TIDMTSL
RNS Number : 7579N
ThinkSmart Limited
26 September 2019
26 September 2019
ThinkSmart Limited
("ThinkSmart" or "the Company" which together with its
subsidiaries is the "Group")
Final Results for the year ended 30 June 2019
ThinkSmart Limited (AIM: TSL), a leading digital payment
solutions provider, today announces its full year results for the
twelve-month period to 30 June 2019.
Highlights
-- Successfully completed the sale of 90% of Clearpay Finance
Ltd ("Clearpay") to Afterpay Touch Group Ltd ("APT" or "Afterpay")
on 23 August 2018, delivering GBP7.73 million profit after tax on
the sale.
-- ThinkSmart's remaining 10%(1) holding in Clearpay provides
shareholders with further upside potential given Afterpay's 5 year
call option, exercisable at any time after 23 August 2023, and
ThinkSmart's 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.
-- Continuing to trade as Clearpay post acquisition by Afterpay,
the Clearpay UK business onboarded more than 200,000 active
customers in the first 15 weeks of trading - higher than the
Afterpay US operation achieved at the same time post-launch which
has since grown to over 2.1 million active US customers in just
over a year.
-- Group cash of GBP11 million at 31 August 2019 reflecting cash
of GBP7.10 million at 30 June 2019, after the A$8 million (GBP4.40
million) special dividend/capital return, and cash received post 30
June 2019 of AU$6.93 million (GBP3.82 million) from the sale of the
second tranche of 250,000 shares in Afterpay from the Clearpay
sale.
-- Leasing originations from continuing operations at GBP4.3
million, significantly lower than the same period last year (FY18:
GBP13.4 million) with majority of reduction from the lower margin
Flexible Leasing product.
-- Operating costs reduced by 26% to GBP4.8 million and remain
controlled, aligned to current volume performance, with further
cost reductions made in July and August 2019.
-- Net profit after tax of GBP8.67 million (FY18 restated(2) :
loss of GBP4.56 million), reflecting net profit after tax from
continuing operations of GBP0.94 million (FY18 restated: loss of
GBP3.96 million), together with profit on the sale of 90% of
Clearpay.
-- Net Assets of GBP16.6 million at 30 June 2019, equivalent to 15.56 pence per share.
(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) Restated for the adoption of IFRS 15 in the current year
applying the full retrospective transition approach with the date
of initial application being 1 July 2018.
Commenting on the results, Ned Montarello, Executive Chairman of
ThinkSmart, said:
"The sale of 90% of ThinkSmart's Clearpay business to Afterpay
has been a significant positive point for the Group and its
shareholders.
"Our shareholders will be encouraged with the early growth of
the Clearpay business in the UK, as announced by Afterpay in August
2019, given the stake we hold in the business. Continuing to trade
as Clearpay post acquisition by Afterpay, the Clearpay UK business
onboarded more than 200,000 active customers in the first 15 weeks
of trading - higher than the Afterpay US operation achieved at the
same time post-launch, which has since grown to over 2.1 million
active US customers in just over a year. As well, Clearpay
announced that it had established important new UK retail
partnerships, including with PrettyLittleThing, boohoo, JD Sports
and Missy Empire.
"ThinkSmart's remaining holding in Clearpay provides
shareholders with future upside profit potential through the 5 year
call option for Afterpay to purchase ThinkSmart's remaining holding
in Clearpay any time after August 2023 at a price calculated on
agreed principles based on market valuations at the time of option
exercise. ThinkSmart has a reciprocal put option 6 months later to
sell its remaining holding in Clearpay to Afterpay. Clearly,
ongoing growth in Clearpay is beneficial for ThinkSmart
shareholders.
We continue to look at options to leverage ThinkSmart's
established technology platform across the core leasing
business."
For further information please contact:
ThinkSmart Limited Via Canaccord Genuity
Ned Montarello
Canaccord Genuity LTD (Joint Broker) +44 (0)20 7523 8350
Sunil Duggal
David Tyrrell
Notes to Editors
About ThinkSmart Limited
ThinkSmart Limited is a leading digital payments company and
provider of retail finance for both consumers and businesses.
ThinkSmart's solutions are underpinned by its innovative and
scalable proprietary technology platform, 'SmartCheck'. Since it
commenced operations in the UK in 2003, the Group has processed in
excess of 350,000 individual applications.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014.
Chairman's Statement
Introduction
This year saw the successful completion of the Group's sale of
90% of Clearpay to ASX listed Afterpay, a global leader in online
payments, with the transaction realising profit after tax of
GBP7.7m. As well as generating a significant return on investment
for Shareholders, the transaction also offers further significant
upside potential from the retained 10% stake in Afterpay's UK
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. Any
such options will only be exercisable on an ultimate exit event or
at such time as the Group no longer holds shares in Clearpay.
ThinkSmart is pleased to note the Afterpay 2019 results
announcement on 29 August 2019 which stated that the launch into
the UK, trading as Clearpay, had been successful. It stated
Clearpay gained over 200,000 active customers in the first 15 weeks
of trading, which is higher than Afterpay's US operation at the
same time post launch which has since grown to over 2.1 million
active US customers in just over a year (US now accounts for more
than 10% of Afterpay group's underlying merchant sales).
The Group continues to align its cost base with its volumes and
review the ongoing strategy of its leasing arm together with
providing an outsourced customer contact centre for Clearpay in the
UK.
The Group has a robust financing position, with cash of GBP11m
at 31 August 2019 reflecting cash of GBP7.10 million at 30 June
2019, after the A$8 million (GBP4.40 million) special
dividend/capital return, and cash received post 30 June 2019 of
AU$6.93 million (GBP3.82 million) from the sale of the second
tranche of 250,000 shares in Afterpay from the Clearpay sale,
together with available headroom on its funding facilities of
GBP58m.
Performance
Leasing volumes fell 68% to GBP4.3m (FY18: GBP13.4m) over the
period, with the majority of this reduction experienced within our
lower margin Flexible Leasing product. We are in ongoing
discussions with our retail partner, Dixons Carphone, with regard
to this performance.
Revenues were 15% lower for the period at GBP8.1m (FY18
restated: GBP9.6m) 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.
Net profit after tax increased to GBP8.7 million (FY18 restated:
loss of GBP4.6 million), reflecting net profit after tax from
continuing operations of GBP0.9 million (FY18 restated: loss of
GBP4.0 million), together with GBP7.7 million profit on the sale of
90% of Clearpay.
Operating costs reduced by 26% to GBP4.8m for the period and
remain controlled, aligned to current volume performance, with
further cost reductions made in July and August 2019.
Statutory earnings per share of 8.21 pence (FY18 restated: loss
of 4.34 pence per share) is largely due to the sale of 90%
Clearpay.
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 position.
Position
As at 30 June 2019, lease receivables under management were
GBP13.2m, with approximately 29,600 active customer contracts.
The Group held cash and cash equivalents of GBP7.1m at 30 June
2019, after the AU$8m (GBP4.4m) special dividend/capital return and
prior to the AU$6.9m (GBP3.8m) cash received post 30 June 2019 from
the sale of the remaining 250,000 Afterpay shares which increased
group cash at 31 August 2019 to GBP11 million.
The Group has sufficient headroom available on its funding
facilities totalling GBP70m (including GBP60m STB Operating
agreement and GBP10m STB credit facility) in place of which less
than 25% has been drawn leaving GBP58m available.
Disposal of Shares in Clearpay
As announced on 23 August 2018, the Company's subsidiary,
ThinkSmart Europe Limited ("TSE"), completed the sale of 90% of the
issued shares in Clearpay to Afterpay for 1,000,000 shares in the
capital of Afterpay. On 24 August 2018, the Company sold its
initial tranche of 750,000 shares in the capital of Afterpay at a
price of A$20 per share.
The Group received the second tranche of 250,000 shares in
Afterpay, from the sale of Clearpay, on 25 February 2019. These
shares have now been sold in two tranches of 125,000 (on 27 June
and 28 August 2019) with cash received post 30 June 2019 of AU$6.93
million (GBP3.82 million).
Dividend/Capital Return
As previously announced, the Group returned AU$8m to its
shareholders/depositary interest holders during the year in two
payments, one for A$3,999,875.72 being a capital return and the
other for A$3,999,875.72 being a special dividend with a record
date of 15 March 2019 and payment date of 29 March 2019 for both
payments.
Current Trading Update
Post the period end, leasing volumes have stabilised and remain
broadly in line with the last two months of FY19 at c.GBP0.2m
monthly settled value, whilst operating costs remain controlled
aligned to current volume performance.
Looking ahead, the business 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.
