ThinkSmart Limited
Corporate Information
ABN 24 092 319 698
Directors
N R Montarello (Executive Chairman)
G Halton (Chief Financial Officer)
P Gammell (Non-Executive Director)
(cid:37)(cid:1)(cid:34)(cid:69)(cid:66)(cid:78)(cid:84) (Non-Executive Director)
Company Secretary
Kerin Williams (UK resident)
Jill Dorrington (Australian resident)
Registered and Principal Office
Suite 5, 531 Hay Street
Subiaco
WA 6008
Australia
Company Registrars
Computershare Investor Services Pty Limited(cid:1)
Level 11, 172 St Georges Terrace
Perth WA 6000
Australia
Depositary
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
ThinkSmart Limited shares are listed on AIM,(cid:1)
a sub-market of the London Stock Exchange(cid:1)
(AIM code: TSL)
Solicitors
Herbert Smith Freehills
250 St Georges Terrace
Perth WA 6000
Australia
Auditors
BDO
38 Station Street
Subiaco
Perth WA 600
8
Australia
Bankers
Westpac Banking Corporation
109 St Georges Terrace
Perth WA 6000
Australia
Santander UK plc
298 Deansgate
Manchester
M3 4HH
ThinkSmart Limited
(cid:19)(cid:17)(cid:19)(cid:18)
(cid:34)(cid:79)(cid:79)(cid:86)(cid:66)(cid:77)(cid:1)(cid:51)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:1)
ABN 24 092 319 698
ThinkSmart Limited
Contents
Contents
Highlights for the year ended 30 June 2021
Chairman’s Statement
Directors’ Report
Auditor’s Independence Declaration
Directors’ Declaration
Consolidated Statement of Profit & Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Independent Auditor’s Report
Corporate Information
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Back Cover
ThinkSmart Limited
Highlights for the year ended 30 June 2021
Highlights for the year ended 30 June 2021
Clearpay shareholding revaluation continues to drive material value
• Profit after tax up 35% to £71.7 million (FY20: £53.0 million) driven by a £71.3 million non-cash fair value gain
on the independent valuation(2) of the Group’s retained 10%(1) shareholding in Clearpay.
• 10%(1) shareholding in Clearpay independently revalued to £125 million(2) at year end (up from £106.6 million at
31 December 2020 and £53.7 million at 30 June 2020). Afterpay Ltd (“Afterpay”) retains the remaining 90% of
Clearpay.
• The revaluation is as at 30 June 2021 and therefore prior to the announcement of the proposed takeover of
Afterpay by Square Inc. Since then the Afterpay share price has risen from AU$118.17 on 30 June 2021 to
AU$133.30 as at 1 September 2021.
• Net assets at period end of £134.5 million are equivalent to 126.20 pence per share (FY20: £66.5 million/62.42
pence per share).
• Put/call option agreement with Afterpay Ltd (“Afterpay”), exercisable in 2023/24, for the remaining 10%(1)
shareholding in Clearpay provides a clear and agreed legal mechanism to enable Clearpay shareholding realisation.
• A change of control of Afterpay from the announced Square takeover would give Afterpay the right to exercise its
call option anytime following the change of control occurring. As announced by Square and Afterpay, this
takeover is expected to complete Q1 calendar 2022. Following a change of control, ThinkSmart will continue to
retain its reciprocal put option, exercisable in February 2024. The exercise price for the call option will be
determined by the same pre-agreed valuation principles whether or not the option is exercised early. In addition,
if the shares of Afterpay are no longer quoted on a recognised stock exchange at the time of the exercise then
Afterpay can only elect to pay the exercise price in cash.
• Shareholder return with special dividend and capital return of A$6.5 million (6.1 cents per share), equivalent to
£3.7 million, paid in December 2020.
• Sale of 90% shareholding in Clearpay to Afterpay and retained 10%(1) shareholding has now generated cumulative
accounting profit of £135.1 million (including £124.9 million(2) of non-cash fair value gains), with the 10%(1) stake
offering further upside potential subject to the ongoing performance of Clearpay.
• Cash and cash equivalents of £7.1 million at 30 June 2021 (FY20: £8.8 million).
Clearpay trading performance for the year ended 30 June 2021
Figures are as announced to the Australian Stock Exchange by Afterpay Ltd on 25 August 2021 in its full year results to
30 June 2021 and have been extracted from that announcement. All currency figures are in Australian dollars unless
otherwise stated. Clearpay is 90% owned by Afterpay. The performance of Clearpay has an impact on the valuation of
the Group’s retained 10%(1) shareholding in Clearpay.
• AUS$1.8b(3) underlying sales reflects an increase of 227% on FY20 and equates to c8.5% of Afterpay’s global
total. The proportion of Clearpay’s underlying sales to Afterpay’s global sales total has continued to increase,
having stood at c5.4% at FY20.
• 2.1 million(3) active customers equates to c13% of Afterpay’s global total and an increase of 104% from FY20.
The proportion of Clearpay’s active customers to Afterpay’s global active customer total has continued to increase,
having stood at c10.1% at FY20.
• AUS$13.6m(3) EBITDA represents c35% of Afterpay’s EBITDA.
• Top 10% of Clearpay UK customers use Clearpay 32x per year, up 60% of FY20.
• The number of active merchants increased by 501%(3). Merchant acceptance in Clearpay UK continued strongly
with more than 5,000 new merchants added during FY21 including Wayfair, Lazy Oaf, Cox and Cox, Lick,
Serenata Flowers, Bottle Club, Lucy and Yak, T.M Lewin, Steve Madden, Rat & Boa, and Feel Unique.
• During FY21, Afterpay launched in-store cards across ANZ and the US, with the UK to follow in Q2 FY22.
• Clearpay continues to engage with HM Treasury and the UK Government regarding a proportionate regulatory
framework for currently exempted Buy Now Pay Later (BNPL) products.
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ThinkSmart Limited
Highlights for the year ended 30 June 2021 (continued)
Managed wind down of legacy operations continues to generate positive cash flow
• ThinkSmart’s operating business, powered by SmartCheck, a proprietary digital payments platform and credit
decision-making engine, continues to generate positive cashflow through its managed wind down.
• £1.45 million cash receipt and realised gain in the period, as announced on 10 August 2020, from the settlement
agreement in relation to the legal proceedings issued by the Group against Carphone Warehouse.
• Total revenue of £4.3 million (FY20: £6.3 million) includes £0.9 million (FY20: £0.5 million) from the provision
of the outsourced call centre customer support service for Clearpay.
• Optimised cash management with £2.2 million net cash generated from operating activities (FY20: £1.0 million)
including £1.45 million from settlement agreement in relation to legal proceedings.
• Operating costs further reduced to £3.4 million (FY20: £4.3 million) and remain controlled, aligned to current
volume performance.
Commenting on the results, Ned Montarello, Executive Chairman of ThinkSmart, said:
“Our 10% shareholding in Clearpay gives us significant and material exposure to a rapidly expanding segment of
consumer finance and allows us to benefit from the continued shift away from credit card use and into BNPL. Our
expectation is for that shift to sustain, given BNPL remains in its early stages of growth penetrating 2% of a US$10
trillion global market. Millennials and Gen Z are key drivers of this shift and their share of spend is set to continue to
grow over the next decade.
We are particularly pleased that Clearpay’s trading performance continues to represent an increasing proportion of the
Afterpay group, highlighting both its strategic and financial importance. We believe that the expansion of Clearpay to
omni-channel with the roll-out of the UK instore-card in Q1 FY22 together with the announced takeover of Afterpay by
Square Inc - which, as announced by Square and Afterpay, is expected to complete in Q1 calendar 2022 - will serve to
further accelerate the growth of Clearpay, which has been outstanding to date.
For shareholders, our investment in Clearpay has now generated over £135 million of profit, and we believe there remains
further upside potential. While our focus is on value creation via our holding in Clearpay, the managed wind down of our
legacy operations continues to generate positive cash flow as we control costs while rightsizing the operations to lower
volumes. This leaves our balance sheet robust with £7.1 million of cash and no debt.
Ultimately, we believe ThinkSmart is well placed to continue accruing material value for shareholders, subject to
Clearpay’s ongoing progress, and we thank shareholders for their ongoing support of the strategy.”
(1) A proportion of the 10% retained shareholding (up to 3.5% of the total share capital of Clearpay) will be made available to employees of Clearpay under an employee
share ownership plan.
(2) The Group engaged a third party global professional services firm to independently value its retained shareholding in Clearpay at 30 June 2021 for accounting purposes
under AASB 9 in accordance with AASB 13 (Fair Value Measurement). This valuation has been undertaken based on publicly available information, reflecting the
Afterpay call option (exercisable from 23 August 2023) and ThinkSmart put option (exercisable from 23 February 2024) and including a discount for the lack of
marketability of Clearpay as a privately owned company, and has produced a range of values for the Group’s 10%(1) shareholding in Clearpay from which the Group
has taken at two thirds of the range. Under either the call or put option, the sale of the 10%(1) shareholding in Clearpay to Afterpay will be at a price calculated on agreed
valuation principles at the time. Further detail is provided in Note 10 to the 30 June 2021 Group audited financial statements below.
(3) Afterpay segment reporting for Clearpay now includes UK and Europe. Clearpay Europe only launched in March 2021 and as such only made a minor contribution to
Afterpay’s Group results to 30 June 2021.
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ThinkSmart Limited
Chairman’s Statement
Chairman’s Statement
Clearpay drives significant value for shareholders
Our year to 30 June 2021 has been beneficial for our shareholders. Our business was founded on a deeply entrepreneurial
mindset and culture, always ready to move quickly, in particular in relation to how digital transformation has and
continues to reshape consumer behaviour in the core retail markets and the way in which retailers have needed to adapt
their offerings to stay relevant. Accordingly, in 2017/18 we developed and launched Clearpay in the UK, taking first
mover advantage in the nascent ‘Buy Now, Pay Later’ market. Our decision in 2018 to sell 90% of Clearpay, together
with the put/call options to sell the remaining 10%, to Australian listed Afterpay, a highly capitalised, well-funded global
financial technology business, has delivered – and I’m confident will continue to deliver – material value for
shareholders.
Our results for the year reflect record profitability, with profit after tax of £71.7m, driven by the revaluation gains
attributable to our remaining 10%(1) holding in Clearpay as a result of the exceptional underlying performance of that
business. Regarding Clearpay’s trading, we are particularly pleased to see that it continues to represent an increasing
proportion of the Afterpay group. Clearpay’s increased scale and sustained trading success has positive connotations for
our 10%(1) holding and highlights both Clearpay’s strategic and financial importance as a business within Afterpay. In
addition, we view the expansion of Clearpay to omni-channel with the roll-out of the UK instore-card in Q1 FY22 as a
logical next step. That, together with the announced takeover of Afterpay by Square Inc, is something we believe will
accelerate the growth of Clearpay, which has been outstanding to date.
Our Net Asset Value stood at £134.5 million at the year end, or 126.20 pence per share. On a per share basis this is an
uplift of 63.78 pence per share in the last 12 months, in addition to the 3.4 pence per share capital return and special
dividend paid to shareholders in December 2020. All in all, the sale of 90% of the Clearpay business and our retained
10%(1) shareholding has now generated cumulative profit of £135.1 million (including £124.9(2) million of non-cash fair
value gains), with the 10%(1) stake offering further upside potential subject to the performance of Clearpay.
As part of the agreement with Afterpay, made at the time of the Clearpay sale, there is a put/call option mechanism which
gives an agreed, clear legal mechanism to a realisation of the 10%(1) stake in Clearpay in 2023/24. The price will be
calculated on pre-agreed principles based on market valuations at that time. These principles are reflected in the carrying
valuation of the asset on our balance sheet.
On 2 August 2021, Square Inc announced its plans to acquire Afterpay. A change of control of Afterpay would bring
forward the Afterpay call option to anytime following the change of control occurring, expected in Q1 calendar 2022.
The exercise price for the call option will be determined by the same pre-agreed valuation principles whether or not the
option is exercised early. In addition, if the shares of Afterpay are no longer quoted on a recognised stock exchange at
the time of the exercise then Afterpay can only elect to pay the exercise price in cash. The announcement of the planned
takeover has had a significantly positive impact on both Square and Afterpay’s share prices, with Afterpay’s increasing
from AU$118.17 at 30 June 2021 to AU$133.30 at 1 September 2021. We believe the takeover will have a positive and
material impact on Clearpay UK.
The Board has consistently sought to return capital to shareholders where appropriate and is mindful of maintaining a
prudent level of cash reserves in the business. In line with this, the business paid a special dividend and capital return of
A$6.5 million (6.1 cents per share), equivalent to £3.7 million (3.4 pence per share), in December 2020.
Turning to our legacy retail consumer and business finance offerings, shareholders will be aware that this has been in
managed wind-down, reflecting our strategic focus on delivering value to holders via the Clearpay asset, together with
providing the outsourced call centre customer support service for Clearpay. As announced on 10 August 2020 we reached
a settlement with Carphone Warehouse for £1.45 million and as a result have now ceased writing any new business. We
are managing the wind-down by adjusting the cost base accordingly and are continuing to deliver net positive cash flows.
Therefore, we expect our cash reserves to continue to build over the next few years.
The Group has a robust financial position, with net cash of £7.1 million at 30 June 2021 (after the payment of £3.7 million
special dividend/capital return in December 2020 and including receipt of the £1.45 million settlement amount in August 2020).
I’m very pleased to be reporting this level of value accretion to our shareholders.
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ThinkSmart Limited
Chairman’s Statement (continued)
Operating Business Performance
As expected, leasing volumes fell 74% to £0.5 million (FY20: £1.9 million) in the year, and we expect this volume
reduction to continue as we manage the division’s wind down. Revenues were consequently 31% lower for the year at
£4.3 million (FY20: £6.3 million) as the lower volumes in the period are partially offset by the majority of revenue for
the period being derived from higher volumes in previous years.
As announced on 10 August 2020, ThinkSmart reached a settlement agreement of £1.45 million in relation to the legal
proceedings issued by the Group against Carphone Warehouse. As part of the settlement, the Group has agreed with
Dixons Carphone (“DC”) to the orderly winding up of all of its agreements with DC including Flexible Leasing,
SmartPlan and Upgrade Anytime. In the year to 30 June 2021, all of ThinkSmart’s new business volumes were generated
from its existing agreements with DC. The Group will continue to service its existing customer base, ensuring the fair
treatment of customers, during the orderly winding up of the three products and will continue to benefit from cash
generation in the meantime.
The Group continues to have a good mix of consumer and business customers, in addition to being diversified by region
and demography. The quality of the Group’s underwriting procedures, as well as the small value of debt per customer
and its high-quality credit customer portfolio, continues to mitigate the risk to any adverse impact on its existing
customers’ financial positions. As at 30 June 2021, lease receivables under management were £2.6 million, with
approximately 6,900 active customer contracts.
