until 30 September 2012, Steven was a
partner of Freehills, having been appointed to the partnership on 1 July 1987. Steven now practises solely as a barrister, specialising
in the area of Corporate and Corporations Law litigation. He is a part time Senior Member of the Commonwealth Administrative
Appeals Tribunal, a former elected member and Chairman of the Legal Practice Board of Western Australia and a former elected
member of the Council of the Law Society of Western Australia (having served from 1 January 2002 to 31 December 2012). Steven
was Chairman of the Nomination and Remuneration Committee of ThinkSmart before retiring on 26 November 2014.
COMPANY SECRETARY
Neil Hackett
B. Ec, FFin, GAICD (merit)
Mr Neil Hackett holds a Bachelor of Economics from the University of Western Australia, Post-graduate qualifications in Applied
Finance and Investment, and is a Graduate (Order of Merit) with the Australian Institute of Company Directors. Mr Hackett is an
Affiliate of the Governance Institute of Australia and a Fellow of the Financial Services Institute of Australia. He is currently a
Non-executive Director of Australian Securities Exchange listed entities; Azonto Petroleum Limited and Ardiden Limited. Neil is
also on the Board of two unlisted entities, Steel Blue Pty Ltd and WestCycle Inc.
PRINCIPAL ACTIVITIES
The Group’s principal activity during the period was the provision of lease and rental financing services in the UK.
OPERATING AND FINANCIAL REVIEW
The Board of Directors of the Group resolved to change the Group’s financial year end from 31 December to 30 June commencing
from 1 January 2014. The Board presents its Operating and Financial Review for the 12 month financial period to 30 June 2015 and
as a result of the year end change the comparative is for the 6 month financial period to 30 June 2014. This information should be
read in conjunction with the financial statements and accompanying notes.
Business model
ThinkSmart is an international finance company, creating differentiation and competitive advantage in ‘point of sale’ finance. It has
an exclusive distribution agreement and partnership with Dixons Carphone Group, one of the UK’s leading electrical retailers and
their customers. ThinkSmart’s products leverage its sector leading software and processing IP for delivering fast finance solutions in
today’s complex retail environment and it offers a compelling and profitable value proposition for retail partners, customers and
funders.
Since the sale of the Australian and New Zealand operations settled on 31 January 2014 the Group has focused on the UK market.
The company continues to innovate within this growing market of 64.6 million consumers through new product and system
development and new distribution channels whilst further building on the strong relationship it has with Dixons Carphone Group.
8
THINKSMART LIMITED
DIRECTORS’ REPORT
Key financial data
For the year ending
June
2015
June
2014
Dec
2013
June
2015
June
2014
Dec
2013
June
2015
Continuing operations
Discontinued operations
Total
June
2014
Dec
2013
12 mths
6 mths
12 mths
12 mths
6 mths
12 mths
12 mths
6 mths
12 mths
$000
$000
$000
$000
$000
$000
$000
$000
$000
Total revenue
Indirect customer acquisition costs
Operating expenses
Depreciation and amortisation
Impairment losses
Profit / (loss) before tax
Income tax (expense) / benefit
Profit / (loss) after tax
24,957
(8,290)
(10,840)
(648)
(512)
4,667
(1,177)
3,490
11,461
(3,805)
(4,960)
(275)
(155)
2,266
(716)
1,550
18,933
(4,943)
(9,923)
(463)
(255)
3,349
(752)
2,597
-
-
-
-
-
-
-
-
17,257
(89)
18,758
(1,361)
24,957
(8,290)
(3,694)
(13,039)
(10,840)
(197)
-
13,277
(3,490)
9,787
(2,399)
(2,338)
(379)
91
(288)
(648)
(512)
4,667
(1,177)
3,490
28,718
(3,894)
(8,654)
(472)
(155)
15,543
(4,206)
11,337
37,691
(6,304)
(22,962)
(2,862)
(2,593)
2,970
(661)
2,309
Summary of results (12 months ended 30 June 2015 compared to 6 months ended 30 June 2014)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
(cid:1)
Net profit after tax of $3.5m, compared to $11.3m in prior 6 month period
The comparative (six months to June 2014) includes $9.8m after tax profit from sale of the Australian and New Zealand
businesses.
Total revenue of $25.0m, up 32% on last 12 month reporting period from continuing operations.
Total expenses of $20.3m, up 30% on last 12 month reporting period from continuing operations.
Operating expenses of $10.8m, up 9% on last 12 month reporting period from continuing operations.
Available cash assets of $16.4m, down 57% on 30 June 2014 position as a result of share buy backs.
Earnings per share of 2.73 cents, compared to an earnings per share of 0.97 cents for six months to 30 June 2014 from
continuing operations.
During the period 63m shares were purchased through market buy-backs and cancelled at a cost of $20m (see note 19).
As part of the off market share buy-back a $6m special dividend composing of a fully franked amount at 4 cents per share and
an unfranked amount at 8 cents per share, was declared on 27 January 2015 and paid on 30 January 2015.
Review of operations
Continuing operations – UK
A consistent set of results was delivered by the UK business.
New originations totalling $37.8m are up 33% on a constant currency basis against the last 12 month reporting period from
continuous operations. This is mainly a result of the growth in the consumer offering ‘Upgrade Anytime’ launched on 15 May 2014
which has revitalised the product whilst broadening the product range to now include televisions as well as computers and tablets.
This combined with strong repeat business (circa 30%) is now producing a strong pattern of growth and customer retention. The
business offering ‘SmartPlan’ has seen growth in every month of the 12 months to 30 June 2015 and benefitted from successful
Spring and Autumn campaigns.
UK average transaction values (ATV’s) have reduced to $1,336 down 7% on a constant currency basis against same period last year
due to a higher proportion of Upgrade Anytime leases. The growth in volumes has now reversed the decline in assets under
management which have now increased to $56.5m up 14% on a constant currency basis against same period last year.
A new £10m 5 year revolving credit facility was signed with Santander on 15 December 2014 resulting in lease receivables together
with related bank debt strengthening the group balance sheet. In addition reduced funding costs will improve margins, however lease
accounting means income and costs will be recognised over the 24 month term of each lease rather than upfront.
Continuing operations – Corporate
Corporate costs continue to fall being $3.3m for the 12 months to 30 June 2015 (down 25% on last 12 month reporting period).
9
THINKSMART LIMITED
DIRECTORS’ REPORT
Financial position and cash flows
Summary financial position
As at
Cash and cash equivalents (unrestricted)
Cash and cash equivalents (restricted)
Other assets
Goodwill and intangibles
Total assets
Other liabilities
Total liabilities
Equity
Net cash from operating activities
30 June
2015
$000
16,396
436
17,508
17,431
30 June
2014
$000
38,498
572
12,216
16,216
51,771
67,502
12,262
12,262
39,509
8,555
8,555
58,947
1,155
2,536
The return of surplus capital to shareholders through the on and off market buy-backs is reflected in the table above through the
reduction in cash as at 30 June 2015.
The company has now taken on $4.1m (note 18) corporate debt through the UK Santander facility but available cash remains strong
at $16.4m at the end of June 2015.
Business strategies and prospects for future financial years
Distribution network
ThinkSmart has a 12 year partnership with Dixons, now extended to 2019, and there is now a strong leadership focus on the UK,
aimed at establishing additional relationships.
Operational capability and efficiency
With the recent appointment of Mr Fernando de Vicente as Chief Executive Officer along with Mr Keith Jones continuing in the new
role of Executive Director Group Strategy and Development on a part time basis, both with extensive retail experience, ThinkSmart
plans to use its market leading IP capability to further develop its multi-channel operating model at an efficient and scalable level.
Asset quality
Our continued focus on consistent improvements in loss history is expected to improve the cost of funding, as it will make
ThinkSmart a more attractive proposition to potential new funding partners.
Product diversification
Upgrade Anytime was launched on 15 May 2014 and replaced the Infinity consumer product within Dixon stores. Upgrade Anytime
has broadened the category range to TVs and gives the customer more flexibility in terms of upgrading early and product/service
range.
The SmartPlan offering will be revitalised in the second half of 2015, targeting realignment to meet the changing retail environment.
In addition to existing products, our in-house development capability will be used to develop bespoke products for new partners and
markets.
Funding platform and cash resources
The group now has a multi-funder model after signing a new £10m 5 year revolving credit facility with Santander contracted to 2019
to fund the Group’s on balance sheet leases. This compliments the current £60m facility with Secure Trust Bank contracted to April
2016, which funds off balance sheet leases.
10
THINKSMART LIMITED
DIRECTORS’ REPORT
Strategic Review
The group has appointed Canaccord Genuity as strategic advisor to the Board to assist in continuing to unlock value for the UK
business and this could result in a range of outcomes including the Group entering new partnerships, new businesses or changes to the
ownership or structure of the group
Risks
ThinkSmart accepts that risk is an inherent part of doing business and actively identifies, monitors and manages material risks.
Key material risks faced by the group are:
Credit risk
The credit quality of accepted customers and the Group’s policies and procedures to mitigate payment defaults has an impact on the
Group’s financial performance either directly through impairment losses or indirectly through funding costs. Robust credit checking
and collections processes combined with continual development of our market leading IP capability in this area assist in managing
and mitigating this risk.
Achievement of Volume Growth
The Group’s ability to achieve its growth targets is impacted by its Retail partners’ own growth strategies, key relationships with
those partners, the ability to establish new partnerships, regulatory risks or product lines, and the broader economic environment
particularly in the retail sector.
Funding
The availability and cost of funds impacts the Group’s product pricing decisions, its ability to accept volume growth delivered by its
partners and the ultimate profitability of its products. The historic credit quality of ThinkSmart’s lending, market competition for debt
and other macro-economic factors also impact this risk.
Concentration Risk
The vast majority of the Group’s new business volumes are from its Retail partner, Dixons Carphone, Europe’s leading specialist
electrical and telecommunications retailer. The Group has a long term exclusive contract with Dixons which has recently been
extended to 2019 which is conditional on the group continuing to perform and develop the financial products it provides to Dixons
just as it has done since 2003.
Currency Risk
The majority of the Group’s income and assets are from its UK operations and therefore are denominated in GBP creating currency
risk when translating to AUD. This risk is mitigated by ensuring that the majority of the Group’s costs and liabilities are also
denominated in GBP however the currency translation risk remains on the net profit and net assets held in GBP.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
During the period to 30 June 2015 63,006,935 shares (40% of shares in issue) were purchased and cancelled as part of an on market
buyback scheme at a cost of $20m (see note 19(a)).
11
THINKSMART LIMITED
DIRECTORS’ REPORT
DIVIDENDS
Dividends paid or declared by the Company to members since the end of the previous financial year were:
Declared and paid during the period
Special dividend
Special dividend
Cents per
share
Total amount
Franked/
unfranked
Date paid
4 cents
$1,999,958
franked
31 January 2015
8 cents
$3,999,917
unfranked
31 January 2015
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
A fully franked dividend of 3.5 cents per share was declared at the board meeting on 25 August 2015 and will be paid in September
2015.
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.
DIRECTORS’ MEETINGS
The following table sets out the number of Directors’ meetings held during the financial period.
Director
Board Meetings
N Montarello
D Griffiths
S Penglis
F de Vicente
K Jones
A
9
9
4
9
9
B
9
9
4
9
9
Audit and Risk
Committee Meetings
Nomination and
Remuneration
Committee Meetings
A
2*
2
1
2
2*
B
-
2
1
2
-
A
-
1
1
-
-
B
-
1
1
-
-
A – Number of meetings attended
B – Number of meetings held during the time the Director held office during the period
* – Attendance by invitation from the Committee
DIRECTORS’ INTERESTS
The relevant interests of each Director in ThinkSmart Limited shares and options at the date of this report are as follows:
Number of ordinary shares
Options granted over
ordinary shares
31,059,356
2,592,001
603,500
341,000
-
-
2,000,000
2,000,000
N Montarello
D Griffiths
F de Vicente
K Jones
12
THINKSMART LIMITED
DIRECTORS’ REPORT
Unissued Shares under Options
At the date of this report there were 5,033,333 unissued ordinary shares of the Company subject to option or performance rights,
comprising:
Number of shares
under option
Exercise price of
options
200,000
500,000
1,000,000
1,000,000
333,333
2,000,000
Expiry date of
options
09 August 2017
04 July 2018
10 June 2019
10 June 2019
$0.1923
$0.2652
$0.3448
$0.4195
$0.3471
11 December 2019
$0.4021
31 March 2020
All options expire on the earlier of their expiry date or the termination of the option holder’s employment. Further details are
included in the remuneration report on pages 7 to 19. These options do not entitle the holder to participate in any share issue of the
Company or any other body corporate.
REMUNERATION REPORT - Audited
This Report details the remuneration arrangements for Key Management Personnel. Key Management Personnel encompass all
Directors and those Executives that have specific responsibility for planning, directing and controlling material activities of the
Group. In this report, “Executives” refers to the Key Management Personnel excluding the Non-Executive Directors. The
information provided in this Remuneration Report has been audited as required by Section 308(3C) of the Corporations Act 2001.