Key Performance Indicators:
Restated 12 Months
12 Months to
to 30 June 2018
30 June 2019
Business Volumes (ex VAT
cost of equipment acquired
in period and leased to
customers)
--------------- ------------------- ------
* SmartPlan GBP2.7m GBP4.8m -43%
--------------- ------------------- ------
* Upgrade Anytime GBP0.8m GBP2.0m -62%
--------------- ------------------- ------
* Flexible Leasing GBP0.8m GBP6.5m -88%
--------------- ------------------- ------
Total - Continuing Operations GBP4.3m GBP13.4m -68%
--------------- ------------------- ------
GBP0.3m GBP0.3m -
* Clearpay
--------------- ------------------- ------
Total GBP4.6m GBP13.7m -66%
--------------- ------------------- ------
Revenue (Total) GBP8.1m GBP9.6m -15%
--------------- ------------------- ------
Net profit/(loss) after
tax from continuing operations GBP0.9m GBP(4.0)m +124%
--------------- ------------------- ------
Statutory Profit/(Loss)
After Tax GBP8.7m GBP(4.6)m +290%
--------------- ------------------- ------
Basic EPS profit/(loss)
in pence 8.21 (4.34) +289%
--------------- ------------------- ------
As at Restated as at
30 June 2019 30 June 2018
--------------- ------------------- ------
Lease Receivables Under
Management (Closing) GBP13.3m GBP19.9m -33%
--------------- ------------------- ------
Active Customer Contracts
(000) 29.6 41.0 -28%
--------------- ------------------- ------
ATV (Average Transaction
Value) GBP982 GBP703 +40%
--------------- ------------------- ------
Cash and Cash Equivalents GBP7.1m GBP2.5m +181%
--------------- ------------------- ------
Net Assets GBP16.6m GBP12.2m +35%
--------------- ------------------- ------
The following results have been extracted from the audited
financial statements
Consolidated Statement of Profit & Loss and Other
Comprehensive Income
For the Financial Year Ended 30 June 2019
Restated
12 Months
12 Months to June
to June 2019 2018
Notes GBP,000 GBP,000
Continuing operations
Revenue 6(a) 7,240 8,892
Other revenue 6(b) 897 659
-------------- -----------
Total revenue 8,137 9,551
Customer acquisition cost 6(c) (965) (1,317)
Cost of inertia assets sold 6(d) (901) (842)
Other operating expenses 6(e) (4,813) (6,508)
Depreciation and amortisation 6(f) (2,299) (2,636)
Impairment losses 6(g) (272) (2,742)
Gains/(Losses) on Financial Instruments 6(h) 1,647 -
-------------- -----------
Profit/(Loss) before tax 534 (4,494)
Income tax benefit 7 404 530
-------------- -----------
Net Profit/(Loss) after tax from continuing
operations 938 (3,964)
Gain/(Loss) from discontinued operations
net of tax 8 7,731 (594)
Net Profit/(Loss) after tax - attributable
to owners of the Company 8,669 (4,558)
Other comprehensive (loss)/income
Items that may be reclassified subsequently
to profit or loss, net of income tax:
Foreign currency translation differences
for foreign operations (134) (140)
Total items that may be reclassified subsequently
to profit or loss net of income tax (134) (140)
-------------- -----------
Other comprehensive loss for the year, net
of income tax (134) (140)
-------------- -----------
Total comprehensive income/(loss) for the
year attributable to owners of the Company 8,535 (4,698)
-------------- -----------
Earnings/(Loss) per share
Basic Earnings/(loss) per share (pence) 30 8.21 (4.34)
Diluted Earnings/(loss) per share (pence) 30 8.21 (4.34)
The attached notes form an integral part of these consolidated
financial statements
Consolidated Statement of Financial Position
As at 30 June 2019
Restated
June 2019 June 2018
Notes GBP,000 GBP,000
Current assets
Cash and cash equivalents 22(a) 7,099 2,523
Trade receivables 27(c) 82 180
Finance lease receivables 9 2,640 3,399
Tax receivable 7 540 578
Other current assets 10 2,729 1,325
Assets held for sale 8 - 1,528
Total current assets 13,090 9,533
---------- -----------
Non-current assets
Finance lease receivables 9 805 3,420
Plant and equipment 14 286 373
Intangible assets 15 2,183 3,116
Deferred tax assets 7 - 71
Financial assets at fair value through profit
or loss 11 1,795 -
Contract assets 12 2,032 2,739
Other non-current assets 13 2,403 2,861
Total non-current assets 9,504 12,580
---------- -----------
Total assets 22,594 22,113
---------- -----------
Current liabilities
Trade and other payables 18 1,265 1,560
Contract liabilities 19 772 1,029
Other interest bearing liabilities 20 1,907 2,510
Provisions 18 252 283
Liabilities held for sale 8 - 141
Total current liabilities 4,196 5,523
---------- -----------
Non-current liabilities
Contract liabilities 19 1,221 1,638
Deferred tax liability 7 - -
Other interest bearing liabilities 20 603 2,708
---------- -----------
Total non-current liabilities 1,824 4,346
---------- -----------
Total liabilities 6,020 9,869
---------- -----------
Net assets 16,574 12,244
---------- -----------
Equity
Issued capital 21(a) 15,211 17,397
Reserves (2,977) (2,843)
Accumulated profits 4,340 (2,310)
---------- -----------
Total equity 16,574 12,244
---------- -----------
The attached notes form an integral part of these consolidated
financial statements
Consolidated Statement of Changes in Equity
For the Financial Year Ended 30 June 2019
Foreign Attributable
Fully paid currency to equity
ordinary translation Accumulated holders
Consolidated shares reserve Profit of the parent
GBP,000 GBP,000 GBP,000 GBP,000
----------- ------------- ------------ ---------------
Restated Balance at 1 July 2017 17,332 (2,703) 2,209 16,838
Loss for the year - - (4,558) (4,558)
Exchange differences arising on translation
of foreign operations, net of tax - (140) - (140)
Total comprehensive loss for the year - (140) (4,558) (4,698)
----------- ------------- ------------ ---------------
Transactions with owners of the Company,
recognised directly in equity
Contributions by and distributions to owners
of the Company
Issue of ordinary shares - - - -
Dividends paid in respect of Loan Funded
Shares exercised in year - - (12) (12)
Recognition of share-based payments - - 51 51
Share options exercised 65 - - 65
Restated Balance at 30 June 2018 17,397 (2,843) (2,310) 12,244
----------- ------------- ------------ ---------------
Restated Balance at 1 July 2018 17,397 (2,843) (2,310) 12,244
Profit for the year - - 8,669 8,669
Exchange differences arising on translation
of foreign operations, net of tax - (134) - (134)
Total comprehensive income/(loss) for the
year - (134) 8,669 8,535
-------- -------- -------- --------
Transactions with owners of the Company,
recognised directly in equity
Contributions by and distributions to owners
of the Company
Capital return paid (2,186) - - (2,186)
Dividends paid - - (2,214) (2,214)
Recognition of share-based payments - - 195 195
Share options exercised - - - -
-------- -------- -------- --------
Balance at 30 June 2019 15,211 (2,977) 4,340 16,574
-------- -------- -------- --------
The attached notes form an integral part of these consolidated
financial statements
Consolidated Statement of Cash Flows
For the Financial Year Ended 30 June 2019
12 Months Restated
to June 12 Months
2019 to June
GBP,000 2018
Notes GBP,000
Cash Flows from Operating Activities
Receipts from customers 6,228 7,437
Payments to suppliers and employees (5,561) (7,041)
Receipts/(payments) in respect of lease
receivables 3,916 (3,187)
(Payments)/proceeds from other interest
bearing liabilities, inclusive of related
costs (2,708) 3,271
Interest received 131 77
Interest and finance charges paid (348) (359)
Receipts from security guarantee 278 649
Income tax received 513 172
Net cash from operating activities 22(b) 2,449 1,019
---------- -----------
Cash Flows from Investing Activities
Payments for plant and equipment (54) (76)
Payment for intangible assets - software
& contract rights (328) (976)
Disposal of discontinued operation net
of tax (1,392) (1,981)
Receipts from sale of financial instruments 8,453 -
---------- -----------
Net cash from/(used in) investing activities 6,679 (3,033)
---------- -----------
Cash Flows from Financing Activities
Proceeds from share issue net of costs - 65
Dividends paid (2,214) (12)
Share buyback/return of capital net of
costs (2,186) -
Net cash (used in)/from financing activities (4,400) 53
---------- -----------
Net increase/(decrease) in cash and cash
equivalents 4,728 (1,961)
Effect of exchange rate fluctuations on
cash held (152) (130)
Cash and cash equivalents at beginning
of the financial year 2,523 4,527
Cash and cash equivalents from discontinued
operations 8 - 87
Total cash and cash equivalents at the
end of the financial period 22(a) 7,099 2,523
---------- -----------
Restricted cash and cash equivalents at
the end of the financial period 22(a) (55) (56)
---------- -----------
Net available cash and cash equivalents
at the end of the financial period 7,044 2,467
---------- -----------
The attached notes form an integral part of these 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. 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 Corporation Act 2001. The consolidated financial statements
comply with International Financial Reporting Standards (AASB)
adopted by the International Accounting Standards Board (AASB) as
well as International Financial Reporting Standards as adopted by
the EU ("Adopted AASBs"). The consolidated financial statements
were authorised for issue by the Board of Directors on 26 September
2019.
(b) Basis of measurement
The financial report has been prepared on the basis of
historical cost, except for derivative financial instruments
measured at fair value. Cost is based on the fair values of the
consideration given in exchange for assets. All amounts are
presented in British Pounds ("GBP") unless otherwise noted.
(c) Functional and presentation currency
These consolidated financial statements are presented in British
Pounds, which is the Group's functional currency. The Group is of a
kind referred to in ASIC Corporations (Rounding in Financial/
Directors' Reports) Instrument 2016/191b and in accordance with
that instrument, amounts in the consolidated financial statements
and directors' report have been rounded off to the nearest thousand
pounds, unless otherwise stated.
