21 February 201121 February 2011

FY 2010: Full Year Results 1 Jan 10 – 31 Dec 10

Ned Montarello: Executive Chairman & CEO

Agenda

1. Key Points & Results Highlights

2 ThinkSmart: A Focused Global Business2. ThinkSmart: A Focused, Global Business

3. FY 2010 Results Analysis

4 Funding4. Funding

5. 2011 Growth Strategies 

6 ThinkSmart Investment Summary6. ThinkSmart Investment Summary

7. Appendices

2

KEY POINTS & RESULTS HIGHLIGHTSKEY POINTS & RESULTS HIGHLIGHTS

3

Key Points

• Record Profit ‐ NPAT up 31%, delivering to top end of full year EBITDA target.

• Well positioned for continued growth.

• Final dividend of 3.5cents partly franked. 

• Second half EBITDA 34% higher than first half.

• EBITDA CAGR 17% (2007 2010)• EBITDA CAGR 17% (2007 – 2010).

• 2010 showed strong growth in Australia and solid underlying performance in UK.

• Cost of doing business cut by 17% due to sustainable operating improvements.

• Introduced Consumer services‐based rental product Infinity to UK in Nov.

• Funding capacity significantly increased through new financing platforms in UK and Australia.and Australia.

4

FY 2010 Results HighlightsStrong Profit Growth Driven by Revenue & Operating Cost Reductions.

FY 2010 FY 2009 % change

NPAT $6.8m $5.2m +31%

Total Revenue $42.1m $36.8m +14%

Earnings Per Share 6.5¢ 5.3¢ +23%

EBITDA $13.3m $11.9m +12%

EBITDA M i 42% 40% 5%EBITDA Margin (pre Corp Dev costs) 42% 40% +5%

Cost of Doing Business (pre Corp Dev costs) 22% 27% ‐17%

Final Dividend – partly franked† 3.5cps 3.5cps no change

5† Final Dividend of 3.5 cents partly franked to be paid on 29 April 2011.  Total 2009 dividends of 3.5¢ fully franked.

p y p p g

THINKSMART: A FOCUSED GLOBAL BUSINESSTHINKSMART: A FOCUSED, GLOBAL BUSINESS

6

Overview of ThinkSmart• Leading international provider of point‐of‐sale finance:

– Provides rental finance products to small businesses and consumers

– Shop in retail stores for computing and electricals– “Nano‐ticket” transactions – A$500 – A$10k

• International footprint across Europe and Australia and strong platform for growthplatform for growth

• Distribution through exclusive and entrenched partnerships with major international electrical retailing groups

• Products and services offer compelling and highly profitable• Products and services offer compelling and highly profitable value proposition for retail partners, customers and wholesale funders

• Strong track record of growth through recent challenging g g g g gtrading conditions

7

Focused Niche Model

What Are Customers Where Do They Shop? What’s the Product? What’s The Customer

ThinkSmart’s products fill the gap for small business & retail 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 Dixons Operating Leases Fast in store and Online processLaptops and Electricals

• 12 week product lifecycles.

• High obsolescence factor for users.

• Driven by the “latest”

Dixons

• “Take away” service    

• Highly accessible locations

• On the spot environment

Operating Leases

• Delivered in store at the point of sale and online

• Monthly payments.  Good for cash flow

• 100% tax deductible for business

• Bundle equipment and high value services into

Fast in‐store and Online process

• Selects equipment 

• Sub 10 minutes online approval

• Executes agreement • Driven by the  latest  

technology.• Bundle equipment and high value services into 

consumer contract – circa 25% of added invoice value at no extra cost.

• Helps customer keep up to date with technology

• Leaves store

8

Leading International FootprintThinkSmart has long term relationships with leading international retailersThinkSmart has long term relationships with leading international retailers and funders in 5 countries

UK

• Euro Ops Centre• Population 60m• 4.4m SMEs• 600+ stores 

SPAIN

• Population 40m• 2.2m SMEs• 50+ stores

ITALY

• Population 58m• 4.5m SMEs• 200+ stores

AUSTRALIA• Australian Ops Centre

• Population 20m• 1.9m SMEs• 600+ Stores

NEW ZEALAND

• Population 4m• 0.3m SMEs• 70+ Stores

Exposure to over 183m people and 13.3m small businesses 9

FY 2010 RESULTS ANALYSISFY 2010 RESULTS ANALYSIS

10

FY 2010 Results HighlightsS P fi G h D i b R & O i C R d iStrong Profit Growth Driven by Revenue & Operating Cost Reductions.