This Report contains the following sections:
A: Principles of remuneration
B: Key Management Personnel remuneration
C: Service agreements
D: Share-based compensation (loan-funded shares and options)
E:
F: Bonus remuneration
G: Key Management Personnel transactions
Share-based compensation (shares)
A. Principles of Remuneration
Key Management Personnel have authority and responsibility for planning, directing and controlling the activities of the Company
and the Group and comprise for the 12 months ended 30 June 2015:
Executive Chairman
N Montarello
Executive Director and Chief Executive Officer
F de Vicente
Non-Executive Directors
D Griffiths (deputy Chairman)
S Penglis (retired 26/11/14)
Executive Director
K Jones (Group Strategy and Development Director)
Executives
G Halton (Chief Financial Officer)
D Twigg (Chief Operating Officer (Credit and Operations))
13
THINKSMART LIMITED
DIRECTORS’ REPORT
The Board recognises that the Company’s performance depends upon the quality of its staff. To achieve its financial and operating
objectives, the Company must attract, motivate and retain highly skilled Directors and Executives. To this end, the remuneration
structure seeks to:
Provide competitive rewards to attract, retain and motivate talented Directors and Executives;
•
• Align incentive rewards with the Company’s short term and long term objectives by including a portion of Executive
remuneration “at risk” as short term and long term incentives;
Set demanding performance hurdles which are clearly linked to an Executive’s remuneration; and
Structure remuneration at a level that reflects the Executive’s duties and responsibilities and is competitive within the sector.
•
•
The remuneration structures take into account:
•
•
•
the capability and experience of the individual;
the individual’s ability to control the relevant segment’s performance; and
the performance of the Group.
The Nomination and Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages,
trends in comparative companies and markets, both locally and internationally, and the objectives of the Company’s remuneration
strategy.
Remuneration packages include a mix of fixed and variable remuneration with a blend of short-term and long-term performance-
based incentives. The variable remuneration components are directly linked to both the performance of the Group and the
performance of the Company’s share price. This ensures close alignment of remuneration of Key Management Personnel and the
creation of shareholder value.
Non-Executive Directors
Fees and payments to Non-Executive Directors reflect the demands which are made on and the responsibilities of the Non-Executive
Directors. Non-Executive Directors’ fees and payments are reviewed annually by the Board. Non-Executive Directors do not receive
share options or loan-funded shares.
Non-Executive Directors’ Fees
Non-Executive Directors’ fees are determined within an aggregate Directors’ fee pool of $600,000 per annum and was approved by
shareholders at a previous general meeting. The total fees paid in the financial period were $105,720. In addition to these fees,
Directors also receive superannuation contributions as required under government legislation. The Company also pays all reasonable
expenses incurred by Directors attending meetings and carrying out their duties.
Executive Pay
The Group’s executive remuneration structure has four components which comprise the Executive’s total remuneration:
•
•
•
•
base pay and benefits;
short-term performance incentives (STIs);
long-term incentives through participation in the ThinkSmart Long Term Incentive Plan (LTIs); and
other remuneration such as superannuation.
CEO
Other executives
94%
78%
-%
13%
6%
9%
Fixed remuneration
Short-term incentive
Long-term incentive
At risk
Base Pay – Fixed Compensation
Executives are offered a competitive salary that comprises the components of base pay and benefits. Base pay for Executives is
reviewed annually by the Nomination and Remuneration Committee or the Executive Chairman to ensure the Executive’s pay is
competitive with the market and appropriate to the Executive’s experience, responsibilities and contribution. An Executive’s pay is
also reviewed on promotion. Base pay for the Executive Chairman is reviewed annually by the Nomination and Remuneration
Committee.
14
THINKSMART LIMITED
DIRECTORS’ REPORT
Short-Term Performance Incentive
Short-term performance incentives (STIs) vary according to individual contracts, however, for Executives they are broadly based as
follows:
•
•
a component of the STI is linked to the individual performance of the Executive (this is based on a number of factors, including
performance against budgets, achievement of key performance indicators (KPIs) and other personal objectives); and
a component of the STI is linked to the financial performance of the Group determined at the beginning of each financial year.
Using various performance targets and personal performance objectives the Group ensures variable reward is only paid when value
has been created for shareholders. The performance measures include financial, such as Profit Before Tax and the value of new
originations, and non-financial, including KPIs targeting high levels of customer service and new retail partner acquisition. The STI
bonus is delivered in the form of cash.
The short-term bonus payments may be adjusted up or down in line with under or over achievement against the target performance
levels. This is at the discretion of the Nomination and Remuneration Committee or the Executive Chairman. The STI targets are
reviewed annually. Information on the STI is detailed in section F of the Remuneration Report.
Long-Term Performance Incentive
Long-term performance incentives are awarded to Key Management Personnel and other Executives. Prior to 2012, incentives were
awarded under the Company’s Executive Share Option Plan. In May 2012, shareholders approved a Long Term Incentive Plan
designed to increase the motivation of staff and to create a stronger link between increasing shareholder value and employee award.
The details of these schemes are set out on pages 10 to 11.
Consequences of Performance on Shareholder Wealth
In considering the Group’s performance and benefits for shareholder wealth, the Nomination and Remuneration committee have
regard to the following indices in respect of the current financial period and the previous four financial years.
Profit/(loss) attributable to
owners of the company ($000s)
Basic EPS
Dividends paid
Dividend paid per share
Share price at year end
Change in share price
12 Months to
June 2015
6 Months to
June 2014
12 Months
to Dec 2013
12 Months
to Dec 2012
12 Months
to Dec 2011
$3,490
$11,337
$2,309
($1,441)
$6,798
2.73 cents
$5,999,875
6 cents
$0.31
($0.06)
7.06 cents
$5,843,055
3.6 cents
$0.37
$0.01
1.45 cents
-
-
$0.36
$0.17
(0.95) cents
-
-
$0.19
($0.22)
5.23 cents
$4,545,779
3.5 cents
$0.41
($0.32)
15
THINKSMART LIMITED
DIRECTORS’ REPORT
During 2012, the Board implemented a new loan-funded share plan for Executives located in Australia, following shareholder
approval in May 2012. The limited recourse loans to acquire shares are issued to Executives and the ability to exercise the shares is
conditional on the Group achieving the pre-determined performance criteria. There were $500,000 of loan-funded shares issued to
Executives in the financial year ended 30th June 2015 and the table below sets out the details of the loan-funded share plan:
Instrument
Each loan-funded share represents an entitlement to one ordinary share.
Limited recourse loan
The company is providing interest-free, limited recourse loans to Executives to acquire shares.
The limited recourse loan means that if the shares do not vest for any reason or the value of the
shares is less than the outstanding loan value when it is required to be repaid, the participant’s
liability is limited to the value of the shares.
Exercise price
Vesting conditions
2012 loan-funded share issue: $0.1923
2013 loan-funded share issue: $0.2652
2015 loan-funded share issue: $0.3620
Shares will vest at the end of the three years from the issue date if at any time during this period
the volume-weighted average price of the Company’s shares on ASX over any consecutive
30 trading days is, or is in excess of, the following performance conditions.
Loan-funded share issue
VWAP target
Percentage of shares
vesting
2012
Tranche 1
Tranche 2
Tranche 3
2013
Tranche 1
Tranche 2
Tranche 3
2015
Tranche 1
Tranche 2
Tranche 3
$0.35
$0.55
$0.75
$0.3802
$0.4889
$0.5975
$0.5537
$0.7119
$0.8701
25%
25%
50%
25%
25%
50%
25%
25%
50%
Vesting is subject to the Executive remaining an employee of the Group.
Why vesting conditions are
chosen
The vesting conditions were chosen to align the financial interests of participants with those of
shareholders.
Vesting date
Performance period
2012 loan-funded share issue: 10 August 2015
2013 loan-funded share issue: 04 July 2016
2015 loan-funded share issue: 18 September 2017
2012 loan-funded share issue: 10 August 2012 to 10 August 2015
2013 loan-funded share issue: 04 July 2013 to 04 July 2016
2015 loan-funded share issue: 18 September 2014 to 18 September 2017
Exercise period
From vesting date until expiry date
Expiry date
2012 loan-funded share issue: 09 August 2017
2013 loan-funded share issue: 03 July 2018
2015 loan-funded share issue: 18 September 2019
16
THINKSMART LIMITED
DIRECTORS’ REPORT
The table below sets out the details of the performance options issued to Executives since 2012:
Instrument
Each option represents an entitlement to one ordinary share.
Exercise price
2012 performance option issue: $0.1923
2013 performance option issue: $0.2652
2014 Series 1 performance option issue: $0.3448
2014 Series 2 performance option issue: $0.4195
2014 Series 3 performance option issue: $0.3471
2015 performance option issue: $0.4021
Vesting conditions
Options will vest at the end of the three years from the issue date if at any time during this period
the volume-weighted average price of the Company’s shares on the ASX over any consecutive
30 trading days is, or is in excess of, the following performance conditions.
Performance option
issue
VWAP target
Percentage of shares vesting
2012
Tranche 1
Tranche 2
Tranche 3
2013
Tranche 1
Tranche 2
Tranche 3
2014
Tranche 1
Tranche 2
Tranche 3
2015
Tranche 1
Tranche 2
Tranche 3
$0.35
$0.55
$0.75
$0.3802
$0.4889
$0.5975
Series2
$0.5873
$0.7551
$0.9229
$0.4691
$0.6032
$0.7372
Series3
$0.5527
$0.7107
$0.8686
Series1
$0.4827
$0.6206
$0.7586
25%
25%
50%
25%
25%
50%
25%
25%
50%
25%
25%
50%
Vesting is subject to the Executive remaining an employee of the Group.
Why vesting conditions are
chosen
The vesting conditions were chosen to align the financial interests of participants with those of
shareholders.
Vesting date
Performance period
2012 performance option issue: 10 August 2015
2013 performance option issue: 04 July 2016
2014 (Series 1 and 2) performance option issue: 11 June 2017
2014 (Series 3) performance option issue: 12 December 2017
2015 performance option issue: 31 March 2018
2012 performance option issue: 10 August 2012 to 10 August 2015
2013 performance option issue: 04 July 2013 to 04 July 2016
2014 (Series 1 and 2) performance option issue: 11 June 2014 to 11 June 2017
2014 (Series 3) performance option issue: 12 December 2014 to 12 December 2017
2015 performance option issue: 31 March 2015 to 31 March 2018
Exercise period
From vesting date until expiry date
Expiry date
2012 performance option issue: 09 August 2017
2013 performance option issue: 03 July 2018
2014 (Series 1 and 2) performance option issue: 11 June 2019
2014 (Series 3) performance option issue: 11 December 2019
2015 performance option issue: 31 March 2020
17
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#
THINKSMART LIMITED
DIRECTORS’ REPORT
C. Service Agreements
A service agreement can be used for the provision of short-term performance incentives, eligibility for the ThinkSmart LTI and
other benefits, including the use of a Company motor vehicle, tax advisory fees, payment of benefits forgone at a previous employer
and relocation expenses.
As announced to the market on 20 October 2014, Fernando de Vicente was appointed Chief Executive Officer, effective 1 January
2015. Mr Keith Jones continued with ThinkSmart as Executive Director Group Strategy and Development on a part time basis
from 1 April 2015. Ned Montarello will remain Executive Chairman.
Remuneration and other terms of employment for the Chief Executive Officer are formalised in a service agreement. Fernando de
Vicente’s employment agreement, signed on 17 October 2014, is a rolling agreement which is unlimited in term but capable of
termination with six months notice by either party. All other employment agreements are unlimited in term but capable of
termination with one to three months notice by either the Company or the Executive. The Company can make a payment in lieu of
notice of an amount equal to the monthly instalment of basic salary for any unexpired period of notice.
In the event of retrenchment, the Executives listed in the table on page 12 are entitled to the payment provided for in the service
agreement, where applicable. The employment of the Executives may be terminated by the Company without notice by payment in
lieu of notice. The service agreements also contain confidentiality and restraint of trade clauses.
D. Share-Based Compensation (loan-funded shares and options)
Loan-Funded Shares and Options
Details of ordinary shares in the Company that were granted to Key Management Personnel in the financial period ending 30th June
2015 as part of the loan-funded share or options over ordinary shares in the Company and details on options that vested during the
same period are as follows:
Number of
options/shares
granted Grant date
Fair value per
share/option at
grant date
$
Exercise
price per
option/share
$
Number of
options/shares
vested
Expiry date
500,000
2,000,000
18/09/2014
31/03/2015
$0.133-$0.170
$0.071-$0.096
$0.3620
$0.4021
18/09/2019
31/03/2020
333,333
12/12/2014
$0.053-$0.080
$0.3471
11/12/2019
-
-
-
Directors
N Montarello
F de Vicente
Executives
D Twigg
All shares and options were granted during the financial period. The shares and options are subject to Performance Conditions as set
out on pages 10 to 11. The options are provided at no cost to the recipients. No shares have been granted since the end of the
financial period.
During the financial period, no shares were issued as a result of the exercise of options.