(d) Going Concern
The consolidated 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.
(e) Accounting policies available for early adoption not yet adopted
AASB 16 is the only new standard for annual periods beginning
after 1 January 2019 and has not been applied in preparing this
financial report. The Group has not adopted this standard early
with the first implementation effective for the next financial
year.
Ref Title Summary Application Application Impact on Group financial
date of date for report
standard Group
AASB Leases Replaces AASB17, the 1 January 1 July The Group currently
16 standard introduces 2019 2019 only leases its office
a single lessee accounting and one company vehicle
model and requires due for return in
a lessee to recognise September 2019. The
assets and liabilities office lease is shown
for all leases with in note 21. At the
a term of more than time of preparing
12 months, unless the this report the Group
underlying asset is has assessed that
of low value. A lessee there will be no
is required to recognise significant impact
a right-of-use asset due to the adoption
representing its right of AASB 16 in future
to use the underlying periods.
leased asset and a
lease liability representing
its obligation to make
lease payments.
------- ------------------------------ ------------ ------------ --------------------------
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.
New or amended Accounting Standards and Interpretations
adopted
The Group has adopted all of the new or amended International
Financial Reporting 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 are most
relevant to the Group:
AASB 9 Financial Instruments
The Group has adopted AASB 9 in the current year applying the
full retrospective transition approach with the date of initial
application being 1 July 2018. The standard introduced new
classification and measurement models for financial assets. A
financial asset shall be measured at amortised cost if it is held
within a business model whose objective is to hold assets in order
to collect contractual cash flows which arise on specified dates
and that are solely principal and interest. A debt investment shall
be measured at fair value through other comprehensive income if it
is held within a business model whose objective is to both hold
assets in order to collect contractual cash flows which arise on
specified dates that are solely principal and interest as well as
selling the asset on the basis of its fair value. All other
financial assets are classified and measured at fair value through
profit or loss unless the entity makes an irrevocable election on
initial recognition to present gains and losses on equity
instruments (that are not held-for-trading or contingent
consideration recognised in a business combination) in other
comprehensive income ('OCI'). Despite these requirements, a
financial asset may be irrevocably designated as measured at fair
value through profit or loss to reduce the effect of, or eliminate,
an accounting mismatch. For financial liabilities designated at
fair value through profit or loss, the standard requires the
portion of the change in fair value that relates to the entity's
own credit risk to be presented in OCI (unless it would create an
accounting mismatch). New simpler hedge accounting requirements are
intended to more closely align the accounting treatment with the
risk management activities of the entity. New impairment
requirements use an 'expected credit loss' ('ECL') model to
recognise an allowance. 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.
AASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 in the current year applying the
full retrospective transition approach with the date of initial
application being 1 July 2018. The standard provides a single
comprehensive model for revenue recognition. The core principle of
the standard is that an entity shall recognise revenue to depict
the transfer of promised goods or services to customers at an
amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The
standard introduced a new contract-based revenue recognition model
with a measurement approach that is based on an allocation of the
transaction price. This is described further in the accounting
policies below. Credit risk is presented separately as an expense
rather than adjusted against revenue. Contracts with customers are
presented in an entity's statement of financial position as a
contract liability, a contract asset, or a receivable, depending on
the relationship between the entity's performance and the
customer's payment. Customer acquisition costs and costs to fulfil
a contract can, subject to certain criteria, be capitalised as an
asset and amortised over the contract period.
The impact on the financial performance and position of the
Group from the adoption of these Accounting Standards is detailed
in note 32.
(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.
Measuring goodwill
The Group measures goodwill as the fair value of consideration
transferred including the recognised amount of any non-controlling
interest in the acquiree, less the net recognised amount (generally
fair value) of the identifiable assets acquired and liabilities
assumed, all measured as of the acquisition date. Consideration
transferred includes the fair values of the asset transferred,
liabilities incurred by the Group to the previous owners of the
acquiree, and equity interests issued by the Group. Consideration
transferred also includes the fair value of any contingent
consideration and share-based payment awards of the acquiree that
are replaced mandatorily in the business combination.
(c) 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 117 Leases (AASB 16 for year ended
30 June 2020) and AASB 9 Financial Instruments (previously AASB
139).
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).
Where the Group is acting as the lessor it follows the treatment
outlined in AASB 117. In accordance with AASB 117 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.
(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.
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.
(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
In the year ended 30 June 2019 the Group has adopted the new
accounting standard AASB 9 - Financial Instruments replaces AASB
139. The objective of AASB 9 is to provide users of the financial
statements with relevant information on future cash flows generated
by financial assets or liabilities. The three areas of focus for
AASB 9 are: Classification and Measurement, Credit Losses, and
Hedge Accounting. The financial instruments that the group holds
are primarily lease contracts which are accounted for under AASB
117 (AASB 16 from 2019) and financial instruments held at fair
value through profit or loss. The financial instruments held at
FVTPL include the Financial Guarantee Contract with STB, 125,000
shares in Afterpay Touch Group and the 10% holding in Clearpay
Finance Limited. It is the assessment of the management that there
has been no material impact of the change in standard.
(i) Non-derivative financial assets
The Group initially recognises loans and receivables and
deposits on the date that they are originated. All other financial
assets (including assets designated at fair value through profit or
loss) are recognised initially on the trade date at which the Group
becomes a party to the contractual provisions of the
instrument.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
right to receive the contractual cash flows on the financial asset
in a transaction in which substantially all the risks and rewards
of ownership of the financial asset are transferred. Any interest
in transferred financial assets that is created or retained by the
Group is recognised as a separate asset or liability. Financial
assets and liabilities are offset and the net amount presented in
the statement of financial position when, and only when, the Group
has a legal right to offset the amounts and intends either to
settle on a net basis or to realise the asset and settle the
liability simultaneously.
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.
Lease receivables
The Group has entered into financing transactions with customers
and has classified nearly all of its leases as finance leases for
accounting purposes. Under a finance lease, substantially all the
risks and benefits incidental to the ownership of the leased asset
are transferred by the lessor to the lessee. The Group recognises
at the beginning of the lease minimum term an asset at an amount
equal to the aggregate of the present value (discounted at the
interest rate implicit in the lease) of the minimum lease payments
and an estimate of the value of any unguaranteed residual value
expected to accrue to the benefit of the Group at the end of the
minimum lease term. This asset represents the Group's net
investment in the lease.
Unearned finance lease income
Unearned finance lease income on leases and other receivables is
brought to account over the life of the lease contract based on the
interest rate implicit in the lease using the effective interest
rate method.
Initial direct transaction income and costs
Initial direct income/costs or directly attributable,
incremental transaction income/costs incurred in the origination of
leases are included as part of receivables on the balance sheet and
are amortised in the calculation of lease income and interest
income.
Allowance for expected credit losses
The collectability of lease receivables is assessed on an
ongoing basis. A provision is made for expected credit losses using
the simplified approach of measuring expected credit losses on a
lifetime expected credit loss basis (refer note 3(g)(iii)).
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.
(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, the loss allowance is recognised within other
comprehensive income. 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 inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of
impairment. If any such indication exists then the asset's
recoverable amount is estimated. For goodwill and intangible assets
that have indefinite lives or that are not yet available for use,
the recoverable amount is estimated at each reporting date.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows
are discounted to their present value using a 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.
(i) Intangible assets
Intellectual property
Intellectual property is recorded at the cost of acquisition
over the fair value of the identifiable net assets acquired, and is
amortised on a straight line basis over 20 years.
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) Goodwill
Goodwill acquired in a business combination is initially
measured at its cost, being the excess of the cost of the business
combination over the acquirer's interest in the net fair value of
the identifiable assets, liabilities and contingent liabilities
recognised. Goodwill is subsequently measured at its cost less any
impairment losses.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash generating units (CGUs) or Group's of
CGUs, expected to benefit from the synergies of the business
combination. CGUs (or Group's of CGUs) to which goodwill has been
allocated are tested for impairment annually, or more frequently if
events or changes in circumstances indicate that goodwill might be
impaired.
If the recoverable amount of the CGU (or group of CGUs) is less
than the carrying amount of the CGU (or group of CGUs), the
impairment loss is allocated first to reduce the carrying amount of
any goodwill allocated to the CGU (or group of CGUs) and then to
the other assets of the CGU (or group of CGUs) pro-rata on the
basis of the carrying amount of each asset in the CGU (or CGUs).
The impairment loss recognised for goodwill is recognised
immediately in profit or loss and is not reversed in the subsequent
period.
On disposal of an operation within a CGU, the attributable
goodwill is included in the determination of profit or loss on
disposal of the operation.
(k) 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.
(l) Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to issue of ordinary shares and share options
are recognised as a deduction from equity, net of any tax
effects.
(m) Income tax
Current tax
Current tax is calculated by reference to the amount of income
taxes payable or recoverable in respect of the taxable profit or
tax loss for the period. It is calculated using tax rates and tax
laws that have been enacted or substantively enacted by reporting
date. Current tax payable for current and prior periods is
recognised as a liability to the extent that it is unpaid. Carried
forward tax recoverable on tax losses is recognised as a deferred
tax asset where it is probable that future taxable profit will be
available to offset in future periods.