Operating costs decreased further to £3.4 million (FY20: £4.3 million) over the period and remain controlled, aligned to
the volume performance of the division.
Group Financial Position
The Group’s 10%(1) holding in Clearpay Finance Limited was revalued to £125 million(2) at 30 June 2021 (FY20:
£53.7 million). An asset valuation exercise was performed by an independent third-party valuer, a leading global
professional services firm. The sale of the Group’s holding is subject to a put/call arrangement with Afterpay in 2023/24,
based on agreed valuation principles using the same valuation metrics, multiples and methodologies, including those used
by market participants and with regard to sell-side analysts, to value the Clearpay business within the Afterpay listed
group. These valuation principles are the same principles that the independent third-party valuer used to determine the
£125 million(2) valuation of the Group’s 10%(1) stake in Clearpay as at 30 June 2021. In addition, these principles will
apply should the call option be exercised early following a change of control of Afterpay.
The Group held cash and cash equivalents of £7.1 million at 30 June 2021, after the £3.7 million payment of the special
dividend/capital return in December 2019 and including receipt of the £1.45 million settlement amount in August 2020.
This is down from £8.8m at 30 June 2020.
Current Trading Update
ThinkSmart anticipates its cash reserves will continue to build over the next few years, as the Group’s operating division
continues to service its existing customer base during the orderly winding up of its existing agreements. ThinkSmart also
provides an outsourced call centre customer support service for Clearpay. As announced in August 2020, following the
settlement agreement with DC, the Group has now ceased writing any new business.
Looking ahead, the business is well positioned to further benefit from future growth in the value of its shareholding in
Clearpay, subject to the ongoing performance of Clearpay, and therefore to continue creating material value for
shareholders.
Ned Montarello
Executive Chairman
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ThinkSmart Limited
Directors’ Report
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 year
ended 30 June 2021, 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 & CEO
Ned was appointed Executive Chairman on 22 May 2010 and is also CEO (since 3 January 2018). He founded
ThinkSmart in 1996 and through this vehicle has been credited with elevating the Nano-Ticket rental market sector (the
lease of high-volume low-value, i.e. A$500-A$10,000 equipment) in Australia, receiving the EY and Telstra Australian
Government’s Entrepreneur of the Year Award in 1998. In 2007 Ned successfully listed, via $204m IPO, the business in
Australia and subsequently migrated the listing to the UK AIM in 2016. 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. He led the development of the Group’s Australian distribution network,
led the business expansion into Europe and in 2017 launched Clearpay Finance Limited (Clearpay) in the UK. In 2018,
he successfully negotiated the sale of 90% of Clearpay to the emerging, global, industry leading Afterpay Ltd. Ned retains
a board seat on Clearpay (i.e. the Afterpay UK subsidiary).
Peter Gammell Non-Executive Director, Chair of the Remuneration and Nomination Committee
Peter is a Non-Executive Director of One Ventures Pty Ltd, a Venture Capital fund manager based in Sydney. Previously
Peter was Managing Director and CEO of Seven Group Holdings (2010-2013) and Managing Director of Australian
Capital Equity Pty Ltd (1989-2010). Peter is also Chairman of Octet Group Holdings Pty Ltd and former Chairman of
Scottish Pacific Business Finance Pty Ltd. Peter is Chair of the Remuneration and Nomination Committee of
ThinkSmart.
Gary Halton Chief Financial Officer
Gary was appointed to the Board on Admission to London AIM and has been Chief Financial Officer of the Group since
2008 when he joined the Group. Between October 2012 and January 2014, Gary acted as interim Managing Director of
the Group. Prior to joining the Group, Gary held several senior positions, including Head of Finance Services and Head
of Group Taxation, with De Vere Group plc. Gary is a qualified chartered accountant and a chartered tax advisor, with
over 20 years post-qualification experience, having qualified with Ernst & Young, and then a subsequent senior manager
role with PricewaterhouseCoopers.
David Adams Non-Executive Director, Chair of the Audit and Risk Committee
David was appointed to the Board on Admission to London AIM and has over 30 years of experience. He has previously
held executive roles including Chief Financial Officer and Deputy Chief Executive Officer of House of Fraser plc and
non-executive roles including Debenhams plc, Jessops plc, Moss Bros plc, Fevertree Drinks plc, Conviviality plc, Hornby
plc and Halfords plc. David’s current appointments include serving as a Non-Executive Director of Pizza Express,
Non-Executive Director and Chair of the Audit and Remuneration Committees of DP Eurasia Plc, Trustee of Walk the
Walk (a breast cancer charity), and Trustee of The Hackney Empire. David is Chairman of the Audit and Risk Committee
and a member of the Nomination and Remuneration Committee, and was appointed Senior Independent Non-Executive
Director on 10 June 2021.
Roger McDowell Non-Executive Director (resigned 11 November 2020)
Roger was appointed to the Board on Admission to London AIM and has over twenty years experience in the public
company environment, having led the Oliver Ashworth Group through a main market initial public offering and a
subsequent sale. Roger was a member of the Audit and Risk and Remuneration and Nomination Committees. Roger
retired from the Board of the Company at the Annual General Meeting on 11 November 2020.
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ThinkSmart Limited
Directors’ Report (continued)
COMPANY SECRETARIES
Kerin Williams (UK resident)
Jill Dorrington (Australian resident)
PRINCIPAL ACTIVITIES
The Group’s principal activity during the year was the provision of lease and rental financing services in the United
Kingdom (“UK”) and the holding of a financial asset.
OPERATING AND FINANCIAL REVIEW
The Board presents its Operating and Financial Review for the year ended 30 June 2021 and this information should be
read in conjunction with the consolidated financial statements and accompanying notes.
Business model
ThinkSmart is a leading digital payments company and provider of leasing finance for both consumers and businesses.
ThinkSmart’s core capability is to provide customer life cycle contract management through its market leading
proprietary technology platform ‘SmartCheck’.
ThinkSmart ceased writing new business in February 2021 and as such its leasing business is in managed wind-down.
ThinkSmart retains a 10% holding in Clearpay Finance Limited, creating value through exposure to the UK Buy Now
Pay Later digital payments market, and provides an outsourced call centre customer support service for Clearpay.
Key financial data
12 Months 12 Months
to June 2021 to June 2020 Variance Variance
£,000 £,000 £,000 %
Revenue 4,286 6,079 (1,793) –29%
Other revenue 62 253 (191) –75%
Total revenue 4,348 6,332 (1,984) –31%
Customer acquisition costs (258) (627) 369 +59%
Cost of inertia assets sold (335) (700) 365 +52%
Other operating expenses (3,431) (4,270) 839 +20%
Depreciation and amortisation (1,401) (2,047) 646 +32%
Impairment gains/(losses) 41 (2) 43 +2150%
Gains on Financial Instruments 71,267 54,418 16,849 +31%
Other gains 1,450 – 1,450 +100%
Profit before tax from continuing operations 71,681 53,104 18,577 +35%
Income tax expense (17) (62) 45 +73%
Profit after tax 71,664 53,042 18,622 +35%
Summary of results
• Net profit after tax of £71.7 million in the year up 35% on the prior financial year.
• Fair value of retained holding in Clearpay Finance Limited, calculated on agreed valuation principles, generated
a gain on financial instruments of £71.3 million in the year.
• As announced on 10 August 2020, the Group agreed a settlement with Dixons Carphone plc (Dixons) of £1.5m
inclusive of costs. As part of this settlement, the Group agreed with Dixons to the orderly winding up of all its
agreements with Dixons including Flexible Leasing, SmartPlan and Upgrade Anytime. The Group ceased writing
new business in February 2021 and its leasing business is now in managed wind-down.
• Basic Earnings Per Share of 67.28 pence at 30 June 2021 up 35% from Earnings Per Share of 49.80 pence at
30 June 2020.
• The Group returned £3.7 million (A$6.5 million) to shareholders in December 2020.
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ThinkSmart Limited
Directors’ Report (continued)
• Available cash assets of £7.1 million at 30 June 2021, down £1.7 million on prior financial year end position after
the £3.7m payment to shareholders and £1.5 million settlement receipt.
• Net assets are £134.5 million at 30 June 2021, equivalent to 126.20 pence per share.
Review of operations
UK
The UK business incurred a loss (before intercompany recharge of corporate costs) of £0.4m (2020: £0.6m loss) which
was driven by the further decline in business volumes from its sole retail partner, Dixons, and the cessation of new
business from February 2021. Inertia income performed well throughout the year as did insurance commission income
which, combined with the managed cost reduction, mitigated the impact of the reduced volumes of new business. In
addition, the UK business continued to provide an outsourced call centre customer support service for Clearpay which
generated revenue of £0.9m (2020: £0.5m).
Overall UK volumes at £0.5m for the year were down 74% on prior year of £1.9m driven by reduced volumes of
established products due to business change within Dixons. SmartPlan volumes decreased from £1.6m to £0.5m, Upgrade
Anytime volumes decreased from £0.2m to £35k and Flexible Leasing volumes decreased from £0.1m to £3k for the year.
As announced on 29 November 2019, the Group issued a claim against Dixons in respect of the Flexible Leasing contract
and its predecessor Upgrade Everytime contract and, as announced on 10 August 2020, the Group agreed a settlement
with Dixons of £1.5m inclusive of costs. As part of this settlement, the Group agreed with Dixons to the orderly winding
up of all its agreements with Dixons including Flexible Leasing, SmartPlan and Upgrade Anytime. The Group ceased
writing new business in February 2021 and its leasing business is now in managed wind-down.
In the year to 30 June 2021, all of ThinkSmart’s new business volumes were generated from its agreements with Dixons.
The Group will continue to service its existing customer base ensuring the fair treatment of customers, along with any
new volumes generated during the orderly winding up of the three contracts and will continue to benefit from the cash
generated from this business.
UK Operating costs reduced by 28% to £2.6m (2020: £3.6m) and remained controlled, aligned to current business
volumes.
Corporate
Corporate costs (before intercompany recharge of corporate costs) were £0.6m for the 12 months to 30 June 2021 (2020: £0.7m).
Summary Financial Position
30 June 2021 30 June 2020 Variance Variance
£,000 £,000 £,000 %
Cash and cash equivalents 7,067 8,805 (1,738) –20%
Other assets 128,621 59,269 69,352 +117%
Goodwill and intangibles 590 1,433 (843) –59%
Total assets 136,278 69,507 66,771 +96%
Other liabilities (1,821) (3,019) 1,198 +40%
Total liabilities (1,821) (3,019) 1,198 +40%
Equity 134,457 66,488 84,888 +128%
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ThinkSmart Limited
Directors’ Report (continued)
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The sale of 90% of Clearpay Finance Ltd (“Clearpay”) to Afterpay Ltd (formerly Afterpay Touch Group Ltd “Afterpay”)
in August 2018 has been a significant pivot point for the Group. The initial sale delivered £7.73 million profit after tax
which significantly strengthened the Group’s balance sheet.
ThinkSmart’s remaining 10%* holding in Clearpay is subject to a 5 year call option by Afterpay and ThinkSmart holds
a reciprocal put option 6 months later to be able to sell the remaining holding to Afterpay at a price calculated on agreed
principles based on market valuations at the time of option exercise. ThinkSmart’s holding in Clearpay is held as a
financial instrument at fair value through profit or loss. As at 30 June 2021 the fair value of this asset, net of the 3.5%
ESOP commitment, was determined to be £125.0 million.
In August 2021 Square Inc (“Square”) and Afterpay announced the intention for Square to acquire Afterpay in a deal
which valued Afterpay at US$29 billion (AU$39 billion). The transaction is expected to complete in the first quarter of
the calendar year 2022. Under the terms of the agreement that ThinkSmart has with Afterpay, relating to the sale of the
Group’s remaining holding in Clearpay, a change of control of Afterpay gives Afterpay the right to exercise its call option
to purchase the remaining shares in Clearpay from ThinkSmart at any time following said change of control. The exercise
price for the call option will be determined by the same pre-agreed valuation principles whether or not the option is
exercised early.
As of February 2021, ThinkSmart has ceased writing any new business volumes following the termination of all its
agreements with its sole retail partner, Dixons, including Flexible Leasing, SmartPlan and Upgrade Anytime. All
remaining active lease contracts have a minimum term (of up to four years) during which time the Group will continue
to service its existing customers, collect out the lease receivables and realise the commission, inertia and insurance
revenue on the leases written to February 2021. In addition, the UK business continues to provide an outsourced call
centre customer support service for Clearpay.
The Group will continue to align its cost base with its volumes and review the ongoing strategy of its leasing arm together
with continuing to look at options to leverage its established technology platform across its core leasing business.
* A proportion of the 10% retained shareholding (up to 3.5% of the total share capital of Clearpay) will be made available to employees of
Clearpay under an employee share ownership plan.
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ThinkSmart Limited
Directors’ Report (continued)
RISKS
The Directors of ThinkSmart accept that risk is an inherent part of doing business and actively identify, monitor and
manage material risks. Key material risks faced by the Group are:
The Group is exposed to the risk of default or fraud by its customers
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 through impairment. Robust credit checking and collection processes
combined with continual development of our IP capability in this area assist in managing and mitigating this risk.
The valuation of financial instruments held by the Group are subject to estimates and judgements
ThinkSmart’s remaining 10%* holding in Clearpay is subject to a 5 year call option by Afterpay and ThinkSmart holds
a reciprocal put option 6 months later to be able to sell the remaining holding to Afterpay at a price calculated on agreed
principles based on market valuations at the time of option exercise. In order to manage the risk associated with this
valuation the Group has engaged a global professional services firm to produce an independent valuation report for the
purposes of compliance with AASB 9 – Financial Instruments.
The Group is subject to inherent risks from general macro-economic conditions in the UK, the Eurozone and
globally
The Group’s business is subject to general macro-economic conditions in the UK and volatility in the global economic
and financial markets, both generally and as they specifically affect finance providers. The outlook for the UK economy
remains somewhat uncertain as businesses adjust to operating under new UK-EU trade terms following the UK leaving
the EU on 31 January 2020. The changes to consumer behavior and pent up consumer demand driven by COVID-19 add
to the uncertainty in the UK economic outlook. Adverse economic conditions in the UK, such as unemployment, or
dramatic increases in inflation could also have a negative impact on the financial circumstances of the customers to whom
the Group has financial exposure to.
COVID-19
Thanks to operating in a less affected sector of the economy, robust business continuity processes, proactive management
and timely access to government support, the Group has so far been only minimally impacted by COVID-19. While the
UK government enforced the closure of Dixons retail outlets for part of the financial year the Group continued to
originate new and repeat business through the Dixons call centre. Having assessed the critical areas of cash flows, going
concern, impairment of assets, accounting estimates and judgements and expected credit losses, the Group has more than
adequate resources to meet its liabilities as they fall due even when stressed to reasonable worst case scenarios.