19
THINKSMART LIMITED
DIRECTORS’ REPORT
Details of vesting profiles of the options and loan-funded shares granted as remuneration to each Director of the Company and other
Key Management Personnel are detailed below:
Options and loan-funded shares granted
Number
granted
1,000,000
1,000,000
500,000
2,000,000
1,000,000
1,000,000
100,000
250,000
333,333
Grant Date
10/08/2012
04/07/2013
18/09/2014
31/03/2015
11/06/2014
11/06/2014
10/08/2012
04/07/2013
12/12/2014
% vested
in period
% forfeited,
lapsed or expired
in period (a)
Financial year
in which grant
vests
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
2016
2017
2018
2018
2017
2017
2016
2017
2018
Directors
N Montarello
F de Vicente
Executives
K Jones
G Halton
D Twigg
(a) The % forfeited, lapsed or expired in the year represents the reduction from the maximum number of loan-funded shares or
options available to vest due to either the performance conditions attached to the loan-funded shares or options not being
met or the departure of the Executive from the Group.
Analysis of Movement of Options and Loan-Funded Shares
The movement during the reporting period, by value, of options and loan-funded shares over ordinary shares in the Company held
by Directors and Key Management Personnel is detailed below:
Granted in period (a)
$
Exercised in period (b)
$
Lapsed in
period
Number
Year(s) in which
lapsed options
granted
Directors
N Montarello
F de Vicente
Executives
K Jones
G Halton
D Twigg
500,000
2,000,000
-
-
333,333
3,333,333
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(a) The value of loan-funded shares granted in the period is the fair value of the loan-funded shares calculated at grant date
using a Monte-Carlo option-pricing model. This total amount is allocated to remuneration over the vesting period.
(b) The value of options exercised during the period is calculated as the market price of shares of the Company on the
Australian Securities Exchange as at close of trading on the date the options were exercised after deducting the price paid to
exercise the option.
E. Share-Based Compensation (shares)
There were no shares granted to Key Management Personnel during the reporting period.
No shares were granted since the end of the financial period.
20
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n
THINKSMART LIMITED
DIRECTORS’ REPORT
F. Bonus Remuneration
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to the Director and Key
Management Personnel of the Company are detailed below:
Short term incentive bonus
Included in
remuneration (a)
$
Maximum
entitlement
$
% vested in
period
% forfeited in
period (b)
-
-
212,110
-
-
-
181,364
424,220
47,108
74,194
-%
-%
50%
-%
-%
-%
100%
50%
100%
100%
Directors
N Montarello
F de Vicente
K Jones
Executives
G Halton
D Twigg
(a) Amounts included in remuneration for the financial period represent the amount that vested in the financial period based on
achievement of personal goals and satisfaction of specified performance criteria pertaining to the financial period ending 30
June 2015. No amounts vest in future financial years.
(b) The amounts forfeited are due to the performance or service criteria not being met in relation to the current financial period.
G. Key Management Personnel Transactions
Loans to Key Management Personnel and their related parties
There have been no loans provided to Key Management Personnel and their related parties as at 30 June 2015 (30 June 2014: nil),
with the exception of the limited recourse loans in relation to the loan-funded share scheme (refer to Note 19(b)(i) and pages 10 – 11
of this Remuneration Report).
Other Key Management Personnel transactions
During the year and previous year, there has been no transaction with entities in which the Key Management Personnel has
significant control or influence over those entities’ financial or operating policies.
Options and rights over equity instruments
Options over ordinary shares in ThinkSmart Ltd held have been issued to Key Management Personnel during the financial year and
are detailed in Note 19(b)(i) and pages 10 – 11 of this Remuneration Report.
23
THINKSMART LIMITED
DIRECTORS’ REPORT
CORPORATE GOVERNANCE STATEMENT
The Board of Directors of ThinkSmart Limited is responsible for and committed to ensuring that the Company complies with the
ASX Corporate Governance Council’s Guide “Corporate Governance Principles and Recommendations”. A copy of the
Company’s Corporate Governance policy can be found at the Company’s website www.thinksmartworld.com.
Indemnification and Insurance
During the period ended 30 June 2015, the Company paid insurance premiums in respect of a Directors’ and Officers’ Liability
insurance contract. Disclosure of the total amount of the premium and the nature of the liabilities in respect of such insurance is
prohibited by the policy.
The Company has not otherwise, during or since the financial period, indemnified or agreed to indemnify an officer or auditor of
the Company or of any related body corporate against a liability incurred by such an officer or Director.
Environmental Regulation
The Group’s operations are not subject to any significant environmental regulation under both Commonwealth and State legislation
in relation to its activities.
NON-AUDIT SERVICES
During the period KPMG, the Company auditor, has performed certain other services in addition to their statutory duties.
The Board has considered the non-audit services provided during the period by the auditor is satisfied that the provision of those
non-audit services during the year is compatible with, and did not compromise, the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
• All non-audit services are subject to the corporate governance procedures adopted by the Company and have been reviewed
by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor; and
• The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting
in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks
and rewards.
Details of the amounts paid to the auditor of the Group, KPMG, and its related practices for audit and non-audit services provided
during the year are set out below.
Services other than audit and review of financial statements
Other services
Taxation compliance services
Advisory services
Audit and review of financial statements
Total paid to KPMG
24
12 Months to
June 2015
$
10,542
8,461
19,003
208,649
227,652
THINKSMART LIMITED
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration which forms part of this report is included in page 20 of the financial report.
ROUNDING
ThinkSmart is a Group of the kind referred to in ASIC Class Order 98/100 dated 10 July 1998, as varied by Class Order 05/641
dated 28 July 2005 and Class Order 06/51 dated 31 January 2006. In accordance with those class orders, amounts in the financial
statements and the directors’ report have been rounded off to the nearest thousand dollars, unless otherwise indicated.
Signed in accordance with a resolution of the Directors made pursuant to s.298 (2) of the Corporations Act 2001.
On behalf of the Directors
______________________________
N Montarello
Chairman
Perth, Western Australia, 25 August 2015
25
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of ThinkSmart Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2015 there have been:
(i)
(ii)
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the
audit.
KPMG
Matthew Beevers
Partner
Perth
25 August 2015
26
THINKSMART LIMITED
DIRECTORS’ DECLARATION
1.
In the opinion of the Directors of ThinkSmart Limited:
(a)
The consolidated financial statements, notes and disclosures and the Remuneration Report in the Directors’ report, are
in accordance with the Corporations Act 2001, including:
i. Giving a true and fair view of the Group’s financial position as at 30 June 2015 and of its performance for the
financial year ended on that date; and
ii. Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
(b)
The financial report also complies with International Financial Reporting Standards as disclosed in Note 2(a); and
(c)
There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
2.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief
Executive Officer and Chief Financial Officer for the financial year ended 30 June 2015.
Signed in accordance with a resolution of the Directors:
______________________________
N Montarello
Chairman
Perth, Western Australia, 25 August 2015
27
THINKSMART LIMITED
CONSOLIDATED STATEMENT OF PROFIT & LOSS AND OTHER COMPREHENSIVE INCOME
Consolidated Statement of Profit & Loss and Other Comprehensive Income
for the Financial Year Ended 30 June 2015
Continuing operations
Revenue
Other revenue
Total revenue
Indirect customer acquisition cost
Other operating expenses
Depreciation and amortisation
Impairment losses
Profit before tax
Income tax expense
Profit after tax from continuing operations
Profit/(loss) from discontinued operation, net of tax
Profit/(loss) after tax – attributable to owners of the Company
Other comprehensive income
Items that may be reclassified subsequently to profit or loss, net of
income tax:
Foreign currency translation differences for foreign operations
Effective portion of changes in fair value of cash flow hedges relating to the
disposal group, net of tax
Total items that may be reclassified subsequently to profit or loss net of
income tax
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period attributable to owners of the
Company
Earnings/(loss) per share
Basic (cents per share)
Diluted (cents per share)
Earnings per share – continuing operations
Basic (cents per share)
Diluted (cents per share)
12 Months to
June 2015
$000
6 Months to
June 2014
$000
22,060
2,897
24,957
(8,290)
(10,840)
(648)
(512)
4,667
(1,177)
3,490
-
3,490
3,138
-
3,138
3,138
6,628
2.73
2.69
2.73
2.69
10,161
1,300
11,461
(3,805)
(4,960)
(275)
(155)
2,266
(716)
1,550
9,787
11,337
(378)
45
(333)
(333)
11,004
7.06
7.01
0.97
0.96
Notes
6(a)
6(b)
6(c)
6(d)
6(e)
7
8
8
28
28
28
28
The attached notes form an integral part of these consolidated financial statements
28
THINKSMART LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Consolidated Statement of Financial Position
as at 30 June 2015
Current assets
Cash and cash equivalents
Trade receivables
Loan and lease receivables
Other current assets
Total current assets
Non-current assets
Loan and lease receivables
Plant and equipment
Intangible assets
Goodwill
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Deferred service income
Other interest bearing liabilities
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Deferred service income
Other interest bearing liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated profits
Total equity
Notes
20(a)
9
10
9
12
13
15
7
11
16
17
18
7
16
17
18
19(a)
The attached notes form an integral part of these consolidated financial statements
*Refer to note 2(e) for further details
June 2015
$000
June 2014
*Restated
$000
16,832
1,014
2,301
5,786
25,933
2,361
506
12,658
4,773
57
5,483
25,838
51,771
2,374
3,369
2,205
834
230
9,012
1,833
1,417
3,250
12,262
39,509
27,838
1,852
9,819
39,509
39,070
1,092
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45,250
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236
12,000
4,216
342
5,458
22,252
67,502
3,247
3,354
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233
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1,621
-
1,621
8,555
58,947
48,096
(1,286)
12,137
58,947
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T
THINKSMART LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
Consolidated Statement of Cash Flows
for the Financial Year Ended 30 June 2015
12 Months to
June 2015
$000
6 Months to
June 2014
$000
Notes
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and finance charges
Income tax paid
Payments from security guarantee
Net cash from operating activities
Cash Flows from Investing Activities
Disposal of discontinued operations net of cash disposed
Income tax paid on discontinued operations
Payments for plant and equipment
Payment for intangible assets – Software
Payment for intangible assets – Contract rights
Net cash used in investing activities
20(b)
Cash Flows from Financing Activities
Proceeds from other interest bearing liabilities, inclusive of related costs
Repayment of other interest bearing liabilities
Dividends paid
Share buyback, inclusive of transaction costs
Proceeds from exercise of share options
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents from continuing operations at beginning of the
financial year
Cash and cash equivalents from discontinued operations at beginning of year
Total cash and cash equivalents at the end of the financial period
Restricted cash and cash equivalents at the end of the financial period
20(a)
20(a)
Net available cash and cash equivalents at the end of the financial period
The attached notes form an integral part of these consolidated financial statements
25,329
(24,107)
758
(194)
(451)
(180)
1,155
-
-
(398)
(1,227)
(657)
(2,282)
3,776
-
(6,000)
(20,258)
-
(22,482)
(23,609)
1,371
39,070
-
16,832
(436)
16,396
14,797
(11,579)
457
(287)
(852)
-
2,536
26,366
(3,206)
(355)
-
(220)
22,585
2,500
(2,296)
(5,680)
(229)
234
(5,471)
19,650
(132)
7,569
11,983
39,070
(572)
38,498
31
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. General Information
ThinkSmart Limited (the “Company” or “ThinkSmart”) is a publicly listed company, incorporated and domiciled in Australia. The
consolidated financial statements of the Company as at and for the twelve months ended 30 June 2015 comprise of 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 address of the Company’s registered office is Suite 5, 531 Hay Street, Subiaco,
West Perth, WA 6008 and further information can be found at www.thinksmartworld.com.
2. Basis of Preparation
(a) Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with the
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 (IFRSs) and
interpretations adopted by the International Accounting Standards Board (IASB).
The consolidated financial statements were authorised for issue by the Board of Directors on 25 August 2015.
(b) Basis of measurement
The financial report has been prepared on the basis of historical cost, except for derivative 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 Australian
Dollars unless otherwise noted.
(c) Discontinued operations
Discontinued operations are a component of the Group’s business, the operations and cash flows of which can be clearly
distinguished from the rest of the Group and which:
-
-
-
represent a separate major line of business or geographical area of operation;
is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operation; or
is a subsidiary acquired exclusively with a view to re-sale.
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified
as held-for-sale.
When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is re-presented as
if the operation had been discontinued from the start of the comparative year.
(d) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency.
ThinkSmart is a Group of the kind referred to in ASIC Class Order 98/100 dated 10 July 1998, as varied by Class Order 05/641
dated 28 July 2005 and Class Order 06/51 dated 31 January 2006. In accordance with those class orders, amounts in the financial
statements and the directors’ report have been rounded off to the nearest thousand dollars, unless otherwise indicated.
(e) Changes in accounting policies
The accounting policies applied by the consolidated entity in this financial report are consistent with those applied by the
consolidated entity in its consolidated financial report as at and for the period ended 30 June 2014 other than the following:
Share-based payments
The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense over the
period that the employees unconditionally become entitled to the awards, with a corresponding increase in equity. Previously this
increase in equity was held in a separate reserve named ‘Equity settled employee benefits reserve’. AASB 2 allows share based
payment transactions to be presented within a separate reserve or within retained earnings. The Group has decided to present the
share based payment transactions within retained earnings and therefore in accordance with AASB 108 have retrospectively
applied this change with amounts previously recorded in ‘Equity settled employee benefits reserve’ totalling $1,141,000 at 1
January 2014 transferred to ‘Accumulated Profit’.