Deferred tax
Deferred tax is accounted for using the balance sheet method in
respect of temporary differences arising from differences between
the carrying amount of assets and liabilities in the 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 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.
(n) 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.
(o) 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.
(p) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company, excluding any costs
of servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the
period.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary
shares.
(q) Provisions
A provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligations. Provisions are
determined by discounting the expected future cash flows at a rate
that reflects current market assessments of the time value of money
and the risks specific to the liability.
(r) Lease payments
Payments made under operating leases are recognised in profit or
loss on a straight line basis over the minimum term of the lease.
Lease incentives received are recognised as an integral part of the
total lease expense, over the minimum term of the lease. Minimum
lease payments made under finance leases are apportioned between
the finance expense and the reduction of the outstanding liability.
The finance expense is allocated to each period during the minimum
lease term so as to produce a constant period rate of interest on
the remaining balance of the liability.
(s) 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).
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.
Further information about the assumptions made in measuring fair
values is included in the following notes:
Note 21(b)(i) - share based payment transactions; and
Note 27(b) - financial instruments.
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.
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 9 - 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 12 - measurement of contract asset non-cash consideration
Note 19 - measurement of contract liabilities;
Note 17 - measurement of the recoverable amount of cash
generating units containing goodwill; and
Note 21(b)(i) - measurement of share-based payments.
Determination of consideration of separate performance
obligation
5. Financial Risk Management
Overview
The Group has exposure to the following risks from the use of
financial instruments:
-- Credit risk
-- Liquidity risk
-- Market risk
-- Operational risk
This note presents information about the Group's exposure to
each of the above risks, the objectives, policies and processes for
measuring and managing financial risks, and the management of
capital. Further quantitative disclosures are included throughout
this financial report.
The Board of Directors has overall responsibility for the
establishment and oversight of the risk management framework. The
Board has established the Audit and Risk 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 27(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.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. The Group's
approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the
Group's reputation. The consolidated entity manages liquidity risk
by maintaining adequate reserve facilities by continuously
reviewing its facilities and cash flows. The Group ensures that it
has sufficient cash on demand to meet expected operational expenses
and financing subordination requirements. In addition, the Group
maintains the operational facilities which are shown in note
20.
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
As at 30 June 2019 the Group has drawn down GBP0.1m on its
Santander loan facility of GBP10m which is in run off until
September 2019. The Group has also drawn down GBP2.4m on its STB
loan facility of GBP10m. 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.
Concentration risk
The Company's main retail distribution partner in the UK is
Dixons Carphone plc and contracts for both business sales and
consumer sales are in place until at least 2020, with the consumer
"Flexible Leasing" contract being exclusive. Should Dixons cease
trading or terminate the contracts, turnover would be reduced until
alternative distribution partners were found.
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:
Restated
30 June 30 June
2019 2018
GBP,000 GBP,000
Total liabilities 6,020 9,869
Less cash and cash equivalents (7,099) (2,523)
-------- ---------
Net (cash)/debt (1,079) 7,346
-------- ---------
Total capital 16,574 12,244
Debt-to-adjusted capital ratio (0.07) 0.60
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 14 November 2018 shareholders
approved a return of capital of up to AUD $8.0m with the final
amount and timing to be determined by the directors of the company.
On 5 March 2019 the Group announced that the Company would
distribute AUD $7,999,751.44 to shareholders (the "Distribution")
in two parts:
1. a capital reduction, pursuant to which the Company will
return 3.772 cents per share (or depositary interest) to
shareholders (or depositary interest holders) ("Return of
Capital"); and
2. a special dividend of 3.772 cents per ordinary share (or
depositary interest) - 0.440 cents of which will be fully franked,
with the remaining 3.332 cents declared as attaching conduit
foreign income ("Dividend").
The return of capital and dividend have a record date of 15
March 2019 and were paid on 29 March 2019.
6. Consolidated Statement of Profit and Loss
12 Months Restated
to 12 Months
30 June to
2019 30 June 2018
GBP,000 GBP,000
Profit/(loss) is arrived at after crediting/(charging)
the following items:
a) Revenue
Services revenue - insurance commission 586 715
Interest revenue - other entities 131 77
Income earned from sale of inertia equipment 778 818
Extended rental income 2,444 2,728
Fee revenue - customers 101 91
Commission income 3,200 4,463
---------- --------------
7,240 8,892
---------- --------------
b) Other revenue
Finance lease income 814 653
Other revenue 83 6
---------- --------------
897 659
---------- --------------
Total revenue 8,137 9,551
---------- --------------
All revenue is generated in the UK from
the following products:
SmartPlan 5,828 6,702
Upgrade Anytime 1,220 2,141
Flexible Leasing 742 413
Other/non-product specific 347 295
---------- --------------
8,137 9,551
---------- --------------
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 inventory, including
that transferred from PPE Operating lease when end customer terminates
their lease agreement during secondary period, upon sale of inertia
equipment.
30 June Restated
2019 30 June 2018
Notes GBP,000 GBP,000
e) Other operating expenses
Employee benefits expense:
- Payments to employees (1,871) (3,076)
- Employee superannuation costs (139) (236)
- Share-based payment expense (195) (51)
(2,205) (3,363)
Occupancy costs (271) (286)
Professional services (720) (687)
Finance charges (348) (359)
Credit losses arising from financial guarantee
contract (344) (598)
Other costs (925) (1,215)
---------- --------------
(4,813) (6,508)
---------- --------------
f) Depreciation and amortisation
Depreciation (1,021) (1,341)
Amortisation (1,278) (1,295)
---------- --------------
(2,299) (2,636)
---------- --------------
g) Impairment losses
Impairment losses finance leases and receivables (272) (410)
Impairment of goodwill 15 - (2,332)
---------- --------------
(272) (2,742)
---------- --------------
(h) Gains/(losses) on financial instruments
Realised gains 1,226 -
Unrealised gains 421 -
1,647 -
------
Realised gains arose on the disposal of the full tranche 1 of
750,000 Afterpay Touch Group Ltd (APT) shares on 24 August 2018 at
AU$20.00 (GBP11) per share and 125,000 tranche 2 APT shares on 27
June 2019 at AU$27.693 (GBP15) per share, with the cash being
received in July 2019 for the 27 June 2019 share sale. Unrealised
gains have arisen on the revaluation of the remaining 125,000
tranche 2 APT shares, still held on 30 June 2019, at AU$25.07
(GBP14) per share. These amounts are included in the table
above.
7. Income Tax
Restated
30 June 30 June
2019 2018
GBP,000 GBP,000
(a) Amounts recognised in profit and loss
The major components of income tax benefit/(expense) are:
Current income tax expense (67) (59)
Adjustment for prior year 540 477
Deferred income tax benefit/(expense)
Origination and reversal of temporary differences - 119
Adjustment for prior year (69) (7)
Total income tax benefit 404 530
--------- ---------
A reconciliation between tax expense and the product of
accounting profit before income tax from continuing operations
multiplied by the applicable income tax rate is as follows:
Accounting profit/(loss) before tax 8,265 (4,842)
-------- -----------
At the statutory income tax rate of 30% (2,480) 1,453
Effect of tax rates in foreign jurisdictions 885 (562)
Non-deductible expenses (147) (633)
Non-taxable gain (Substantial Shareholdings
Exemption) 1,954 -
Losses carried back - -
Losses carried forward - (192)
Overseas tax losses (recognised) (279) (6)
Adjustments in respect of prior years 471 470
-------- -----------
Income tax credit 404 530
-------- -----------
Deferred tax asset
Accrued expenses - 6
Employee entitlements - 64
Intangible assets - 1
Total - 71
-------- --------
Net deferred tax asset/(liability) for UK - -
Net deferred tax asset for Australia - 71
Tax receivable/(payable)
Current 540 578
The current tax asset/(liability) is recognised for income tax
receivable/(payable) in respect of all periods to date.
8. Profit/(Loss) from discontinued operations
In June 2018, management committed to a plan to sell one of the
subsidiary companies, Clearpay Finance Limited. The sale was
completed on 23 August 2018.
30 June 2019 30 June 2018
GBP,000 GBP,000
Revenue 11 11
------------- -------------
Total revenue 11 11
Customer acquisition costs (62) (293)
Other operating expenses (52) (235)
Depreciation and amortisation (49) (61)
Impairment losses (8) (16)
------------- -------------
Loss before tax (160) (594)
Income tax expense - -
------------- -------------
Loss after tax (160) (594)
------------- -------------
Consideration for sale of discontinued operation 10,510 -
Net assets sold (see below) (1,727) -
Costs associated with sale of discontinued
operation (892) -
Profit on sale of discontinued operation net
of tax 7,891 -
------------- -------------
Profit/(Loss) after tax from discontinued
operations 7,731 (594)
------------- -------------
The sale of Clearpay Finance Limited is not considered to result
in a tax charge for the Group by virtue of the Substantial
Shareholdings Exemption. Based on professional advice, the
directors consider that the Group is exempt from the charge to tax
on gains or losses accruing on the disposal by companies of shares
as they meet the conditions of this exemption.
At 30 June 2018 the disposal group was stated at Fair Value and
comprised the following assets and liabilities.