Prior to the outbreak of COVID-19 the Group already had in place a robust risk management structure which has been
augmented by the adoption of a specific COVID-19 risk assessment and associated updates to operating procedures. In
line with UK government guidance, the Group has facilitated remote working for all staff and supporting a safe working
environment with a focus on staff health and wellbeing. The Group has in place adequate measures to ensure that its going
concern status and ongoing performance will not be materially compromised by the impact of COVID-19.
The Group is exposed to changes in Government policies
Government policies (of both the UK and Australia) are subject to review and change on a periodic basis. Such changes
are likely to be beyond the control of the Group and may adversely affect its operating and financial performance. At
present, the Group is not aware of any reviews or changes that would materially affect its business.
The consumer credit industry is subject to extensive regulation, and companies operating in this sector are
generally required to obtain authorisation from the FCA
The industry in which the Group operates is subject to a range of legislation and regulations. The Financial Conduct
Authority (“FCA”) is the regulatory body responsible for the consumer credit industry in the UK. The Group’s activities
are regulated by a regulatory framework based on a combination of the Financial Services and Markets Act 2000 and its
secondary legislation, the provisions of the Consumer Credit Act 1974 and the FCA Rules. The volume and demands of
regulation, and the regulatory scrutiny have increased since the transfer of regulatory powers from the Office of Fair
Trading to the FCA in 2014.
9
ThinkSmart Limited
Directors’ Report (continued)
In February 2021 the FCA published the Woolard Review on how regulation can support the market for unsecured
lending including the developing buy-now-pay-later (BNPL) sector in which Clearpay is a market leader. The report
recognises that BNPL offers consumers a significant alternative to more expensive traditional credit. The report also
recognises that the current lack of regulation creates potential for consumer harm. Clearpay is committed to promoting
good consumer outcomes and continues to work with HM Treasury and the UK Government regarding a proportionate
regulatory framework for currently exempt BNPL products.
The Group is dependent on information technology
The Group relies on information technology to process new lease contracts and the Group benefits from software
developed for this purpose. The successful operation of the Group’s business depends upon maintaining the integrity of
its computer, communication and information technology systems. These systems and operations are vulnerable to
damage, breakdown or interruption from events which are beyond the Group’s control, such as fire, flood and other
natural disasters; power loss or telecommunications or data network failures; improper or negligent operation of the
Group’s systems by employees, or unauthorised physical or electronic access; and interruptions to internet system
integrity. Any such damage or interruption could cause significant disruption to the operations of the Group, its ability to
trade and its reputation.
The Group is dependent on key personnel and an effective Board
The Group’s continued success depends on its ability to retain current key members of the senior management team, with
their experience and knowledge of the business. While the Group endeavours to retain key management personnel, there
can be no guarantee that its key management personnel will continue in their employment with the Group. Any loss of
key members of the senior management team would disrupt the Group’s operations and may also have a material adverse
effect on the Group’s operating and financial performance and prospects.
DIVIDENDS
At the AGM on 11 November 2020 shareholders approved a return of capital of up to AUD $6,497,111 to shareholders
(the “Distribution”) in two parts:
1. a capital reduction, pursuant to which the Company will return 4.575 cents per share (or depositary interest) to
shareholders (or depositary interest holders) (“Return of Capital”); and
2. a special unfranked dividend of 1.525 cents per ordinary share (or depositary interest) - declared as attaching
conduit foreign income (“Dividend”).
The return of capital and dividend had a record date of 13 November 2020 and were paid on 9 December 2020.
SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD END DATE
There has not arisen, in the interval between the end of the financial period and the date of this report, any other item,
transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect
significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future
financial years.
SIGNIFICANT CHANGES IN THE GROUP’S STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the consolidated entity to the date of this report that have
not otherwise been disclosed elsewhere in the Annual Report.
10
ThinkSmart Limited
Directors’ Report (continued)
CHAIRMAN’S STATEMENT ON CORPORATE GOVERNANCE
The Principles of Corporate Governance
As Chairman, I am responsible for leading the Board and upholding high standards of corporate governance throughout
the Group and particularly at Board level. As a Board we recognise the importance of high standards of corporate
governance and their importance and support to our strategic goals and long-term success. The Company is listed on AIM
and is therefore required to provide details of a recognised corporate governance code that the Board of Directors have
decided to apply. We continue to acknowledge the importance of the principles of the QCA Corporate Governance Code
(the “QCA Code”). Our Directors’ report sets out how we apply the QCA Code principles and explains how our Board
and Committees operate. As a Board we believe that, with the exception of principle 7, we apply the principles of the
QCA Code.
Deliver Growth
The Board has collective responsibility for setting the strategic aims and objectives of the Group. This strategy is set out
in the Group Strategy section of the Directors’ Report and the business model can be found in the Operating and Financial
Review section of the Directors’ Report.
The Board also has responsibility for the Group’s internal control and risk management systems and structures. Our risk
management process is embedded into the business and starts at Board level but is delivered through the Group. The
Board regularly considers and reviews the risks and opportunities for the business and ensures that the mitigation
strategies in place are the most effective and appropriate to the Group’s operations. Further details on our risks can be
found in the Risks section of the Directors’ report.
Dynamic Management Framework
As Chairman, I consider the operation of the Board as a whole and the performance of the Directors individually
regularly. We have not carried out a board performance evaluation so we have not complied with principle 7 of the QCA
Code which requires the Company to carry out a board performance evaluation. We are however a small and cohesive
Board that openly discusses its performance and effectiveness against strategy on a regular basis.
Responsibility for the overall leadership of the Group and setting the Group’s values and standards sits with the Board.
We understand that these values influence and shape our business. Our Company values of being Accountable,
Straightforward, Challenging and operating with Dignity and Respect are taught to all employees and ensure the
customer is at the centre of everything we do. These values also ensure a unified culture and consistent behaviors across
our business.
Build Trust
During the year ThinkSmart has undertaken a number of investor relations activities. These include investor roadshows,
participation at investor conferences and attending other events where investors have the opportunity to meet and talk to the
Directors and senior management. During the year the Board has continued to review governance and the Group’s corporate
governance framework. We review our governance against the QCA Code annually as required by AIM Rule 26.
Ned Montarello
Executive Chairman, 13 September 2021
11
ThinkSmart Limited
Directors’ Report (continued)
BOARD STRUCTURE AND OPERATION
The Board comprises two Executive Directors being Ned Montarello (Chairman) and Gary Halton (CFO), and two Non-
Executive Directors, being David Adams and Peter Gammell, whom the Board believe are independent. Roger McDowell
was a non-executive director for part of the year and retired from the Board of the Company at the Annual General
Meeting on 11 November 2020. The Board continues to consider that its composition gives the necessary mix of industry
specific and broad business experience necessary for the effective governance of the Group.
There are certain matters specifically reserved to the Board for its decision (‘List of Reserved Matters’) which includes
responsibility for the overall management of the Group and long-term objectives and strategy, approvals of the annual
budget, major expenditure and investments and key policies. Board meetings are held on a regular basis and effectively
no decision of any consequence is made other than by the Board. Directors also have ongoing contact on a variety of
issues between formal meetings. All Directors participate in the key areas of decision making. The agenda for the board
meetings is prepared by the Company Secretary in consultation with the Chairman and the Board.
The Board is responsible to shareholders for the proper management of the Group. The Non-Executive Directors have a
particular responsibility to ensure that the strategies proposed by the Executive Directors are fully considered. To enable
the Board to discharge its duties, all Directors have full and timely access to all relevant information. All Directors have
access to the Company Secretary. The Directors who served during the year, and a brief biography of each, is set out
on pages 5 and 6. The Board is supported in its work by Board Committees which are responsible for a variety of tasks
delegated by the Board.
Board Committees
The Board has delegated specific responsibilities to the Audit Committee and the Remuneration and Nominations
Committee. Each Committee has written terms of reference setting out its duties, authority and reporting responsibilities.
These terms of reference are reviewed annually to ensure they remain relevant and appropriate and reflect changes to
legislation and best practice.
Training and Development
Directors are encouraged to attend training and continuing professional development courses as required. The Company
Secretary provides updates at each Board meeting on governance and regulatory matters.
Time Commitment
The nature of the role of Non-Executive Directors makes it difficult to place a specific time commitment however, a
minimum of two days per month is what the Company anticipates as reasonable for the proper performance of duties.
Directors are expected to attend all Board and Committee meetings as well as the Annual General Meeting.
External Advisers
The Board seeks advice on various matters from its Nominated Adviser (Canaccord Genuity) and lawyers (Shoosmiths
in the UK and Herbert Smith Freehills LLP in Australia). The Board also uses the services of an external company
secretarial provider, Trakehner Cosec Limited.
Board Evaluation
The Company does not currently comply with principle 7 of the QCA Code, which requires the Company to carry out a
formal Board performance evaluation. The Board keeps this under review and regularly discusses performance and
effectiveness on an informal basis.
Succession Planning
The Company through its Remuneration and Nomination Committee has a formal process in place for succession on the
Board and for Board appointments. When vacancies arise the Remuneration and Nomination Committee assesses the
skills and expertise already on the Board and any additional skills and expertise required. External head hunters are
appointed to search for appropriate candidates.
12
ThinkSmart Limited
Directors’ Report (continued)
BOARD MEETING ATTENDANCE
Directors’ attendance at Board meetings is shown below
Nomination and
Audit and Risk Remuneration
Board Committee Committee
Director Meetings Meetings Meetings
N Montarello 4/4 – –
P Gammell 4/4 2/2 2/2
G Halton 4/4 – –
D Adams 4/4 2/2 2/2
R McDowell* 0/1 – –
* retired from the Board 11 November 2020
During the financial year, in addition to the official Board meetings, the Board has implemented a number of corporate
decisions by virtue of Circular Resolutions as required.
The Board has established an Audit Committee and a Nomination and Remuneration Committee, which each have
written terms of reference, to deal with specific aspects of the Group’s affairs. The terms of reference for each of these
committees is available on the Company’s website.
AUDIT COMMITTEE
The Audit Committee consists entirely of Non-Executive Directors. The Chairman, David Adams, has extensive financial
experience and is a qualified accountant. The other Member is Peter Gammell. The Audit Committee meets as often as
it deems necessary but in any case at least twice a year, with meetings scheduled at appropriate intervals in the reporting
and audit cycle. Although only members of the Committee have the right to attend meetings, standing invitations are
extended to the Executive Chairman and the Chief Financial Officer who attend meetings as a matter of practice. Other
non-members generally attend all or part of any meeting as and when appropriate. The external auditors attend all
meetings and also have the opportunity to meet in private with the Committee on each occasion. In addition, the
Chairman of the Audit Committee has regular contact with the external auditors throughout the year.
Duties
The main duties of the Audit Committee are set out in its Terms of Reference and include the following:
• To engage in the pro-active oversight of the Company’s financial reporting and disclosure processes and
overseeing and reviewing the outputs of the process;
• To monitor the integrity of the consolidated financial statements of the Company, including its annual and
half-year reports;
• To review and challenge where necessary the consistency of and any changes to significant accounting policies,
whether the Company has followed appropriate accounting standards and made appropriate estimates and
judgements, the going concern assumption and all material information presented with the consolidated financial
statements;
• Ensure procedures are in place which are designed to verify the existence and effectiveness of accounting and
financial systems and other systems of internal control which relate to financial risk management;
• Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding
accounting, internal controls and auditing matters and the procedures for the confidential, anonymous submission
of concerns by employees;
• To consider and make recommendations to the Board, to be put to shareholders for approval at the Annual General
Meeting, in relation to the appointment, reappointment and removal of the Company’s external auditor;
• To oversee the relationship with the external auditor including approval of their remuneration, approval of their
terms of engagement, annual assessment of their independence and objectivity taking into account relevant
professional and regulatory requirements and the relationship with the auditor as a whole, including the provision
of any non-audit services;
13
ThinkSmart Limited
Directors’ Report (continued)
• To meet regularly with the external auditor and at least once a year, without any Executive Director or other
member of management present to discuss any issues arising from the audit; and
• To review and approve the Audit Plan and review the findings of the audit.
The main activities of the Audit Committee during the year
The principal areas of focus for the Committee included the following items:
• Review of the audit plan, process and scope;
• Review of significant risks;
• Review of significant issues from the audit report;
• Going concern review;
• Review of the Annual and half year Reports;
• Approval of management representation letter; and
• Review of the independence of the Auditor, review of Auditor fees and engagement letter.
The Audit Committee has reviewed the following matters in relation to these financial statements and is of the opinion
that the Group has adopted appropriate accounting policies along with the associated estimates and judgements:
Area of review
Revenue recognition
Valuation of financial asset
Management override of controls
Points considered
The Group has multiple revenue streams which are generated through the
provision of finance and leasing services and the holding of a financial asset.
The Group recognises revenue under AASB 15 – Revenue from Contracts
with Customers, AASB 16 – Leases and AASB 9 – Financial Instruments. For
each of these the Audit committee has reviewed the technical accounting
documents prepared by the Group’s management which detail the rational for
the application of each standard along with support for key estimates and
judgements. The Audit Committee has considered whether the key estimates
and judgements remain valid as the operating environment evolves including
the likely impact of COVID-19.
In addition to their own review the Audit Committee has also considered any
matters raised by the external auditors in respect of revenue recognition. The
Audit Committee is therefore comfortable that appropriate accounting policies
have been applied and that the key estimates and judgements used are fair and
reasonable.
The Group has appointed an independent valuation expert to provide a
valuation report on the Group’s holding in Clearpay which is classified as a
financial asset under AASB 9 – Financial Instruments. The Audit Committee
has reviewed the valuation report and is satisfied that the approach taken,
methodology applied, inputs selected and assumptions made are reasonable
and appropriate. The Audit Committee has also considered all matters raised
by the external auditors in relation to the valuation.
The Audit Committee monitors the effectiveness of the Group’s operating and
risk management framework. The Board of Directors have appointed the
Operating and Risk Committee to oversee the implementation of the Group’s
operating and risk framework including the management of associated
corporate governance, training, processes and controls. The Audit Committee
has reviewed the reports of the Operating and Risk Committee as presented to
the Board. The Audit Committee has considered how the Group’s processes
and controls are implemented within the overall control environment and is
satisfied that these are adequate and proportionate to the associated risks.
14
ThinkSmart Limited
Directors’ Report (continued)
Role of the external auditor
The Audit Committee monitors the relationship with the external auditor, BDO, to ensure that auditor independence and
objectivity are maintained. As part of its review the Committee monitors the provision of non-audit services by the
external auditor. The external auditor did not provide any non-audit services in the year ending 30 June 2021 (2020: £nil).
