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HARMONEY ANNUAL REPORT FY22
We are Australasia's largest 100% online
consumer-direct lender, delivering faster,
fairer loans through our smart technology,
powered by our proprietary technology
platform Stellare®. Our deep consumer
data and automation leads to lower
customer acquisition costs, lower losses,
lower funding costs, fixed opex and higher
shareholder returns.
Our purpose is to help and inspire people
to achieve their goals through financial
products that are friendly, fair, and simple
to use.
Our values describe what is important to us
in our organisation and our relationships to
each other and our customers. They are
our publicly stated reference points for
how we operate: Empathy, Pioneering,
Impact, Integrity, Consistency.
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HARMONEY ANNUAL REPORT FY22
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HARMONEY ANNUAL REPORT FY22
Contents
HMY 2022 Highlights ........................................... 7
Board of Directors ................................................ 9
From the Chair. ..................................................... 11
From the CEO. ..................................................... 13
Review of Operations ......................................... 15
Environmental, Social and Governance ........ 23
Directors’ Report ................................................. 31
Directors’ Responsibility Statement ............. 34
Consolidated Group Financial Statements .. 35
Notes to the Consolidated Group Financial
Statements .......................................................... 39
Independent Auditor’s Report ........................ 70
Shareholder Information ................................... 77
Corporate Information ...................................... 79
Directory .............................................................. 84
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HARMONEY ANNUAL REPORT FY22
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HARMONEY ANNUAL REPORT FY22
HMY 2022
Highlights
Pro Forma Performance.
Pro forma Group loan book grew to
a record NZ$685 million.
Pro forma Cash
NPAT+ delivered thanks to
attractive net lending margin
and scalable platform.
Personalised rates and efficient
funding producing an industry
leading pro forma net interest
margin.
Our pro forma Australian loan
book reached a new milestone of
A$287 million, 113% growth on
prior year.
Group pro forma arrears continue
to perform ahead of
expectation and are at
historical lows.
Harmoney’s strong pro forma
Net Lending Margin of 8.4%
includes all lending related costs,
including losses (charge-offs),
demonstrating strength of
underlying profit drivers.
$685m
Group Loan Book
$1.5m
Cash NPAT
12.1%
Net Interest Margin
A$287m
Australian Loan Book
0.45%
Group 90+ Arrears
8.4%
Net Lending Margin
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HARMONEY ANNUAL REPORT FY22
Achievements.
Profitable
Cash NPAT Profitable
70%
New originations from Australian
customers
4.7/5
Customers rate us! Google & Shopper
Approved scores of 4.7/5 from more than
45,000 reviews
86%
Employee Engagement score
3 of the “Big-4”
Diverse funding with warehouses from 3 of
the “Big-4” banks
4th
AFR Most Innovative Companies for 2021
ABS
Launched our inaugural asset-backed
securitisation programme
94%
Warehouse funded
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HARMONEY ANNUAL REPORT FY22
Board of Directors
Paul Lahiff
Independent Chairman
Tracey Jones
Independent Director
John Quirk
Independent Director
Paul is a highly seasoned executive following 40 years of
experience in financial services, encompassing a broad portfolio
of Directorships. Paul currently sits on the Board of ASX-listed
AUB Holdings, as well as payments company Sezzle Inc. He is
also a Director of Australian neo-bank, 86 400 Holdings, and
NESS Super. Paul was previously the CEO and Managing
Director of Mortgage Choice (2003 – 2009), during which time
he led its successful listing on the Australian Stock Exchange.
He was also a former Managing Director at Permanent Trustee,
and before that at Heritage Building Society. Paul brings a
recent track-record of Chairmanships where he gained
extensive capital markets, regulatory and governance
experience from his time at Cuscal Limited; New Payments
Platform (NPP) Australia; Australian Retail Credit Association;
and RFi Group.
Paul chairs Harmoney's Nomination and Remuneration
Committee, and is a member of the Audit and Risk Committee.
Tracey is a professional director and family office adviser. She
currently has a portfolio of governance roles in the commercial,
not for profit and charitable sectors. She has significant
investment, commercial, and governance experience having
previously held executive roles in one of New Zealand’s largest
family offices. She is a chartered accountant, a member of the
Chartered Accountants of Australia & New Zealand, and a
member of the New Zealand Institute of Directors.
John has over 40 years of experience in the technology sector
across international and multinational information technology
companies. He has held key leadership roles, including the
position of Chief Executive Officer (Asia Pacific) of MI Services
Group, an international management consulting organisation
and information systems company. For the past 20 years, he
has specialised in strategic advisory to high-growth technology
companies like Harmoney.
John also has an extensive governance background, and has
been actively involved in strategic, mentoring and M&A activity.
Currently, he is Chair of Portainer.io, Cumulo9, Aeroqual, and
has recently been appointed to the New Zealand Government's
'Strong Public Media' Establishment Board. Previous roles have
included Chair of Kordia Group, Clearpoint Group, SMX Limited,
FrameCAD Group, merlot.aero, WhereScape Software, Farm-IQ
Systems and Axon Computers. John is a Chartered Member of
the Institute of Directors.
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HARMONEY ANNUAL REPORT FY22
Monique Cairns
Independent Director
Neil Roberts
Founder, Chief
Strategy Officer &
Executive
Director
Monique joins Harmoney with over 20 years of experience in
strategy, communications, marketing and sales, across financial
institutions and a range of sectors. She has a diverse
governance experience with extensive shareholder
engagement. She is currently the Deputy Chair of New Zealand
Home Loans (“NZHL”), and the Chair of NZHL’s People and
Culture Committee. Monique is also a Director of DEC
International, Unitec Institute of NZ, Manukau Institute of
Technology, and a Trustee of the NZ Portrait Gallery.
Monique owns Caribou, a consulting provider in New Zealand,
providing business strategy, brand marketing and
communication advice to clients from diverse industry sectors,
including Fintech and personal lending. Monique’s unique
experience across governance and marketing will provide
valuable insights for the Harmoney Board. Prior to her
governance roles, Monique was the Chief Marketing Officer at
GE Capital New Zealand, and the Head of Retail Sales
Development and Customer Experience at the Bank of New
Zealand. She is a member of the Australian Institute of Company
Directors and the NZ Institute of Directors.
Neil founded Harmoney, was CEO over 6 years driving the
capital path, building culture, systems and processes that are
intrinsic to Harmoney’s success. Prior to that Neil was Head of
Sales and Business Development at FlexiGroup, leading a team
of 80 with sales of $200m driving a $30m profit. Neil founded
the Direct Division of a listed New Zealand retail company, PRG
Group, that sold personal loans to consumers and raised retail
debentures to fund loans. Launched in 2001 PRF Direct,
achieved $3.2b in personal loan applications and $1.2b in written
personal loans over five years. Ultimately heading the business,
Neil was responsible for over 400 staff and a balance sheet of
$750m in assets with forecasted PBT of $50m six years later
and prior to being sold to GE Money in 2006.
David Stevens
Chief Executive Officer
& Managing Director
David is a highly experienced public company CEO specialising
in consumer and commercial finance in Australia and New
Zealand. Before commencing with Harmoney as CEO in 2019,
David had most recently led a start-up consumer finance
company, to ultimately securing a major equity stake in the
business by a large Australian Bank in 2018. Prior to this, David
served as CEO and CFO of Humm (formerly “FlexiGroup”) (ASX:
“FXL” now “HUM”). In David’s nine years with FlexiGroup, he led
a team of over 1,000 employees in the strategic growth of the
business, through organic growth and M&A. What was a small
company when he started, to becoming CEO of an ASX200-
listed business. David also led the $300m+ acquisition of Fisher
& Paykel Finance and spent considerable time in New Zealand in
the course of his work in the local side of the business.