23 August
30 June 2019 2018 30 June 2018
GBP,000 GBP,000 GBP,000
Cash and equivalents - - 87
Trade receivables - 24 12
Finance loan receivable - 178 72
Intangible assets - 1,554 1,357
-------------- ---------- -------------
Assets held for sale/sold - 1,756 1,528
-------------- ---------- -------------
Trade and other payables - 20 137
Deferred income - 9 4
-------------- ---------- -------------
Liabilities held for sale/sold - 29 141
-------------- ---------- -------------
Net assets sold 1,727
9. Finance lease receivables
30 June 2019 30 June 2018
GBP,000 GBP,000
Current
Gross investment in finance lease receivables 2,721 3,468
Unguaranteed residuals 390 434
Unearned future finance lease income (283) (355)
------------- -------------
Net lease receivable 2,828 3,547
Allowance for expected credit losses (188) (148)
------------- -------------
2,640 3,399
------------- -------------
Non-current
Gross investment in finance lease receivables 556 3,607
Unguaranteed residuals 430 478
Unearned future finance lease income (122) (506)
------------- -------------
Net lease receivable 864 3,579
Allowance for expected credit losses (59) (159)
------------- -------------
805 3,420
------------- -------------
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. See note 27(c) for detailed
analysis of the ageing of lease receivables and expected credit
losses recognised.
10. Other Current Assets
Restated
30 June 2019 30 June 2018
GBP,000 GBP,000
Prepayments 340 420
Insurance prepayments 137 320
Accrued income - insurance commission (see
Note 13(i)) 279 451
Other debtors (i) 1,909 -
Sundry debtors 64 134
2,729 1,325
------------- --------------
i) In the year ended 30 June 2019 other debtors includes the
realised sale of 125,000 Afterpay (APT) shares on the 27 June 2019.
The cash of GBP1.909m for this sale was received on 01 July
2019.
11. Financial assets at fair value through profit or loss
Restated
30 June 2019 30 June 2018
GBP,000 GBP,000
125,000 APT shares held at fair value (i) 1,735 -
Investment in Clearpay Finance Ltd (ii) 60 -
1,795 -
------------- --------------
i) The remaining 125,000 Afterpay Touch Group Ltd (APT) shares
held at 30 June 2019 are held at fair value. APT are listed on the
Australian Stock Exchange (ASX) and are a level 1 financial
instrument held at fair value through the profit and loss account
under AASB 9. At 30 June 2019, the APT shares closed at AUD 25.07
per share. Subsequent to the reporting period end, the remaining
125,000 shares held were sold on 28 August 2019 at AUD 27.73 per
share.
ii) On 23 August 2018 the Group sold 90% of Clearpay Finance Ltd
to Afterpay Touch Group Ltd. The Group retains a 10% holding in
Clearpay which is held as an investment at fair value under AASB 9.
The Group has recognised the investment at fair value through
profit or loss of GBP60,000. The investment in Clearpay is a level
3 financial instrument.
12. Contract assets
Restated
30 June 30 June
2019 2018
GBP,000 GBP,000
Balance at 1 July 2,739 2,975
Recognised as revenue in period (i) 1,208 1,602
Recognised as customer acquisition cost
(ii) (135) (92)
Transferred to Plant & Equipment Operating
lease additions (1,780) (1,746)
--------- ---------
2,032 2,739
--------- ---------
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.
13. Other Non-Current Assets
Restated
30 June 2019 30 June 2018
GBP,000 GBP,000
Insurance prepayments 100 234
Accrued income - insurance commission (i) 276 322
Deposits held by funders (ii) 2,027 2,305
------------- --------------
2,403 2,861
------------- --------------
(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 27 for further information.
14. Plant and Equipment
Plant &
Plant & Plant & Equipment
Equipment Equipment Operating
(Australia) (UK) Lease Total
GBP,000 GBP,000 GBP,000 GBP,000
------------- ----------- ----------- ---------
Gross Carrying Amount
Cost or deemed cost
Restated balance at 30 June 2017 83 2,489 1,222 3,794
Effect of movement in exchange
rate (4) - - (4)
Transferred from contract assets - - 1,746 1,746
Transferred to inventory/cost
of inertia assets sold - - (842) (842)
Additions - 67 9 76
Restated balance at 30 June 2018 79 2,556 2,135 4,770
------------- ----------- ----------- ---------
Effect of movement in exchange
rate (2) - - (2)
Transferred from contract assets - - 1,780 1,780
Transferred to inventory/cost
of inertia assets sold - - (901) (901)
Additions - 45 9 54
Balance at 30 June 2019 77 2,601 3,023 5,701
Accumulated Depreciation
Restated balance at 30 June 2017 (81) (2,284) (695) (3,060)
Effect of movement in exchange
rate 4 - - 4
Depreciation expense (1) (140) (1,200) (1,341)
Restated balance at 30 June 2018 (78) (2,424) (1,895) (4,397)
------------- ----------- ----------- ---------
Effect of movement in exchange
rate 3 - - 3
Depreciation expense (1) (87) (933) (1,021)
Balance at 30 June 2019 (76) (2,511) (2,828) (5,415)
------------- ----------- ----------- ---------
Net Book Value
At 30 June 2018 1 132 240 373
------------- ----------- ----------- ---------
At 30 June 2019 1 90 195 286
------------- ----------- ----------- ---------
15. Intangible Assets
Contract Software Distribution Intellectual Total
rights network Property
GBP,000 GBP,000 GBP,000 GBP,000 GBP,000
--------- --------- ------------- ------------- ---------
Gross carrying amount
At cost
Restated balance
at 30 June 2017 1,360 4,550 270 380 6,560
Effect of movement
in exchange rate - - - (18) (18)
Additions 81 2,252 - - 2,333
Disposals/transfer
to inventory - - - - -
Transfer to assets
held for sale - (1,418) - - (1,418)
Restated balance
at 30 June 2018 1,441 5,384 270 362 7,457
--------- --------- ------------- ------------- ---------
Effect of movement
in exchange rate - - - (6) (6)
Additions 15 313 - - 328
Disposals/transfer
to inventory - - - - -
Balance at 30 June
2019 1,456 5,697 270 356 7,779
--------- --------- ------------- ------------- ---------
Contract Software Distribution Intellectual Total
rights network Property
GBP,000 GBP,000 GBP,000 GBP,000 GBP,000
--------- --------- ------------- ------------- ---------
Accumulated amortisation
and impairment
Restated balance
at 30 June 2017 (1,081) (1,255) (270) (323) (2,929)
Effect of movement
in exchange rate - - - 15 15
Amortisation expense (161) (1,177) - (18) (1,356)
Impairment loss
(i) (132) - - - (132)
Transfer to assets
held for sale - 61 - - 61
Restated balance
at 30 June 2018 (1,374) (2,371) (270) (326) (4,341)
--------- --------- ------------- ------------- ---------
Effect of movement
in exchange rate - - - 23 23
Amortisation expense (44) (1,216) - (18) (1,278)
Impairment loss
(i) - - - - -
Balance at 30 June
2019 (1,418) (3,587) (270) (321) (5,596)
--------- --------- ------------- ------------- ---------
Net book value
At 30 June 2018 67 3,013 - 36 3,116
--------- --------- ------------- ------------- ---------
At 30 June 2019 38 2,110 - 35 2,183
--------- --------- ------------- ------------- ---------
(i) Impairment loss relates to the write off where the related
contract has early terminated.
16. Interest in Subsidiaries
% of Equity
30 June 30 June
Interest in Subsidiaries Country of Incorporation 2019 2018
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
Clearpay Finance Ltd UK 10 100
ThinkSmart Finance Group
Ltd UK 100 100
SmartCheck SL Spain 100 100
SmartPlan Spain SL (see Note
30) Spain 100 100
ThinkSmart Inc USA 100 100
ThinkSmart Employee Share
Trust Australia 100 100
ThinkSmart LTI Pty Limited Australia 100 100
17. Goodwill
30 June 30 June
2019 2018
GBP,000 GBP,000
Balance at beginning of financial year - 2,332
Impairment - (2,332)
---------- ----------
Balance at end of financial year - -
---------- ----------
Impairment testing for cash-generating (CGU) units containing
goodwill
The goodwill of GBP2.33 million arose on the acquisition of the
UK business, RentSmart Limited from Bank of Scotland plc in 2007
(taking ThinkSmart's holding to 100%). Further financial
information relating to the UK business is shown within the segment
information (note 24).
The recoverable amount of the cash-generating unit, being
ThinkSmart's UK leasing business, was based on its value in use
using business plan assumptions and a market discount rate and
hence includes inherent estimation uncertainty. Having been
historically profitable, and in the absence of an active market,
value in use was deemed to be the appropriate method for
measurement of the value of the CGU. However, in the year to 30
June 2018 ThinkSmart's UK leasing business incurred operating
losses of GBP1.2 million (being UK losses of GBP4.1m less GBP0.6m
relating to Clearpay and GBP2.3m goodwill impairment). In addition,
the Group received an indicative proposal from a third party in May
2018 which valued the ThinkSmart leasing business below its net
assets (including GBP2.33m goodwill). These indicators implied that
the carrying value of the goodwill in the ThinkSmart UK leasing
business was impaired and as such a GBP2.33m impairment of the
goodwill was made at 30 June 2018.