FY 2010 FY 2009 % change% Change @ Constant FX*

NPAT $6.8m $5.2m +31% +46%

Cash NPAT $8.9m $7.5m +19% +30%

Total Revenue $42.1m $36.8m +14% +19%$ $

Gross Margin 64% 69% ‐6% ‐6%

EBITDA $13.3m $11.9m +12% +21%

EBITDA M i 42% 40% +5% +5%EBITDA Margin (pre Corp Dev costs) 42% 40% +5% +5%

Cost of Doing Business (pre Corp Dev costs) 22% 27% ‐17% ‐17%

Earnings Per Share 6.5¢ 5.3¢ +23% +37%

11* Earnings translation based on like for like FX rate – 2010 numbers converted at 2009 average FX rate.† Final Dividend of 3.5 cents partly franked to be paid on 29 April 2011.  Total 2009 dividends of 3.5¢ fully franked.

Final Dividend – partly franked† 3.5cps 3.5cps +0% +0%

FY 2010 ResultsNet Profit After Tax Growth & Increased Revenue

Revenue$'000s

Reported NPAT('000s)

$30 000

$35,000

$40,000

$45,000$ 000s

6000

7000

8000

( 000s)

$15,000

$20,000

$25,000

$30,000

2000

3000

4000

5000

$0

$5,000

$10,000

2007 2008 2009 2010

0

1000

2000

2007 2008 2009 2010

12

Revenue reported FX impactReported NPAT ('000s)

2010 Revenue restated applying average 2009 FX rate on foreign sourced revenue.

FY 2010 ResultsRevenue growth from a lower cost base enabled by systems automation

EBITDA Underlying$'000s

Cost of Doing Business ( f T l R )

10,000

12,000

14,000 $ 000s

25.0%

30.0%

35.0%

(as a percentage of Total Revenue)

4,000

6,000

8,000

5 0%

10.0%

15.0%

20.0%

0

2,000

2007 2008 2009 2010H1 H2

0.0%

5.0%

2008 2009 2010

Cost of Doing Business

13

Will serve to accelerate growth on European retail recovery and Australian expansion.

Strong 2H Performance2H f id i i f i di f f h2H performance provides positive performance indicators for future growth

Application Growth: H2 on H1 2010

EBITDA Growth: H2 on H1 2010

40%

50%

60%

H1 2010

25%30%35%40%45%

2010

0%

10%

20%

30%

0%5%

10%15%20%25%

Australia continues to generate very strong EBITDA growth rates

AUS UK

Growth 12% 49%

0%AUS UK

Growth 39% 29%

0%

++ + +

14

Australia continues to generate very strong EBITDA growth rates 

UK Infinity product launched in late November sees UK return to strong volume growth

FY 2010 ResultsEBITDA by Territory

Actual 2010 $Am Actual 2009 $Am^ % Change % Change @ Constant FX*

Australia / NZ 11.5 8.5 +34%

United Kingdom 5.8 7.2 ‐19% ‐5%

Spain 0.3 0.1 n/m†

Italy (0.1) (0.5) n/m†

France (0.1) (0.2) n/m†

Corporate Development (2.6) (2.1) +24%

Corporate Costs (1.5) (1.1) +36%

EBITDA 13.3 11.9 +12% +21%

15

•Earnings translation based on like for like FX rate – 2010 numbers converted at 2009 average FX rate.  GBP = 59.50p vs pcp of 50.44p (‐18%)    Euro = 69.38c vs pcp of 56.64c (‐18%)            † Not Meaningful due to lower starting  base.^ Some expenses have been reallocated to be like for like with current year expense allocation.

UK Infinity Opportunity to Grow ContributionPenetration Estimate (%)

Settled Value Upfront EBITDA Contribution 

(£’000)

Average Transaction Value

(£)

November to December 2010 0.3% £1.178m £193k 600(high of 0.6%)

Scenario 1 0.8% £10m £1.2m 620

Scenario 2 1.2% £15m £2.0m 620

Scenario 3 1.6% £20m £2.7m 620

• Late November/December extreme weather conditions across UK impacted sales

• November/December 2010 annualised Infinity volumes more than doubles total UK business volumes• November/December 2010 annualised Infinity volumes more than doubles total UK business volumes. 

• Dixons are committed to increased penetration levels

• Funding capacity can accommodate expected growth.