32
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(f) Change of Financial Year End
The Group changed its financial year end from 31 December to 30 June effective 1 January 2014. As a result of the change, the
financial report for the Group at 30 June 2015 reflects the results for the twelve months ended 30 June 2015. The comparative
period disclosures are for the six months ended 30 June 2014.
(g) Accounting policies available for early adoption not yet adopted
A number of new standards and interpretations are effective for annual periods beginning after 1 July 2015 and have not been
applied in preparing this financial report. The Group does not plan to adopt these standards early and the extent of the impact has
not been determined.
Reference
Title
Summary
AASB 9
Financial
Instruments
AASB 2014-7
AASB 2014-8
Amendments to
Australian
Accounting
Standards arising
from AASB 9
Amendments to
Australian
Accounting
Standards arising
from AASB 9
AASB 15
Revenue from
Contracts with
Customers
AASB 9 includes revised guidance on
the classification and measurement of
financial assets, including a new
expected credit loss model for
calculating impairment, and
supplements the new general hedge
accounting requirements previously
published.
(a) These amendments arise from the
issuance of AASB 9 Financial
Instruments that set out requirements
for the classification and measurement
of financial assets.
(b) This Standard shall be applied
when AASB 9 is applied.
The application of the existing versions
of AASB 9 (December 2009 and
December 2010, including the hedging
amendments made in December 2013)
from 1 February 2015 is limited to
entities that have already early adopted
them.
The standard contains a single model
that applies to contracts with customers
and two approaches to recognising
revenue: at a point in time or over time.
The model features a contract-based
five-step analysis of transactions to
determine whether, how much and
when revenue is recognised.
AASB 2014-5
Amendments to
Australian
Accounting
Standards arising
from AASB 15
(a) These amendments arise from the
issuance of AASB 15 Revenue from
contracts with customers that set out
requirements for the classification and
measurement of financial assets.
(b) This Standard shall be applied
when AASB 15 is applied.
Application
date of
standard
1-Jan-2018
Application
date for
Group
1-Jan-2018
Impact on Group
financial report
The Group has not
yet determined the
extent of the impacts
of the amendments,
if any.
1-Jul-2017
1-Jul-2017
The Group has not
yet determined the
extent of the impacts
of the amendments,
if any.
33
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
3.
Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements, and have been applied consistently by Group entities.
(a) Basis of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the company and entities controlled by the
company (its subsidiaries). The Group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. The results of
subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit and loss from the
effective date of acquisition or up to the effective date of disposal, as appropriate. The accounting policies of subsidiaries
have been changed when necessary to align them with the policies adopted by the Group.
(ii) Transactions eliminated on consolidation
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line
with those by other members of the Group. All intra-group balances, transactions, income and expenses are eliminated in
full on consolidation.
(b) Business combinations
For every business combination, the Group identifies the acquirer, which is the combining entity that obtains control of the other
combining entities or businesses. The acquisition date is the date on which control is transferred to the acquirer. Judgement is
applied in determining the acquisition date and determining whether control is transferred from one party to another.
Measuring goodwill
The Group measures goodwill as the fair value of consideration transferred including the recognised amount of any non-
controlling interest in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and
liabilities assumed, all measured as of the acquisition date.
Consideration transferred includes the fair values of the asset transferred, liabilities incurred by the Group to the previous owners
of the acquiree, and equity interests issued by the Group. Consideration transferred also includes the fair value of any contingent
consideration and share-based payment awards of the acquiree that are replaced mandatorily in the business combination.
(c) Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily
converted to known amounts of cash and which are subject to an insignificant risk of change in value.
Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
34
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(d) Plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. Purchased software that is integral to the
functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives they are accounted for as separate items (major
components) of property, plant and equipment.
The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal
with the carrying amount of the property, plant and equipment, and is recognised net within other income/other expenses in profit
or loss.
Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if
a component has a useful life that is different from the remainder of the asset, that component is depreciated separately.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of
property, plant and equipment.
The following estimated useful lives are used in the calculation of depreciation:
-
-
-
Office furniture, fittings, equipment and computers
Leasehold improvements
Leased computer equipment and software
3 to 5 years
the lease term
3 to 5 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
(e) Trade and other payables
Trade payables are recognised when the consolidated entity becomes obliged to make future payments resulting from the purchase
of goods and services.
(f) Financial instruments
(i) Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets
(including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group
becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the
right to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group
is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when,
the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
Investments
Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose
terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at
fair value net of transaction costs. Subsequent to initial recognition, investments in subsidiaries are measured at cost in the
company financial statements, net of accumulated impairment losses. Other financial assets are classified into the following
specified categories: financial assets at ‘fair value through profit and loss’, ‘held-to-maturity’ investments, ‘available-for-sale’
financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is
determined at the time of initial recognition.
35
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Lease receivables
The Group has entered into financing transactions with customers and has classified its leases as finance leases for accounting
purposes. Under a finance lease, substantially all the risks and benefits incidental to the ownership of the leased asset are
transferred by the lessor to the lessee. The Group recognises at the beginning of the lease term an asset at an amount equal to the
aggregate of the present value (discounted at the interest rate implicit in the lease) of the minimum lease payments and an estimate
of the value of any unguaranteed residual value expected to accrue to the benefit of the Group at the end of the lease term. This
asset represents the Group’s net investment in the lease.
Unearned interest
Unearned interest on leases and other receivables is brought to account over the life of the lease contract based on the interest
rate implicit in the lease using the effective interest rate method.
Initial direct transaction income and costs
Initial direct income/costs or directly attributable, incremental transaction income/costs incurred in the origination of leases
are included as part of receivables in the balance sheet and are amortised in the calculation of lease income and interest
income.
Allowance for losses
The collectability of lease receivables is assessed on an ongoing basis. A provision is made for losses based on historical
rates of arrears and the current delinquency position of the portfolio (refer note 3(f)(iii)).
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected
life of the financial asset or, where appropriate, a shorter period.
Insurance prepayment
In respect to the UK operations, when an equipment insurance policy is issued by Allianz to RentSmart Limited’s customers,
RentSmart Limited pays the customer’s insurance premium to Allianz. RentSmart Limited subsequently collects the insurance
premium from the customer on a monthly basis over the life of the rental agreement. Where a policy is cancelled, the unexpired
premiums are refunded to RentSmart Limited.
(ii) Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. The Group
derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
Financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised cost using the effective interest rate method.
Transaction costs consist of legal and other costs that are incurred in connection with the borrowing of funds. These costs are
capitalised and then amortised over the life of the loan.
36
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Financial guarantee contracts
Financial guarantees issued by the Group are recognised as financial liabilities at the date the guarantee is issued. Liabilities
arising from financial guarantee contracts, including where applicable, guarantees of subsidiaries through deeds of cross
guarantee, are initially recognised at fair value and subsequently at the higher of the amount of projected future losses and the
amount initially recognised less cumulative amortisation.
The fair value of the financial guarantee is determined by way of calculating the present value of the difference in net cash flows
between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the
estimated amount that would be payable to a third party for assuming the obligation.
Any increase in the liability relating to financial guarantees is recognised in profit and loss. Any liability remaining is
derecognised in profit and loss when the guarantee is discharged, cancelled or expires.
(iii) Impairment of assets
Financial assets, including finance lease receivables and loan receivables
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A
financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on
the estimated future cash flows of that asset.
In assessing collective impairment, the Group uses modelling of historical trends of the probability of defaults, timing of
recoveries and the amount of loss incurred. Impairment losses on assets carried at amortised cost are measured as the difference
between the carrying amount of the financial assets and the present value of the estimated future cash flows discounted at the
assets original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are
assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit and loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was
recognised. For financial assets measured at amortised cost, the reversal is recognised in profit and loss.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable
amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the
recoverable amount is estimated at each reporting date.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment
testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). The goodwill acquired in a
business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from
the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of the other assets in the unit (groups of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in the prior
periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss
is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
37
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(g)
Intangible assets
Intellectual property
Intellectual property is recorded at the cost of acquisition over the fair value of the identifiable net assets acquired, and is
amortised on a straight line basis over 20 years.
Inertia Contracts
The Group recognises an intangible asset arising if it has an unconditional contractual right to receive income arising from
equipment and rights to the hiring agreement at the end of term. This inertia contract is measured at fair value at the inception of
the hiring agreement, and is based on discounted cash flows expected to be derived from the sale or hire of the assets at the end of
the term. Subsequent to initial recognition the intangible asset is measured at cost. Amortisation is based on cost less estimated
residual value. Individual intangible assets are assessed at each reporting period for impairment. Impaired contracts are offset
against any unamortised deferred service income with the remainder recognised in profit and loss.
At the end of the hiring term the intangible asset is derecognised and the Group recognises the equipment as inventory at the
corresponding value.
Contract Rights
The contractual rights obtained by the Group under financing agreements entered into with its funding partners and operating
agreements with its retail partners constitute intangible assets with finite useful lives. These contract rights are recognised initially
at cost and amortised over their expected useful lives. In relation to funder contact rights, the expected useful life is the earlier of
the initial contract term or expected period until facility limit is reached. At each reporting date a review for indicators of
impairment is conducted.
Software development
Software development predominantly relates to the development of the Group’s proprietary SmartCheck credit application
processing software system. Software development costs are capitalised only up to the point when the software has been tested and
is ready for use in the manner intended by management.
Software development expenditure is capitalised only if the development costs can be measured reliably, the product process is
technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient
resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of direct labour and
overhead costs that are directly attributable to preparing the asset for its intended use.
The intangible asset is amortised on a straight line basis over its estimated useful life, which is between 3 and 5 years. Capitalised
software development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.
(h) Goodwill
Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business
combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities
recognised. Goodwill is subsequently measured at its cost less any impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units (CGUs) or groups of
CGUs, expected to benefit from the synergies of the business combination. CGUs (or groups of CGUs) to which goodwill has
been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill
might be impaired.
If the recoverable amount of the CGU (or group of CGUs) is less than the carrying amount of the CGU (or group of CGUs), the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or group of CGUs) and
then to the other assets of the CGU (or group of CGUs) pro-rata on the basis of the carrying amount of each asset in the CGU (or
CGUs). The impairment loss recognised for goodwill is recognised immediately in the profit or loss and is not reversed in the
subsequent period.
On disposal of an operation within a CGU, the attributable goodwill is included in the determination of the profit or loss of
disposal on the operation.
38
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(i) Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries and annual leave when it is probable
that settlement will be required and they are capable of being measured reliably.
The Group’s net obligation in respect of long service leave is the amount of future benefit that employees earned in return for their
service in the current and prior periods plus related on-costs; that benefit is discounted to determine its present value.
Liabilities recognised in respect of employee benefits, which are expected to be settled within 12 months, are measured at their
nominal values, using the remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of employee benefits, which are not expected to be settled within 12 months, are measured at their
present value of the estimated future cash flows to be made by the Group.
The Group pays defined contributions for post-employment benefit into a separate entity. Obligations for contributions to defined
contribution pension plans are recognised as an employee benefit expense in profit or loss in the period during which services are
rendered by employees.
Termination benefits are recognised as an expense when the Group is committed, it is probable that settlement will be required,
and they are capable of being reliably measured. If benefits are payable more than 12 months after the reporting date, then they are
discounted to their present value.
Share-based payments
The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount
recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting
conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that
do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-
vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-
up for differences between expected and actual outcomes.
(j)
Inventories
Inventories are valued at the lower of cost and net realisable value. Net realisable value represents the estimated selling price less
all estimated costs of completion and costs necessary to make use for sale.
(k) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and is recognised to the extent that it is probable
that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition
criteria must also be met before revenue is recognised:
Finance lease income
Finance lease income is recognised on those leases originated by the Group where the Group, rather than a third party financier, is
the lessor. Finance lease income is recognised on the effective interest rate method at the constant rate of return which amortises
over its economic life, the lease asset down to the estimate of any unguaranteed residual value that is expected to be accrued to the
Group at the end of the lease.
Commission income
Commission receivable from funders is recognised at the time finance approval is given to the customer, adjusted for an allowance
for loans not expected to proceed to a contract by the funder.
39
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Residual interest in equipment (inertia income)
•
Secondary rental income
Rental income from extended rental assets is recognised when receivable usually on a monthly basis. No ongoing rental
income is brought to account in respect of the unexpired rental contracts.
Income earned from sale of equipment
Proceeds from the sale of rental assets are brought to account at the time of the sale to the extent not already recognised
through Finance lease income.
•
Insurance income
Insurance income includes commissions received on insurance policies issued by third party insurers to cover theft and damage of
rental equipment. In the UK, insurance income is recognised at fair value of the future payments receivable as substantially all of
the services to earn that revenue are completed upfront. The revenue recognition policy for the Australian insurance income is
consistent with the treatment of commission income from funders.
Interest income and expense
Interest income and expense for all interest bearing financial instruments is recognised in the profit and loss account using the
effective interest rates of the financial assets or liabilities to which they relate.
The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts through the expected life
of the financial asset or financial liability. When calculating the effective interest rate the Group includes all amounts paid or
received by the Group which are considered to be an integral part of the effective interest rate, including merchant fees received
and rebates paid.