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HARMONEY ANNUAL REPORT FY22
From the Chair.
Paul Lahiff.
Dear Shareholders,
We began our journey eight years ago, with a humble vision to provide loans to
people through a simple and easy online process that offered competitive rates
using personalised risk-based pricing. By removing intermediaries and focusing on a
direct value-based relationship with our customers, we disrupted the personal
lending market, dominated by long standing established players. A rapidly growing
number of customers across both Australia and New Zealand now see us as their
personal lender of choice.
Key to this growth has been Stellare®, our pioneering, highly automated lending
platform, which incorporates machine learning technology to gain insights from
every application, helping more than 124,000 borrowers start something new.
Our strong customer reviews show why these customers return to us for their
subsequent borrowing needs, and our direct relationship with them means that
subsequent lending involves near zero additional marketing investment – a key
component of Harmoney’s unique business model.
This year has been a significant year for Harmoney, achieving many milestones,
including delivering Cash NPAT profitability, and setting up the momentum to carry
us into FY23 and beyond.
Changes to the Board with the addition of new diverse
backgrounds and expertise.
First I’d like to thank David Flacks for his many years of dedication to Harmoney.
David joined Harmoney in May 2014 when it was a start-up about to launch, and has
continued through significant growth and changes in the Company, including
Harmoney’s initial public offering in 2020. We wish him well in his retirement from
the Harmoney Board and thank him for his support and counsel. His contribution to
Harmoney’s success has been significant and enduring.
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HARMONEY ANNUAL REPORT FY22
Following David’s retirement, we welcomed John Quirk and Monique Cairns to the
Board in August 2022 as non-executive directors. John is an experienced director
specialising in strategic advisory to technology companies, whilst Monique manages
a portfolio of governance roles with business advisory acumen. Both directors are
highly experienced in governance and in their fields of expertise, and I look forward
to their contribution to the Board and welcome them to the team.
Lastly, I wish to thank my fellow Board members, David Stevens (our CEO) and the
Harmoney team for their support, hard work, and dedication, and our shareholders
for their ongoing support of Harmoney.
Paul Lahiff,
Chair
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HARMONEY ANNUAL REPORT FY22
From the CEO.
David Stevens.
Harmoney achieves Cash NPAT profitability in FY22
Harmoney’s 100% consumer-direct model is fundamental to our business. We have
built our success over the past eight years on the strong foundations of this unique
model, and our proven ability to deliver sustainable growth. So it is pleasing that we
reached an important milestone of Cash NPAT profitability in FY22 (as per our
guidance), and expect the advantages of scale – from which our model benefits – to
continue this momentum into FY23 and beyond.
Funding diversity
Despite some concerns about the impact of rising interest rates, our overall pro
forma funding rates reduced by 180bps compared to last year – a reflection of our
quality loan portfolio and diverse sources of funding, which include 3 of the 4 major
Australian Banks. Our strategic approach to funding is the direct result of careful
management and successful planning. In 2019, we began transitioning to warehouse
funding, and are now 94% funded by warehouse facilities, with that number
continuing to climb every day. We have adopted a prudent approach to
management of our cost of funds, with 73% of floating rate borrowings hedged at
30 June 2022. The personalised, risk based, interest rates offered on our Stellare®
lending platform have enabled us to pass on targeted rate increases to customers,
further mitigating the impact of rising interest rates.
100% direct model driving customer numbers
Today, demand for Harmoney is stronger than any time in its history, with our
platform attracting over 12,000 new customer accounts per month, underpinning
the effectiveness of our 100% consumer-direct model. In FY22, our statutory net
interest margin of 11.7% and net lending margin (after losses) of 9.3% shows that
there is an appetite among customers seeking a superior customer experience
combined with competitive personalised interest rates. Our sole focus remains on
building a direct relationship with our customers – whether they are new to
Harmoney or returning customers looking to get started on their next big thing.
Looking ahead, Australia’s loan book is expected to surpass the New Zealand book
this calendar year. Today Australia represents 70% of new customer loan
originations, with 113% total loan book growth compared to the prior year and now
representing 46% of the group pro forma loan book of NZ$685 million. This has
been achieved whilst retaining strong credit disciplines, with credit losses and
arrears at historic lows.
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HARMONEY ANNUAL REPORT FY22
A substantial market with greater opportunities ahead
With strong growth momentum continuing, we are extremely confident in the
trajectory for FY23 and beyond. We see a substantial market and significant
opportunities for us to continue our growth and expect to report continuing
improvement in our Cash NPAT as we scale the business. With the Australian
market at nine times larger than New Zealand, the strategy will be to continue
growth in the Australian market.
On behalf of the Management Team, I would like to thank my fellow Harmoney
colleagues for their work and dedication. I’d also like to extend my thanks to
shareholders for their ongoing support. We look forward to another exciting year
with a focus on our strategy and the exciting opportunities ahead.
David Stevens,
CEO and Managing Director
PAGE 14
HARMONEY ANNUAL REPORT FY22
Review of Operations
Review of
Operations
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HARMONEY ANNUAL REPORT FY22
Financial performance
The table below sets out the statutory financial performance for the year compared with current and prior year pro forma
financial performance. Harmoney has previously provided the pro forma results to provide a more comparable view of the
Group’s operating performance, normalising for differences in accounting treatment between warehouse and peer-to-peer
funded loans while the Group was transitioning to warehouse funding. As the Group loan book is 94% warehouse funded at year
end, subsequent annual reports will not include pro forma information.
A reconciliation of the statutory consolidated statement of comprehensive income is set out on page 22.
Interest income
Other income
Total income
Interest expense
Incurred credit losses
Net lending margin
Statutory
Pro forma
Pro forma
Pro forma
Pro forma
Year ended
Year ended
Year ended
Change
Change %
30 June 2022 30 June 2022
30 June 2021
$'000
$'000
$'000
$'000
73,624
90,590
78,560
12,030
4,121
483
505
(22)
77,745
91,073
79,065
12,008
%
15%
(4%)
15%
19,408
21,365
27,410
(6,045)
(22%)
11,354
20,866
18,626
2,240
46,983
48,842
33,029
15,813
12%
48%
N/A
22%
34%
38%
3%
13%
37%
(7%)
17%
Movement in expected credit loss provision
16,023
7,930
(436)
8,366
Net lending margin after loss provision
30,960
40,912
33,465
7,447
Marketing expenses
22,067
22,067
16,475
5,592
Verification and servicing expenses
5,514
5,514
4,006
1,508
Net operating margin
Personnel expenses
3,379
13,331
12,984
347
10,450
10,450
9,241
1,209
Share-based payment expenses
2,930
2,930
4,078
(1,148)
(28%)
Technology expenses
4,459
4,459
3,245
1,214
37%
General and administrative expenses
4,281
4,281
7,728
(3,447)
(45%)
Depreciation and amortisation expenses
1,438
1,438
1,046
392
Total indirect expenses
Loss before income tax
Income tax benefit
Loss after income tax
Non-cash and other normalisation adjustments
23,558
23,558
25,338
(1,780)
(20,179)
(10,227)
(12,354)
2,127
-
2,864
3,459
(595)
(17%)
(20,179)
(7,363)
(8,895)
1,532
17%
Movement in expected credit loss provision
16,023
7,930
(436)
8,366
N/A
Share-based payment expenses
2,930
2,930
4,078
(1,148)
(28%)
Depreciation and amortisation expenses
1,438
1,438
1,046
392
37%
Borrower establishment fee rebate
IPO expenses
Income tax impact of adjustments
-
-
-
-
4,000
(4,000)
(100%)
-
3,172
(3,172)
(100%)
(3,444)
(3,321)
(123)
(4%)
Cash NPAT
212
1,491
(356)
1,847
N/A
For the year ended 30 June 2022 the Group reported a statutory Cash NPAT of $0.2m and pro forma Cash NPAT of $1.5m
which are both significant improvements on the FY21 Cash Net losses after tax. The improvement in performance is attributable
to a significant increase in net lending margin1 which outstripped the increase in spending on direct costs, while indirect costs
remained stable. Direct costs increased to support new customer originations with a 34% increase in Group marketing costs
resulting in a more than tripling of new customer originations in Australia.