16

• Revenue accounting model will be maintained for business funded with STB

• EBITDA contribution excludes future inertia revenue recognised at conclusion of contract (2 years).

FY 2010 Results:   AustraliaS G h & S i bl C Effi i i

• Strong Growth through FY 2010:

EBITDA CAGR f 43% l t 4

• Revenue up 30% to $27.4m

• EBITDA up 34% to $11.3m

Strong Growth & Sustainable Cost Efficiencies

• EBITDA CAGR of 43% over last 4 years. 

• Move into consumer rental 5 years ago has driven ~50% CAGR in consumer volumes.

• Online acquisition channels increasing and now accounting for up to 32%

• EBITDA margin up 3% to 41%

• Gross margin down 3% to 60% (57% in H1 2010)

Online acquisition channels increasing and now accounting for up to 32% of volume (pcp 27%).

• “QuickSmart” processing platform continues to reduce the cost of doing business & improve the customer experience.

• Volumes up by 45%

• ATV down 11% to $1,780

• Income mix:  • Gross margins increased in H2 through pricing increase and continuing 

predictable Inertia income.

• Warranty Services product in Dick Smith has delivered strong EBITDA contribution.

Brokerage & Insurance 70% (pcp 67%)

Inertia & Warranty 28% (pcp 30%)

• Contracts extended with JB Hi‐Fi & Dick Smith.

17

)

Other 2%

FY 2010 Results:  EuropeSolid EBITDA Performance in UK │Mainland Europe Positioned for steady profit growth

United Kingdom:  

• Delivered solid underlying EBITDA performance during retail market downturn:• Delivered sustainable operating efficiencies from Q4 2010

• Revenue unchanged at £7.3m

• EBITDA down 5% to £3.5m

Solid EBITDA Performance in UK  │Mainland Europe Positioned for steady profit growth.

Delivered sustainable operating efficiencies from Q4 2010.• Expanded funding platform with Secure Trust Bank.• Signed 5 year Consumer Agreement with Dixons.• Launched Infinity consumer product in November.

Spain:

• EBITDA margin down 9% to 47%

• Gross margin down 4% to 79%

• Delivered positive FY 2010 EBITDA from €30k to €192k. • Strategy to develop Spain into multi‐channel territory on course. • 66% application growth for year with stable ATV.

Italy:• Computer Discount (CDC) introduced as a second retailer

• Volumes (B2B) down by 12%

• ATV up 12% to £881

• Income mix:  • Computer Discount (CDC) introduced as a second retailer.• Advanced negotiations with funding partners and new retail partners  to 

introduce Consumer product. 

France:• No trading occurred in 2010 and there are no immediate plans to commence

Brokerage & Insurance 55% (pcp 57%)

Inertia & Warranty 42% (pcp 39%)No trading occurred in 2010 and there are no immediate plans to commence 

trading. 

18

Other 3%

FUNDINGFUNDING

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Funding – The Transformation Takes Shape• Funding transformation running to plan ‐ well placed to capture growth opportunities.

• $160m in additional funding capacity created across UK and$160m in additional funding capacity created across UK and Australia.

• New and existing funding sufficient to settle 3x 2010 business volumes in all territories going forwardvolumes in all territories going forward.

• Platform supports additional funders on as needs basis.• Improved margins delivered through a transition to an p g gannuity revenue stream and lower funding costs.

• No refinancing risk – all facilities pay down in line with repayments from customersrepayments from customers.

20

UK Funding Plan well Advanced• UK Multi Funder platform on track for financial close 

by end Q1.• GBP 40M revolving facility signed with Secure Trust 

Bank 70 

UK Funding Capacity (GBPm)

Bank – No requirement for Regulatory Capital Investment under final 

structure– Term extended until 2014

40

50 

60 

– Current brokerage revenue recognition model retained.• Commercial terms agreed and credit approvals 

obtained (subject to documentation) for GBP 20M second UK funder (term to renewal 2015) 10

20 

30 

40 

second UK funder (term to renewal 2015).• Required capital investment less than forecast in 

October.• Platform supports additional funders on an as needs 

‐

10 

2009 2010

Drawn Undrawn Cashbasis

21

Drawn Undrawn Cash

Australian Funding on trackli $200 l i d S i i i l f• Australian $200m Multi Funder Securitisation platform 

on track for financial close by end Q1.• New $100m Major Australian Bank facility

Commercial terms agreed and credit approvals obtained (subject 250

Australian Funding Capacity ($Am)

– Commercial terms agreed and credit approvals obtained (subject to documentation)

– Facility supports rated transactions delivering greater funding diversity and lower costs

• A stralian facilit mat rities e tend thro gh to 2016150 

200 

250 

• Australian facility maturities extend through to 2016 –no refinancing risk.