Deferred service income
Income arising on recognition of any intangible inertia asset at the commencement of the lease is deferred and recognised over the
lease term on a straight line basis as the services are rendered.
(l) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are
recognised as a deduction from equity, net of any tax effects.
(m) Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax
loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date.
Current tax payable for current and prior periods is recognised as a liability to the extent that it is unpaid. Carried forward tax
recoverable on tax losses is recognised as a deferred tax asset where it is probably that future taxable profit will be available to
offset in future periods.
Deferred tax
Deferred tax is accounted for using the balance sheet method in respect of temporary differences arising from differences between
the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the
extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or
unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary
differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business
combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in
relation to taxable temporary differences arising from goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and joint ventures
except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary
differences will not reverse in the foreseeable future.
40
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only
recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the
temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and
liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow
from the manner in which the Consolidated Entity expects, at the reporting date, to recover or settle the carrying amount of its
assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the
Company/Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the statement of profit and loss, except when it relates to items
credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from
the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess
purchase consideration.
(n) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST/VAT) except:
(i) where the amount of GST/VAT incurred is not recoverable from the taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense; and
receivables and payables which are recognised inclusive of GST/VAT.
(ii)
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows are included in the statement of cash flows on a gross basis. The GST/VAT component of cash flows arising from
investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash
flows.
(o) Foreign currency transactions
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates
prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date
are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is
the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and
payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the
functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency
that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency
differences arising on retranslation are presented in profit or loss on a net basis, except for differences arising on the retranslation
of a financial liability designated as a hedge of the net investment in a foreign operation that is effective, which are recognised in
other comprehensive income.
41
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated
to the functional currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to
Australian dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation
reserve in equity. However, if the operation is not a wholly-owned subsidiary, then the relevant proportionate share of the
translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control,
significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is
reclassified to the profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a
subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is
reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture
that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative
amount is classified to profit or loss.
(p) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(q) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligations. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability.
(r) Lease payments
Payments made under operating leases are recognised in profit or loss on a straight line basis over the term of the lease. Lease
incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the
outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant period rate
of interest on the remaining balance of the liability.
Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when
the contingency no longer exists and the lease adjustments are known.
(s) Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating
segments’ operating results are regularly reviewed by the Group’s Chief Executive Officer to make decisions about resources to be
allocated to the segment and assess its performance, and for which discrete financial information is available.
Segment results, assets and liabilities include items attributable to a segment as well as those that can be allocated on a reasonable
basis. Unallocated items compromise mainly loans and borrowings and related expenses, and head office expenses, and income
tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible
assets other than goodwill.
42
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(t) Measurement of fair values
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-
financial assets and liabilities.
The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that
has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to
the CFO.
The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such
as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from
the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value
hierarchy in which such valuations should be classified.
Significant valuation issues are reported to the Audit and Risk Committee.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are
categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
•
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in 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).
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value
hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest
level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the
change has occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
•
•
•
Note 13 – Intangible inertia assets;
Note 19(b)(i) – Share based payment transactions;
Note 25(b) – Financial instruments.
4. Critical accounting estimates and judgements
The preparation of the consolidated financial statements in conforming with IFRS requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income
and expenses.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the
circumstances.
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial period are discussed below:
•
•
•
•
Note 13 - fair value at inception of inertia intangible assets and recoverable amount;
Note 15 - measurement of the recoverable amount of cash generating units containing goodwill;
Note 17 - measurement of deferred services income;
Note 19(b)(i) - measurement of share-based payments.
43
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
5.
Financial Risk Management
Overview
The Group has exposure to the following risks from the use of financial instruments:
Credit risk
Liquidity risk
•
•
• Market risk
•
Operational risk
This note presents information about the Group’s exposure to each of the above risks, the objectives, policies and processes for
measuring and managing financial risks, and the management of capital. Further quantitative disclosures are included throughout
this financial report.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The
Board has established the Audit and Risk Management Committee, which is responsible for developing and monitoring risk
management policies. The Committee reports to the Board of Directors on its activities.
Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate limits and
controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect the
changes in market conditions and the Group’s activities. The Audit and Risk Committee oversees how management monitors
compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group.
Credit Risk
Credit risk refers to the risk that a counterparty or customer will default on its contractual obligations resulting in financial loss to
the Group. The Group’s UK operations have adopted a policy of only dealing with credit worthy counterparties as a means of
mitigating the risk of financial loss from defaults. The Chief Financial Officer and Group Financial Controller have day to day
responsibility for managing credit risk within the risk appetite of the Board. Appropriate oversight occurs via monthly credit
performance reporting to management and the Board.
The UK operations have an obligation to meet the cost of future bad debts incurred by its funders. The funder deposits discussed
below represent security for that credit exposure and are recorded net of the Group’s estimate of this credit risk. Further
information is provided in Note 25.
To manage credit risk in relation to its customers, UK employs a sophisticated credit assessment and fraud minimisation process
delivered through its patented QuickSmart system. The credit underwriting system uses a combination of credit scoring and credit
bureau reports as well as electronic identity verification and a review of an applicant’s details against a fraud database. The credit
policy is developed and applied by the General Manager of Credit and Operations who monitors ongoing credit performance on
different cohorts of customer contracts. UK has a specialist collections function which manages all delinquent accounts.
Credit risk exposure to funder deposits are more concentrated, however the counterparties are regulated banking institutions and
the credit risk exposure is assessed as low. UK closely monitors the credit risk associated with each funder deposit counterparty.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The consolidated entity manages liquidity risk by maintaining adequate reserve facilities by continuously reviewing its facilities
and cash flows.
The Group ensures that it has sufficient cash on demand to meet expected operational expenses and financing subordination
requirements. In addition, the Group maintains the operational facilities which is shown in Note 18.
44
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters, while optimising return.
Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the
respective functional currencies of the Group entities, primarily the Australian dollar, Sterling and Euro.
Interest on borrowings is denominated in currencies that match the cash flows generated by the underlying operations of the
Group. This provides an economic hedge and no derivatives are entered into.
Liabilities incurred in each respective geographical territory are paid for by the cash flows of the functional currency of that
territory. Exposures for singular transactions greater than $50,000 are considered for hedging by management, with forward
exchange contracts to mitigate exchange rate risk and are considered separately as they arise. The consolidated entity has no
forward exchange contracts as at reporting date (2014: nil).
In respect of other monetary assets and liabilities denominated in foreign currencies, management ensures that the Group’s net
exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address the short
term imbalances (refer to Note 25 for further information).
Interest rate risk
The Group has $4.1m corporate borrowings as at 30 June 2015 (30 June 2014: nil). Exposure to interest rate risk on any future
corporate borrowings will be assessed by the Board and where appropriate, the exposure to movement in interest rates may be
hedged by entering into interest rate swaps, when considered appropriate by the management and the Board. As at 30 June 2015
there were no contracts relating to interest rate swaps.
Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s processes,
personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those
arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise
from all of the Group’s operations.
The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior
management within each business unit. This responsibility is supported by the development of overall group standards for the
management of operational risk in the following areas:
•
•
•
•
•
•
•
Requirements for appropriate segregation of duties, including the independent authorisation of transactions
Requirements for the reconciliation and monitoring of transactions
Compliance with regulatory and other legal requirements
Documentation of controls and procedures
Requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address
the risks identified
Ethical and business standards
Risk mitigation, including insurance where this is effective
45
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business. Management aims to maintain a capital structure that ensures the lowest cost of capital
available to the Group. Management constantly reviews the capital structure to ensure an increasing return on assets.
The Group’s debt-to-adjusted capital ratio at the end of the reporting period was as follows:
Total liabilities
Less cash and cash equivalents
Net debt/(Net cash)
Total equity
Debt-to-adjusted capital ratio
June 2015
$000
June 2014
$000
12,262
(16,832)
(4,570)
39,509
-
8,555
(39,070)
(30,515)
58,947
-
For the purposes of capital management, capital consists of share capital, reserves and retained earnings.
The Board assesses the Group’s ability to pay dividends from time to time. During the financial period to 30 June 2015, the Board
declared and paid a special dividend composing of a fully franked amount at 4 cents per share and an unfranked amount at 8 cents
per share, was declared on 27 January 2015 and paid on 30 January 2015 (refer to Note 19(c)).
During the period to 30 June 2015 63,006,935 shares were purchased and cancelled as part of an on market and off market
buyback scheme at a cost of $19,714,956 (see note 19(a)).
46
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
6. Consolidated Statement of Profit and Loss
Profit/(loss) from continuing operations is arrived at after
crediting/(charging) the following items:
(a) Revenue
Finance lease income
Interest revenue – other entities
Surplus unguaranteed residual income
Extended rental income
Other inertia income
Fee revenue – customers
Commission income
(b) Other revenue
Services revenue – insurance
Other revenue
(c) Other operating expenses
Employees benefits expense:
- Payments to employees
- Employee superannuation costs
- Share-based payment expense
- Provision for employee entitlements
Occupancy costs
Professional services
Finance charges
Other costs
(d) Depreciation and amortisation
Depreciation
Amortisation
(e)
Impairment losses
Impairment losses finance leases and receivables
Impairment losses on intangible assets (net)
12 months to
June 2015
$000
6 months to
June 2014
$000
Notes
17
269
758
3,183
7,597
4,502
286
5,465
22,060
2,789
108
2,897
6,612
426
190
-
7,228
549
1,591
216
1,256
10,840
168
480
648
42
470
512
-
560
2,025
2,707
2,519
195
2,155
10,161
1,220
80
1,300
3,177
185
(1)
(117)
3,244
233
656
119
708
4,960
93
182
275
-
155
155
47
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
12 months to
June 2015
$000
6 months to
June 2014
$000
Notes
7.
Income Tax
The major components of income tax expense/(benefit) for the 12 months
ended 30 June 2015 are:
Current income tax expense
Current income tax charge
Adjustment for prior period
Deferred income tax expense
Origination and reversal of temporary differences
Adjustment for prior period
Income tax expense from continuing operations
Income tax benefit from discontinued operations
8
Total income tax expense/(benefit)
1,105
710
-
72
-
1,177
-
1,177
1
2
3
716
3,490
4,206
A reconciliation between tax expense and the product of accounting profit before income tax from continuing operations
multiplied by the applicable income tax rate is as follows:
Accounting profit before tax
At the statutory income tax rate of 30%
Effect of tax rates in foreign jurisdictions
Non deductible expenses:
Overseas tax losses not recognised/(recognised)
Adjustments in respect of prior periods
Income tax expense from continuing operations
4,667
1,398
(381)
136
24
-
1,177
2,266
681
(99)
121
10
3
716
48
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
7.
Income Tax (continued)
Deferred tax asset – continuing operations
Accrued expenses
Employee entitlements
Equity raising costs
Borrowing costs
Plant & equipment
Intangible assets
Total
Deferred tax liability – continuing operations
Plant & equipment
Intangible assets
Total
Net deferred tax (liability)/asset for UK
Net deferred tax asset for Australia
12 months to
June 2015
$000
6 months to
June 2014
$000
28
69
136
7
-
736
976
10
909
919
(182)
239
65
70
248
13
63
736
1,195
-
853
853
61
281
(i) Deferred tax assets and deferred tax liabilities that relate to the same taxable entity have been netted off.
The deductible temporary differences and tax losses do not expire under current tax legislation.
Tax Payable
Current
834
834
100
100
The current tax liability is recognised for income tax payable in respect of all periods to date.
49
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
8. Discontinued operations
On 12 December 2013, the Group announced that it had entered into an agreement to sell its Australian and New Zealand
business to FlexiGroup and settlement for the sale occurred on 31 January 2014.
12 Months to
June 2015
$000
6 Months to
June 2014
$000
Notes
(a)
Results of discontinued operations
Total revenue
Expenses
Loss from operating activities
Income tax benefit/(expense)
Loss from operating activities, net of tax
Gain on sale of discontinued operation
Costs associated with sale of discontinued operation
Tax on gain on sale of discontinued operation
Profit/(loss) for the period
(b) Cash flows from/(used in) discontinued operations
Net cash used in operating activities
Net cash from investing activities
Net cash from financing activities
Net cash flow for the period
Earnings per share – discontinued operations
Basic (cents per share)
Diluted (cents per share)
28
28
Cumulative income or expense included in other comprehensive income
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,536
(1,648)
(112)
(27)
(139)
15,721
(2,332)
(3,463)
9,787
292
(88)
212
416
6.09
6.05
The cumulative income or expense included in other comprehensive income relating to the disposal group is as follows:
Effective portion of changes in fair value of cash flow hedges, net of tax
-
45
50
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
9. Loan and lease receivables
Current
Rental receivables
Unguaranteed residuals
Unearned finance income
Net lease receivable
Allowance for losses
Non-current
Rental receivables
Unguaranteed residuals
Unearned finance income
Net lease receivable
Allowance for losses
Refer to note 25(c) for further information relating to credit risk.
10. Other Current Assets
Prepayments
Inventories
Sundry debtors
11. Other Non-Current Assets
Insurance prepayments
Deposits held by funders (i)
30 June 2015
$000
30 June 2014
$000
2,519
41
(245)
2,315
(14)
2,301
2,667
44
(335)
2,376
(15)
2,361
-
-
-
-
-
-
-
-
-
-
-
-
30 June 2015
$000
30 June 2014
$000
3,380
1,567
839
5,786
2,177
3,306
5,483
2,795
1,185
1,108
5,088
1,672
3,786
5,458
(i) 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.