During the year the Audit Committee assessed the auditor’s performance by review against the external audit terms of
engagement with consideration to the scope of the external audit, timetable, materiality, audit strategy and fees. The Audit
Committee reviewed the written reports produced by the external auditors, considered the capabilities demonstrated by
the external audit team, their independence, challenge of management and quality of communications. The assessment
also took into account the views of the Group’s finance team.
Internal audit
At present the Company does not have an internal audit function. Given the current size of the Company and control
systems that are in place the Committee believes that there is sufficient management oversight to highlight any areas of
weaknesses in the financial reporting systems. The Committee reviews the need for an internal function at least annually.
INTERNAL FINANCIAL CONTROL
The Board acknowledges its responsibility for establishing and monitoring the Group’s systems of internal control.
Although no system of internal control can provide absolute assurance against material misstatement or loss, the Group’s
systems are designed to provide the Directors with reasonable assurance that problems are identified on a timely basis
and dealt with appropriately. The Group maintains a comprehensive process of financial reporting. The annual budget is
reviewed and approved before being formally adopted. Other key procedures that have been established and which are
designed to provide effective control are as follows:
Management structure – The Board meets regularly to discuss all issues affecting the Group; and
Investment appraisal – The Group has a clearly defined framework for investment appraisal and approval is required by
the Board where appropriate.
The Board regularly reviews the effectiveness of the systems of internal control and considers the major business risks
and the control environment. No significant deficiencies have come to light during the year and no weakness in internal
financial control have resulted in any material losses, contingencies which would require disclosure as recommended by
the guidance for Directors on reporting on internal financial control.
DIRECTORS’ INTERESTS
The relevant interests of each Director in ThinkSmart Limited’s shares and options at the date of this report are as follows:
Options
Number of granted over
ordinary shares ordinary shares
N Montarello 31,339,886 1,073,863
P Gammell 12,582,572 –
G Halton – 470,659
D Adams 100,000 –
Unissued Shares under Options
At the date of this report there were 1,724,532 unissued ordinary shares of the Company subject to option or performance
rights, comprising:
Number
of shares Exercise price Expiry date
under option of options of options
21 December
1,724,532 £0.1745 2026
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. These options do not entitle the holder to participate in any share issue of the
Company or any other body corporate.
15
ThinkSmart Limited
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED)
The Nomination and Remuneration Committee is comprised of Peter Gammell (Chairman of the Committee) and David
Adams. The Committee is responsible for making recommendations to the Board on the Group’s framework of Executive
remuneration and its cost, and recommendations on Board recruitment and succession planning. The Committee
determines the contract terms, remuneration and other benefits for each of the Executive Directors. The Board itself
determines the remuneration of the Non-Executive Directors. The report on Directors’ remuneration is set out on page 19.
The main duties of the Remuneration Committee are set out in its Terms of Reference and include:
• Have responsibility for setting the remuneration policy for the Executive Directors and the Company’s Chairman;
• Recommend and monitor the level and structure of remuneration for senior management;
• The authority to appoint remuneration consultants and commission any reports or surveys required to fulfil its
remit;
• Approve the design of and determine the targets for any schemes of performance-related remuneration;
• Oversee any major changes in employee benefit structures throughout the Company or Group;
• Agree the policy for authorising claims for expenses from the Executive Directors and Chairman;
• Ensure that contractual terms on termination, and any payments made, are fair to the individual, and the Company
and that failure is not rewarded and that the duty to mitigate loss is fully recognised;
• Review the structure, size and composition (including the skills, knowledge, experience and diversity);
• Consider succession planning for directors and other senior executives in the course of its work, taking into
account the challenges and opportunities facing the Company, and what skills and expertise are therefore needed
on the Board in the future; and
• Be responsible for identifying and nominating for the approval of the Board, candidates to fill board vacancies as
and when they arise.
ThinkSmart Limited is an Australian registered company and is not required to prepare a remuneration report that
complies with the Australian Corporations Act 2001 (the Act). However, in the interests of maintaining the high standards
of corporate governance to which the Directors of ThinkSmart have committed, the following remuneration report has
been prepared voluntarily.
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. This Report contains the following sections:
A: Principles of remuneration;
B: Key Management Personnel remuneration;
C: Service agreements;
D: Share Plans;
E: Bonus remuneration; and
F: Key Management Personnel transactions.
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, for the year ended 30 June 2021, comprise:
16
ThinkSmart Limited
Directors’ Report (continued)
Executive Directors
N Montarello – Executive Chairman & Chief Executive Officer
G Halton – Chief Financial Officer
Non-Executive Directors
P Gammell
D Adams
R McDowell (resigned 11 November 2020)
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:
(cid:129) Provide competitive rewards to attract, retain and motivate talented Directors and Executives;
(cid:129) 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;
(cid:129) Set demanding performance hurdles which are clearly linked to an Executive’s remuneration; and
(cid:129) 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:
(cid:129) the capability and experience of the individual;
(cid:129) the individual’s ability to control the relevant segment’s performance; and
(cid:129) 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 AU$600,000 per annum and
were approved by shareholders at a previous general meeting. The total fees paid in the financial year were £62,239. 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:
(cid:129) base pay and benefits;
(cid:129) short-term performance incentives (STIs);
(cid:129) long-term incentives through participation in the ThinkSmart Long Term Incentive Plan (LTIPs); and
(cid:129) other remuneration such as superannuation.
17
ThinkSmart Limited
Directors’ Report (continued)
At risk
Fixed Short-term Long-term
remuneration incentive incentive
CEO 100% 0% 0%
Other executives 86% 14% 0%
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
periodically by the Nomination and Remuneration Committee.
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. 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. This Long Term Incentive Plan was then updated in
December 2016 following admission to AIM to be measured against Group EPS. The details of these schemes are set out
in the Remuneration Report.
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 year and the previous three financial
years.
Restated Restated
12 Months 12 Months 12 Months 12 Months
to June 2021 to June 2020 to June 2019 to June 2018
Profit/(loss) attributable to owners
of the company (£,000) £71,664 £53,042 £8,659 (£4,558)
Basic EPS (pence per share) 67.28 pence 49.80 pence 8.20 pence (4.34) pence
Dividends paid (£,000) £901 £1,135 £2,214 –
Dividend paid per share (pence) 0.85 pence 1.09 pence 2.08 pence –
Capital return paid (£,000) £2,757 £2,047 £2,186 –
Capital returned per share (pence) 2.59 pence 1.92 pence 2.05 pence –
Share price at year end £0.725 £0.205 £0.078 £0.093
Change in share price £0.520 £0.127 (£0.015) (£0.052)
18
ThinkSmart Limited
Directors’ Report (continued)
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B
ThinkSmart Limited
Directors’ Report (continued)
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.
Remuneration and other terms of employment for the Chief Executive Officer are formalised in a service agreement. All
employment agreements are unlimited in term but capable of termination with one to six 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 on page 17 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 Plans
New Long Term Incentive Plan
The Company adopted a new long term incentive plan from December 2016 to align the interests of senior management
with those of the Shareholders. The performance conditions of all active Plan Options issued were met during the
performance period and consequently these options vested in December 2019, and can be exercised as instructed by the
Participants. The options will normally lapse and cease to be exercisable on the 10th anniversary of the Date of Grant.
It is a condition of exercise of the Award that the Participant agrees to pay the Company or any person nominated for this
purpose an amount equal to the Tax Liability. In addition there is a condition of exercise of the Award for the Participant
to enter into a NIC Agreement to pay Employers’ NIC on gains in excess of 100% of the award value at the date of grant.
There are currently 1,724,532 of the above Plan Options currently on issue, as set out in the table below.
Number of plan options Performance period Exercise price Vesting date Expiry date
1,724,532 01/07/16-30/06/19 £0.1745 21/12/19 22/12/2026
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:
Financial
Number year in
granted and which grant
Instrument vested Grant Date vested Expiry date
Directors
N Montarello Share options 1,073,863 22/12/2016 2020 22/12/2026
G Halton Share options 470,659 22/12/2016 2020 22/12/2026
Employee Options and Loan-Funded Shares
Held at Held at Cancelled, Vested and
30 June date of new Granted as forfeited or Held at Vested during exercisable at
2020 appointment compensation Exercised expired 30 June 2021 the year 30 June 2021
Directors
N Montarello 1,073,863 – – – – 1,073,863 – 1,073,863
G Halton 470,659 – – – – 470,659 – 470,659
All of the amounts held at 30 June 2021 are Employee Share Options.
20
ThinkSmart Limited
Directors’ Report (continued)
Movement in shares
The movement during the reporting period in the number of ordinary shares in ThinkSmart Limited held, directly,
indirectly or beneficially, by each Key Management Person, including their related parties, is as follows:
Loan-funded
share issue
Held at Held at Received on Loan- cancelled, Held at
1 July date of exercise of funded forfeited Granted as 30 June
2020 Purchases Rights issue appointment Sales options share issue or expired compensation 2021
Directors
N Montarello 31,339,886 – – – – – – – – 31,339,886
P Gammell 12,582,572 – – – – – – – – 12,582,572
D Adams 100,000 – – – – – – – – 100,000
Where personnel are no longer employed on the report date, the share movement only relates to the period up to their
respective resignation dates.
E. 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 Maximum
remuneration(a) entitlement % vested in % forfeited in
£ £ year year(b)
Executive Directors
N Montarello – – –% –%
G Halton 25,000 25,000 100% –%
(a) Amounts included in remuneration for the financial year represent the amount that vested in the financial year based on the discretion of
the Board pertaining to the financial year ended 30 June 2021. 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 year.
F. 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 2021 (30 June
2020: nil).
Other Key Management Personnel transactions
During the financial year there were no payments made to any other entities in which Key Management Personnel have
significant control or influence over.
Options and rights over equity instruments
Options over ordinary shares in ThinkSmart Limited issued to Key Management Personnel during the financial year are
detailed in Note 19(b) and pages 20 to 21 of the Remuneration Report.
End of audited Remuneration Report.
INDEMNIFICATION AND INSURANCE
During the year ended 30 June 2021, 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 year, 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.
21
ThinkSmart Limited
Directors’ Report (continued)
ENVIRONMENTAL REGULATION
The Group’s operations are not subject to any significant environmental regulation under both Australian Commonwealth
and State legislation in relation to its activities.
NON-AUDIT SERVICES
BDO have conducted the audit of the Company’s consolidated financial statements for the financial year ended 30 June
2021. During the year BDO have not provided any services to ThinkSmart prior to conducting the audit of the financial
statements for the year ended 30 June 2021, this includes any non-audit services.
Details of the amounts paid or payable and expensed to BDO in respect of audit and non-audit services provided during
or in respect of the year are set out below.
12 Months to 12 Months to
30 June 2021 30 June 2020
£ £
Audit and review of consolidated financial statements 124,791 139,948
Total paid or payable to Company auditors 124,791 139,948
ROUNDING
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191
and in accordance with that Instrument, amounts in the consolidated financial statements and the Directors’ report have
been rounded off to the nearest thousand pounds, unless otherwise indicated.
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration which forms part of this report is included in page 23 of the financial report.
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, 13 September 2021
22
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth
WA 6872 Australia
Declaration of Independence
by Ashleigh Woodley to the
Directors of Thinksmart Limited
As lead auditor of ThinkSmart Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and
belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of ThinkSmart Limited and the entities it controlled during the period.
Ashleigh Woodley
Director
BDO Audit (WA) Pty Ltd
Perth, 13 September 2021
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110
275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by
guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
23
ThinkSmart Limited
Directors’ Declaration
Directors’ Declaration
1. In the opinion of the Directors of ThinkSmart Limited (‘the Company’):
(a) The consolidated financial statements, notes and disclosures 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 2021 and of its
performance for the financial year ended on that date; and
ii. Complying with the Australian Accounting Standards and the Corporations Regulations 2001.
(b) 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 2021.
3. The Directors draw attention to Note 2(a) to the consolidated financial statements, which includes a statement of
compliance with Australian Accounting Standards.
Signed in accordance with a resolution of the Directors:
N Montarello
Chairman
Perth, Western Australia, 13 September 2021
24
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 2021
12 Months to 12 Months to
June 2021 June 2020
Notes £,000 £,000
Continuing operations
Revenue 6(a) 4,286 6,079
Other revenue 6(b) 62 253
Total revenue 4,348 6,332
Customer acquisition cost 6(c) (258) (627)
Cost of inertia assets sold 6(d) (335) (700)
Other operating expenses 6(e) (3,431) (4,270)
Depreciation and amortisation 6(f) (1,401) (2,047)
Impairment gains/(losses) 6(g) 41 (2)
Gains on Financial Instruments 6(h) 71,267 54,418
Other gains 6(i) 1,450 –
Profit before tax 71,681 53,104
Income tax charge 7 (17) (62)
Net Profit after tax – attributable to owners of the Company 71,664 53,042
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss,
net of income tax:
Foreign currency translation differences for foreign operations (43) 146
Total items that may be reclassified subsequently to profit or loss
net of income tax (43) 146
Other comprehensive income/(loss) for the year, net of income tax (43) 146
Total comprehensive income for the year attributable to
owners of the Company 71,621 53,188
Earnings per share
Basic Earnings per share (pence) 27 67.28 49.80
Diluted Earnings per share (pence) 27 66.21 48.99
The attached notes form an integral part of these consolidated financial statements.
25
ThinkSmart Limited
Consolidated Statement of Financial Position
Consolidated Statement of Financial Position
As at 30 June 2021
June 2021 June 2020
Notes £,000 £,000
Current assets
Cash and cash equivalents 20(a) 7,067 8,805
Trade receivables 24(c) 55 129
Finance lease receivables 8 38 431
Other current assets 9 380 924
Total current assets 7,540 10,289
Non-current assets
Finance lease receivables 8 – 15
Plant and equipment 13 302 460
Intangible assets 14 590 1,433
Financial assets at fair value through profit or loss 10 125,000 53,733
Contract assets 11 777 1,430
Other non-current assets 12 2,069 2,147
Total non-current assets 128,738 59,218
Total assets 136,278 69,507
Current liabilities
Trade and other payables 16 (728) (1,195)
Lease liabilities 17 (103) (94)
Contract liabilities 18 (410) (648)
Provisions 16 (202) (255)
Total current liabilities (1,443) (2,192)
Non-current liabilities
Lease liabilities 17 (46) (148)
Contract liabilities 18 (332) (679)
Total non-current liabilities (378) (827)
Total liabilities (1,821) (3,019)
Net assets 134,457 66,488
Equity
Issued capital 19(a) 10,413 13,164
Reserves (2,875) (2,832)
Accumulated profits 126,919 56,156
Total equity 134,457 66,488
The attached notes form an integral part of these consolidated financial statements.