1 Net lending margin is interest income less interest expense and incurred credit losses.
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HARMONEY ANNUAL REPORT FY22
Loan originations
Statutory
Pro forma
Pro forma
Pro forma
Pro forma
Year ended
Year ended
Year ended
Change
Change %
30 June 2022
30 June 2022
30 June 2021
Total originations ($'000)
472,364
472,364
255,457
216,907
85%
New customer originations ($'000)
302,831
302,831
136,381
166,450
122%
Existing customer originations ($'000)
169,533
169,533
119,076
50,457
Number of originations
26,642
26,642
18,164
8,478
Average value of new customer originations ($)
22,111
22,111
19,383
2,728
Average value of existing customer incremental
originations ($)
13,095
13,095
11,977
1,118
42%
47%
14%
9%
Loan originations for the year were $472m, an increase of $217m (85%) on the prior year. The increase was led by new customer
originations of $303m, up 122% as the Group’s proprietary Stellare® marketing model continued attracting record numbers of
new customers 100% direct online. Existing customers added $170m in growth originations, up 42% on prior year. New customer
origination growth is the best indicator of upcoming existing customer origination growth, as new customers later return for
future needs, at minimal additional marketing cost due to the direct customer relationship.
Loan origination by geography
$300M
$250M
$200M
$150M
$100M
$50M
-
FY21
NZ
FY22
FY21
AU
FY22
Existing customer originations
New customer originations
Loan originations in Australia were $267m, an increase of $180m (207%) on the prior year. This provides a strong pipeline for
future existing customer originations, which lag new originations, as those new customers later return, seeking to borrow for
further needs. As the Australian portfolio grows and matures it is expected to trend towards the New Zealand origination mix
where existing customer originations significantly exceed new customer originations. The early signs of this are already
evidenced in these results where Australian existing customer growth was $57m, an increase of $34m (148%) on the prior year.
Loan originations in New Zealand were $205m, an increase of $36m on the prior year driven by a 27% increase in new customer
originations and 17% increase in existing customer originations.
PAGE 17
HARMONEY ANNUAL REPORT FY22
Portfolio
Loan book (period end) ($'000) 1
Loan book (average) ($'000) 1
Statutory
Pro forma
Pro forma
Pro forma
Pro forma
Year ended
Year ended
Year ended
Change
Change %
30 June 2022
30 June 2022
30 June 2021
641,744
684,992
500,831
184,161
462,904
573,814
480,623
93,191
37%
19%
1 Pro forma includes warehouse and peer-to-peer funded loans
The statutory loan portfolio ended the year at $642m, being 94% of the pro forma loan book. This increase represents a more
than 100% increase in warehouse funded loans from the prior year, with the Group having successfully executed on its strategy
to transition to warehouse funding. The pro forma loan portfolio grew to $685m, an increase of $184m, driven by marketing
investment and resulting strong growth in Australia, with the Australian proportion of the total portfolio reaching 46%, up from
29% at 30 June 2021.
Portfolio by geography
$700M
$600M
$500M
$400M
$300M
$200M
$100M
-
Statutory
Pro forma
FY21
Statutory
FY22
Pro forma
New Zealand
Australia
PAGE 18
HARMONEY ANNUAL REPORT FY22
Net lending margin
Statutory
Pro forma
Pro forma
Pro forma
Pro forma
Year ended
Year ended
Year ended
Change
Change %
30 June 2022
30 June 2022
30 June 2021
Average interest rate (%)
15.9%
15.8%
16.3%
(50bps)
Funding debt (period end) ($'000)
623,231
666,419
482,192
184,227
Funding debt (average) ($'000)
429,338
540,163
473,376
66,787
Warehouse funded % of book (period end) ($'000)
Warehouse funded % of book (average) ($'000)
Average funding rate (%)
Net interest margin (%)
Incurred credit loss ($'000)
100%
100%
4.5%
11.7%
94%
81%
4.0%
12.1%
61%
44%
33%
37%
5.8%
(180bps)
10.6%
150bps
11,354
20,866
18,626
2,240
Incurred credit loss to average gross loans (%)
Net lending margin (%)
2.5%
9.3%
3.6%
8.4%
3.9%
(30bps)
6.8%
160bps
N/A
38%
14%
N/A
N/A
N/A
N/A
12%
N/A
N/A
Statutory interest income for the year was $73.6m, a 96% increase on prior year statutory, driven by both overall loan portfolio
growth and the average warehouse funded percentage growing from 44% in the prior year to 81% this year, reaching 94% by
30 June 2022. Pro forma interest income for the year was $90.6m, an increase of $12.0m, driven by loan portfolio growth.
The statutory average interest rate, which represents interest income as a percentage of the portfolio was 15.9%, down slightly
on the prior year, with stronger growth in the Australian proportion of the portfolio, where interest rates (and funding costs) are
lower. Harmoney’s personalised, risk-based pricing model provides targeted pricing flexibility in a dynamic interest rate
environment. In response to rising interest rates this year, in April Harmoney passed through a weighted average interest rate
increase of more than 100bps on new lending, with no reduction in demand.
The statutory average funding rate, which represents interest expense as a percentage of the average funding debt was 4.5%,
being the funding rate of warehouse funding through the year.
Statutory incurred credit loss, which represent actual losses on loans written off during the period, were $11.4m. Incurred credit
loss to average loan portfolio, which represents incurred credit loss as a percentage of the portfolio, was 2.5%. Arrears
continued at historic lows, with Group 90+ day arrears of 45bps at 30 June 2022, down from 58bps at 30 June 2021.
Harmoney achieved a statutory net lending margin of $47m, a 90% increase on prior year statutory, fuelled by significant loan
book growth. During the year Harmoney added two new “Big-4” bank warehouse facilities and issued its inaugural asset backed
securitisation.
Credit provisioning
Statutory
Pro forma
Pro forma
Pro forma
Pro forma
Year ended
Year ended
Year ended
Change
Change %
Movement in expected credit loss provision ($'000)
16,023
7,930
30 June 2022
30 June 2022
30 June 2021
(436)
8,366
Provision rate (%)
4.9%
5.3%
5.6%
(30bps)
N/A
N/A
The Group’s statutory expected credit loss (ECL) provision at 30 June 2022 was $31.9m, representing 4.9% of the portfolio,
consistent with the statutory provision rate of 4.9% at 30 June 2021.
While the provision rate is consistent, there has been a slight decrease in the underlying loss experienced offset by a slight
increase in the overlay applied. The overlay applied by management adjusts for future macroeconomic factors not incorporated
within the base provisioning model. The increase reflects the current levels of economic uncertainty as both Australia and New
Zealand work through inflation and interest rate tensions.
PAGE 19
HARMONEY ANNUAL REPORT FY22
Direct expense metrics
Marketing to origination ratio
Verification & servicing to origination ratio
Marketing to income
Verification & servicing to income
Statutory
Pro forma
Pro forma
Pro forma
Pro forma
Year ended
Year ended
Year ended
Change
Change %
30 June 2022
30 June 2022
30 June 2021
4.7%
1.2%
28.4%
7.1%
4.7%
1.2%
24.2%
6.1%
6.4%
1.4%
20.8%
4.6%
(1.7%)
(0.2%)
3.4%
1.5%
N/A
N/A
N/A
N/A
The Group’s direct expenses are those that drive, or are driven by, the level of customer activity, being marketing and customer
verification and servicing.