• Initial/ Extended term to renewal (2016) • Platform supports additional funders on an as needs

50 

100 

• Platform supports additional funders on an as needs basis.

• Revenue to be recognised over contract life – eps positive from year 2

‐

2009 2010

Drawn Undrawn Cashpositive from year 2.

22

Revenue Comparison under New Funder Model

• Australian leases written “On Balance Sheet” rather than agency/brokerage model.agency/brokerage model.

• Consistent annuity income stream delivers greater value to TSM over life.

• Accretive to EPS from Year 2 expected to be near neutral in 2011.• Structure reduces the average cost of funding.• Master Trust structure is non‐recourse to ThinkSmart.

23

Accounting over Lifecycle – New ModelConsumer renting a $1 500 computer on a 36 month term

$800 

$900 Comparison Profit Recognised Over Time

Consumer renting a $1,500 computer on a 36 month term.

Increase in

$500 

$600 

$700 Increase in margin

$200 

$300 

$400  Consistent cashflows across term

$‐

$100 

H1 YR1 H2 YR1 H1 YR2 H2 YR2 H1 YR3 H2 YR3

Current Model New Model Cumulative Current Model Cumulative New ModelCurrent Model New Model Cumulative Current Model Cumulative New Model

24

New funding model improves margins, creates an annuity revenue stream and grows earnings per share from year 2.

2011 GROWTH STRATEGIES2011 GROWTH STRATEGIES

25

Key Growth Strategies

1.  Growth Through Cash  3.  Alignment with Market 2.  Pace of Expansion        

Governing Principles

gFlow Not Debt

gLeading Retailers

pGoverned by Performance

Strategic FocusGrow Distribution in New and Existing Territories

Expand Accessible Market though Consumer Rental

• Significantly expands total

Improve Delivery & Customer Experience

• QuickSmart & Eclipse

Grow Revenue Lines and Continue to Diversify Income 

Strategic Focus

• Targeting new Retail partnerships

• Grow the internet acquisition channel

Significantly expands total available market in UK

• Potential to introduce to other existing territories.

QuickSmart & Eclipse systems automate process at stores and significantly reduce costs of doing 

• Follow Australian mature territory model

• Repeat customer

26

acquisition channel in all markets business.

• Repeat customer strategy

Key StrategiesExpand Accessible Market though Consumer Rental

b d d ff ll l f• Services based product offering creates compelling value proposition for consumers.

• Move into consumer rental in Australia 5 years ago has driven c50% CAGR in ons mer ol mesconsumer volumes.

– Now accounts for more than 70% of Australian new business volumes

• Consumer rental launched in UK November 2010.– Potential to give ThinkSmart access to 4 times the current available UK market.

– Expose product to all Curry’s stores & PC World stores in the UK.

– Immediate Profit contribution due to leverage off existing infrastructure.

27

• Appetite also exists in other existing markets for ThinkSmart to expand to consumer market too.

Key StrategiesGrow distribution in New and Existing Territories

• In addition to expanding distribution through traditional channels ThinkSmart is looking toIn addition to expanding distribution through traditional channels, ThinkSmart is looking to increase its customer acquisition through Internet sales.

• ThinkSmart currently originates approved customers online with fulfilment occurring in‐store. 32% of Australian volumes were initiated online in 2010, up from 27% in 2009., p

• E‐signature capability will enable ThinkSmart to further streamline the process for traditional retail transactions and work seamlessly online allowing ThinkSmart to access the pure‐play online retail market globally. 

• Leverage leading edge technology solutions to acquire new retailer relationships in existing markets.

• Opportunities to expand into new territories will be explored in 2011 with an expected lead time 

28

to implementation of 12 ‐ 24 months.

Key Strategies

Italy

Grow Revenue Lines and Continue to Diversify Income

• Existing territories create opportunities to diversify revenue baseAustralasia United Kingdom Spain Italy

(est. 2007)

Commercial13%Inertia

19%

Australasia(est. 1996)

CommercialI ti

United Kingdom(est. 2003)

Spain(est. 2005)

Commercial100%Consumer

37%Insurance20%

Warranty11%

35%

Consumer5%

Insurance19%

Inertia41% Commercial

51%

Inertia49%

• Repeat Customer Strategy is complimentary to the services based product offer to 

29

Consumers  and creates opportunities for customer contact throughout the contract term and increase repeat business:

‐ Support for computer set up/Annual health check/End of life upgrade

Key Strategies

Improve Delivery & Customer Experience

• Newly patented QuickSmart online application and approval system automates in store  process and significantly reduces the cost of doing business.