26
ThinkSmart Limited
Consolidated Statement of Changes in Equity
Consolidated Statement of Changes in Equity
For the Financial Year Ended 30 June 2021
Foreign Attributable
Fully paid currency to equity
ordinary translation Accumulated holders of the
shares reserve Profit parent
£,000 £,000 £,000 £,000
Consolidated
Balance at 1 July 2019 15,211 (2,977) 4,340 16,574
Effects of adoption of IFRS 16 – (1) (98) (99)
Restated Balance at 1 July 2019 15,211 (2,978) 4,242 16,475
Profit for the year – – 53,042 53,042
Exchange differences arising on translation of
foreign operations, net of tax – 146 – 146
Total comprehensive income for the year – 146 53,042 53,188
Transactions with owners of the Company,
recognised directly in equity
Contributions by and distributions to owners of
the Company
Capital return paid (2,047) – – (2,047)
Dividends paid – – (1,135) (1,135)
Recognition of share-based payments – – 7 7
Balance at 30 June 2020 13,164 (2,832) 56,156 66,488
Balance at 1 July 2020 13,164 (2,832) 56,156 66,488
Profit for the year – – 71,664 71,664
Exchange differences arising on translation of
foreign operations, net of tax – (43) – (43)
Total comprehensive income for the year – (43) 71,664 71,621
Transactions with owners of the Company,
recognised directly in equity
Contributions by and distributions to owners of
the Company
Capital return paid (2,757) – – (2,757)
Dividends paid – – (901) (901)
Share options exercised 6 – – 6
Balance at 30 June 2021 10,413 (2,875) 126,919 134,457
The attached notes form an integral part of these consolidated financial statements.
27
ThinkSmart Limited
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
For the Financial Year Ended 30 June 2021
12 Months to 12 Months to
June 2021 June 2020
Notes £,000 £,000
Cash Flows from Operating Activities
Receipts from customers 4,033 4,741
Payments to suppliers and employees (3,796) (4,670)
Receipts in respect of lease receivables 511 3,244
Payments from other interest-bearing liabilities, inclusive of related costs – (2,533)
Interest received 65 108
Interest and finance charges paid (92) (380)
Receipts/(Payments) from security guarantee 35 (29)
Income tax (paid)/received (17) 478
Other gains receipts 1,450 –
Net cash from operating activities 20(b) 2,189 959
Cash Flows from Investing Activities
Payments for plant and equipment (17) (398)
Payment for intangible assets – software & contract rights (122) (111)
Payments for purchase of financial instruments – (987)
Receipts from sale of financial instruments – 5,376
Net cash from investing activities (139) 3,880
Cash Flows from Financing Activities
Payment of lease liabilities (93) (114)
Dividends paid (901) (1,135)
Proceeds from share issue net of costs 6 –
Share buyback/return of capital net of costs (2,757) (2,047)
Net cash used in financing activities (3,745) (3,296)
Net (decrease)/increase in cash and cash equivalents (1,695) 1,543
Effect of exchange rate fluctuations on cash held (43) 163
Cash and cash equivalents at beginning of the financial year 8,805 7,099
Total cash and cash equivalents at the end of the financial period 20(a) 7,067 8,805
Restricted cash and cash equivalents at the end of the financial period 20(a) (60) (61)
Net available cash and cash equivalents at the end of the financial period 7,007 8,744
The attached notes form an integral part of these consolidated financial statements.
28
ThinkSmart Limited
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
1. General Information
ThinkSmart Limited (the “Company” or “ThinkSmart”) is a limited liability company incorporated in Australia.
The consolidated financial statements of the Company comprise the Company and its subsidiaries (the “Group”).
The Group is a for profit entity and its principal activity during the year was the provision of lease and rental
financing services in the UK and the holding of a financial asset. The address of the Company’s registered office
is Suite 5, 531 Hay Street Subiaco, WA 6008, Australia and further information can be found at
www.thinksmartworld.com.
2. Basis of Preparation
(a) Statement of compliance
The Company is listed on the Alternative Investment Market (“AIM”), a sub-market of the London Stock
Exchange. The financial information has been prepared in accordance with the AIM Rules for Companies and in
accordance with this basis of preparation, including the significant accounting policies set out below.
The consolidated financial statements are general purpose financial statements which have been prepared and
approved by the Directors in accordance with Australian Accounting Standards (AASBs) adopted by the
Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial
statements comply with International Financial Reporting Standards (IFRS) adopted by the International
Accounting Standards Board (IASB) as well as International Financial Reporting Standards as adopted by the UK
(“Adopted IFRSs’’). The consolidated financial statements were authorised for issue by the Board of Directors on
13 September 2021.
(b) Basis of measurement
The financial report has been prepared on the basis of historical cost, except for financial instruments measured
at fair value. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are
presented in British Pounds (“GBP”) unless otherwise noted.
(c) Functional and presentation currency
These consolidated financial statements are presented in British Pounds, which is the Group’s functional currency.
The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that instrument, amounts in the consolidated financial statements and Directors’
report have been rounded off to the nearest thousand pounds, unless otherwise stated.
(d) Going Concern
The consolidated financial statements are prepared on a going concern basis, as the Directors are satisfied that the
Group has the resources to continue in business for the foreseeable future (which has been taken as 12 months
from the date of approval of these consolidated financial statements). In making this assessment, the Directors
have considered a wide range of information relating to present and future conditions, including the current state
of the statement of financial position, future projections of profitability, cash flows and resources and the longer
term strategy of the business. The Directors have assessed the impact of COVID-19 on the current and forecast
position of the Group. As the Group has only been minimally impacted the Directors are satisfied that the Group
has more than adequate resources to meet its liabilities as they fall due even when stressed to reasonable worst
case scenarios.
29
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
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 year 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 applied 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.
(c) Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled
in exchange for transferring goods or services to a customer. For each contract with a customer, the Group:
identifies the contract with a customer; identifies the performance obligations in the contract; determines the
transaction price which takes into account estimates of variable consideration and the time value of money;
allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone
selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance
obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as
discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The
measurement of variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable
consideration is subsequently resolved. Amounts received that are subject to the constraining principle are
recognised as a contract liability.
Some forms of revenue fall outside the scope of AASB 15 – Revenue from Contracts with Customers, of relevance
to ThinkSmart this includes revenue under AASB 16 Leases (previously AASB 117) and AASB 9 Financial
Instruments.
The Group has relationships with retail partners to act as a facilitator and arranger of financing arrangements to
allow those retailers to provide technological products to consumers under short/medium term finance contracts.
The financing is obtained by the Group from third party funding partners.
Depending on the nature of the agreements with those funders, these contracts result in the Group acting as a
lessor or as the agent of the funder (who is then the lessor).
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ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
(c) Revenue recognition (continued)
Where the Group is acting as the lessor it follows the treatment outlined in AASB 16. In accordance with AASB
16 nearly all the contracts are considered to be finance leases and the only source of revenue is Finance Lease
Income. This Finance Lease Income is recognised on the effective interest rate method at the constant rate of
return. This method amortises the lease asset over its economic life down to the estimate of any unguaranteed
residual value that is expected to be accrued to the Group at the end of the lease.
Where the Group is acting as the agent it receives the following revenue streams:
Commission income
This includes the upfront cash transaction fee receivable from the funder together with the non-cash consideration
between the funder and the end customer (for the contract or inertia asset) which is allocated under AASB 15
between the inception/brokerage of the lease arrangement, a financial guarantee contract premium over the lease
term, a contract liability reflecting the reversal constraint for the potential refund of the transaction fee, and the
non-cash consideration contract asset accruing over the lease term.
Extended rental income
Once the contract between the funder and the end customer expires the asset becomes the property of the Group
and any extended rental income is payable to the Group, being recognised when receivable.
Income earned from sale of inertia assets
At the end of the extended rental period any proceeds on disposal of the asset are recognised at the point of
disposal.
Services revenue – insurance
Lease customers of hire agreements originated by the Group are required to have suitable insurance in respect of
the leased equipment. If these customers do not make independent insurance arrangements the Group arrange
insurance and collect the premiums on their behalf, receiving a commission from the insurer for doing so.
The Group has a further revenue stream for the provision of outsourced services. The Group is a B2B provider of
call centre customer services. The services provided by the Group are simultaneously created, transferred and
consumed at a point in time with the corresponding revenue being recognised at the same point in time. The
provision of call centre services comprise the whole and single contractual obligation and all revenue is recognised
at the same time as this is fulfilled. There is no variable income attached to the services provided and all costs are
expensed as incurred.
(d) Cash and cash equivalents
Cash comprises cash on hand and demand deposits with an original maturity of less than 3 months. Cash
equivalents are short-term, highly liquid investments that are readily converted to known amounts of cash which
are subject to an insignificant risk of change in value. Restricted cash comprises amounts held in trust in relation
to dividends paid on employee loan funded shares.
(e) 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.
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ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
(e) Plant and equipment (continued)
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
3 to 5 years
Leasehold improvements
the lease term
Depreciation methods, useful lives and residual values are reviewed at each reporting date. If on review the
remaining useful life of any asset is found to be shorter than its useful life at recognition then the depreciation
schedule is accelerated to reflect the shorter remaining useful life with any adjustment charged to depreciation
cost.
(f) Customer acquisition costs
Customer acquisition costs are capitalised as an asset where such costs are incremental to obtaining a contract
between the funder and the end customer, for which the Group receives commission under the funder contract,
and are expected to be recovered. Customer acquisition costs are amortised on a straight-line basis over the term
of the contract.
Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained or which
are not otherwise recoverable from a customer are expensed as incurred to profit or loss. Incremental costs of
obtaining a contract where the contract term is less than one year is immediately expensed to profit or loss.
(g) 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 and measured at fair value.
(h) Financial instruments
The financial instruments held by the Group are the financial assets and financial liabilities reflected in the
statement of financial position. As at 30 June 2021 the financial instruments held by the Group comprised the 10%
holding in Clearpay Finance Limited and the Financial Guarantee Contract with STB. Other assets and liabilities
held by the Group excluded from financial instruments include lease contracts which are accounted for under
AASB 16, property, plant and equipment, intangible assets, prepayments, provisions, tax liabilities and
investments in subsidiaries.
(i) Non-derivative financial assets
The Group classifies financial assets as subsequently measured at amortised cost, fair value through other
comprehensive income or fair value through profit or loss on the basis of both:
• The Group’s business model for managing the financial assets; and
• The contractual cash flow characteristics of the financial asset.
The Group measures a financial asset at fair value through profit or loss unless it is measured at amortised
cost or fair value through other comprehensive income having met the criteria specified in AASB 9 –
Financial Instruments in respect of business model and cash flows that are solely payments of principal and
interest.
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.
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ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
(h) Financial instruments (continued)
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.
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 relation to business customers who do not already have insurance, a policy is set up through a third party
insurance provider. The Group pays for the insurance cover upfront and also recognises its income upfront
which creates an insurance prepayment on the statement of financial position. The Group subsequently
collects the insurance premium from the customer on a monthly basis over the life of the rental agreement,
which reduces the prepayment. Where a policy is cancelled, the unexpired premiums are refunded to the
Group.
Other financial assets
Other financial assets are initially valued at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently
measured at either amortised cost or fair value depending on their classification. Classification is
determined based on both the business model within which assets are held and the contractual cash flow
characteristics of the financial asset.
(ii) Non-derivative financial liabilities
The Group initially recognises financial liabilities on the date 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.
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, are initially recognised at fair value and
subsequently at the higher of the amount of expected credit losses determined under AASB 9 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. Any liability remaining is derecognised in profit or loss when the guarantee is discharged,
cancelled or expires.
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ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
(h) Financial instruments (continued)
(iii) Impairment of assets
Financial assets, including finance lease receivables and loan receivables
The Group recognises a loss allowance for expected credit losses on financial assets which are either
measured at amortised cost or fair value through profit or loss. The measurement of the loss allowance
depends upon the Group’s assessment at the end of each reporting period as to whether the financial
instrument’s credit risk has increased significantly since initial recognition, based on reasonable and
supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month
expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit
losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset
has become credit impaired or where it is determined that credit risk has increased significantly, the loss
allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss
recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls
over the life of the instrument discounted at the original effective interest rate. For lease receivables the Group
applies the simplified approach as such the loss allowance is based on the asset’s lifetime expected credit
losses.
For financial assets measured at fair value through other comprehensive income, gains or losses are
recognised in other comprehensive income, except for impairment gains of losses and foreign exchange
gains or losses, until the asset is derecognised or reclassified. In all other cases, the loss allowance in excess
of amounts previously recognised is recognised in profit or loss.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than 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 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 Group 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 (Group 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.
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ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
(i) Intangible assets
Intellectual property
Intellectual property is recorded at the cost of acquisition and is amortised on a straight line basis over 20 years.
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 contract
rights, the expected useful life is the earlier of the initial contract minimum 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 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.
(j) 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 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.
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.
(k) 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.
(l) 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 probable that future taxable profit will be available to offset in future periods.
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ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
(l) Income tax (continued)
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 consolidated 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 the initial recognition of 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.
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 year
Current and deferred tax is recognised as an expense or income in profit or 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.
(m) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (VAT/GST) except:
(i) where the amount of VAT/GST 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
(ii) receivables and payables which are recognised inclusive of VAT/GST.
The net amount of VAT/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 VAT/GST 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.
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ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
(n) 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 at 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.
(o) 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.
(p) 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 rate that reflects current
market assessments of the time value of money and the risks specific to the liability.
(q) 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. 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); and
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 highest 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.
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ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
(q) Measurement of fair values (continued)
Further information about the assumptions made in measuring fair values is included in the following notes:
Note 10 – financial assets at fair value through profit or loss;
Note 19(b) – share based payment transactions; and
Note 24(b) – financial instruments.
(r) Government Grants
In the current year the Group has applied for and received government support through the UK government
Coronavirus Job Retention Scheme (CJRS). The Group recognises government grants only where it is reasonably
certain that the Group will comply with the conditions attached to the grant and it is reasonably likely that the
grant will be received. The CJRS is designed to compensate for staff costs so the Group recognises grant funding
in the period necessary to match it with the corresponding staff costs. A grant receivable as compensation for
expenses already incurred is recognised when it becomes receivable. The Group presents the relevant expenses net
of any grant income received (note 6(e)).
(s) Leases where the Group acts as lessee
The Group recognises assets and liabilities for all leases with a term of more than 12 months, unless the underlying
asset is of low value. On entering a lease contract the Group recognises a right-of-use asset representing its right
to use the underlying leased asset and a lease liability representing its obligation to make lease payments. The right
of use asset is measured as being equal to the value of the lease liability at the inception of the lease, plus the initial
direct costs incurred and the estimated costs for restoring the property to its original condition. Depreciation on
the right of use asset is charged on a straight-line basis over the ten year period of the lease. The lease liability in
respect of the lease payments due to the lessor is measured at each reporting date as the present value of all future
lease payments due. As the interest rate implicit in the lease is not readily determinable the discount rate of 9.14%
used is the Group’s incremental borrowing rate being the STB cost of funds using an estimated 10 year interest
rate swap at February 2013. The only lease held by the Group which is relevant to AASB 16 is for its office space
at Oakland House, Manchester.