Marketing expenses increased to $22m in the year from $16.5m in the prior year. The 34% increase resulted in a 3 times increase
in the statutory Australian loan book as the marketing cost to origination ratio continues to improve.
Customer verification and serving costs increased to $5.5m in the year from $4m in the prior year on increased originations.
A consequence of Harmoney’s direct to consumer model is that marketing expenses are recognised when incurred, rather than
over the expected life of the loan, causing these costs to significantly lead the associated interest income. Accordingly,
Harmoney believes that for marketing expenditure the cost to origination ratio is a better measure of efficiency, comparing the
expenditure in the period to the loans originated in the period.
For Harmoney, the timing difference between marketing expenditure and the revenue that it generates is compounded with
Harmoney’s ability to generate subsequent originations from existing customers for little or no additional marketing expense,
due to the direct relationship with the customer. The chart below illustrates that in the longer established New Zealand portfolio,
where originations from existing customers are a much higher proportion of total originations, the marketing expense to total
originations ratio has been significantly lower, however the Australian ratio is clearly trending towards this.
Marketing to originations ratio
12%
10%
8%
6%
4%
2%
0%
H1-FY21
H2-FY21
H1-FY22
H2-FY22
Australia
New Zealand
PAGE 20
HARMONEY ANNUAL REPORT FY22
Indirect expense metrics
Personnel to income ratio
Technology to income ratio
General and administrative to income
Statutory
Pro forma
Pro forma
Pro forma
Pro forma
Year ended
Year ended
Year ended
Change
Change %
30 June 2022
30 June 2022
30 June 2021
13.4%
11.5%
11.7%
(20bps)
5.7%
5.5%
4.9%
4.7%
4.1%
80bps
6.2%
(150bps)
N/A
N/A
N/A
Personnel expenses (excluding share-based payments) increased to $10.5m in the year from $9.2m in the prior year on a full
year of increased investment in engineering resources, following Harmoney’s initial public offering in FY21, to accelerate
enhancements to Harmoney’s proprietary Stellare® technology platform, as well as increased costs to attract and retain talent
in a constrained labour market.
Technology costs increased to $4.5m in the year from $3.2m in the prior year driven by costs associated with capability
enhancements to the Group’s proprietary Stellare® platform including further cloud infrastructure capacity.
Administrative expenses decreased to $4.3m in the year from $4.9m in the prior year, with the reduction primarily driven by
lower costs associated with establishing new funding structures, with the Group now able to leverage investments made in this
area in prior periods.
PAGE 21
HARMONEY ANNUAL REPORT FY22
Statutory to pro forma reconciliation
The table below sets out the pro forma adjustments applied to the statutory consolidated income statement by line, for the year
ended 30 June 2022 and the prior comparable period. The pro forma adjustments are consistent with those made in the Group’s
prospectus dated 30 October 2020 (‘Prospectus’) and are intended to provide a more meaningful view of the Group’s operating
performance, normalising for differences in statutory accounting treatment between warehouse and peer-to-peer funded loans.
Year ended 30 June 2022
Year ended 30 June 2021
Statutory
Pro forma
Pro forma
Statutory
Pro forma
Pro forma
Adjustments
Adjustments
$'000
$'000
$'000
$'000
$'000
$'000
73,624
16,966
90,590
37,643
40,917
78,560
3,638
(3,638)
-
483
-
483
659
845
(659)
(340)
-
505
77,745
13,328
91,073
39,147
39,918
79,065
19,408
1,957
21,365
9,647
17,763
27,410
27,377
1,419
28,796
13,072
5,118
18,190
22,067
5,514
13,380
4,459
1,438
-
-
-
-
-
22,067
16,475
5,514
4,006
-
-
16,475
4,006
13,380
13,248
71
13,319
4,459
3,245
1,438
1,046
-
-
3,245
1,046
4,281
-
4,281
7,728
-
7,728
Interest income 1
Fee income 2
Other income 3
Total income
Interest expense 4
Impairment expense 5
Marketing expenses
Verification and servicing
expenses
Personnel expenses 6
Technology expenses
Depreciation and
amortisation expenses
General and administrative
expenses
Loss before income tax
(20,179)
9,952
(10,227)
(29,320)
16,966
(12,354)
Income tax benefit 7
-
2,864
2,864
2,286
1,173
3,459
Loss after income tax
(20,179)
12,816
(7,363)
(27,034)
18,139
(8,895)
Notes:
1.
2.
3.
4.
5.
6.
7.
In the statutory income statement, loans funded via warehouse facilities are recorded on-balance sheet, while loans funded via the Group’s peer-to-peer
trusts are “derecognised” for accounting purposes. As the Group is transitioning to full warehouse funding, this creates income statement comparability
issues between periods. As such a pro forma adjustment has been made to present the income statement consistently with recognition of peer-to-peer
funded loans on-balance sheet, indifferent to funding sources. In the statutory income statement, for loans funded by the Group’s peer-to-peer trusts,
expected lifetime fee income is recognised on loan origination, in contrast with warehouse funding where interest income and interest expense are
recognised over the life of the loan. The interest income adjustment recognises interest income earned during the period from peer-to-peer funded
loans.
For the reasons set out in note 1, the fee income adjustment removes fees earned from peer-to-peer funded loans with establishment fees being
recognised in the pro forma income statement through interest income over the expected life of the loan and peer-to-peer lender fees being recognised
in the pro forma as a deduction from interest expense. The fee income adjustment also reclassifies borrower dishonour and late fees to other income
in the prior comparable period.
In the prior comparable period only, the other income adjustment reclassifies borrower dishonour and late fees from fee income in the statutory income
statement to other income in the pro forma income statement and, for consistency with the pro forma income statement presented in the Prospectus,
removes non-recurring benefit of the Wage Subsidy Scheme in New Zealand and the JobKeeper wage subsidy in Australia.
For the reasons set out in note 1, the interest expense adjustment recognises net interest paid to peer-to-peer lenders after deducting impairments and
fees owed to the Group and, for consistency with the pro forma income statement presented in the Prospectus, for the prior comparable period only
removes the interest expense relating to the corporate debt facility, which was repaid prior to the IPO.
For the reasons set out in note 1, the impairment expenses adjustment recognises, for peer-to-peer funded loans, both actual incurred credit losses and
the movement in expected credit loss provision during the period.
For consistency with the pro forma income statement presented in the Prospectus, for the prior comparable period only, the personnel expenses have
been adjusted to remove the net impact of the non-recurring benefit of the Wage Subsidy Scheme in New Zealand and the JobKeeper wage subsidy in
Australia and salary reductions taken by employees.
The income tax benefit adjustment represents the cumulative income tax expense on the pro forma adjustments at an effective income tax rate of
28%.
PAGE 22
HARMONEY ANNUAL REPORT FY22
Environmental, Social and Governance
Environmental,
Social and
Governance
PAGE 23
HARMONEY ANNUAL REPORT FY22
PAGE 24
HARMONEY ANNUAL REPORT FY22
Harmoney was founded in 2014 with a conviction that things could
be done better. The promise of technology and a growing ability to
create direct relationships with customers online had the potential
to usher in a brave new world of financial services that put people
squarely in the middle.
To that end, we have focused on a simple but powerful
concept – that access to the right financial services at
the right time can be transformational. Not just for
customers, but for their families, and their communities.
