JP Morgan Emerging Companies Conference 17 th November 2009 Ned Montarello Executive Chairman & CEO

Transcription

1 JP Morgan Emerging Companies Conference 17 th November 2009 Ned Montarello Executive Chairman & CEO

2 Agenda Overview The ThinkSmart Business Model Trading Snapshot 2010 Growth Strategies 2

3 THINKSMART A GROWTH COMPANY 3

4 Introduction to ThinkSmart (ASX:TSM) Leading international provider of point-of-sale finance within the retail store environment Target niche SOHOs & 1-5 seat small businesses Increasing share of consumers and prosumers in mature territories Shop in retail stores for computing and electricals Nano-ticket transactions A$500 A$10k Market leading international footprint across Europe and Australia Distribution through exclusive and entrenched partnerships with major international electrical retailing groups Products offer compelling and highly profitable value proposition for retail partners, customers and wholesale funders Proven track record of growth through adverse trading conditions Platform for international and domestic growth 4

5 Key Information Listed in June m shares on issue Current market capitalization $70m No net debt. Delivered 14% CAGR in underlying EBITDA since listing (2.5 years to June 2009) On target to meet guidance for continued positive growth in Dividend yield 5% fully franked. P/E ratio (2009 earnings) 10.6x versus sector average of 17x*. *JP Morgan: Aug 2009 ** excl. US operations 5

6 THE THINKSMART BUSINESS MODEL 6

7 Focused Niche Model ThinkSmart s products fill the gap for small business & consumer customers between a credit card & a bank loan in the fast moving electrical retailing environment. What Are Customers Shopping For? Where Do They Shop? What s the Product? What s The Customer Experience Laptops and Electricals PC Superstores Rental Operating Leases Fast in-store Process 12 week product lifecycles. High obsolescence factor for users. Driven by the latest technology. Take away service Highly accessible locations On the spot environment Delivered in store at the point of sale Monthly payments Good for cash flow 100% tax deductible for business Bundle equipment & high value services into consumer contract Helps customer keep up to date with technology Selects equipment Sub 10 minutes online approval Executes agreement Leaves store * Sensis Australia Small Business survey

8 Targeting B2B & Consumer Customers B2B Market Product range embedded in Small Business. Provides cashflow and tax friendly financing solution in Big Box computer retailers. Historically under serviced niche. B2B customers seeking B2B finance. Has been platform for ThinkSmart s international expansion Consumer Market Running a Consumer proposition in Australia since 2004 Consumer Rental = 60% of Australian new business volumes Consumer Rental growth FY2008 = 33% European partners now seeking the same. Quadruples market size in UK alone. Same in store process and credit process/criteria as B2B Key 2010 Growth initiative - packaging high value services into rental product to further enhance consumers offering 8

9 Funding Existing funding agreements are contracted to 2011/2012 UK Lloyds HBoS to 2011 Australia Bendigo Adelaide to 2012 Spain Societe Generale to 2011 and Santander to 2010 Italy Santander to 2012 Priority to operate multiple funding agreements in major territories New funding relationship opportunities emerging as credit markets recover 9

10 Leading International Footprint ThinkSmart has long term relationships with leading international retailers and funders in 6 countries UK Euro Ops Centre Population 60m 4.4m SMEs 160+ stores SPAIN Population 40m 2.2m SMEs 50+ stores ITALY Population 58m 4.5m SMEs 23 stores FRANCE Population 60m 4m SMEs AUSTRALIA Australian Ops Centre Population 20m 1.9m SMEs 600+ Stores NEW ZEALAND Population 4m 0.3m SMEs 70+ Stores Exposure to over 243m people and 17.3m small businesses 10

11 Revenue Generated at Multiple Points in Contract Life ThinkSmart generates revenue from 3 core sources: 1. Upfront brokerage on sale of equipment Credit risk is mostly limited to the pre-agreed loss reserves Predominantly non-recourse funding models with leading banks 2. Recurring income stream from Insurance through life of contracts ThinkSmart takes no underwriting risk but receives a significant portion of the insurance premium as commission 3. Inertia income at end of term Generate from extended rentals & sales of equipment into secondary markets existing contracts to deliver $60m of future revenue. 11

12 THINKSMART S TRADING SNAPSHOT 12

13 Strong Track Record for Earnings Growth EBITDA $A m 2005* 2006* 2007** 2008** EBITDA FY2008 = $11.3M** up 36% EBITDA H12009 = $5.7M H Grew NPAT 17% to $2.6m. Sustained H1 EBITDA at $5.7m growth weighted to second half. Grew margins by 7% Delivered 56% increase in EBITDA & 20% increase in new business volumes from mature Australian business. Positioned Group well in Europe against global recessionary environment. * - proforma Prospectus ** - pre IPO and US Operations 13

14 Australia & NZ Mature Business Delivering Continued Strong Growth EBITDA CAGR of 29% over past 2.5 years. Achieved 20% growth in new business, 56% growth in EBITDA for H Continued to grow margins through predictable inertia income Diversified income streams through partnership with The Warranty Group to deliver warranty product in Dick Smith. Delivered strong EBITDA contribution. Conscious move into consumer rental 4 years ago has driven 51% CAGR in new business volumes. Australian retail partners have been highly resilient in current global market. New QuickSmart processing platform has continued to reduce the cost of doing business & improved customer experience Calls down to sub 20% of applications, 60% reduction in processing time Stores 79 Stores 14