(t) New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Australian Accounting Standards that are mandatory for the
current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory
have not been early adopted. The following Accounting Standards and Interpretations have been adopted in the
annual financial statements for the year ended 30 June 2021, but have not had a material effect on the Group:
Interest Rate Benchmark Reform – IBOR ‘phase 2’ (Amendments to AASB 9, AASB 139, AASB 7, AASB 4
and AASB 16)
These amendments to various AASB standards are mandatorily effective for reporting periods beginning on or
after 1 January 2021. As the Group has no loans whose contractual terms are affected by interest benchmark
reform there was no impact on the Group from the adoption of these amendments.
(u) Accounting policies available for early adoption not yet adopted
A number of new and revised standards issued by the AASB have not yet come into effect. Below are those which
are effective in future accounting periods that the group has decided not to adopt early.
The following amendments are effective for accounting periods beginning on or after 1 January 2022:
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to AASB 137);
• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to AASB 116);
• Insurance Contracts – In June 2020, the AASB issued amendments to AASB 17, including a deferral of its
effective date to 1 January 2023;
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ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
3. Significant Accounting Policies (continued)
(u) Accounting policies available for early adoption not yet adopted (continued)
• Annual Improvements to IFRS Standards 2018-2020 (Amendments to AASB 1, AASB 9, AASB 16 and
AASB 141); and
• References to Conceptual Framework (Amendments to AASB 3).
In January 2020, the AASB issued amendments to AASB 101, which clarify the criteria used to determine whether
liabilities are classified as current or non-current. These amendments clarify that current or non-current
classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the
liability for at least twelve months after the reporting period. The amendments also clarify that ‘settlement’
includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity
instruments arises from a conversion feature classified as an equity instrument separately from the liability
component of a compound financial instrument. The amendments were originally effective for annual reporting
periods beginning on or after 1 January 2022. However, in May 2020, the effective date was deferred to annual
reporting periods beginning on or after 1 January 2023.
4. Critical accounting estimates and judgements
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements. Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its
judgements, estimates and assumptions on historical experience and on other various factors, including
expectations of future events, management believes to be reasonable under the circumstances. The resulting
accounting judgements and estimates will seldom equal the related actual results.
The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
Revenue from contracts with customers
When recognising revenue in relation to the provision of services to customers, the key performance obligation of
the consolidated entity is considered to be the point of delivery of the service to the customer, as this is deemed
to be the time that the customer obtains the benefits and control of the service.
Principal vs agent
Judgement is exercised in relation to certain services that the group is providing in relation to leases entered in to
by an end customer with the lessor (STB) as to whether the group is acting as principal in the arrangement or as
agent. Management have determined that having regard to the contractual conditions with STB and the rights
attaching to consumer contracts for the leases entered in to by the end customer with STB that the group is acting
as agent and records commission income from STB.
Financial guarantee contract
Financial guarantee contracts are initially recognised at fair value and subsequently at the higher of the amount of
expected credit losses determined under AASB 9 and the amount initially recognised less cumulative amortisation.
The fair value of the financial guarantee is a key estimate and 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. This has been determined from historic data and forward looking estimates to
determine expected default rates. This fair value determines a financial guarantee premium which is recognised
as revenue over the term of the lease between the end customer and STB.
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ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
4. Critical accounting estimates and judgements (continued)
Determination of variable consideration
Judgement is exercised in estimating variable consideration which is determined having regard to past experience
with respect to the expected default rates where the customer (STB) has the right to clawback from the group’s
commission income any amount of default on lease payments due from the end customer under the financial
guarantee contract. Revenue in respect of this amount of commission income will only be recognised to the extent
that it is highly probable that a significant reversal in the amount of cumulative revenue recognised under the
contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
Contract right income
A contract asset is recognised where the Group act as agent for the lessor (STB) during an end customer’s
minimum lease term with STB and the Group have a contractual right to an inertia asset at the end of this
minimum lease term. Contract assets are recognised as revenue accruing over the minimum lease term up to the
fair value of the inertia asset at the end of that minimum lease term. The fair value is determined based on available
market data regarding expected returns for a similar risk asset and discounted using a credit risk rate.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges
for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly
as a result of technical innovations or some other event. The depreciation and amortisation charge will increase
where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that
have been abandoned or sold will be written off or written down.
A. Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the
amounts recognised in the consolidated financial statements is included in the following notes:
Note 6 – commission income: whether the Group acts as an agent in the transaction rather than as principal; and
Note 8 – leases: whether an arrangement contains a finance lease.
B. Assumptions and estimation uncertainties
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 3(c) – determination of consideration of separate performance obligation
Note 11 – measurement of contract asset non-cash consideration;
Note 18 – measurement of contract liabilities; and
Note 19(b) – measurement of share-based payments.
Fair Value of Investments
The valuation of the Group’s retained holding in Clearpay Finance Limited (“Clearpay”), following the sale of
90% of Clearpay to ASX listed Afterpay Ltd (formerly Afterpay Touch Group Ltd)(“Afterpay”) on 23 August
2018, is based on the agreed valuation principles for the purpose of the Afterpay call option to purchase and the
Group’s put option to sell the Group’s holding in Clearpay to Afterpay at any time after 23 August 2023 and 23
February 2024 respectively. The key judgements that are critical to the valuation are the interpretation of the
agreed valuation principles, market valuation of Afterpay Ltd in GBP equivalent, and the relevant proportion of
this that relates to Clearpay, and the discount to be applied for minority holding and lack of marketability of
Clearpay as a standalone entity. In order to support these judgements, management have appointed independent
valuation experts to advise on this matter. The independent valuation process, in accordance with the agreed
valuation principles, uses the same valuation metrics, multiples and methodologies, including those used by
market participants and with regard to sell-side analysts, to value the Clearpay business within the Afterpay listed
group. The Directors note that, as at 30 June 2021, Afterpay have included the Group’s put option as a separate
financial liability in their accounts at AU$99.9m.
40
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
4. Critical accounting estimates and judgements (continued)
Right of use lease asset and lease liability – AASB 16
AASB 16 - Leases requires management to make estimates and judgements in respect of the term of the lease and
the discount rate used where it is not possible to determine the interest rate implicit in the lease. At the reporting
date it is reasonably certain that the Group will not terminate the lease before the minimum term while there is
also no indication that it is reasonably certain that the lease will be extended beyond that date. As it is not possible
to determine the interest rate implicit in the lease management have estimated the discount rate equivalent to the
borrowing rate available to the business over the same period as the lease term.
5. Financial Risk Management
Overview
The Group has exposure to the following risks from the use of financial instruments:
• Credit risk;
• Liquidity risk;
• Market risk; and
• 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 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 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 has 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 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 trading subsidiaries 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. Further information is provided in Note 24(c).
To manage credit risk in relation to its customers, there is a credit assessment and fraud minimisation process
delivered through its patented SmartCheck 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 by the Head of Credit Risk and applied by the Credit Risk
Committee with Board approval. The Head of Credit Risk monitors ongoing credit performance on different
cohorts of customer contracts. In addition there exists a specialist collections function to manage any delinquent
accounts.
Credit risk exposure to the funder deposit with Secure Trust Bank is more concentrated, however the counterparty
is a regulated banking institution and the credit risk exposure is assessed as low. The Group monitors the credit
risk associated with the funder deposit counterparty.
41
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
5. Financial Risk Management (continued)
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.
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’s exposure to foreign currency risk is limited to the cash balances held by the Australian parent
ThinkSmart Limited denominated in Australian Dollars.
Interest rate risk
Exposure to interest rate risk on any 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 management and the Board.
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; and
• Risk mitigation, including insurance where this is effective.
42
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
5. Financial Risk Management (continued)
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 it
achieves this objective. The Group’s debt-to-adjusted capital ratio at the end of the reporting period was as
follows:
30 June 2021 30 June 2020
£,000 £,000
Total liabilities 1,821 3,019
Less cash and cash equivalents (7,067) (8,805)
Net (cash) (5,246) (5,786)
Total capital 134,457 66,488
Debt-to-adjusted capital ratio (0.04) (0.09)
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 on a periodic basis. At the AGM on 11 November 2020
shareholders approved a return of capital of up to AUD $6,497,111 to shareholders (the “Distribution”) in two
parts:
1. a capital reduction, pursuant to which the Company will return 4.575 cents per share (or depositary
interest) to shareholders (or depositary interest holders) (“Return of Capital”); and
2. a special unfranked dividend of 1.525 cents per ordinary share (or depositary interest) – declared as
attaching conduit foreign income (“Dividend”).
The return of capital and dividend had a record date of 13 November 2020 and were paid on 9 December 2020.
6. Consolidated Statement of Profit and Loss
12 Months to 12 Months to
30 June 2021 30 June 2020
£,000 £,000
Profit is arrived at after crediting/(charging) the following items:
(a) Revenue
Commission income 851 2,409
Extended rental income 1,566 1,869
Income earned from sale of inertia equipment 698 727
Outsourced services 863 496
Services revenue – insurance commission 226 398
Interest revenue – other entities 65 108
Fee revenue – customers 17 72
4,286 6,079
43
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
6. Consolidated Statement of Profit and Loss (continued)
(b) Other revenue
12 Months to 12 Months to
30 June 2021 30 June 2020
£,000 £,000
Finance lease income 62 247
Other revenue – 6
62 253
Total revenue 4,348 6,332
All revenue is generated in the UK from the following products:
SmartPlan 3,205 5,088
Upgrade Anytime 147 450
Flexible Leasing 68 185
Other/non-product specific 928 609
4,348 6,332
(c) Customer acquisition costs
Customer acquisition costs relate to commissions payable to our retail partners together with sales and marketing
expenses incurred during the ongoing promotional activity of the finance contracts to new and existing customers.
(d) Cost of inertia assets sold
Cost of inertia assets sold is the write-off of inertia assets, including that transferred from PPE Operating Lease assets
when the end customer terminates their lease agreement during secondary period, upon sale of inertia equipment.
30 June 2021 30 June 2020
£,000 £,000
(e) Other operating expenses
Employee benefits expense:
– Payments to employees(i) (1,725) (1,749)
– Employee superannuation costs (109) (90)
– Share-based payment expense – (7)
(1,834) (1,846)
Occupancy costs (171) (169)
Lease interest charge (19) (26)
Professional services (758) (805)
Finance charges (92) (380)
Losses arising from financial guarantee contract (104) (367)
Other costs (453) (677)
(3,431) (4,270)
(i) Payments to employees are presented net of government grants received through the UK government Coronavirus Job Retention
Scheme. In the year the Group received payments of £30,629 (FY20: £19,372).
30 June 2021 30 June 2020
£,000 £,000
(f) Depreciation and amortisation
Depreciation (437) (820)
Amortisation (964) (1,227)
(1,401) (2,047)
(g) Impairment gains/(losses)
Impairment losses finance leases and receivables (16) (182)
Movement in provision for expected credit losses 57 180
41 (2)
44
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
6. Consolidated Statement of Profit and Loss (continued)
(h) Gains on financial instruments
30 June 2021 30 June 2020
£,000 £,000
Realised gain – 745
Unrealised gain 71,267 53,673
71,267 54,418
In the period to 30 June 2021 unrealised gains arose from the revaluation of the Group’s investment in 10% of
Clearpay Finance Limited (see note 11(ii)).
In the period to 30 June 2020 realised gains arose on the disposal of the remaining 125,000 Afterpay Limited
(APT) shares on 28 August 2019 at AU$27.73 (£15) per share. An additional realised gain arose on the trading of
205,000 APT shares, purchased on 23 March 2020 at AU$9.71 and disposed on 25 March 2020 at AU$15.08.
Unrealised gains arose from the revaluation of the Group’s investment in 10% of Clearpay Finance Limited
(see note 11(ii)). These amounts are shown above.
(i) Other gains
Fair value gain on financial asset through profit and loss 1,450 –
1,450 –
In the period to 30 June 2021 other gains arose on the settlement of legal claims against Dixons as announced on
10 August 2020.
7. Income Tax
Amounts recognised in profit and loss
30 June 2021 30 June 2020
£,000 £,000
The major components of income tax (expense)/benefit are:
Current income tax expense (17) (62)
Total income tax (expense)/benefit (17) (62)
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:
30 June 2021 30 June 2020
£,000 £,000
Accounting profit before tax 71,681 53,104
At the statutory income tax rate of 30% (21,504) (15,931)
Effect of tax rates in foreign jurisdictions 7,885 5,824
Non-deductible expenses (3) (1)
Non-taxable gain (Substantial Shareholdings Exemption) 13,541 10,198
Reversal of unrecognised deferred tax asset 81 –
Losses carried forward – (136)
Irrecoverable withholding tax (17) (16)
Income tax credit/(charge) (17) (62)
Tax receivable/(payable)
Current – –
The current tax asset/(liability) is recognised for income tax receivable/(payable) in respect of all periods to date.
The Group has an unrecognised deferred tax asset of £1.1m at 30 June 2021 (30 June 2020: £1.0m) being mainly
in respect of the estimated £4.4m (30 June 2020: £5.3m) of UK tax losses carried forward at the substantively
enacted UK corporation tax rate of 25% (30 June 2020: 19%).
45
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
8. Finance lease receivables
30 June 2021 30 June 2020
£,000 £,000
Current
Gross investment in finance lease receivables 29 207
Unguaranteed residuals 24 331
Unearned future finance lease income (6) (43)
Net lease receivable 47 495
Allowance for expected credit losses (9) (64)
38 431
Non-current
Gross investment in finance lease receivables – 7
Unguaranteed residuals – 11
Unearned future finance lease income – (1)
Net lease receivable – 17
Allowance for expected credit losses – (2)
– 15
Balance at 1 July 446 3,445
Receipts in respect of lease receivable (511) (3,244)
Finance lease income 62 247
Impairment loss 41 (2)
38 446
All finance leases detailed above have a minimum lease term of 2 years, see note 3(h)(i) for further information
on the accounting policy for these finance leases and note 5 for further information on financial risk management.
See note 24(c) for detailed analysis of the ageing of lease receivables and expected credit losses recognised.