By starting with personal loans and stripping away
complexities customers faced with traditional personal
lending, we’ve been able to do just that. All the while
ensuring we continue to meet or exceed responsible
Engagement score this year is in large part thanks to
the efforts and resources outlined in this report.
Likewise, employee diversity across gender and
nationality are the result of a conscious effort to obtain
benefits that only come from harnessing a broad range
of different experiences, perspectives, and ideas. This
commitment is also reflected in our latest Board
lending and credit performance standards.
appointments.
Since 2014, we’ve approved over 124,000 loans. These
loans have helped people start (or complete) the things
that are important to them, such as home renovations
($411m), simplifying debt ($773m), getting a car
($162m), or an education ($25m). We’ve helped
This report details Harmoney’s commitment to the
highest levels of ethical and responsible governance.
These extend beyond our own extensive internal policy
framework to compliance with the recommendations of
the ASX Corporate Governance Council, and the
customers get married ($35m), get healthy ($29m), or
adoption of a new Governance Framework.
grow their business ($78m).
And our work at Harmoney is making the process of
getting a loan fairer: innovations such as our credit
scoring and pricing engine have opened up access to
affordable personal loans to many people previously
excluded from such products.
We also have programmes for customers who find
themselves needing support when circumstances
change, and a highly trained team to nurture and
support them. Our customer feedback practices
promote the customer voice within the company, and
our complaints policy ensures customers know they
have options and a place to turn to should they need it.
Finally, due to our focus on providing a 100% online
experience for customers, and supporting remote work
flexibility for employees, the environmental impacts of
our workplace environment have minimal material
impact. However, we are conscious that every bit
counts as we strive to achieve global emissions targets
and seek to reduce negative impacts on our natural
environment. We are playing our part and eager to
continue this effort.
Harmoney is pleased to submit this, our first ESG
summary. We are fully committed to sharing the
Company's ESG efforts and approach in line with
ESG principles and have appointed a member of the
leadership team as Harmoney's ESG officer.
Our enviable Employee Engagement Score is the result
of conscious and consistent focus on the needs of our
Harmoney also welcomes the climate reporting
standards in development by the External Reporting
employees. In particular, the responsiveness and
flexibility needed to help people navigate the demands
of the last couple of years. A record Employee
Board (XRB). We look forward to sharing our
continued progress.
PAGE 25
HARMONEY ANNUAL REPORT FY22
Environment.
FOCUS AREAS
ACHIEVEMENT / PROGRESS SO FAR
ONGOING
Our impact on the
• We understand the climate-related risks facing
environment
our planet and that all businesses have an impact
on the environment. We are committed to playing
our part in the transition to a low carbon future.
• We are committed to exploring product
developments that help and inspire our
stakeholders to also adopt low and zero
carbon alternatives.
•
As a 100% online consumer-direct personal
lender we are proud that we have maintained
limited direct environmental impact.
• We support remote working and flexibility, which
reduces commutes and associated emissions, as
well as make extensive use of video
conferencing, reducing the need for business
travel and the emissions associated with that.
Climate change
• We have fully offset our measured carbon
emissions through Ekos NZ for FY22 and are
committed to reducing emissions in future years.
•
•
•
This year no direct (Scope 1)1 emissions were
generated.
Very low indirect emissions were generated with
22 CO2e tonnes2 total actual measured
(Scope 2 & 3)3 emissions, and further 20 CO2e
tonnes (Scope 3) estimated emissions, for the
year ended 30 June 2022. These were all fully
offset through the purchase of certified carbon
credits.
The Harmoney office has also received a 4
Green Star rating from the NZGBC (New
Zealand Green Building Council) with sustainable
features that lower environmental impact.
Waste
management
•
The Harmoney office has onsite recycling
facilities (paper and cardboard) reducing overall
landfill waste.
• We are committed to further enhancing our
understanding of both upstream and
downstream carbon emissions and working to
reduce or eliminate these.
• Many of our key suppliers have already made
environmental commitments:
o Google has been carbon neutral since
2007 and has made a commitment to
operate on 24/7 carbon-free energy by
2030.
o Amazon Web Services has a goal of
100% renewable energy-powered
operations by 2025.
o
Salesforce has net zero residual
emissions and has achieved 100%
renewable energy offsets for their
operations. They are aligned to a global
trajectory of ~50% emissions reductions
by 2030, and to near-zero absolute
emissions by 2040.
Harmoney will be complying with the XRB’s
Climate-related Disclosure Standards (once
published), with the first year of reporting
under the standards expected in FY24.
Harmoney will continue to generate ongoing
awareness with our teams about utilising the
recycling facilities in the building to ensure
effective and responsible waste management.
•
•
1 Scope 1 emissions are direct greenhouse gas (GHG) emissions from sources owned or controlled by the entity.
2 Carbon dioxide equivalent (CO2e) is the universal unit of measurement to indicate the global warming potential of each of the seven GHGs, expressed
in terms of the global warming potential of one unit of carbon dioxide for 100 years. It is used to evaluate releasing (or avoiding releasing) any GHGs
against a common basis.
3 Scope 2 emissions are indirect GHG emissions from consumption of purchased electricity, heat, or steam. Scope 3 emissions are other indirect GHG
emissions not covered in scope 2.
PAGE 26
HARMONEY ANNUAL REPORT FY22
Social.
FOCUS AREAS
ACHIEVEMENT / PROGRESS SO FAR
ONGOING
Customer
commitment
Innovation of
products
•
•
•
•
•
•
• We aspire to enable consumers from all walks of
•
Continuous process and product development
to improve customer experience.
•
Utilising Net Promoter Score to measure
customer satisfaction and comments.
• We operate a Feedback & Complaints
Committee who meet monthly to ensure there
is regular review of the effectiveness of our
processes for addressing customer feedback
and complaints and promptly identify any
emerging trends.
life to access our financial services offerings in
ways that simplify their use and lessen the
anxiety of getting approved for credit.
Harmoney achieves this by having a broad-based
online application process that utilises modern
technology to assess creditworthiness on the
basis of reliably sourced financial data with
machine learning developed scoring systems
ensuring product suitability.
In doing so Harmoney follows the law, regulatory
guidance and its own internal policies and
procedures to ensure to the best of its ability
that customer information and financial wellbeing
is secure.
Harmoney has also successfully implemented
ISO10002-2014 standards enabling Harmoney
to continually improve how we handle customer
feedback and complaints.
Harmoney embraces a culture of developing
products and product features to deliver good
consumer outcomes for the market they were
designed for, including support through
periods of financial difficulty.
Harmoney will continue to address and
combat financial crime through the use of
biometric identification processes, contributing
information to the industry wide Shared Fraud
Database and actively reporting any
suspicious matters to AUSTRAC and FMA,
while also engaging with other relevant
governmental departments.
Harmoney has a Product Governance
Framework in place, adhering to the Design and
Distribution Obligations guidance from ASIC in
Australia and aligned to the FMA view of conduct
ensuring suitable and targeted financial products
and including support through periods of
financial difficulty for customers.
•
•
Harmoney has developed and adopted stringent
measures to secure and protect financial and
credit-related customer data through internal
policies, regular system and application
penetration testing by an external third party,
and high levels of data encryption and security.
Improving access to financial services across all
consumer segments - applying technology with
credibility and trustworthiness. Creation of a
100% online application makes finance
accessible to those unable to access a branch
network or meet face-to-face.
PAGE 27
HARMONEY ANNUAL REPORT FY22
FOCUS AREAS
ACHIEVEMENT / PROGRESS SO FAR
ONGOING
Employee
benefits
Training
• We pride ourselves on being a high growth
innovative fintech company with close to 90 full
time employees across Australia and New
Zealand. We have created a purpose-driven
culture built around learning, development,
knowledge sharing, empowerment, and
encouraging collaboration and contribution.