18. Trade and Other Payables, and Provisions
Restated
30 June 30 June
2019 2018
GBP,000 GBP,000
Trade and other payables 219 371
GST/VAT Payable 350 553
Other accrued expenses 696 636
--------- ---------
1,265 1,560
--------- ---------
Provisions
Annual leave 136 123
Long service leave 82 89
Risk Transfer cancellation and claims 34 71
--------- ---------
252 283
--------- ---------
Annual and long service leave
Balance at 1 July 212 200
Effect of exchange rate movement (3) (8)
Additional provisions made in the year 9 20
Amounts used during the year - -
--------- ---------
Balance at 30 June 218 212
--------- ---------
Other
Balance at 1 July 71 114
Additional provisions made in the year - -
Amounts used during the year (37) (43)
--------- ---------
Balance at 30 June 34 71
--------- ---------
19. Contract liabilities
Restated
30 June 30 June
2019 2018
GBP,000 GBP,000
Balance at 1 July 2,667 3,246
Recognised as revenue in period (674) (579)
--------- ---------
1,993 2,667
--------- ---------
Contract liabilities due within 12 months 772 1,029
Contract liabilities due greater than
12 months 1,221 1,638
--------- ---------
1,993 2,667
--------- ---------
20. Other interest bearing liabilities
Restated
30 June
30 June 2019 2018
GBP,000 GBP,000
Current - Loan advances net of deferred costs
of raising facility (i) 1,907 2,510
------------- ---------
Non-current- Loan advances net of deferred
costs of raising facility (i) 603 2,708
------------- ---------
Customer financing facilities
- Amount used 2,510 5,553
- Amount unused 17,490 14,447
Total Facility (i) 20,000 20,000
------------- ---------
Other finance facilities (business credit card):
- amount used 5 8
- amount unused 21 27
------------- ---------
26 35
------------- ---------
(i) The loan is made up of a GBP10 million 5 year revolving
credit facility provided by Santander UK plc dated 15 December 2014
and a GBP10 million (option to extend to GBP20 million) minimum 3
year credit facility provided by STB dated 2 October 2017.
21. Issued Capital
Restated
30 June
30 June 2019 2018
GBP,000 GBP,000
(a) Issued and paid up capital
------------- ---------
106,509,994 Ordinary Shares fully paid (2018:
104,728,744) 15,211 17,397
------------- ---------
2019 2019 2018 2018
Number GBP000 Number GBP000
Fully Paid Ordinary Shares
Balance at beginning of the financial
year 104,728,744 17,397 105,478,744 17,332
Issue of ordinary shares 1,781,250 - 500,000 -
Repayment of loans in respect of
500,000 loan funded shares* - - - 65
Return of capital to shareholders - (2,186) - -
Cancellation employee loan-funded
shares - - (1,250,000) -
------------ -------- ------------ --------
Balance at end of the financial
period 106,509,994 15,211 104,728,744 17,397
------------ -------- ------------ --------
*During the prior year 500,000 employee loan-funded shares were
exercised with the related loans being repaid.
Ordinary Shares entitle the holder to participate in dividends
and the proceeds on winding up the Company in proportion to the
number of and amount paid on the Shares held. On a show of hands,
every holder of Ordinary Shares present in the meeting in person or
by proxy is entitled to one vote, and upon a poll each Share is
entitled to one vote. The Company does not have authorised capital
or par value in respect to its issued shares.
(b)(i) Share options - employee options and loan-funded shares
The Company has an ownership-based remuneration scheme for
Executives and senior employees. Each employee share option
converts to one ordinary share of ThinkSmart Limited on exercise
and payment of the exercise price. Each employee loan-funded share
converts to one ordinary share of ThinkSmart Limited on exercise
and repayment of the loan. The options carry neither rights or
dividends nor voting rights. The loan-funded shares carry voting
and rights to dividends.
Options and loan-funded shares issued in previous years and not
yet vested or exercised as at 30 June 2019:
-- 1,757,352 options over ordinary shares were issued 21
December 2016 and exercisable at GBP0.22, vesting and exercisable
on 21 December 2019 until 21 December 2026. The fair value of these
options at grant date was GBP0.0371. Vesting of the options is
subject to achievement of the following performance conditions:
Earnings per Share Condition 1 (EPS1) - Vesting of 75% of the
share options will be subject to meeting EPS1. The metric for EPS1
is growth in earnings per share over the performance period being
the 3 years from 1 July 2016. Share options will vest as
follows;
Metric <15% Nil EPS1 options will vest
Metric = 15% (Lower Target 1) 25% of EPS1 options will vest
------------------------------------
15% < Metric < 50% Straight line vesting between Lower
Target 1 and Upper Target 1
------------------------------------
Metric = 50% (Upper Target 1) 100% of EPS1 options will vest
------------------------------------
Earnings per Share Condition 2 (EPS2) - Vesting of 25% of the
share options will be subject to meeting EPS2. The metric for EPS2
is growth in earnings per share over the performance period, being
the 3 years from 1 July 2016, adjusted to exclude profit generated
from any business transacted with any member of the Dixons Carphone
plc Group. Share options will vest as follows;
Metric <15% Nil EPS2 options will vest
Metric = 15% (Lower Target 2) 25% of EPS2 options will vest
------------------------------------
15% < Metric < 50% Straight line vesting between Lower
Target 2 and Upper Target 2
------------------------------------
Metric = 50% (Upper Target 2) 100% of EPS2 options will vest
------------------------------------
The value of these options and loan-funded shares will be
expensed over the vesting period in accordance with AASB 2.
Measurement of fair values
The fair value of employee share options is measured using a
binomial model and loan-funded shares are measured using a
Monte-Carlo simulation model.
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 Employee
options and options and
loan-funded loan-funded
shares shares
30 June 2017 31 December
Period ending 2013
------------- --------------------
Grant date 21/12/16 04/07/2013
------------- --------------------
Fair value at grant date GBP0.0371 GBP0.0576-GBP0.0694
------------- --------------------
Grant date share price GBP0.22 GBP0.1587
------------- --------------------
Exercise price GBP0.22 GBP0.1559
------------- --------------------
Expected volatility 29.42% 55%
------------- --------------------
Option/loan share life 10 years 4 years
------------- --------------------
Dividend yield 2.00% 0%
------------- --------------------
Risk-free interest rate 0.23% 2.99%
------------- --------------------
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 Year ended 30 June
2019 2018
Weighted Weighted
average average
Number of exercise Number of exercise
options/loan price options/loan price
funded shares GBP funded shares GBP
Balance at beginning of the
financial year 2,445,629 0.2167 5,001,026 0.1995
Granted during the financial
year - - - -
Cancelled during the financial
year (688,277) 0.2083 (2,055,397) 0.1949
Exercised/Repaid Loan during
the financial year - - (500,000) 0.1345
--------------- ---------- --------------- ----------
Balance at the end of financial
year 1,757,352 0.2200 2,445,629 0.2167
--------------- ---------- --------------- ----------
Exercisable at end of the
financial year - - 125,000 0.1559
--------------- ---------- --------------- ----------
The options and loan-funded shares outstanding at 30 June 2019
have an exercise price of GBP0.22 (30 June 2018: GBP0.1559 to
GBP0.22) and a weighted average contractual life of 10 years (30
June 2018: 8.05 years). The following is the total expense
recognised for the year arising from share-based payment
transactions:
12 months 12 months
to 30 June to 30 June
2019 2018
GBP,000 GBP,000
Share options/loan-funded shares granted in
2014 - equity settled - -
Share options/loan-funded shares granted in
2015 - equity settled - -
Share options/loan-funded shares granted in
2016 - equity settled - 14
Share compensation - employee shares (note
21(b)(ii)) 195 37
------------ ------------
Total expense recognised as employee costs
(note 6e) 195 51
------------ ------------
(b)(ii) Share compensation - employee shares
1,781,250 shares of the Company were granted to Ned Montarello
as remuneration.
(c) Dividends
The following dividends were declared and paid by the Group for
the year:
as at as at
30 June 30 June
2019 2018
GBP,000 GBP,000
2.08 pence per ordinary share (2018: nil) 2,214 -
--------- ---------
2,214 -
--------- ---------
22. 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 30 June
2019 2018
GBP,000 GBP,000
Reconciliation of cash and cash equivalents
Cash balance comprises:
* Available cash and cash equivalents 7,044 2,467
* Restricted cash 55 56
--------- ---------
7,099 2,523
--------- ---------
The Group's exposure to credit risk, interest rate and
sensitivity analysis of the financial assets and liabilities are
provided in Note 27.
(b) Reconciliation of the profit/(loss) for the year to net cash flows from operating activities:
Restated
12 months 12 months
to to
30 June 30 June
2019 2018
GBP,000 GBP,000
Profit/(loss) after tax 8,669 (4,558)
Add back non-cash and non-operating items:
Depreciation 1,021 1,341
Amortisation 1,278 1,295
Impairment losses on intangible assets - 2,332
Impairment losses on finance lease receivables (60) 307
Foreign currency (gain)/loss unrealised - -
Equity settled share-based payment 195 51
(Gain)/loss on Financial Instruments (1,647) -
(Profit)/Loss on disposal of discontinued operations (7,731) 594
Cost of inertia assets sold 901 842
Other non-cash items - -
(Increase)/decrease in assets:
Trade receivables, deposits held with funders
and other movements in lease assets 1,196 1,446
Finance lease receivable 3,434 (3,737)
Deferred tax asset 71 (2)
Other assets - -
Contract asset recognised to revenue (1,208) (1,602)
Increase/(decrease) in liabilities:
Trade and other creditors (295) 405
Contract liabilities (674) (579)
Other interest bearing liabilities (2,708) 3,271
Provisions (31) (31)
Provision for income tax 38 (356)
Net cash (used in)/from operating activities 2,449 1,019
---------- -----------
23. Leases and Hire Purchase Obligations
Operating leases - leasing arrangements
Operating leases relate to office facilities with lease terms of
up to 5 years. All operating lease contracts contain market review
clauses in the event that the consolidated entity exercises its
option to renew. The consolidated entity does not have an option to
purchase the leased asset at the expiry of the lease period. No
provisions have been recognised in respect of non-cancellable
operating leases.
