ThinkSmart leaves leverage in the business

Computer and office equipment financer ThinkSmart has marginally outperformed full year prospectus forecasts and outlined an aggressive United States expansion.

ThinkSmart reported a $5.1 million net profit after tax, though only after ignoring amortisation and last year's listing costs. This was fractionally higher than the $5 million prospectus forecast.

The firm said actual loans and leases settled of 28,600 were eight per cent more than forecast, but the average transaction price was lower with total revenue $36.3 million, one per cent higher. This is mainly due to the affect of exchange rates.

NPAT after taking into account all costs was $0.7 million, up on the $0.6 million 2007 forecast.

Britain accounted for 46 per cent of volume and Spain 13 per cent, with Australia 41 per cent.

The average transaction values for Australia are five per cent below forecast, the United Kingdom two per cent below and Spain nine per cent below.

Neil Barker, group chief financial officer for ThinkSmart, said that "In Spain, we have seen the biggest impact as the operating environment is very soft and competitive.

"The weaker US dollar has basically led to deflation on technology prices, so the combination of lower prices for technology and a very competitive market in retail has lead to the nine per cent drop in Spain."

On bad and doubtful debts, Barker said ThinkSmart pays into a sinking fund with the funder, which is considered part of the company's cost of funds.

"We basically look at our contribution to the losses as an expense, the same way interest is an expense.

"We write that off on day one, even though cash has gone into a sinking fund, and then losses are applied to the sinking fund. This represents our contribution to the losses."

Doubtful and bad debts for 2007 have increased to $247,000, up from $105,000 in the previous year.

"The provision for doubtful debts is mostly in relation to our inertia book where we charge rentals on the assets once we take control of them, at the end of the primary rental period.

"So that represents what we call inertia revenue where the customer isn't paying and we haven't been able to collect that money."

Ned Montarello, group managing director, owns approximately 20 per cent of issued equity, with around another three per cent owned by employees.

"None of them (equity positions) are leveraged," Barker said.