• We regularly review our employee value
proposition against market practice to attract
and retain staff with the right skills and values.
•
•
•
At Harmoney, we balance reward and
recognition as a way to build cohesion, belonging
and respect within our teams, and to celebrate
successes. While recognition awards are often
light-hearted and fun, they play an important role
in fostering our Harmoney team culture.
Harmoney employees are provided with the time
and support they need to pursue and grow their
skill set. We use a complete performance
management platform, development plans and
an effective survey platform where individuals
can discover areas of focus.
An annual training budget encourages each
employee to explore their potential and be
certified in their field of expertise.
• We conduct regular reviews of remuneration,
rewards and benefits to ensure these remain
fair and competitive.
• We encourage our employees to host demo
days, partake in public tech events and provide
them with opportunities for growth including
monthly lunch and learn events to build
leadership skills, encourage teamwork and
create a workplace of communication and
collaboration.
Health and Safety
•
Since the 2020 COVID-19 lockdown we have
adopted company-wide partial remote working in
addition to flexible work arrangements. With
consideration of wellbeing and attrition we
created a retention strategy focusing on:
o Hiring the right people
o Creating an accessible work environment
Easing employees’ work-life balance
o
Facilitating training programmes for
o
employee growth
o Cultivating our Harmoney team spirit
• We conduct regular anonymous employee
surveys to gather honest and up-to-date
feedback on employee satisfaction levels.
• We have a clear purpose and vision with highly
engaged employees (86%). This high score is
reflective of employees’ commitment and
connection with Harmoney and its purpose
and values.
•
Harmoney also offers a comprehensive benefits
programme, including for example wellness days,
to support a productive workforce that can help
customers have positive experiences.
Modern Slavery
•
Harmoney is aware that modern slavery can
exist in all aspects of business. We are currently
reviewing the Modern Slavery reporting
framework and will be undertaking the necessary
steps to develop Harmoney’s Modern Slavery
Statement.
•
Harmoney operates in accordance with an
established Code of Conduct that is
periodically reviewed and endorsed by the
Board of Directors (“the Board”), to ensure the
company maintains high ethical standards.
•
Harmoney is currently not required to report
under Australia’s Modern Slavery Act 2018 but
we expect to commence reporting in FY23.
• Our Audit and Risk Committee also plays a key
role in overseeing the company's exposure to
social risks.
PAGE 28
HARMONEY ANNUAL REPORT FY22
Governance.
FOCUS AREAS
ACHIEVEMENT / PROGRESS SO FAR
ONGOING
Governance
framework
Stakeholder
engagement
Risk and
opportunity
•
•
•
•
•
•
•
•
•
•
•
Harmoney’s company policies are regularly
reviewed by external providers (such as law
firms, auditors, and AML specialists) and kept
up to date.
Since listing on the ASX in November 2020,
Harmoney has elected to comply with all of the
ASX Corporate Governance Council’s
“Corporate Governance Principles and
Recommendations (4th Edition)” (the ASX
Recommendations).
Harmoney also publishes a Corporate
Governance Statement on its website (at
https://www.harmoney.com.au/investor), which
sets out the details of its practices with respect
to the ASX Recommendations, which was last
updated on 30 June 2022.
Establishment of an Investor Centre on the
Harmoney website to provide information about
our Board members, business results,
governance information and other Harmoney
news.
•
In accordance with its policy, Harmoney
acknowledges feedback from all sources, and
will respond to customer feedback and
complaints in a timely manner.
• Harmoney also has a Feedback and
In addition to our customer communication
channels, establishment of a dedicated
shareholder email address to facilitate enquiries
and the provision of feedback.
Complaints Committee which meets regularly,
for identifying patterns in customer feedback,
systemic issues, and areas for improvement.
Material matters are reported to the Board.
A characteristic of our Product Governance
Framework is the methodical qualitative
surveying of consumers to identify market needs
and demands to be incorporated into product
offerings.
Harmoney has a Complaints and Internal Dispute
Resolution Policy to ensure consistent handling
of customer queries.
Harmoney is committed to the development and
implementation of a risk and compliance
assurance testing program.
Harmoney conducts regular automated and
manual audits, both internally and externally, and
these will be further aligned and augmented
under this program.
A newly established Compliance Manager role
has been recruited to develop the program.
The Audit and Risk Committee reviews and
approves Harmoney’s risk management system
(including policy and framework) for identifying,
assessing and managing financial and non-
financial risk. A review of Harmoney’s risk
management framework was undertaken by the
Committee during FY22. The framework,
inclusive of ESG risk, is reviewed quarterly.
• Harmoney plans to revise its enterprise-wide
risk framework and focus on ‘risk to people’ as
a mechanism for better analysing not just ESG
risk but risk as a whole. The redesign of the
framework will accommodate improved
visibility of risks and opportunities in ESG.
PAGE 29
HARMONEY ANNUAL REPORT FY22
FOCUS AREAS
ACHIEVEMENT / PROGRESS SO FAR
ONGOING
• Harmoney has a Compliance Committee which
meets regularly, and which receives reports
from Harmoney’s Feedback and Complaints
Committee
• Regular external legal advice is sought to
ensure Harmoney’s ongoing compliance with
changes to applicable laws
• Regular external assurance testing and audits
are performed against various aspects of
Harmoney’s obligations (such as controls, and
AML).
Ethics
•
•
Harmoney’s corporate governance framework
includes a Code of Conduct, Anti-Bribery &
Corruption Policy, and Whistleblower Policy
Harmoney ensures that all applicable legal
obligations are met through:
o Regular review and reporting of our
adherence to our licence obligations
(Market Services Licence, Australian Credit
Licence, and Australian Financial Services
Licence)
o Review of our Responsible Lending Policy
and procedures, with recent enhancements
for CCCFA changes in December 2021 and
February 2022
o Continuous improvement of our systems to
recognise potentially vulnerable applicants
o Ongoing staff training across all relevant
regulations
o Harmoney is a signatory to the Principles of
Reciprocity and Data Exchange with RDEA
(a subsidiary of the Australian Retail Credit
Association).
o Harmoney is a member of the Financial
Services Federation in New Zealand, the
industry body for responsible non-bank
lenders.
PAGE 30
HARMONEY ANNUAL REPORT FY22
Directors’ Report
The Directors present their report, together with the financial statements, on the consolidated entity consisting of Harmoney
Corp Limited and the entities it controlled at the end of, or during the year ended, 30 June 2022 (“the Group”).
Directors
The Directors of Harmoney Corp Limited at the date of this report are:
Paul Lahiff
Monique Cairns
Tracey Jones
John Quirk
Neil Roberts
David Stevens
Independent Chairman
Independent Director
Independent Director
Independent Director
Founder, Chief Strategy Officer and Executive Director
Chief Executive Officer and Managing Director
For details of Directors during the year refer to the Corporate Information section.
Principal activities
Harmoney provides customers with unsecured personal loans that are competitively priced using risk-adjusted interest rates
and accessed 100% online. The Group operates across New Zealand and Australia.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the year ended 30 June 2022.
Dividends
There were no dividends paid, recommended, or declared during the current or previous financial year.
For and on behalf of the Directors
Paul Lahiff
Chairman
Auckland
30 August 2022
PAGE 31
HARMONEY ANNUAL REPORT FY22
This page has intentionally been left blank
PAGE 32
HARMONEY ANNUAL REPORT FY22
Financial Report
PAGE 33
HARMONEY ANNUAL REPORT FY22
Directors’ Responsibility
Statement
The Directors are pleased to present the consolidated financial statements of Harmoney Corp Limited for the year ended 30
June 2022.