15 Europe Consumer strategy & expected market recovery positions European operations for strong growth Established trading platform in Manchester provides a low cost, highly scalable platform for territory expansion. Business currently trading in UK (7 years); Spain (5 years) and has immature businesses in Italy & France UK > EBITDA CAGR of 32% over last 2.5 years. > H EBITDA unchanged at 1.8m, margins up 6% > 9% increase in penetration of PC World store sales against declining footfall Spain > H EBITDA breakeven > Strong underlying Inertia performance in Spain continues to underpin earnings. > Strategy to develop Spain into multi-channel territory on course (added Phone House &Fnac to retail stable + Société Générale to funding). France > Advancing negotiations with prospective funding partners and further retail partners. Italy > Solid penetration on low B2B store spend. Advancing negotiations with prospective funding partners and further retail partners. Manchester Hub ThinkSmart is well positioned to capitalise on market recovery 15

16 THINKSMART 2010 GROWTH STRATEGIES 16

17 Guiding Principles for Growth Successfully positioned Business for Current Environment and future markets recoveries 1. Growth Through Cash Flow, Not Debt 2. Pace of Expansion Governed by Performance 3. Alignment with Market Leading Retailers 17

18 ThinkSmart s Key Growth Strategies Increase distribution channels in existing markets Product evolution Consumer rental model into mature territories Next generation SmartCheck integration Grow the Internet Territory expansion 18

19 Increase Distribution in Existing Markets Launched in each European territory through exclusive relationships. Now moving Europe to a multi-channel retailing environment like Australia. Targeting 3 to 4 key partners in each territory in mainland Europe. Already trading with chains in 4 of the top 6 electrical retailers in Europe. Positions business well for market recovery. 19

20 European Electrical Retailing Landscape Retailing Groups # Electrical Stores Mixed Electrical Revenue Countries Position 1, bn 11 #1 UK, #1 Nordics, #1 Greece, #4 Italy bn 16 #1 Germany, #1 Italy, #3 France 2, bn 9 n/a bn 8 #2 France (but #1 by PC sales), #6 Spain, #7 Italy bn 12 #1 France, #3 UK 11, bn 29 n/a 20

21 Product Evolution Rolling out a suite of product enhancements in Europe across H Designed to offer even greater value proposition to customers Becomes easier for sales person to sell Provides value over and above core finance benefits Aligns strongly with retail partners in store services Enhances B2B offering plus provides strong leverage into consumer rental market 21

22 Launch Consumer Rental in Mature Territories Consumer rental volumes have increased 5 fold in Australian market over past 4 years. B2B entry strategy has enabled us to embed with major partners in international markets. Proven operational alignment model to make finance successful. Appetite now exists in a number of European markets for ThinkSmart to also provide rental to professional consumer segment Potential to unleash 4 times the current available market. 22

23 Next Generation SmartCheck Integration Continuing deployment of QuickSmart retailer portal in Australia. Provides direct access to SmartCheck system through a web interface in store Streamlines documentation delivery and retrieval Lowered operating costs 60% reduction in processing times Moving to Eclipse till integration model with DSGi group in Europe. Provides platform for greater expansion across group Expands user base in stores 23

24 Grow the Internet Provides SmartCheck system direct to end users. Offers 24x7 pre approval capability. Aligns to growing customer habits for using internet to research purchase in advance. Acquisition strategy in Australia is seeing Internet account for 18% of settlements in recent months. 17% higher ATV 20% Lower conversion rate Core delivery strategy for AU in Commencing roll-out with partners in Europe through

25 Territory Expansion Continued watch on US re entry Strategic retailer relationships in Europe present numerous opportunities No new scheduled territories slated for

26 Investment Summary Expected strong positive EBITDA growth into 2010 Strong and resilient business model, proven in challenging trading conditions Compelling and highly profitable value proposition for retail partners, customers and wholesale funders Exclusive and entrenched partnerships with market leading international retailers and funders. Opportunity to grow market share through existing relationships (increased product relevance broadening Consumer offer) Continuing to expand distribution channels (additional relationships in existing territories) Growing funding relationships Credit losses in line with expectations No net debt Recurring income lines from existing contracts on books. Will contribute increased revenue from Inertia and Insurance over the next 4 years. 26

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28 Appendices: Exclusive & Entrenched Relationships # Stores Launched Contract to Description Funding Partner Contract to United Kingdom Exclusive 2-way relationship Umbrella agreement for Europe Long-term exclusive working relationship Australia Solid trading from first full year together / Long-term partnership with traditional B2B strength Spain Long-term relationship 420* Jul * Launching with 5 B2B direct channel managers, expanding to 85. Has 420 stores in Spain. Not initially contemplating stores 19 Nov Fnac is part of the Paris based PPR Group. I Italy Non-exclusive relationship 2012 France 29 Apr 2009 Trial with Media-Saturn in 4 stores in Paris In advanced negotiations New Zealand Complements Australian partnership Number 2 player in NZ Complements Australian partnership Aggressive growth plans In advanced negotiations 28