June 2019 June 2018
GBP,000 GBP,000
Non-cancellable operating lease payments:
No later than 1 year 96 96
Later than 1 year and not later than 5 years 263 359
More than 5 years - -
---------- ----------
359 455
---------- ----------
24. 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
- ThinkSmart UK Ltd
Corporate and unallocated:
- ThinkSmart Limited
- SmartCheck Finance Spain SL
- ThinkSmart Italy Srl
- ThinkSmart Inc
Operating Segments
Information about reportable Corporate and
segments UK unallocated Total
For the year ended:
Restated Restated
June June June June June June
2019 2018 2019 2018 2019 2018
GBP,000 GBP,000 GBP,000 GBP,000 GBP,000 GBP,000
Revenue 7,183 8,890 57 2 7,240 8,892
Other revenue 897 659 - - 897 659
Total revenue 8,080 9,549 57 2 8,137 9,551
Customer acquisition cost (963) (1,306) (2) (11) (965) (1,317)
Cost of inertia assets sold (901) (842) - - (901) (842)
Other operating expenses (4,119) (5,206) (694) (1,302) (4,813) (6,508)
Depreciation and amortisation (2,298) (2,635) (1) (1) (2,299) (2,636)
Impairment losses (272) (2,742) - - (272) (2,742)
Gain/(Loss) on Financial
Instruments 1,647 - - - 1,647 -
Profit/(Loss) from discontinued
operations 8,053 (594) (322) - 7,731 (594)
Reportable segment profit/(loss)
before income tax 9,227 (3,776) (962) (1,312) 8,265 (5,088)
-------- ----------- ----------- ---------- -------- ---------
Reportable segment current
assets 12,932 9,245 158 288 13,090 9,533
Reportable segment non-current
assets 9,504 12,509 - 71 9,504 12,580
Reportable segment liabilities 5,675 9,534 345 335 6,020 9,869
Capital expenditure 382 2,409 - - 382 2,409
25. Remuneration of Auditor
12 Months 12 Months
to June 2019 to June 2018
GBP,000 GBP,000
Audit and review services:
Auditor of the Company:
Provided by KPMG 105 218
Provided by BDO 109 -
-------------- ---------------
Audit and review of financial statements 214 218
Services other than statutory audit (all provided
by KPMG):
Tax compliance and advisory services 82 74
296 292
-------------- ---------------
The Group's auditors are BDO.
26. Commitments and Contingent Liabilities
June 2019 June 2018
GBP,000 GBP,000
Leases where Group acts as agent (not included
in the statement of financial position) 9,588 13,129
Deposits held by funder 2,027 2,305
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 13).
27. Financial Instruments
(a) Interest rate risk
At the reporting date, the interest rate profile of the Group's
interest bearing financial instruments were:
Carrying amount
June 2019 June 2018
GBP,000 GBP,000
Variable rate instruments
Cash and cash equivalents (note 22a) 7,099 2,523
Deposits held by funder (note 13) 2,027 2,305
Other interest bearing liabilities (note 20) (2,510) (5,553)
---------- ----------
Net financial assets 6,616 (725)
---------- ----------
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 2019 June 2018
GBP,000 GBP,000
Effect of 1% increase in rates 66 (7)
Effect of 1% decrease in rates (66) 7
(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).
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
Key assumptions in the valuation of the instruments were limited
to interpolating interest rates for certain future periods where
there was no observable market data. The majority of financial
assets and liabilities are measured at amortised cost. At 30 June
2019 the Group held the following financial instruments measured at
fair value through profit or loss:
-- 125,000 shares in Afterpay Touch Group Limited with a fair
value of GBP1,734,531 (2018: nil). The Afterpay shares are a Level
1 financial instrument, traded on the Australian Stock Exchange
(ASX) under the ticker APT.
-- 10% holding in Clearpay Finance Limited with a fair value of
GBP60,000 (2018: nil). The holding in Clearpay is a Level 3
financial instrument.
(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:
Restated
June 2019 June 2018
Note GBP,000 GBP,000
Cash and cash equivalents 22(a) 7,099 2,523
Trade receivables 82 180
Loan and lease receivable (current) 9 2,828 3,547
Loan and lease receivable (non-current) 9 864 3,579
Insurance prepayment and accrued income
(current) 10 416 771
Insurance prepayment and accrued income
(non-current) 13 376 556
Sundry debtors 10 64 134
Deposits held by funders 13 2,027 2,305
13,756 13,595
---------- -----------
The carrying amount of the Group's financial assets that are
exposed to credit risk at the reporting date by geographic region
is:
Restated
June 2019 June 2018
GBP,000 GBP,000
Australia 116 242
UK 13,640 13,353
13,756 13,595
---------- -----------
The carrying amount of the Group's financial assets that are
exposed to credit risk at the reporting date by types of
counterparty is:
Restated
June 2019 June 2018
GBP,000 GBP,000
Banks (i) 7,099 2,523
Funders (ii) 2,027 2,305
Insurance partners (iii) 792 1,327
Retail customers (iv) 3,692 7,126
Others 146 314
13,756 13,595
---------- -----------
(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.
The ageing of the Group's trade and lease receivables at the
reporting date was:
Gross Impairment Gross Impairment
June June 2019 June June 2018
2019 GBP,000 2018 GBP,000
GBP, GBP,000
000
Not past due 3,544 42 6,920 76
Past due 0-30 days 115 25 185 40
Past due 31-120 days 75 65 161 142
Past due 121-365 days 150 121 59 56
--------------------- -------------------------- -------------------- --------------
3,884 253 7,325 314
--------------------- -------------------------- -------------------- --------------
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 2019 June 2018
GBP,000 GBP,000
Balance at 1 July 314 61
Impairment loss recognised 272 410
Bad debt written off (333) (157)
Balance at 30 June 253 314
---------- ----------
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 2019 June 2018
GBP,000 GBP,000
Cash and cash equivalents 116 242
10% strengthening of AUD (12) (24)
10% weakening of AUD 12 24
June 2019 June 2018
AUD/GBP year end exchange rate 0.5535 0.5634
(e) Liquidity risk management
The following are the contractual maturities of financial
liabilities, including estimated interest payments and excluding
the impact of netting agreements:
Restated
June 2019 June 2018
GBP,000 GBP,000
Trade and other payables 1,138 1,573
Other interest bearing liabilities 2,678 5,553
---------- -----------
3,816 7,126
---------- -----------
Less than 1 year 3,472 5,080
1-2 years 344 2,046
------ ------
3,816 7,126
------ ------
28. 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
K Jones (resigned 27 June 2019)
D Adams
R McDowell
The Key Management Personnel remuneration included in 'employee
benefits expense' in Note 6(e) is as follows:
12 months 12 months
to June to June
2019 2018
GBP,000 GBP,000
Short-term employee benefits 592 669
Post-employment benefits 21 22
Other long-term benefits 3 3
Share-based payments 75 49
691 743
---------- ----------
Business expenses incurred by KMP's and
reimbursed by the Company 165 202
---------- ----------
29. Subsequent Events
Subsequent to the reporting period end, the Group sold its
remaining holding of 125,000 Afterpay (APT) shares on 28 August
2019 at AUD 27.73 per share (see Note .10(i)).
In addition, on 13 September 2019 the Group's dormant Spanish
subsidiary, SmartPlan Spain SL, was dissolved.
30. Earnings per Share
Restated
12 months 12 months
to June to June
2019 2018
GBP,000 GBP,000
Profit/(loss) after tax attributable to
ordinary shareholders 8,669 (4,558)
30 June 30 June
2019 2018
Number Number
Weighted average number of ordinary shares
(basic) 105,606,491 104,981,491
Weighted average number of ordinary shares
(diluted) 105,606,491 104,981,491
30 June 30 June
Earnings per share 2019 2018
Basic (loss)/earnings per share (pence) 8.21 (4.34)
Basic (loss)/earnings per share (pence)
- continuing operations 0.89 (3.78)
Basic (loss)/earnings per share (pence)
- discontinued operations 7.32 (0.57)
Diluted (loss)/earnings per share (pence)
- continuing operations 0.89 (3.78)
31. Parent entity information
Set out below is the supplementary information about the parent
entity.
Statement of profit or loss and other comprehensive income
June 2019 June 2018
GBP,000 GBP,000
Profit after tax 4,294 381
Total comprehensive income 4,294 381
Statement of financial position
June 2019 June 2018
GBP,000 GBP,000
Total current assets 158 288
---------- ----------
Total assets 16,907 17,142
---------- ----------
Total current liabilities 345 335
---------- ----------
Total liabilities 345 335
---------- ----------
Equity
Issued share capital 15,211 17,397
Accumulated profits 1,351 (590)
---------- ----------
Total equity 16,562 16,807
---------- ----------
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
2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant
and equipment as at 30 June 2019 and 30 June 2018.