The Directors are responsible for ensuring that the consolidated financial statements give a true and fair view of the financial
position of the Group as at 30 June 2022 and its financial performance and cash flows for the year ended on that date.
The Directors consider that the consolidated financial statements of the Group have been prepared using appropriate
accounting policies consistently applied and supported by reasonable judgements and estimates and that all the relevant
financial reporting and accounting standards have been followed.
The Directors believe that proper accounting records have been kept which enable, with reasonable accuracy, the determination
of the financial position of the Group and facilitate compliance of the consolidated financial statements with the Financial
Reporting Act 2013.
Harmoney Corp Limited's Directors do not have the power to amend these consolidated financial statements after issue.
The Board of Directors of Harmoney Corp Limited authorised the financial statements set out on pages 35-69 for issue on 30
August 2022.
For and on behalf of the Board
Paul Lahiff
Chairman
30 August 2022
Tracey Jones
Chair of the Audit and Risk Committee
PAGE 34
HARMONEY ANNUAL REPORT FY22
Consolidated Group Financial Statements
Consolidated Statement
of Comprehensive Income
For the year ended 30 June 2022
Interest income
Fee income
Other income
Total income
Interest expense
Impairment expense
Marketing expenses
Personnel expenses
Verification and servicing expenses
Technology expenses
General and administrative expenses
Depreciation and amortisation expenses
Loss before income tax
Income tax benefit
Loss for the year attributable to shareholders of Harmoney Corp
Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Gain on cash flow hedge reserve, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year attributable to shareholders of
Harmoney Corp Limited
Earnings per share for loss attributable to the ordinary equity holders of
the Company:
Basic earnings per share
Diluted earnings per share
Year ended
Year ended
30 June 2022
30 June 2021
Notes
$'000
$'000
5
6
7
5
8
9
11
12
13
13
73,624
37,643
3,638
483
659
845
77,745
39,147
19,408
9,647
27,377
13,072
22,067
16,475
13,380
13,248
5,514
4,459
4,281
1,438
4,006
3,245
7,728
1,046
(20,179)
(29,320)
-
2,286
(20,179)
(27,034)
256
6,228
6,484
898
841
1,739
(13,695)
(25,295)
Cents
Cents
(20)
(20)
(29)
(29)
THE ABOVE CONS OLIDATED STATEMENT OF COMPREHENSIVE INCOME SHOULD BE READ IN CONJUNCT ION WITH THE ACCOMPANYING NOTES.
PAGE 35
HARMONEY ANNUAL REPORT FY22
Consolidated Statement
of Financial Position
As at 30 June 2022
Assets
Cash and cash equivalents
Trade and other assets
Finance receivables
Property and equipment
Intangible assets
Deferred tax assets
Derivative financial instruments
Total assets
Liabilities
Payables and accruals
Borrowings
Provisions
Lease liability
Derivative financial instruments
Total liabilities
Net assets
Share capital
Foreign currency translation reserve
Share-based payment reserve
Cash flow hedge reserve
Accumulated losses
Equity
30 June 2022
30 June 2021
Notes
$'000
$'000
14
15
16
17
18
11
12
19
20
21
17
12
22
23
23
12
62,747
76,464
1,839
1,894
609,132
294,821
389
9,416
642
3,455
9,134
11,490
8,669
-
701,326
388,766
6,846
7,324
623,231
291,541
5,700
13,405
238
-
717
85
636,015
313,072
65,311
75,694
131,559
131,399
820
3,368
6,143
564
216
(85)
(76,579)
(56,400)
65,311
75,694
THE ABOVE CONS OLIDATED STATEMENT OF FINANCIAL POS ITION SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES.
PAGE 36
HARMONEY ANNUAL REPORT FY22
Consolidated Statement
of Changes in Equity
For the year ended 30 June 2022
Balance at 30 June 2020
Loss for the year
Other comprehensive income, net of
income tax
Total comprehensive income / (loss)
Recognition of share-based payments
Transfer to capital
Issue of share capital
Balance at 30 June 2021
Loss for the year
Other comprehensive income, net of
income tax
Total comprehensive income / (loss)
Recognition of share-based payments
Transfer to share capital
Balance at 30 June 2022
Share
capital
Foreign
currency
translation
reserve
Share-
based
payment
reserve
Cash
flow
hedge
reserve
Accumulated
losses
Total
Notes
$'000
$'000
$'000
$'000
$'000
$'000
56,686
(334)
2,825
(926)
(29,366)
28,885
-
-
-
-
7,162
67,551
-
898
898
-
-
-
-
-
-
-
(27,034)
(27,034)
841
-
1,739
841
(27,034)
(25,295)
4,553
(7,162)
-
-
-
-
-
-
-
4,553
-
67,551
131,399
564
216
(85)
(56,400)
75,694
-
-
-
-
160
-
256
-
-
-
(20,179)
(20,179)
6,228
-
6,484
256
-
6,228
(20,179)
(13,695)
-
-
3,312
(160)
-
-
-
-
3,312
-
131,559
820
3,368
6,143
(76,579)
65,311
23
23
22
23
23
THE ABOVE CONS OLIDATED STATEMENT OF CHANGES IN EQ UITY SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES.
PAGE 37
HARMONEY ANNUAL REPORT FY22
Consolidated Statement
of Cash Flows
For the year ended 30 June 2022
Cash flows from operating activities
Interest received
Interest paid
Fee income (rebated) / received
Payments to suppliers and employees
Net cash generated by / (used in) operating activities
Cash flows from investing activities
Net advances to customers
Payments for software intangibles and equipment
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from finance receivables borrowings
Net proceeds from / (repayment of) debt financing
Proceeds from share issue, net of transaction costs
Principal element of lease payments
Net cash generated by financing activities
Cash and cash equivalents at the beginning of the year
Net (decrease) / increase in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Year ended
Year ended
30 June 2022
30 June 2021
Notes
$'000
$'000
73,829
38,231
(18,611)
(10,295)
(2,265)
5,338
(47,577)
(34,862)
5,376
(1,588)
(342,414)
(180,044)
(6,744)
(3,694)
(349,158)
(183,738)
314,121
170,227
16,569
(10,694)
-
67,550
(881)
(969)
329,809
226,114
76,464
34,779
(13,973)
40,788
256
897
Cash and cash equivalents at the end of the year
14
62,747
76,464
THE ABOVE CONS OLIDATED STATEMENT OF CASH FLOWS SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES.
PAGE 38
HARMONEY ANNUAL REPORT FY22
Notes to the Consolidated Group
Financial Statements
For the year ended 30 June 2022
1 Corporate information
Harmoney Corp Limited (the Company) and its subsidiaries (collectively, the Group) are companies whose primary business is
to originate, service and invest in loans. There has been no change in the principal activity of the Group during the year.
The results and position of each Group entity are expressed in New Zealand dollars, which is the functional currency of the
Company and the presentation currency for the consolidated financial statements, unless otherwise stated. All amounts
disclosed in the financial statements and notes have been rounded to the nearest thousand New Zealand dollars ($’000) unless
otherwise stated.
Harmoney Corp Limited is a company incorporated in New Zealand and registered under the Companies Act 1993, whose shares
are publicly traded on both the Australian Stock Exchange (ASX) and New Zealand Exchange (NZX) and is required to be treated
as a reporting entity under the Financial Market Conducts Act 2013 and the Financial Reporting Act 2013 as it is a licensed peer-
to-peer lender. The Company was incorporated on 1 May 2014.
