Trading Update

20 Nov Trading Update

ThinkSmart is expecting to report a second half 2012 NPAT result in the region of break-even, a significant improvement on the first half of 2012.

The outlook for 2013 remains unchanged with a return to profit expected due to:

• the benefits of lease accounting
• growth in ThinkSmart’s “no interest ever” product, Fido, in Australia
• on-going growth in the UK, and
• lower fixed costs.

ThinkSmart’s Fido product continues to develop in line with expectations. Sales volumes have built throughout H212 and are expected to total around $3 million in the last four months of 2012.

New Fido retail partners continue to be signed up and, as a result, the Group’s medium term expectations for Fido are unchanged. Fido has recently been selected as the preferred interest free product for one of Australia’s largest jewellery chains, Showcase, and ThinkSmart is focussed on launching Fido in all 300 Showcase stores as soon as possible.

ThinkSmart confirms that it continues to expect higher sales volumes from Fido than the Group’s rental product, RentSmart, by the end of 2013.

Trading conditions for electronic retailers in Australia continue to be challenging and this has been reflected in the volume of rental sales from RentSmart in H212. Sales volumes in the full 2012 year are now expected to be around 30% below 2011. ThinkSmart is seeking to improve the performance of RentSmart by focussing on product development and deeper integration with its core partners, JB Hi-Fi and Dick Smith Electronics.

The UK business continues to perform well with strong growth in H212 in both new sales volumes and profit. Full year results from the UK are expected to provide another record year across all key metrics.

The market position of ThinkSmart’s primary UK retail partner, Dixons, has improved as a key competitor, Comet, has entered administration and announced the closure of 41 stores by the end of November. This is anticipated to contribute to the continued growth trajectory of the UK business in 2013.

In light of trading conditions in the Australian rental business, the Group recently completed a restructure. Group headcount has been reduced by 12% (mostly in Australia) through redundancy and natural attrition. This restructure is expected to deliver annual cost savings of around $2 million from 2013. Costs associated with the restructure will be absorbed in H212.

ThinkSmart’s earnings expectations for H212 are sensitive to the level of sales, particularly in the UK business, achieved during the peak Christmas selling season.