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.
-- 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.
32. Effects of changes in accounting policies
The Group has adopted AASB 15 in the current year applying the
full retrospective transition approach with the date of initial
adoption being 1 July 2018. The main changes have arisen in respect
of the accounting for the revenue, and related assets and
liabilities, under the operating agreement and related financial
guarantee contract with STB Leasing Ltd (STBL) where the Group act
as agent for STBL in the brokering and servicing of lease
agreements where STBL is the lessor. In return, the Group receives
an upfront cash transaction fee from STBL together with the
non-cash consideration between STB 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. This has the following
impact:
1. The recognition of the contract asset non-cash consideration
means that it is no longer appropriate to recognise an inertia
intangible asset and related deferred service income together with
inventory of inertia stock.
2. The recognition of the financial guarantee contract premium
eliminates the need for an additional loss pool provision.
3. A contract liability is recognised reflecting the reversal
constraint for the potential refund of the transaction fee in the
event that an end customer lessee defaults on their lease.
4. The cost of acquiring new end customer lease contracts is
capitalised and spread over the term of the end customer lease.
5. At the end of the minimum term of the end customer lease, the
Group becomes the lessor of an operating lease and at which point
the contract asset is transferred to plant & machinery and
depreciated over the expected secondary term. Once the lessee
terminates the lease the equipment is transferred to inventory at
book value and expensed as a cost of inertia asset sold against the
income earned from the sale of the inertia equipment.
This has resulted in the following restatement of comparatives
for the statement of profit or loss and other comprehensive income
for the year ended 30 June 2018, and the statement of financial
position as at 30 June 2018:
-- Restatement of the 30 June 2017 financial position, which is
the restated opening position for the year to 30 June 2018, results
in a reduction to net assets and accumulated profit at 30 June 2017
of GBP1,470,000.
-- The restatement of the profit or loss for the year ended 30
June 2018 results in a GBP348,000 lower loss for that year
resulting in a cumulative reduction to net assets and accumulated
profit at 30 June 2018 of GBP1,122,000 as follows:
-- Inertia intangible assets of GBP3,219,000, inventories of
inertia stock of GBP321,000, deferred service income liabilities of
GBP1,484,000 and accrued inertia rental income of GBP104,000 were
derecognised resulting in a reduced FY18 loss of GBP238,000 (after
allowing for the 30 June 2017 restatement of financial position
impact of GBP2,398,000 reduction).
-- Loss pool bad debt provisions of GBP726,000 were derecognised
resulting in an increased FY18 loss of GBP45,000 (after allowing
for the 30 June 2017 restatement of financial position impact of
GBP771,000 increase).
-- Contract assets (non-cash consideration) of GBP2,739,000 were
recognised resulting in an increased FY18 loss GBP237,000 (after
allowing for the 30 June 2017 restatement of financial position
impact of GBP2,976,000 increase).
-- Contract liabilities in respect of the financial guarantee
and refundable transaction fee reversal constraint of GBP2,667,000
were recognised resulting in a reduced FY18 loss of GBP579,000
(after allowing for the 30 June 2017 restatement of financial
position impact of GBP3,246,000 reduction).
-- Plant and equipment in respect of operating leased equipment
has been recognised with an NBV of GBP240,000 resulting in an
increased FY18 loss of GBP187,000 (after allowing for the 30 June
2017 restatement of financial position impact of GBP427,000
increase).
The following tables show the adjustments recognised for each
line item of the financial statements affected.
Restated
30 June 2018 12 Months
as originally AASB 15 to 30 June
presented GBP,000 2018
GBP,000 GBP,000
Continuing operations
Revenue 7,417 1,475 8,892
Other revenue 721 (62) 659
--------------- ----------------------- ------------
Total revenue 8,138 1,413 9,551
Customer acquisition cost (1,225) (92) (1,317)
Cost of inertia assets sold (1,264) 422 (842)
Other operating expenses (5,910) (598) (6,508)
Depreciation and amortisation (1,436) (1,200) (2,636)
Impairment losses (3,145) 403 (2,742)
--------------- ----------------------- ------------
Profit/(Loss) before tax (4,842) 348 (4,494)
Income tax benefit 530 - 530
--------------- ----------------------- ------------
Net Loss after tax from continuing operations (4,312) 348 (3,964)
Gain/(Loss) from discontinued operations
net of tax (594) - (594)
--------------- ----------------------- ------------
Net Loss after tax - attributable to owners
of the Company (4,906) 348 (4,558)
--------------- ----------------------- ------------
Other comprehensive (loss)/income
Items that may be reclassified subsequently
to profit or loss, net of income tax:
Foreign currency translation differences
for foreign operations (140) - (140)
Total items that may be reclassified subsequently
to profit or loss net of income tax (140) - (140)
Other comprehensive loss for the year, net
of income tax (140) - (140)
--------------- ----------------------- ------------
Total comprehensive loss for the year attributable
to owners of the Company (5,046) 348 (4,698)
--------------- ----------------------- ------------
Earnings/(Loss) per share
Basic Earnings/(loss) per share (pence) (4.67) 0.35 (4.34)
Diluted Earnings/(loss) per share (pence) (4.67) 0.35 (4.34)
30 June 2018 Restated
as originally 30 June
presented AASB 15 2018
GBP,000 GBP,000 GBP,000
Current assets
Cash and cash equivalents 2,523 - 2,523
Trade receivables 180 - 180
Finance lease receivables 3,399 - 3,399
Tax receivable 578 - 578
Other current assets 1,807 (482) 1,325
Assets held for sale 1,528 - 1,528
Total current assets 10,015 (482) 9,533
--------------- ---------- ---------
Non-current assets
Finance lease receivables 3,420 - 3,420
Plant and equipment 133 240 373
Intangible assets 6,335 (3,219) 3,116
Deferred tax assets 71 - 71
Contract assets - 2,739 2,739
Other non-current assets 2,135 726 2,861
Total non-current assets 12,094 486 12,580
--------------- ---------- ---------
Total assets 22,109 4 22,113
--------------- ---------- ---------
Current liabilities
Trade and other payables 1,617 (57) 1,560
Deferred service income 863 (863) -
Contract liabilities - 1,029 1,029
Other interest bearing liabilities 2,510 - 2,510
Provisions 283 - 283
Liabilities held for sale 141 - 141
Total current liabilities 5,414 109 5,523
--------------- ---------- ---------
Non-current liabilities
Deferred service income 621 (621) -
Contract liabilities - 1,638 1,638
Other interest bearing liabilities 2,708 - 2,708
--------------- ---------- ---------
Total non-current liabilities 3,329 1,017 4,346
--------------- ---------- ---------
Total liabilities 8,743 1,126 9,869
--------------- ---------- ---------
Net assets 13,366 (1,122) 12,244
--------------- ---------- ---------
Equity
Issued capital 17,397 - 17,397
Reserves (2,843) - (2,843)
Accumulated profits (1,188) (1,122) (2,310)
--------------- ---------- ---------
Total equity 13,366 (1,122) 12,244
--------------- ---------- ---------
30 June 2017 Restated
as originally 30 June
presented AASB 15 2017
GBP,000 GBP,000 GBP,000
Current assets
Cash and cash equivalents 4,527 - 4,527
Trade receivables 290 - 290
Finance lease receivables 2,107 - 2,107
Other current assets 2,177 (375) 1,802
Total current assets 9,101 (375) 8,726
--------------- ---------- ---------
Non-current assets
Finance lease receivables 1,282 - 1,282
Plant and equipment 207 427 634
Intangible assets 7,459 (3,828) 3,631
Goodwill 2,332 - 2,332
Deferred tax assets 96 - 96
Tax receivable 222 - 222
Contract assets - 2,976 2,976
Other non-current assets 2,857 771 3,628
Total non-current assets 14,455 346 14,801
--------------- ---------- ---------
Total assets 23,556 (29) 23,527
--------------- ---------- ---------
Current liabilities
Trade and other payables 1,155 - 1,155
Deferred service income 1,059 (1,059) -
Contract liabilities - 1,246 1,246
Other interest bearing liabilities 1,158 - 1,158
Provisions 314 - 314
Total current liabilities 3,686 187 3,873
--------------- ---------- ---------
Non-current liabilities
Deferred service income 746 (746) -
Contract liabilities - 2,000 2,000
Deferred tax liability 27 - 27
Other interest bearing liabilities 789 - 789
--------------- ---------- ---------
Total non-current liabilities 1,562 1,254 2,816
--------------- ---------- ---------
Total liabilities 5,248 1,441 6,689
--------------- ---------- ---------
Net assets 18,308 (1,470) 16,838
--------------- ---------- ---------
Equity
Issued capital 17,332 - 17,332
Reserves (2,703) - (2,703)
Accumulated profits 3,679 (1,470) 2,209
--------------- ---------- ---------
Total equity 18,308 (1,470) 16,838
--------------- ---------- ---------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LIFERAVIRFIA
(END) Dow Jones Newswires
September 26, 2019 02:58 ET (06:58 GMT)
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