51
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
12. Plant and Equipment
Gross Carrying Amount
Cost or deemed cost
Balance at 1 January 2014
Effect of movement in exchange rate
Additions
Balance at 30 June 2014
Effect of movement in exchange rate
Additions
Balance at 30 June 2015
Accumulated Depreciation
Balance at 1 January 2014
Effect of movement in exchange rate
Depreciation expense
Balance at 30 June 2014
Effect of movement in exchange rate
Depreciation expense
Balance at 30 June 2015
Net Book Value
At 30 June 2014
At 30 June 2015
13. Intangible Assets
Gross carrying amount
At cost
Balance at 1 January 2014
Additions
Disposals/transfer to inventory
Effect of movement in
exchange rate
Balance at 30 June 2014
Additions
Disposals/transfer to inventory
Effect of movement in
exchange rate
Balance at 30 June 2015
52
Plant &
Equipment
$000
Lease
equipment &
software
$000
Notes
1,868
(77)
178
1,969
513
432
2,914
(1,713)
73
(93)
(1,733)
(507)
(168)
(2,408)
236
506
73
-
-
73
-
-
73
(73)
-
-
(73)
-
-
(73)
-
-
Total
$000
1,941
(77)
178
2,042
513
432
2,987
(1,786)
73
(93)
(1,806)
(507)
(168)
(2,481)
236
506
Contract
rights
$000
Software
$000
Distribution
network
$000
Intellectual
Property
$000
Inertia
Contracts
$000
Total
$000
1,579
170
-
(34)
1,715
196
-
201
2,112
48
138
-
-
186
1,333
-
18
1,537
498
-
-
(9)
489
-
-
65
554
642
-
-
-
642
-
-
-
642
12,660
2,099
(1,929)
(235)
12,595
4,292
(5,396)
1,571
13,062
15,427
2,407
(1,929)
(278)
15,627
5,821
(5,396)
1,855
17,907
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
13. Intangible Assets (continued)
Accumulated amortisation and
impairment
Balance at 1 January 2014
Amortisation expense
Effect of movement in
exchange rate
Impairment loss (i)
Balance at 30 June 2014
Amortisation expense
Effect of movement in
exchange rate
Impairment loss (i)
Balance at 30 June 2015
Net book value
At 30 June 2014
At 30 June 2015
Contract
rights
$000
(1,016)
(158)
25
-
(1,149)
(306)
(148)
-
(1,603)
Software
$000
(48)
(7)
-
-
(55)
(141)
(13)
-
(209)
Distribution
network
$000
Intellectual
Property
$000
Inertia
Contracts
$000
(497)
-
9
-
(488)
-
(66)
-
(554)
(433)
(16)
-
-
(449)
(33)
-
-
(482)
(1,115)
-
24
(395)
(1,486)
-
(445)
(470)
(2,401)
Total
$000
(3,109)
(181)
58
(395)
(3,627)
(480)
(672)
(470)
(5,249)
566
509
131
1,328
1
-
193
160
11,109
10,661
12,000
12,658
(i)
Impairment loss relates to the write off where the related contract has early terminated principally due to contract default.
Inertia contract assets acquired are measured at fair value based on the discounted cash flows expected to be derived from the sale
or hire of the assets at the end of the term. This measurement inherently introduces estimation uncertainty. The Group continually
assesses current inertia proceeds and includes these in the estimation of inertia assets acquired. As such the fair value
measurement for inertia contract assets has been categorised as Level 3 fair value.
The following tables show the valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable
inputs used.
Valuation technique
Significant unobservable inputs
The fair value is based on current levels
of return (25%-30%) less an allowance
and
for
expected costs (5%-10%) of realization.
cancellations
(10%-30%)
The discount rate applied to the fair value
is 13.21%.
if
it has
The Group recognises an intangible asset
arising
the unconditional
contractual right to receive income arising
from equipment and rights to the hiring
agreement at the end of term. This inertia
asset is measured at fair value at the
inception of the hiring agreement, and is
based on discounted cash flows expected to
be derived from the sale or hire of the asset
term.
at
Subsequent
the
intangible asset is measured at cost.
the minimum
the end of
recognition
initial
to
During the hiring term the valuation is
impaired for any assets that have been
written off.
is derecognised and
At the end of the hiring term the intangible
asset
the group
recognises the equipment as inventory at
the corresponding value.
Inter-relationship between key
unobservable inputs and fair value
measurement
The estimated
increase (decrease) if:
fair value would
• Expected sale value was higher
(lower)
• Expected secondary hire term
was longer (shorter)
• Expected cancellations/bad debts
were lower (higher)
• Expected realization costs were
lower (higher)
• Discount rate derived from group
cost of capital was lower (higher)(cid:1)
53
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
14.
Interest in Subsidiaries
Interest in Subsidiaries
Country of Incorporation
RentSmart Limited
UK
ThinkSmart Insurance Services Administration Ltd UK
UK
ThinkSmart Financial Services Ltd
UK
ThinkSmart Europe Ltd
UK
ThinkSmart UK Ltd
UK
SmartCheck Ltd
Spain
SmartCheck Finance Spain SL
Spain
SmartPlan Spain SL
Italy
ThinkSmart Italy Srl
USA
ThinkSmart Inc
Australia
ThinkSmart Employee Share Trust
Australia
ThinkSmart LTI Pty Limited
15. Goodwill
Balance at beginning of financial period
Effect of movement in exchange rate
Balance at end of financial period
% of Equity
2015
2014
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
30 June 2015
$000
30 June 2014
$000
4,216
557
4,773
4,295
(79)
4,216
Impairment testing for cash-generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the UK segment as disclosed in Note 22, which represents the
lowest level within the Group at which goodwill is monitored for internal management purposes. The goodwill arose on the
acquisition of RentSmart Limited.
The recoverable amount of the UK cash-generating unit was based on its value in use using business plan assumptions and a
discount rate approximating the weighted average cost of capital of the group and hence includes inherent estimation uncertainty.
The recoverable amount of the unit was determined to be significantly higher than the carrying amount, therefore no impairment
of goodwill is required, and no further sensitivity analysis is considered necessary.
Value in use is determined by discounting the future cash flows generated from the continuing use of the unit and was based on
the following key assumptions:
• Cash flows were projected based on the forecast operating results for the 12 months to 30 June 2016 and management
estimates for 2017 to 2021.
• A post tax discount rate of 10.43% (13.20% pre-tax) was applied in determining the recoverable amount of the unit.
54
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
16. Trade and Other Payables, and Provisions
Trade and other payables
GST/VAT Payable
Other accrued expenses
Provisions
Annual leave
Long service leave
Other
17. Deferred Service Income
Balance at 1 July 2014
Effect of movement in exchange rate
Intangible inertia assets acquired
Reversal due to intangible asset impairment
Recognised in Consolidated Statement of Profit and Loss
Deferred service income to be recognised within 12 months
Deferred service income to be recognised in greater than 12 months
18. Other interest bearing liabilities
Current
- Loan advances net of deferred costs of raising facility (i)
Non-current
- Loan advances net of deferred costs of raising facility (i)
Customer financing facilities
- Loan advances net of deferred costs of raising facility
- Amount used
- Amount unused
Total Facility (i)
(i) The loan is a £10m 5 year revolving credit facility provided by Santander UK PLC
dated 15 December 2014 to finance lease receivables.
Other finance facilities (business credit card):
-
-
amount used
amount unused
30 June 2015
$000
30 June 2014
$000
1,037
231
1,106
2,374
81
148
1
230
1,059
575
1,613
3,247
77
155
1
233
Notes
30 June 2015
$000
30 June 2014
$000
13
6(a)
4,975
505
4,292
(68)
(4,502)
5,202
3,369
1,833
5,202
5,533
(104)
2,099
(34)
(2,519)
4,975
3,354
1,621
4,975
30 June 2015
$000
30 June 2014
$000
2,205
1,417
3,622
3,622
16,849
20,471
12
90
102
-
-
-
-
-
-
10
87
97
55
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
19.
(a)
Issued Capital
Issued and paid up capital
30 June 2015
$000
30 June 2014
$000
96,227,922 Ordinary Shares fully paid (2014: 158,734,857)
27,838
48,096
Fully Paid Ordinary Shares
Balance at beginning of the financial period
Issue of new shares for employee loan-funded share plan
Issue of new shares for employee share-based payment
Proceeds from exercise of employee loan-funded share plan
Cancellation of shares through buyback
Costs associated to buy-back
Cancellation employee loan-funded shares
Balance at end of the financial period
2015
Number
2015
$000
2014
Number
158,734,857
500,000
-
-
(63,006,935)
-
-
48,096
-
-
-
(19,715)
(543)
-
162,307,097
-
-
-
(572,981)
-
(2,999,259)
96,227,922
27,838
158,734,857
2014
$000
48,091
-
-
234
(229)
-
-
48,096
During the period no employee share options or loan-funded shares were exercised (2014: nil).
Ordinary Shares entitle the holder to participate in dividends and the proceeds on winding up the Company in proportion to the
number of and amount paid on the Shares held.
On a show of hands, every holder of Ordinary Shares present in the meeting in person or by proxy is entitled to one vote, and upon
a poll each Share is entitled to one vote. The Company does not have authorised capital or par value in respect to its issued shares.
(b)(i) Share options – employee options and loan-funded shares
The Company has an ownership-based remuneration scheme for Executives and senior employees. Each employee share option
converts to one ordinary share of ThinkSmart Limited on exercise and payment of the exercise price. Each employee loan-funded
share converts to one ordinary share of ThinkSmart Limited on exercise and repayment of the loan. The options carry neither
rights or dividends nor voting rights. The loan-funded shares carry voting and rights to dividends.
Options and loan-funded shares issued in previous periods:
•
400,000 options over ordinary shares were issued 10 August 2012 and exercisable at $0.1923, vesting and exercisable on
10 August 2015 until 9 August 2017. The fair value of these options at grant date was $0.02-$0.06. Vesting of the options is
subject to achievement of the following performance conditions:
(cid:2) Tranche 1: 25% of options will vest if the share price hurdle of $0.35 is met in accordance with the performance
conditions;
(cid:2) Tranche 2: 25% of options will vest if the share price hurdle of $0.55 is met in accordance with the performance
conditions; and
(cid:2) Tranche 3: 50% of loan options will vest if the share price hurdle of $0.75 is met in accordance with the performance
conditions.
•
3,033,333 loan-funded shares were issued 10 August 2012 and exercisable at $0.1923, vesting and exercisable on 10 August
2015 until 9 August 2017. The fair value of these options at grant date was $0.02-$0.06. Vesting of the loan-funded shares is
subject to achievement of the following performance conditions:
(cid:2) Tranche 1: 25% of loan-funded shares will vest if the share price hurdle of $0.35 is met in accordance with the
performance conditions;
(cid:2) Tranche 2: 25% of loan-funded shares will vest if the share price hurdle of $0.55 is met in accordance with the
performance conditions; and
(cid:2) Tranche 3: 50% of loan-funded shares will vest if the share price hurdle of $0.75 is met in accordance with the
performance conditions.
56
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Issued Capital (continued)
19.
(b)(i) Share options – employee options and loan-funded shares (continued)
•
750,000 options over ordinary shares were issued 4 July 2013 and exercisable at $0.2652, vesting and exercisable on 4 July
2016 until 3 July 2018. The fair value of these options at grant date was $0.098-$0.118. Vesting of the options is subject to
achievement of the following performance conditions:
(cid:2) Tranche 1: 25% of options will vest if the share price hurdle of $0.3802 is met in accordance with the performance
conditions;
(cid:2) Tranche 2: 25% of options will vest if the share price hurdle of $0.4889 is met in accordance with the performance
conditions; and
(cid:2) Tranche 3: 50% of loan options will vest if the share price hurdle of $0.5975 is met in accordance with the performance
conditions.
•
3,243,333 loan-funded shares were issued 4 July 2013 and exercisable at $0.2652, vesting and exercisable on 4 July 2016
until 3 July 2018. The fair value of these options at grant date was $0.098-$0.118. Vesting of the loan-funded shares is
subject to achievement of the following performance conditions:
(cid:2) Tranche 1: 25% of loan-funded shares will vest if the share price hurdle of $0.3802 is met in accordance with the
performance conditions;
(cid:2) Tranche 2: 25% of loan-funded shares will vest if the share price hurdle of $0.4889 is met in accordance with the
performance conditions; and
(cid:2) Tranche 3: 50% of loan-funded shares will vest if the share price hurdle of $0.5975 is met in accordance with the
performance conditions.
•
1,000,000 (series 1) and 1,000,000 (series 2) options over ordinary shares were issued 11 June 2014 and exercisable at
$0.3448 and $0.4195 respectively, vesting and exercisable on 11 June 2017 until 10 June 2019. The fair value of these
options at grant date was $0.135-$0.158 for series 1 and $0.104-$0.131 for series 2. Vesting of the options is subject to
achievement of the following performance conditions:
Series 1
(cid:2) Tranche 1: 25% of loan-funded shares will vest if the share price hurdle of $0.4827 is met in accordance with the
performance conditions;
(cid:2) Tranche 2: 25% of loan-funded shares will vest if the share price hurdle of $0.6206 is met in accordance with the
performance conditions; and
(cid:2) Tranche 3: 50% of loan-funded shares will vest if the share price hurdle of $0.7586 is met in accordance with the
performance conditions.