9. Other Current Assets
30 June 2021 30 June 2020
£,000 £,000
Prepayments 222 233
Insurance prepayments 4 55
Accrued income – insurance commission (see Note 12(i)) 154 290
Sundry debtors – 346
380 924
46
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
10. Financial assets at fair value through profit or loss
30 June 2021 30 June 2020
£,000 £,000
Investment in Clearpay Finance Limited 125,000 53,733
125,000 53,733
On 23 August 2018 the Group sold 90% of Clearpay Finance Limited to Afterpay Ltd (formerly Afterpay Touch
Group Ltd)(ASX:APT). The Group retains a 10% shareholding in Clearpay which is held as an investment at fair
value through profit or loss under AASB 9. A proportion of the 10% shareholding (up to 35%) will be made
available by the Group to employees of Clearpay under an employee share ownership plan (“ESOP”). Afterpay
has a call option to purchase the remaining shares held by the Group, exercisable at any time after 23 August 2023.
The Group has a reciprocal put option to sell the remaining shares held by the Group to Afterpay, exercisable after
23 February 2024. Under either the call or put option, the sale of the Clearpay shares to Afterpay will be at a price
calculated on agreed valuation principles. The Group engaged a third party global professional services firm to
value its retained shareholding in Clearpay at 30 June 2021 for accounting purposes under AASB 9 in accordance
with AASB 13 (Fair Value Measurement). The independent valuation process, in accordance with the agreed
valuation principles, uses the same valuation metrics, multiples and methodologies, including those used by
market participants and with regard to sell-side analysts, to value the Clearpay business within the Afterpay listed
group. This valuation has been undertaken based on publicly available information, reflecting the above and
including a discount of 17.5% to be applied for minority holding and the lack of marketability of Clearpay as a
privately owned company, and has produced a range of values for the Group’s 10% shareholding in Clearpay. In
August 2021 Square Inc (“Square”) and Afterpay announced the intention for Square to acquire Afterpay in a deal
which valued Afterpay at US$29 billion (AU$39 billion). The transaction is expected to complete in the first
quarter of the calendar year 2022. Under the terms of the agreement that ThinkSmart has with Afterpay, relating
to the sale of the Group’s remaining holding in Clearpay, a change of control of Afterpay gives Afterpay the right
to exercise its call option to purchase the remaining shares in Clearpay from ThinkSmart at any time following
said change of control. The exercise price for the call option will be determined by the same pre-agreed valuation
principles whether or not the option is exercised early. To reflect the relationship between maturity of customer
base and underlying sales the Directors believe that greater weighting should be assigned to active customers. In
line with this the Group has taken the valuation of the 10% shareholding at two thirds of the range produced by
the independent valuation. As the Group has limited control over the setting of the price that it will receive for the
transfer of the ESOP shares to the Clearpay employees, the Group has further discounted the valuation by 35% to
determine the accounting fair value of its retained shareholding in Clearpay to be £125.0m at 30 June 2021. The
investment in Clearpay is a level 3 financial instrument.
Sensitivity of the asset to changes in the principal assumptions
If all other assumptions remained unchanged, reducing the discount for lack of marketability by 10% would
increase the fair value by £15.2m; increasing the discount for lack of marketability by 10% would reduce the fair
value by £15.2m.
The valuation range identified by the independent valuation reflects the sensitivities of the key inputs used in that
valuation. If all other assumptions remained unchanged, selecting a point in the independent valuation range 10%
higher would increase the fair value by £2.7m; selecting a point in the independent valuation range 10% lower
would decrease the fair value by £2.7m.
47
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
11. Contract assets
30 June 2021 30 June 2020
£,000 £,000
Balance at 1 July 1,430 2,032
Recognised as revenue in period(i) 370 858
Recognised as customer acquisition cost(ii) (110) (145)
Transferred to Plant & Equipment Operating lease additions (913) (1,315)
777 1,430
Contract asset revenue to be recognised less than 1 year 215 479
Contract asset revenue to be recognised between 1 and 2 years 71 180
Contract asset revenue to be recognised between 2 and 3 years 10 42
Contract asset revenue to be recognised between 3 and 4 years – 2
296 703
(i) A contract asset is recognised where the Group act as agent for the lessor (STB) during the minimum lease term and have a
contractual right to the inertia asset at the end of the minimum lease term. Contract assets are recognised as revenue accruing
over the minimum lease term building up inertia asset (non-cash consideration) over the minimum lease term.
(ii) Customer acquisition costs are capitalised as an asset where such costs are incremental to obtaining a contract between the funder
and the end customer, for which the Group receives commission under the funder contract, and are expected to be recovered.
Customer acquisition costs are amortised on a straight-line basis over the term of the contract.
12. Other Non-Current Assets
30 June 2021 30 June 2020
£,000 £,000
Insurance prepayments – 5
Accrued income – insurance commission(i) 48 86
Deposits held by funders(ii) 2,021 2,056
2,069 2,147
(i) Accrued income reflects brokerage commission earned from making insurance arrangements on behalf of lessee’s and is net of
a clawback provision. The clawback provision for each reporting year has been estimated to be 30% based on historical
experience and is calculated on the gross commission receivable.
(ii) Deposits held by funders for the servicing and management of their portfolios in the event of default. The deposits earn interest
at market rates of return for similar instruments. See note 24 for further information.
48
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
13. Plant and Equipment
Plant &
Plant & Office Lease Equipment
Equipment Right of Operating
(UK) Use Asset Lease Total
£,000 £,000 £,000 £,000
Gross Carrying Amount
Cost or deemed cost
Balance at 30 June 2019 2,601 690 3,023 6,314
Transferred from contract assets – – 1,315 1,315
Transferred to cost of inertia assets sold – – (587) (587)
Additions 14 – – 14
Disposals (2,463) – (3,391) (5,854)
Balance at 30 June 2020 152 690 360 1,202
Transferred from contract assets – – 917 917
Transferred to cost of inertia assets sold – – (655) (655)
Additions 17 – – 17
Disposals (78) – (339) (417)
Balance at 30 June 2021 91 690 283 1,064
Accumulated Depreciation
Balance at 30 June 2019 (2,511) (437) (2,828) (5,852)
Depreciation expense (54) (69) (697) (820)
Disposals 2,463 – 3,391 5,854
Balance at 30 June 2020 (102) (506) (134) (742)
Depreciation expense (35) (69) (333) (437)
Disposals 78 – 339 417
Balance at 30 June 2021 (59) (575) (128) (762)
Net Book Value
At 30 June 2020 50 184 226 460
At 30 June 2021 32 115 155 302
49
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
14. Intangible Assets
Contract Intellectual
rights Software Property Total
£,000 £,000 £,000 £,000
Gross carrying amount
At cost
Balance at 30 June 2019 1,456 5,697 356 7,509
Effect of movement in exchange rate – – 3 3
Additions 385 109 – 494
Disposals (1,400) (1,437) – (2,837)
Balance at 30 June 2020 441 4,369 359 5,169
Effect of movement in exchange rate – – (11) (11)
Additions 8 115 – 123
Disposals (41) (2,755) – (2,796)
Balance at 30 June 2021 408 1,729 348 2,485
Contract Intellectual
rights Software Property Total
£,000 £,000 £,000 £,000
Accumulated amortisation and impairment
Balance at 30 June 2019 (1,418) (3,587) (321) (5,326)
Effect of movement in exchange rate – – (20) (20)
Amortisation expense (57) (1,153) (17) (1,227)
Disposals 1,400 1,437 – 2,837
Balance at 30 June 2020 (75) (3,303) (358) (3,736)
Effect of movement in exchange rate – – 9 9
Amortisation expense (139) (826) 1 (964)
Disposals 41 2,755 – 2,796
Balance at 30 June 2021 (173) (1,374) (348) (1,895)
Net book value
At 30 June 2020 366 1,066 1 1,433
At 30 June 2021 235 355 – 590
15. Interest in Subsidiaries
% of Equity
Interest in Subsidiaries Country of Incorporation 30 June 2021 30 June 2020
RentSmart Limited UK 100 100
ThinkSmart Insurance Services
Administration Ltd UK 100 100
ThinkSmart Financial Services Ltd UK 100 100
ThinkSmart Europe Ltd UK 100 100
ThinkSmart UK Ltd UK 100 100
ThinkSmart Finance Group Ltd UK 100 100
ThinkSmart Inc USA 100 100
ThinkSmart Employee Share Trust Australia 100 100
ThinkSmart LTI Pty Limited Australia 100 100
50
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
16. Trade and Other Payables, and Provisions
30 June 2021 30 June 2020
£,000 £,000
Trade and other payables 79 220
GST/VAT Payable 132 92
Other accrued expenses 517 883
728 1,195
Provisions
Annual leave 111 159
Long service leave 86 86
Risk Transfer cancellation and claims 5 10
202 255
Annual and long service leave
Balance at 1 July 245 218
Effect of exchange rate movement (7) 3
Additional provisions made in the year 3 24
Amounts used during the year (44) –
Balance at 30 June 197 245
Other
Balance at 1 July 10 34
Additional provisions made in the year – –
Amounts used during the year (5) (24)
Balance at 30 June 5 10
17. Lease liabilities
30 June 2021 30 June 2020
£,000 £,000
Balance brought forward 242 330
Rental paid in period (112) (114)
Interest charged 19 26
149 242
30 June 2021 30 June 2020
£,000 £,000
Lease liabilities due within 12 months 103 94
Lease liabilities due greater than 12 months 46 148
149 242
Undiscounted maturity analysis
Lease liabilities due up to 1 year 113 113
Lease liabilities due between 1 and 2 years 47 113
Lease liabilities due between 3 and 5 years – 47
Lease liabilities due over 5 years – –
160 273
51
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
18. Contract liabilities
30 June 2021 30 June 2020
£,000 £,000
Balance brought forward 1,327 1,993
Recognised as revenue in period (585) (666)
742 1,327
Contract liabilities to be recognised as revenue within 12 months 410 648
Contract liabilities to be recognised as revenue greater than 12 months 332 679
742 1,327
19. Issued Capital and reserves
(a) Issued and paid up capital
30 June 2021 30 June 2020
£,000 £,000
106,542,814 Ordinary Shares fully paid (2020: 106,509,994) 10,413 13,164
Fully Paid Ordinary Shares
2021 2021 2020 2020
Number £000 Number £000
Balance at beginning of the financial year 106,509,994 13,164 106,509,994 15,211
Issue of ordinary shares 32,820 6 – –
Return of capital to shareholders – (2,757) – (2,047)
Balance at end of the financial period 106,542,814 10,413 106,509,994 13,164
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.
At the AGM on 11 November 2020 shareholders approved a return of capital to shareholders. The return of capital
had a record date of 13 November 2020 and was paid on 9 December 2020. The following return of capital was
paid by the Group for the year:
12 months to 12 months to
30 June 2021 30 June 2020
£,000 £,000
2.59 pence per ordinary share (2020: 1.92) 2,757 2,047
2,757 2,047
(b) Share options – employee options
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.
The options carry neither rights to dividends nor voting rights.
Options issued in previous years and vested but not yet exercised as at 30 June 2021:
1,724,532 options over ordinary shares were issued 21 December 2016 and exercisable at £0.1745, vested and
exercisable on 21 December 2019 until 21 December 2026. The fair value of these options at grant date was
£0.0371. The value of these options has been expensed over the vesting period in accordance with AASB 2.
52
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
19. Issued Capital and reserves (continued)
(c) 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.
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
Period ending 30 June 2017
Grant date 21/12/16
Fair value at grant date £0.0371
Grant date share price £0.22
Exercise price at Grant date £0.22
Expected volatility 29.42%
Option/loan share life 10 years
Dividend yield 2.00%
Risk-free interest rate 0.23%
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:
Year ended 30 June 2021
Year ended 30 June 2020
Number of Weighted Number of Weighted
options/loan average options/loan average
funded shares exercise price funded shares exercise price
£ £
Balance at beginning of the financial
year 1,757,352 0.2200 1,757,352 0.2200
Exercised during the financial year (32,820) 0.1745 – –
Balance at the end of financial year 1,724,532 0.1745 1,757,352 0.2200
Exercisable at end of the financial year 1,724,532 0.1745 1,757,352 0.2200
The options and loan-funded shares outstanding at 30 June 2021 have an exercise price of £0.1745 (30 June 2020:
£0.22) and a weighted average contractual life of 5 years (30 June 2020: 6 years). The following is the total
expense recognised for the year arising from share-based payment transactions:
12 months to 12 months to
30 June 2021 30 June 2020
£ £
Share compensation – employee shares – 6,502
Total expense recognised as employee costs (note 6e) – 6,502
(d) Dividends
The following dividends were declared and paid by the Group for the year:
12 months to 12 months to
30 June 2021 30 June 2020
£,000 £,000
0.85 pence per ordinary share (2020: 1.09) 901 1,135
901 1,135
53
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
19. Issued Capital and reserves (continued)
(e) Nature and purpose of reserves
The Group’s reserves are as stated in the consolidated statement of changes in equity and represent the following:
Accumulated profit
Cumulative profit and loss net of distributions to owners.
Foreign currency translation reserve
The cumulative effect of movements in foreign exchange rates on the translation of Group entities with a
functional currency other than the Group’s presentation currency. These amounts are recognised in other
comprehensive income.
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 year as shown in the cash flow statement is reconciled to the related items in the balance sheet
as follows:
as at as at
30 June 2021 30 June 2020
£,000 £,000
Reconciliation of cash and cash equivalents
Cash balance comprises:
– Available cash and cash equivalents 7,007 8,744
– Restricted cash 60 61
7,067 8,805
The Group’s exposure to credit risk, interest rate and sensitivity analysis of the financial assets and liabilities are
provided in Note 24.
(b) Reconciliation of the profit for the year to net cash flows from operating activities:
12 months to 12 months to
30 June 2021 30 June 2020
£,000 £,000
Profit after tax 71,664 53,042
Add back non-cash and non-operating items:
Depreciation 437 820
Amortisation 964 1,227
Impairment losses on finance lease receivables (57) (181)
Equity settled share-based payment – 7
Lease interest 19 26
Gain on Financial Instruments (71,267) (54,418)
Cost of inertia assets sold 655 594
(Increase)/decrease in assets:
Trade receivables, deposits held with funders and other movements
in lease assets 654 121
Finance lease receivable 465 3,180
Contract asset recognised to revenue (264) (719)
Increase/(decrease) in liabilities:
Trade and other creditors (466) (84)
Contract liabilities (585) (666)
Other interest bearing liabilities 23 (2,533)
Provisions (53) 3
Provision for income tax – 540
Net cash from operating activities 2,189 959
54
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
21. Segment Information
The Group currently has one reportable segment which comprise the Group’s core business unit (UK). Head office
and other unallocated corporate functions are shown separately. For the segment, the Board and the CEO review
internal management reports on a monthly basis. The composition of the reportable segment is as follows:
UK:
• ThinkSmart Europe Ltd;
• RentSmart Ltd;
• ThinkSmart Insurance Services Administration Ltd;
• ThinkSmart Financial Services Ltd; and
• ThinkSmart UK Ltd.