• UK Eclipse integration into retail point of sales establishes a benchmark for integration with market leading retailers.

• E‐signature technology will deliver a step change in operational efficiency. The key components of delivering this technology are:

– Technology integration – technology partner has been selected to deliver the integrated e‐signature solution

– Legal documentation and process.

30

g p

– Funding capacity – increased capacity has been established in key markets.

FY 2011 OutlookAustralia & New Zealand – Continued growth.• Funding capacity doubled to facilitate future growth.• Proposed “Infinity” style product enhancements to help drive volume growth, in an environment of cautious consumer 

sentiment• Online strategies will create new opportunities and continue to deliver an increasing share of business.• QuickSmart will sustain operating efficiencies in business.• Strong contribution from Inertia and Warranty Services.• New funding model improves margins, creates an annuity revenue stream and grows year 2 earnings per share. United Kingdom – Infinity product to deliver incremental earnings• Infinity EBITDA contribution since November 2010 launch has been positive.• Capitalise on Dixons objective to lift margins to counterbalance a period of cautious consumer sentiment.• Grow Infinity penetration.• Leverage Consumer and B2B offer in Curry’s stores via Eclipse.• Operational efficiencies delivered through Eclipse integration reduces cost of doing business.• Leverage online capability in Dixons.Europe – Focus on establishing successful multi‐channel relationships  for regions to capitalise on recovery:• Spain ‐ Increasing  EBITDA positive growth. New product offering delivering renewed focus with opportunity to 

dintroduce Consumer.• Italy – Looking to relaunch in UniEuro and introduce prospective new retailers for Consumer and B2B. • France – no trading is anticipated in 2011. 

31

THINKSMART INVESTMENT SUMMARYTHINKSMART INVESTMENT SUMMARY

32

Investment Summary Continued EPS growth and annual dividend yield during challenging global trading Continued EPS growth and annual dividend yield during challenging global trading 

environment.

Strongly capitalised to leverage growth opportunities.

New funding capacity supports continued growth.

Dependable recurring income lines through Inertia book and insurance income.

New product value‐adds, further enhance compelling and highly profitable value proposition for retail partners, customers and wholesale funders.

Exclusive and entrenched partnerships with market leading international retailers and Exclusive and entrenched partnerships with market leading international retailers and funders.  Continuing to expand distribution channels in Australia and Europe.

UK Infinity sales present an immediate and significant opportunity to grow profit.

Business has no net debt.

Shareholder Value:  Paying final dividend of 3.5 cents, partly franked. Dividend yield 5%. 33

APPENDICESAPPENDICES

34

Appendices: Cash Utilisation in PeriodEBITDA Conversion to Cash

FY 2010 

Cash utilisation

EBITDA Conversion to Cash

Dividend payment $1.9m

Tax payment $1.7m

Investing Capex $3.2m

Finance costs net of interest received $0 5mFinance costs net of interest received $0.5m

Cash retained by Funders (subordination) $4.5m

FX impact on balance sheet $1.6m

Total Cash Utilised – non operating ‐$13.4mTotal Cash Utilised  non operating $13.4m

EBITDA $13.3m

Net Equity raised $15.8m

= Increase in Cash over period $15.7m

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Appendices: Cash NPAT reconciliation

FY 2010 FY 2009FY 2010 $’000s

FY 2009 $’000s

NPAT $6,773 $5,171

AdjustmentsAdjustments

Depreciation $465 $555

Amortisation $2,053 $2,097

U li d FX $493 $608Unrealised FX $493 $608

Tax effect of adjustments ‐$903 ‐$978

Cash NPAT $8 881 $7 454Cash NPAT $8,881 $7,454

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Appendices: Balance Sheet SummaryFY 2010 $m

FY 2009 $m

Cash 21.2 5.5

Receivables  2.6 1.7

Prepayments 3.3 4.3

Other  0.4 0.4

Total Current Assets 27.5 11.9

Deposits with Funders 6.7 0.7

Oth 11 7 12 1Other 11.7 12.1

Total Assets 45.9 24.7

Total Liabilities 8.2 6.5

Net Assets 37.7 18.2

37