Series 2
(cid:2) Tranche 1: 25% of loan-funded shares will vest if the share price hurdle of $0.5873 is met in accordance with the
performance conditions;
(cid:2) Tranche 2: 25% of loan-funded shares will vest if the share price hurdle of $0.7551 is met in accordance with the
performance conditions; and
(cid:2) Tranche 3: 50% of loan-funded shares will vest if the share price hurdle of $0.9229 is met in accordance with the
performance conditions.
Options and loan-funded shares issued in the current period:
•
333,333 options over ordinary shares were issued 12 December 2014 and exercisable at $0.3471, vesting and exercisable on
12 December 2017 until 11 December 2019. The fair value of these options at grant date was $0.053-$0.08. Vesting of the
options is subject to achievement of the following performance conditions:
(cid:2) Tranche 1: 25% of options will vest if the share price hurdle of $0.5527 is met in accordance with the performance
conditions;
(cid:2) Tranche 2: 25% of options will vest if the share price hurdle of $0.7107 is met in accordance with the performance
conditions; and
(cid:2) Tranche 3: 50% of loan options will vest if the share price hurdle of $0.8686 is met in accordance with the performance
conditions.
57
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Issued Capital (continued)
19.
(b)(i) Share options – employee options and loan-funded shares (continued)
•
2,000,000 options over ordinary shares were issued 31 March 2015 and exercisable at $0.4021, vesting and exercisable on
31 March 2018 until 31 March 2020. The fair value of these options at grant date was $0.071-$0.096. Vesting of the options
is subject to achievement of the following performance conditions:
(cid:2) Tranche 1: 25% of options will vest if the share price hurdle of $0.4691 is met in accordance with the performance
conditions;
(cid:2) Tranche 2: 25% of options will vest if the share price hurdle of $0.6032 is met in accordance with the performance
conditions; and
(cid:2) Tranche 3: 50% of loan options will vest if the share price hurdle of $0.7372 is met in accordance with the performance
conditions.
•
500,000 loan-funded shares were issued 18 September 2014 and exercisable at $0.3620, vesting and exercisable on 22 May
2017 until 18 September 2019. The fair value of these options at grant date was $0.133-$0.17. Vesting of the loan-funded
shares is subject to achievement of the following performance conditions:
(cid:2) Tranche 1: 25% of options will vest if the share price hurdle of $0.5537 is met in accordance with the performance
conditions;
(cid:2) Tranche 2: 25% of options will vest if the share price hurdle of $0.7119 is met in accordance with the performance
conditions; and
(cid:2) Tranche 3: 50% of loan options will vest if the share price hurdle of $0.8701 is met in accordance with the performance
conditions.
The value of these options and loan-funded shares will be expensed over the vesting period in accordance with AASB 2.
Measurement of fair values
The fair value of employee share options is measured using a binomial model and loan-funded shares are measured using a Monte-
Carlo simulation model.
The weighted average fair value of the share options granted in the period to 30 June 2015 is $0.09 (period to 30 June 2014:
$0.129). Options and loan-funded shares were priced using a monte-carlo pricing model. Expected volatility is based on the
historic volatility of the market price of the Company’s share and the mean reversion tendency of volatilities.
Other measurement inputs include share price on measurement date, exercise price of the instrument, weighted average expected
life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free
interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not
taken into account in determining fair value.
Below are the inputs used to measure the fair value of the options and loan-funded shares:
Employee
options and
loan-funded
shares
Employee
options and
loan-funded
shares
Employee
options and
loan-funded
shares
Employee
options and
loan-funded
shares
30 June 2015 30 June 2015 30 June 2015 30 June 2014
31/03/2015
$0.071-
$0.096
$0.365
12/12/2014
$0.053-
$0.080
$0.315
22/5/2014
$0.133-
$0.170
$0.390
$0.4021
$0.3471
$0.3620
11/06/2014
$0.104-
$0.158
$0.375
$0.3448/$0.41
95
55%
45%
4 years
4.0%
1.76%
50%
4 years
4.7%
2.35%
55%
4.2 years
4 years
1.6%
3.04%
1.6%
3.1%
Employee
options and
loan-funded
shares
31 December
2013
4/07/2013
$0.098-
$0.118
$0.27
Employee
options and
loan-funded
shares
31 December
2012
10/08/2012
$0.02-$0.06
$0.19
$0.2652
$0.1923
55%
4 years
0%
2.99%
50%
4 years
2.14%
2.5%
Period ending
Grant date
Fair value at grant date
Grant date share price
Exercise price
Expected volatility
Option/loan share life
Dividend yield
Risk-free interest rate
58
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
19. Issued Capital (continued)
(b)(i) Share options – employee options and loan-funded shares (continued)
The following reconciles the outstanding share options/loan-funded shares granted under the employee share option plan and loan-
funded shares at the beginning and end of the financial period:
Balance at beginning of the financial year
Granted during the financial period
Forfeited during the financial period
Expired during the financial period
Balance at the end of financial period
Exercisable at end of the financial period
Period ending 30 June 2015
Period ending 30 June 2014
Number of
options/loan
funded shares
5,050,000
2,833,333
(350,000)
-
7,533,333
-
Weighted
average
exercise price
$
$0.29
$0.39
$0.24
-
$0.33
-
Number of
options/loan
funded shares
7,126,666
2,000,000
(4,076,666)
-
5,050,000
-
Weighted
average
exercise price
$
$0.23
$0.38
$0.23
-
$0.29
-
The options and loan-funded shares outstanding at 30 June 2015 have an exercise price in the range of $0.1923 to $0.4195 (30
June 2014: $0.1923 to $0.4195) and a weighted average contractual life of 3.72 years (30 June 2014: 4.15 years).
The following is the total expense recognised for the period arising from share-based payment transactions:
Shares as remuneration granted in 2010, 2011 and 2012 – equity settled
Share options/loan-funded shares granted in 2012 – equity settled
Share options/loan-funded shares granted in 2013 – equity settled
Share options/loan-funded shares granted in 2014 – equity settled
Share options/loan-funded shares granted in 2015 – equity settled
Total expense recognised as employee costs (note 6c)
Less discontinued operations
Total expense recognised from continuing operations
(b)(ii) Share compensation – employee shares
12 months to 30
June 2015
$000
-
-
54
86
52
6 months to 30
June 2014
$000
28
(30)
1
-
-
192
-
192
(1)
(41)
40
No shares of the Company were granted as remuneration and no share options vested during the reporting period.
(c) Dividends
Dividends paid or declared by the Company to members since the end of the previous financial period were.
Special dividend
Special dividend
Cents per
share
Total amount
Franked/
unfranked
Date paid
4 cents
$1,999,958
Fully franked
31 January 2015
8 cents
$3,999,917
unfranked
31 January 2015
59
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
19.
Issued Capital (continued)
(d) Franking credits
Franking credit account balance as at the beginning of the financial period at a tax
rate of 30% (2014: 30%)
Franking credits attached to the dividend paid during the financial period
Franking credits from the payment of income tax paid and payable as at the end of the
financial period
Franking credit account balance as at the end of the financial period at a tax rate of
30% (2014: 30%)
30 June 2015
$000
30 June 2014
$000
2,885
(881)
(129)
1,875
5,733
(2,504)
(344)
2,885
As noted in note 27, subsequent to the year end the company has declared a dividend payable in September 2015. The payment of
this dividend will result in $1,443,000 of the above franking credit being utilised.
20.
Notes to the Cash Flow Statement
(a) For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in banks and investments
in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial
period as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows:
Reconciliation of cash and cash equivalents
Cash balance comprises:
- Available cash and cash equivalents
- Restricted cash
as at
30 June 2015
$000
as at
30 June 2014
$000
16,396
436
16,832
38,498
572
39,070
The Group’s exposure to credit risk, interest rate and sensitivity analysis of the financial assets and liabilities are provided in
Note 25.
60
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
20.
Notes to the Cash Flow Statement (continued)
(b) Reconciliation of the profit/(loss) for the period to net cash flows from
operating activities:
Profit after tax
Add back non-cash and non-operating items:
Depreciation
Amortisation
Impairment losses on finance lease receivables
Foreign currency loss/(gain) unrealised
Provision for employee entitlements
Equity settled share-based payment
(Profit) on disposal of discontinued operation
Costs associated with disposal of discontinued operation
Income tax paid on discontinued operations
Other non-cash items
(Increase)/decrease in assets:
Trade receivables, deposits held with funders and other movements in lease
assets
Finance lease receivable
Prepayments
Deferred tax asset
Other assets
Rental asset inventory
Increase/(decrease) in liabilities:
Trade and other creditors
Provision for income tax
Deferred tax liability
Other payables
Net cash from operating activities
12 months to
30 June 2015
$000
6 months to
30 June 2014
$000
3,490
11,337
168
516
42
(17)
-
190
-
-
-
-
66
(3,999)
-
73
1,079
(180)
(927)
654
-
-
1,155
108
363
64
(249)
5
2
(15,721)
2,332
3,206
278
(1,013)
-
837
(24)
(533)
715
843
119
(7)
(126)
2,536
61
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
21. Leases and Hire Purchase Obligations
Operating leases – leasing arrangements
Operating leases relate to office facilities with lease terms of up to 6 years. All operating lease contracts contain market review
clauses in the event that the consolidated entity exercises its option to renew. The consolidated entity does not have an option to
purchase the leased asset at the expiry of the lease period.
Non-cancellable operating lease payments:
No later than 1 year
Later than 1 year and not later than 5 years
More than 5 years
June 2015
$000
June 2014
$000
196
784
425
1,405
173
693
635
1,501
No provisions have been recognised in respect of non-cancellable operating leases.
22. Segment Information
The Group has three reportable segments which comprise the Group’s two core business units (UK and its discontinued segment,
Australia), with the “other” segment presented composing low volume territories. The head office corporate function composes
the reconciliation between the two continuing reportable segments and the Group, given that there is no inter-segment revenue.
The business units offer predominantly similar products and services, however have separate Executive structures and separate
operational teams.
For each of the segments, the Board and the CEO review internal management reports on a monthly basis. The composition of the
reportable segments is as follows:
UK:
- ThinkSmart Europe Ltd
- RentSmart Ltd
- ThinkSmart Insurance Services Administration Ltd
- ThinkSmart Financial Services Ltd
Other:
- SmartCheck Finance Spain SL
- ThinkSmart Inc (USA)
- ThinkSmart Italy Srl
Corporate:
- ThinkSmart Limited
Discontinued operations - Australia:
- ThinkSmart Finance Ltd
- ThinkSmart Trust
- RentSmart Servicing Pty Ltd
- RentSmart Pty Ltd
- RentSmart (NZ) Pty Ltd
62
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*
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u
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
22. Segment Information (continued)
Major customer
Revenues from the Group’s funding partners represent $5.8m (30 June 2014: $2.2m) of the Group’s total revenue.
23. Remuneration of Auditor
Audit and review services:
Auditor of the Company:
Audit and review of financial reports (Australia)
Audit and review of financial reports (Overseas)
Assurance services associated with disposal of Australian business
Services other than statutory audit:
Tax compliance and advisory services
Other regulatory services*
Advisory services
*relates to statutory accounting requirements within Spain and Italy
The Group’s auditors are KPMG.
24. Commitments and Contingent Liabilities
12 Months to
June 2015
$
6 Months to
June 2014
$
50,000
158,649
-
208,649
10,542
59,581
8,461
78,584
50,000
99,440
57,946
207,386
29,135
20,508
23,766
73,409
Under the terms of the UK current funding agreement with Secure Trust Bank, the group is obliged to purchase delinquent leases
from the funder at the funded amount. As at 30 June 2015, the total funded amount of all leases funded by the funder is $52.182m
(2014: $43.606m). The group has entered into a Credit Default Swap ("CDS") with STB for which it has provided a deposit of
$8.575m (2014: $7.401m) as collateral for the obligation under the CDS. The group has recognised a provision against this deposit
of $5.269m (2014: $3.617m) being its estimate of the funded amount of these leases that are likely to become delinquent in the
future. The group estimates this amount based on historical loss experience for assets with similar characteristics.
The total balance of deposits recognised with funders, net of associated provisions and financial guarantee contracts is $3.306m
(2014: $3.784m).
64
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
25. Financial Instruments
(a) Interest rate risk
At the reporting date, the interest rate profile of the Group’s interest bearing financial instruments were:
Variable rate instruments
Cash and cash equivalents
Deposits held by funder (note 24)
Other interest bearing liabilities (note 18)
Net financial assets
Carrying amount
June 2015
$000
June 2014
$000
16,832
8,575
(4,101)
21,306
39,070
3,786
-
42,856
Sensitivity analysis
A change in 1% in interest rates would have increased or decreased the Group’s profit for continuing operations by the amounts
shown below (2014: 1% increase $0.429m, 1% decrease $0.429m). This analysis assumes that all other factors remain constant
including foreign currency rates.