Corporate and unallocated:
• ThinkSmart Limited;
• ThinkSmart Inc.
Operating Segments
Information about reportable segments
UK
Corporate
and unallocated
Total
June 2021 June 2020 June 2021 June 2020 June 2021 June 2020
For the year ended: £,000 £,000 £,000 £,000 £,000 £,000
Revenue 4,286 6,079 – – 4,286 6,079
Other revenue 61 233 1 20 62 253
Total revenue 4,347 6,312 1 20 4,348 6,332
Customer acquisition cost (258) (627) – – (258) (627)
Cost of inertia assets sold (335) (700) – – (335) (700)
Other operating expenses (2,782) (3,555) (649) (715) (3,431) (4,270)
Depreciation and amortisation (1,401) (2,047) – – (1,401) (2,047)
Impairment gains/(losses) 41 (2) – – 41 (2)
Gain on Financial Instruments 71,267 54,418 – – 71,267 54,418
Other gains 1,450 – – – 1,450 –
Reportable segment profit/(loss)
before income tax 72,329 53,799 (648) (695) 71,681 53,104
Reportable segment current assets 4,181 6,162 3,359 4,127 7,540 10,289
Reportable segment non-current
assets 128,738 59,218 – – 128,738 59,218
Reportable segment liabilities 1,575 2,695 246 324 1,821 3,019
Capital expenditure 139 509 – – 139 509
22. Remuneration of Auditor
12 Months to 12 Months to
June 2021 June 2020
£ £
Audit and review services:
Auditor of the Company:
Provided by BDO 124,791 139,948
Audit and review of financial statements 124,791 139,948
The Group’s auditors are BDO.
55
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
23. Commitments and Contingent Liabilities
June 2021 June 2020
£,000 £,000
Leases where Group acts as agent (not included in the statement
of financial position) 2,583 6,029
Deposits held by funder 2,021 2,056
Under the terms of the UK current funding agreement with Secure Trust Bank (STB) where STB is the lessor, the
Group is obliged to purchase delinquent leases (contracts in arrears for 91 days) from the funder at the funded
amount. The Group has entered into a financial guarantee contract with STB for which the Group has provided a
deposit to support future delinquent leases.
The deposit held by funders is recognised as an asset on the Group’s statement of financial position within other
non-current assets (see note 12).
24. Financial Instruments
(a) Interest rate risk
At the reporting date, the interest rate profile of the Group’s interest bearing financial instruments were:
June 2021 June 2020
£,000 £,000
Variable rate instruments
Cash and cash equivalents (note 20a) 7,067 8,805
Deposits held by funder (note 12) 2,021 2,056
Net financial assets 9,088 10,861
Carrying amount
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. This analysis assumes that all other factors remain constant including foreign
currency rates.
June 2021 June 2020
£,000 £,000
Effect of 1% increase in rates 91 109
Effect of 1% decrease in rates (91) (109)
(b) Fair value of financial instruments
The carrying amounts of financial assets and financial liabilities recorded in the financial statements are not
materially different to their fair values.
Fair value hierarchy
The financial instruments carried at fair value have been classified by valuation method.
The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
56
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
24. Financial Instruments (continued)
(b) Fair value of financial instruments (continued)
Key assumptions in the valuation of the instruments were limited to interpolating interest rates for certain future
periods where there was no observable market data. The majority of financial assets and liabilities are measured
at amortised cost. At 30 June 2021 the Group held the following financial instruments measured at fair value
through profit or loss:
• 10% holding in Clearpay Finance Limited with a fair value of £125,000,000 (2020: £53,733,333). The
holding in Clearpay is a Level 3 financial instrument. Details of the key inputs included in the valuation of
this asset, as well as the sensitivity of these inputs are included in note 10.
(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:
Note June 2021 June 2020
£,000 £,000
Cash and cash equivalents 20(a) 7,067 8,805
Trade receivables 55 129
Loan and lease receivable (current) 8 38 495
Loan and lease receivable (non-current) 8 – 17
Insurance prepayment and accrued income (current) 9 158 345
Insurance prepayment and accrued income (non-current) 12 48 91
Sundry debtors 9 – 346
Deposits held by funders 12 2,021 2,056
9,387 12,284
The carrying amount of the Group’s financial assets that are exposed to credit risk at the reporting date by
geographic region is:
June 2021 June 2020
£,000 £,000
Australia 3,278 4,075
UK 6,109 8,209
9,387 12,284
The carrying amount of the Group’s financial assets that are exposed to credit risk at the reporting date by types
of counterparty is:
June 2021 June 2020
£,000 £,000
Banks(i) 7,067 8,805
Funders(ii) 2,021 2,056
Insurance partners(iii) 206 436
Retail customers(iv) 38 512
Others 55 475
9,387 12,284
(i) Cash and cash equivalents are held with banks with S&P ratings of A and AA-.
(ii) Deposits held with banks with S&P ratings of A and AA-.
(iii) In the current financial reporting period, 100% (prior year: 100%) of the 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. Allianz
holds an AA rating with S&P Insurer Financial Strength and Counterparty Credit Rating.
(iv) Retail customers are assessed for creditworthiness against a bespoke credit scorecard based on information drawn from a
selection of industry sources.
57
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
24. Financial Instruments (continued)
(c) Credit risk management (continued)
The ageing of the Group’s trade and lease receivables at the reporting date was:
Gross Impairment Gross Impairment
June 2021 June 2021 June 2020 June 2020
£,000 £,000 £,000 £,000
Not past due 66 – 492 2
Past due 0-30 days 19 – 29 4
Past due 31-120 days 10 8 43 30
Past due 121-365 days 17 11 90 43
112 19 654 79
Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has
increased significantly since initial recognition in which case the lifetime ECL method is adopted. For receivables,
a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available.
The Group applies the simplified approach to providing for expected credit losses (ECLs) under AASB 9, which
permits the use of the lifetime expected loss provision for trade and lease receivables. The Group makes specific
provisions for lifetime expected credit losses against these receivables where additional information is known
regarding the recoverability of those balances. For the remaining trade and lease receivables balances, the Group
has established an ECL model using provision matrices for recognising ECLs on its trade receivables, based on
its historical credit loss experience over a two year period, adjusted (where appropriate) for forward-looking
factors.
The movement in the allowance for impairment in respect of trade and lease receivables during the year was as
follows:
June 2021 June 2020
£,000 £,000
Balance at 1 July 79 253
Impairment loss recognised (44) (2)
Bad debt written off (16) (172)
Balance at 30 June 19 79
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, adjusted (where appropriate) for forwards looking factors.
(d) Currency risk management
Exposure to currency risk
The Group’s exposure to foreign currency risk is limited to the cash balances held by the Australian parent
ThinkSmart Limited denominated in Australian Dollars:
June 2021 June 2020
£,000 £,000
Cash and cash equivalents 3,277 4,074
10% strengthening of AUD (328) (407)
10% weakening of AUD 328 407
June 2021 June 2020
AUD/GBP year end exchange rate 0.5429 0.5586
58
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
24. Financial Instruments (continued)
(e) Liquidity risk management
The following are the contractual maturities of financial liabilities, including estimated interest payments and
excluding the impact of netting agreements:
June 2021 June 2020
£,000 £,000
Trade and other payables 728 1,195
Lease liabilities 149 242
877 1,437
Less than 1 year 831 1,289
1-2 years 46 148
877 1,437
25. 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
G Halton (Chief Financial Officer)
Non-Executive Directors
P Gammell
D Adams
R McDowell
The Key Management Personnel remuneration included in ‘employee benefits expense’ in Note 6(e) is as follows:
12 months to 12 months to
June 2021 June 2020
£ £
Short-term employee benefits 414,690 463,409
Post-employment benefits 14,403 13,971
Other long-term benefits 2,958 2,575
Share-based payments – 5,825
432,051 485,780
Business expenses incurred by KMP’s and reimbursed by the Company – 55,922
26. Subsequent Events
There has not arisen, in the interval between the end of the financial period and the date of this report, any 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.
59
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
27. Earnings per Share
12 months to 12 months to
June 2021 June 2020
£,000 £,000
Profit after tax attributable to ordinary shareholders 71,664 53,042
30 June 2021 30 June 2020
Number Number
Weighted average number of ordinary shares (basic) 106,518,740 106,509,994
Effects of dilution from share options 1,724,532 1,757,352
Weighted average number of ordinary shares (diluted) 108,243,272 108,267,346
30 June 2021 30 June 2020
Earnings per share
Basic earnings per share (pence) 67.28 49.80
Diluted earnings per share (pence) – continuing operations 66.21 48.99
28. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
June 2021 June 2020
£,000 £,000
(Loss)/Profit after tax (319) 476
Total comprehensive income (319) 476
Statement of financial position
June 2021 June 2020
£,000 £,000
Total current assets 3,359 4,127
Total assets 10,137 14,186
Total current liabilities 246 324
Total liabilities 246 324
Equity
Issued share capital 10,413 13,164
Accumulated profits (522) 698
Total equity 9,891 13,862
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity has provided third party guarantees in relation to the debts of its subsidiaries. No deficiencies of
assets exist in any of these subsidiaries.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2021 and 30 June 2020.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2021 and 30 June
2020.
60
ThinkSmart Limited
Notes to the Consolidated Financial Statements (continued)
28. Parent entity information (continued)
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in
note 1, except for the following:
• Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity;
• Investments in associates are accounted for at cost, less any impairment, in the parent entity; and
• Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
may be an indicator of an impairment of the investment.
61
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth
WA 6872 Australia
Independent Auditor’s Report
To the members of ThinkSmart Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of ThinkSmart
Limited (the Company) and its subsidiaries (the Group),
which comprises the consolidated statement of financial
position as at 30 June 2021, the consolidated statement of
profit or loss and other comprehensive income, the
consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then
ended, and notes to the financial report, including a
summary of significant accounting policies and the
directors’ declaration.
In our opinion the accompanying financial report of the
Group, is 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 2021 and of its financial
performance for the year ended on that date; and
(ii) Complying with Australian Accounting Standards and
the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are
independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including
Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial report of the current period. These matters were addressed in the context of our audit of the financial report as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an
Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part
of the international BDO network of independent a firms. Liability limited by a scheme approved under Professional Standards Legislation.
62
Financial assets at fair value through profit or loss
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 10 of the financial report, the Group
holds a significant asset in Clearpay Finance Limited.
Our procedures included, but were not limited to the
following:
In accordance with AASB 9 Financial Instruments, the
asset is required to be carried at fair value at reporting
date and any associated fair value movements reflected in
profit or loss.
Refer to Note 4 of the financial report for disclosures
relating to the significant estimates and judgements
applied in the fair value determination of this asset.
(cid:129)
Examining the independent valuation report obtained
by the Group to determine if the valuation supported
the asset’s carrying value;
(cid:129) Assessing the competence, capability and objectivity
of the external valuation expert which included
considering their experience and qualifications;
(cid:129)
the valuation process,
Challenging
assessing
significant
assumptions applied in the valuation model; and
judgements
including
and
the
(cid:129) Assessing the adequacy of the related disclosures in
Note 4, 10 and 24(b) of the financial report.
Revenue Recognition
Key audit matter
How the matter was addressed in our audit
As disclosed in Note 3(c), the Group has several
revenue streams in the form of finance lease income,
commission income, insurance commission, extended
rental income and inertia income. All of which have
different revenue recognition timings and contractual
frameworks and are impacted differently by the
“reversal constraint” as applied to the claw back of
brokerage commission and determination of the value of
non-cash consideration.
Refer to Note 3(c) and 4 in the financial report for
disclosures relating to the Group’s revenue accounting
policy and significant judgements applied in revenue
recognition.
Our procedures included, but were not limited to the
following:
(cid:129) Assessing the appropriateness of Management’s
revenue recognition policy ensuring that the policy
is in accordance with the five step model adopted
by the relevant Australian Accounting Standard,
AASB 15;
(cid:129)
Reviewing a sample of contracts and agreeing the
underlying terms to ensure that relevant
performance obligations have been appropriately
assessed and that the transaction price for each
contract has been appropriately allocated to the
various performance obligations;
(cid:129) Assessed the cut off of revenue recognition to
ensure that revenue has been appropriately recorded
in the correct period;
(cid:129) Agreeing a sample of finance lease contracts to
ensure that revenue has been appropriately
recognised in accordance with the relevant
Australian Accounting Standard, AASB 16; and
(cid:129) Assessing the adequacy of the Group’s accounting
policies and related disclosures in Note 3(c) and 4
of the financial report.
63
Other information
The directors are responsible for the other information. The other information comprises the information contained in
financial report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report
thereon, which we obtained prior to the date of this auditor’s report, and the annual report, which is expected to be made
available to us after that date.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information identified above
and, in doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required to
communicate the matter to the directors and will request that it is corrected. If it is not corrected, we will seek to have
the matter appropriately brought to the attention of users for whom our report is prepared.
Responsibilities of the directors 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 gives a true and fair view and is
free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do
so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
64
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 16 to 21 of the directors’ report for the year ended 30 June
2021.
In our opinion, the Remuneration Report of ThinkSmart Limited, for the year ended 30 June 2021, complies with
section 300A of the Corporations Act 2001.
Responsibilities
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 Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Ashleigh Woodley
Director
Perth
13 September 2021
65
sterling 175333
ThinkSmart Limited
Corporate Information
ABN 24 092 319 698
Directors
N R Montarello (Executive Chairman)
G Halton (Chief Financial Officer)
P Gammell (Non-Executive Director)
(cid:37)(cid:1)(cid:34)(cid:69)(cid:66)(cid:78)(cid:84) (Non-Executive Director)
Company Secretary
Kerin Williams (UK resident)
Jill Dorrington (Australian resident)
Registered and Principal Office
Suite 5, 531 Hay Street
Subiaco
WA 6008
Australia
Company Registrars
Computershare Investor Services Pty Limited(cid:1)
Level 11, 172 St Georges Terrace
Perth WA 6000
Australia
Depositary
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
ThinkSmart Limited shares are listed on AIM,(cid:1)
a sub-market of the London Stock Exchange(cid:1)
(AIM code: TSL)
Solicitors
Herbert Smith Freehills
250 St Georges Terrace
Perth WA 6000
Australia
Auditors
BDO
38 Station Street
Subiaco
Perth WA 600
8
Australia
Bankers
Westpac Banking Corporation
109 St Georges Terrace
Perth WA 6000
Australia
Santander UK plc
298 Deansgate
Manchester
M3 4HH
ThinkSmart Limited
(cid:19)(cid:17)(cid:19)(cid:18)
(cid:34)(cid:79)(cid:79)(cid:86)(cid:66)(cid:77)(cid:1)(cid:51)(cid:70)(cid:81)(cid:80)(cid:83)(cid:85)(cid:1)
ABN 24 092 319 698