Variable rate instruments
Net profit sensitivity
(b) Fair value of financial instruments
Profit or Loss
Increase
1%
$000
213
213
Decrease
1%
$000
(213)
(213)
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)
inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Level 3:
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.
65
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
25. Financial Instruments (continued)
(c) Credit risk management
The maximum credit risk exposure of the Group is the sum of the carrying amount of the Group’s financial assets. The carrying
amount of the Group’s financial assets that is exposed to credit risk at the reporting date is:
Cash and cash equivalents
Trade receivables
Loan and lease receivable (current)
Loan and lease receivable (non-current)
Prepayments (current)
Sundry debtors
Other non-current assets
Note
20(a)
9
9
10
11
June 2015
$000
16,832
1,108
2,315
2,376
2,507
839
5,483
31,460
June 2014
$000
39,070
1,153
-
-
2,038
1,108
5,458
48,827
The carrying amount of the Group’s financial assets that is exposed to credit risk at the reporting date by geographic region is:
Australia
UK
Other
June 2015
$000
3,161
28,224
75
31,460
June 2014
$000
32,213
16,346
268
48,827
The carrying amount of the Group’s financial assets that is exposed to credit risk at the reporting date by types of counterparty is:
Banks (i)
Funders
Insurance partners (ii)
Retail customers
Others
June 2015
$000
16,832
3,306
4,684
4,691
1,947
31,460
June 2014
$000
39,070
3,786
3,711
-
2,260
48,827
(i) Cash and cash equivalents are held with banks with S&P ratings of A- and AA-.
(ii)
In the current financial reporting period, 100% (prior year: 100%) of the total prepayment relates to RentSmart Limited’s
(UK) upfront insurance premium payments to Allianz on behalf of the rental customer. The premiums are recovered from the
customer on a monthly basis. In the event the customer defaults, the policy is cancelled and Allianz refunds the unexpired
premium.
66
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
25. Financial Instruments (continued)
(c) Credit risk management (continued)
The ageing of the Group’s trade and lease receivables at the reporting date was:
Not past due
Past due 0-30 days
Past due 31-120 days
Past due 121-365 days
Gross
2015
$000
5,031
635
47
86
5,799
Impairment
2015
$000
23
5
23
72
123
Gross
2014
$000
378
711
59
5
1,153
Impairment
2014
$000
-
-
59
-
59
The movement in the allowance for impairment in respect of trade and lease receivables during the period was as follows:
Balance at 1 January
Impairment loss recognised
Bad debt written off
Effect of exchange rate movement
Balance at 31 December
June 2015
$000
June 2014
$000
59
226
(170)
8
123
37
63
(36)
(5)
59
Trade and lease receivables are reviewed and considered for impairment on a periodic basis, based on the number of days
outstanding and number of payments in arrears.
(d) Currency risk management
Exposure to currency risk
The Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
Cash and cash equivalents
Trade receivables
Lease receivable
Trade and other payables
Net exposure
Cash and cash equivalents
Trade receivables
Trade and other payables
Net exposure
30 June 2015
GBP
£000
6,238
684
2,277
(1,197)
8,002
EUR
€000
51
-
(4)
47
30 June 2014
GBP
£000
3,789
1,138
(1,572)
3,355
EUR
€000
98
1
(21)
78
USD
$000
-
-
(3)
(3)
USD
$000
5
-
3
8
67
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
25. Financial Instruments (continued)
(d) Currency risk management (continued)
The following significant exchange rates applied during the period:
AUD
EUR
GBP
USD
Average rate
2015
0.6963
0.5307
0.8382
2014
0.6673
0.5481
0.9147
Reporting date spot rate
2014
0.6906
0.5531
0.9420
2015
0.6866
0.4885
0.7680
Sensitivity analysis
A 10% strengthening of the Australian dollar against the following currencies at 30 June would have increased/(decreased) equity
and profit and loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain
constant. The analysis is performed on the same basis for 2014:
30 June 2015
EUR
GBP
USD
30 June 2014
EUR
GBP
USD
Equity
$000
Profit or loss
$000
(7)
(1,151)
-
115
(2,433)
-
8
(489)
1
4
(345)
-
A 10% weakening of the Australian dollar against the above currencies at 30 June would have had an equal but opposite effect on
the above currencies to the amounts shown above, on the basis that all other variables remain constant.
(e) Liquidity risk management
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact
of netting agreements:
Non-derivatives
30 June 2015
Trade and other payables
Other interest bearing liabilities
30 June 2014
Trade and other payables
Carrying
Amount
$000
Contractual
cash flow
$000
Less than 1
year
$000
1-2 years
$000
2-5 years
$000
2,374
4,101
6,518
3,247
3,247
(2,374)
(4,101)
(6,518)
(3,247)
(3,247)
(2,374)
(2,308)
(4,725)
(3,247)
(3,247)
-
(1,793)
(1,793)
-
-
-
-
-
-
-
68
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
26. Related Party Disclosures
The following were Key Management Personnel of the Group at any time during the reporting period and unless otherwise
indicated were Key Management Personnel for the entire period:
Executive Chairman
N Montarello
Executive Directors
F de Vicente (Chief Executive Officer)
K Jones (Group Strategy and Development Director)
Non-Executive Directors
D Griffiths (deputy Chairman)
S Penglis (retired 26 November 2014)
Executives
G Halton (Chief Financial Officer)
D Twigg (Chief Operating Officer (Credit and Operations))
The Key Management Personnel remuneration included in ‘employee benefits expense’ in Note 6(c) is as follows:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
27. Subsequent Events
12 Months to
June 2015
$
6 Months to
June 2014
$
1,961,085
57,826
6,211
177,146
2,202,268
969,070
403,788
3,114
60,564
1,436,536
A fully franked dividend of 3.5 cents per share was declared at the board meeting on 25 August 2015 and will be paid in
September 2015.
69
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28. Earnings per Share
12 months to 30 June 2015
Discontinued
operations
$000
Continuing
operations
$000
Total
$000
6 months to 30 June 2014
Discontinued
operations
$000
Continuing
operations
$000
Total
$000
Profit/(loss) after tax attributable to
ordinary shareholders (basic and diluted)
3,490
-
3,490
1,550
9,787
11,337
Weighted average number of ordinary
shares (basic)
Weighted average number of ordinary
shares (diluted)
Earnings per share
Basic earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
Earnings per share from continuing operations
Basic earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
Earnings per share from discontinued operations
Basic earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
30 June 2015 30 June 2014
Number
Number
127,672,035
160,688,734
129,555,185
161,844,290
30 June 2015
30 June 2014
2.73
2.69
2.73
2.69
-
-
7.06
7.01
0.97
0.96
6.09
6.05
At 30 June 2015, 1,500,000 (2014: 105,556) employee share options were excluded from the diluted weighted average number of
ordinary shares calculation as they do not currently meet their share price hurdle and thus would have been anti-dilutive if included.
70
THINKSMART LIMITED
NOTES TO THE FINANCIAL STATEMENTS
29. Parent Entity Disclosures
As at, and throughout, the financial period ending 30 June 2015, the parent entity of the Group was ThinkSmart Limited.
Result of parent entity
(Loss)/profit for the period
Other comprehensive income
Total comprehensive (loss)/profit for the period
Financial position of parent entity at period end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Retained earnings
Total equity
12 Months to
30 June 2015
$000
6 Months to
30 June 2014
$000
588
-
588
3,236
28,574
705
705
27,838
31
27,869
(4,809)
26
(4,783)
32,320
47,283
413
413
48,096
(1,224)
46,872
Parent entity contingencies
The parent entity has provided a commitment to continue its financial support of ThinkSmart Europe Ltd to enable the subsidiary to
pay its debts as and when they fall due. The Company will not call for the repayment of its loan until ThinkSmart Europe Ltd is in a
financial position to make such a payment without affecting its operational capabilities.
The parent entity has provided an unlimited guarantee to Santander UK PLC in support of the financing facility provided to
ThinkSmart Financial Services Ltd.
The parent entity has issued an unlimited parental guarantee in favour of its UK clearing bank to guarantee the obligations of
RentSmart Limited with respect to its Direct Debit and corporate credit card facilities.
The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future
sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
71
ABCD
Independent auditor’s report to the members of ThinkSmart Limited
Report on the financial report
We have audited the accompanying financial report of ThinkSmart Limited (the Company),
which comprises the consolidated statement of financial position as at 30 June 2015, the
consolidated statement of profit and loss and other comprehensive income, the consolidated
statement of changes in equity and consolidated statement of cash flows for the year ended on
that date, notes 1 to 29 comprising a summary of significant accounting policies and other
explanatory information and the directors’ declaration of the Group comprising the Company
and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that is free from material misstatement whether
due to fraud or error. In note 2(a), the directors also state, in accordance with Australian
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements of the Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial
report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
72
ABCD
Auditor’s opinion
In our opinion:
(a) the financial report of ThinkSmart Limited is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2015 and
of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations
Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as
disclosed in note 2(a).
Report on the remuneration report
We have audited the Remuneration Report included in pages 7 to 17 of the directors’ report for
the year ended 30 June 2015. The directors of the Company are responsible for the preparation
and presentation of the remuneration report in accordance with Section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report,
based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of ThinkSmart Limited for the year ended 30 June 2015,
complies with Section 300A of the Corporations Act 2001.
KPMG
Matthew Beevers
Partner
Perth
25 August 2015
73
Annual Report 2015
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 9 October 2015.
Distribution of Equity Security
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Number of ordinary
shares
Security holders
Options
100
627
352
392
82
-
-
-
-
2
There were 149 holders of less than a marketable parcel of Ordinary Shares
Equity Security Holders
Twenty largest quoted equity security holders
The names of the 20 largest holders of quoted equity securities are listed below:
Name
Units
% of Units
PERSHING AUSTRALIA NOMINEES PTY LTD
28,561,036
29.68
WULURA INVESTMENTS PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
THINKSMART LTI PTY LTD
DARJU PTY LTD
PHOENIX PROPERTIES INTERNATIONAL PTY LTD
CITICORP NOMINEES PTY LIMITED
EQUITAS NOMINEES PTY LIMITED <2874398 A/C>
WULURA INVESTMENTS PTY LTD
WULURA INVESTMENTS PTY LTD
EQUITAS NOMINEES PTY LIMITED <3021524 A/C>
WULURA INVESTMENTS PTY LTD
MR FERNANDO VINCENTE LOPEZ
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR DANIEL EDWARD GAMMELL
MR ROBERT BAGNARA
WULURA INVESTMENTS PTY LTD
MR HONG KEONG CHIU + MS YOK KEE KHOO
MRS JULANNE MARY GRIFFITHS + MS JULIA MARY GRIFFITHS
5,537,740
3,473,701
2,500,000
2,107,239
2,000,000
1,881,314
1,880,000
1,636,118
1,566,948
981,200
764,144
678,000
635,000
605,000
600,000
577,622
563,766
484,762
5.75
3.61
2.60
2.19
2.08
1.96
1.95
1.70
1.63
1.02
0.79
0.70
0.66
0.63
0.62
0.60
0.59
0.50
MR MILAN HERCEG
Total
430,000
57,463,590
0.45
59.72
Unquoted Equity Securities
Options issued under the ESOP to take up ordinary shares
Number on Issue
2,333,000
Number of holders
2
The Company has no other unquoted equity securities.
74
Annual Report 2015
Substantial Holders
Substantial holders in the Company are set out below:
Include those above 5%
PERSHING AUSTRALIA NOMINEES PTY LTD
WULURA INVESTMENTS PTY LTD
Number of ordinary
shares
28,561,036
5,537,740
Percentage
%
29.68
5.75
Voting Rights
The voting rights attaching to equity securities are set out below:
a)
b)
c)
Ordinary Shares
On a show of hands, every holder of Ordinary Shares present in the meeting in person or by proxy
is entitled to one vote, and upon a poll each Share is entitles to one vote.
Loan-Funded Ordinary Shares issued under the Long-Term Incentive Plan
Shares under the plan rank equally in all respects with Ordinary Shares, Including voting rights.
Options
There are no voting rights attached to the options.
75
Solicitors
Herbert Smith Freehills
250 St Georges Terrace
Perth WA 6000
Australia
Auditors
KPMG
235 St Georges Terrace
Perth WA 6000
Australia
Bankers
Westpac Banking Corporation
109 St Georges Terrace
Perth WA 6000
Australia
CORPORATE INFORMATION
ABN 24 092 319 698
Directors
N R Montarello (Executive Chairman)
D Griffiths (Deputy Chairman)
F de Vicente (Chief Executive Officer)
K Jones (Executive Director)
Company Secretary
Neil Hackett
ThinkSmart United Kingdom Office:
7th Floor, Oakland House,
Talbot Road, Old Trafford
Manchester M16 0PQ, UK
Phone: +44 161 333 2400
Registered and Principal Office
Suite 5, 531 Hay Street
Subiaco
Western Australia 6008
Phone: +61 8 9380 8333
Share Register
Computershare Investor Services Pty Limited
Level 11, 172 St Georges Terrace
Perth WA 6000
Australia
Phone: 1300 787 272
ThinkSmart Limited shares are listed on the
Australian Securities Exchange (ASX code: TSM)