2 Significant accounting policies
2.1
The consolidated financial statements of Harmoney Corp Limited comply with New Zealand equivalents to International Financial
Basis of preparation
Reporting Standards (NZ IFRS) and have been prepared in accordance with Generally Accepted Accounting Practice in New
Zealand (GAAP). The Company is a for-profit entity for the purposes of complying with GAAP.
The Consolidated group financial statements have been prepared following the historical cost convention, except where
otherwise identified. Financial assets are initially recognised at fair value and are subsequently measured at amortised cost
using the effective interest rate method, less any expected credit loss allowance.
The Consolidated Statement of Financial Position has been prepared in order of liquidity, including the comparatives. All assets
and liabilities are current unless otherwise stated in the notes. The disaggregation of amounts receivable and payable in the
next twelve months and beyond is outlined in the accompanying notes to the financial statements and the contractual maturity
profile of financial liabilities is outlined in note 27.
2.2 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured
entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
has power over the investee;
has the ability to use its power to affect its returns.
is exposed, or has rights, to variable returns from its involvement with the investee; and
The assets and liabilities of entities whose functional currency is not the New Zealand dollar are translated at the exchange
rates ruling at balance date. Revenue and expense items are translated at the spot rate at the transaction date or a rate
approximating that rate. Exchange differences are taken to the foreign currency translation reserve.
PAGE 39
HARMONEY ANNUAL REPORT FY22
All intragroup assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
2.3 Goods and services tax
Revenue, expenses, assets, and liabilities are recognised net of the amount of goods and services tax (GST) except:
where the amount of GST incurred is not recovered from the taxation authority, the unrecoverable GST expense is
included in the related expense item in the income statement.
receivables and payables which are recognised inclusive of GST (the net amount of GST recoverable from or payable to
the taxation authority is included as part of receivables or payables).
cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to, the taxation authority, are presented as operating cash flows.
2.4 Application of new and revised accounting standards
There are no new or revised accounting standards that are mandatory from 1 July 2021 that would have a material impact on
the Group’s financial statements.
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2022 reporting
periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the
Group in the current or future reporting periods and on foreseeable future transactions. The Interest Rate Benchmark Reform
Phase 2 – Amendments to NZ IFRS 9, NZ IAS 39, NZ IFRS 7, NZ IFRS 4 and NZ IFRS 16 will have no impact as the Group does
not have any IBOR-based contracts.
3 Significant accounting judgements, estimates and assumptions
The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts of assets and liabilities, income and expenses and actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
Expected credit loss provision
3.1
The Group has estimated the provision for expected credit losses (ECL) based on historically observed patterns of borrower
behaviour adjusted for current and future economic outcomes. These are discussed in detail in note 16 and have a significant
impact on these financial statements.
The Group measures the allowance for ECL using an expected credit loss impairment model as required by NZ IFRS 9 Financial
Instruments (NZ IFRS 9). The Group’s accounting policy for the recognition and measurement of the allowance for ECL is
described in note 16.
3.2 Treatment of development costs incurred in the year
The Group has incurred and will continue to incur significant costs on software development projects. The Directors believe that
the costs fall within the definition of research and development within NZ IAS 38 Intangible Assets. Judgement has been applied
in assessing these costs against the recognition and measurement criteria in that standard. The costs have been recorded as
Intangible Assets on the balance sheet where the Group believes that they have met all the requirements of the recognition
criteria outlined in the accounting policy (note 18) and expensed where they have not been met.
PAGE 40
HARMONEY ANNUAL REPORT FY22
4 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments,
has been identified as the Chief Executive Officer.
4.1 Description of segments
The CODM considers the business from a geographical operating perspective and has identified two reportable segments: New
Zealand and Australia.
The CODM assesses the business on a Cash NPAT basis. Cash NPAT is a non-GAAP measure and consists of profit/(loss) after
income tax, adjusted for determined non-cash and abnormal items. It is intended as a supplementary measure of operating
performance for readers to understand the cash generating ability of the Group. Cash NPAT does not have a standard meaning
prescribed by GAAP and therefore may not be compared to information presented by other entities.
Intersegment revenue is not considered by the CODM and is accordingly excluded from segment reporting. Operating expenses
are attributed to New Zealand unless they are direct incremental costs of the Australian operation.
4.2 Major customers
There are no customers who account for more than 10% of the Group’s revenue.
The following tables present income and loss information for the Group’s operating segments.
Segmented income statement for the year ended 30 June 2022 $'000
Interest income
Fee income
Other income
Total income
Interest expense
Incurred credit losses
Movement in expected credit loss provision
Marketing expenses
Verification and servicing expenses
New Zealand
Australia
Group
46,401
27,223
73,624
3,247
391
3,638
483
-
483
50,131
27,614
77,745
13,375
6,033
19,408
5,834
5,520
11,354
1,561
14,462
16,023
8,270
13,797
22,067
3,497
2,017
5,514
Personnel expenses (excl. share-based payments)
10,203
247
10,450
Share-based payments expenses
Technology expenses
General and administrative expenses
Depreciation and amortisation expenses
Loss before income tax
Income tax benefit
Loss for the year attributable to shareholders of Harmoney Corp Limited
Non-cash and other normalisation adjustments
Movement in expected credit loss provision
Share-based payments expenses
Depreciation and amortisation expenses
Cash NPAT
2,930
4,459
-
-
2,930
4,459
2,759
1,522
4,281
1,348
90
1,438
(4,105)
(16,074)
(20,179)
-
-
-
(4,105)
(16,074)
(20,179)
1,561
14,462
16,023
2,930
-
2,930
1,348
90
1,438
1,734
(1,522)
212
PAGE 41
HARMONEY ANNUAL REPORT FY22
Segmented income statement for the year ended 30 June 2021 $'000
Interest income
Fee income
Other income
Total income
Interest expense
Incurred credit losses
Movement in expected credit loss provision
Marketing expenses
Verification and servicing expenses
Personnel expenses (excl. share-based payments)
Share-based payments expenses
Technology expenses
General and administrative expenses
Depreciation and amortisation expenses
Loss before income tax
Income tax benefit
New Zealand
Australia
Group
29,542
8,101
37,643
(1,079)
1,738
715
130
659
845
29,178
9,969
39,147
6,573
3,074
9,647
3,974
813
4,787
5,939
2,346
8,285
8,671
7,804
16,475
2,937
1,069
4,006
8,987
183
9,170
4,037
41
4,078
3,240
5
3,245
6,818
910
7,728
914
132
1,046
(22,912)
(6,408)
(29,320)
1,028
1,258
2,286
Loss for the year attributable to shareholders of Harmoney Corp Limited
(21,884)
(5,150)
(27,034)
Non-cash and other normalisation adjustments
Movement in expected credit loss provision
Share-based payments expenses
Depreciation and amortisation expenses
Borrower establishment fee rebate
IPO related expenses
Income tax impact of adjustments
Cash NPAT
5,939
2,346
8,285
4,037
41
4,078
914
132
1,046
4,000
3,172
-
-
4,000
3,172
(5,067)
(755)
(5,822)
(8,889)
(3,386)
(12,275)
PAGE 42
HARMONEY ANNUAL REPORT FY22
The following tables present a disaggregation of the Group’s fee income in operating segments.
Segment fee income statement for the year ended 30 June 2022 $'000
Distributing services
Protect fees
Total fee income
New Zealand
Australia
Group
2,561
686
3,247
391
2,952
-
686
391
3,638
Segment fee income statement for the year ended 30 June 2021 $'000
Distributing services
Establishment services
Borrower establishment fee rebate
Protect fees
Other fees
Total fee income
5
5.1
Interest
Interest income
Interest income
5.2
Interest expense
Interest Expense
Interest on receivables funding
Interest on corporate debt
Interest on lease liability
Total interest expense
New Zealand
Australia
Group
1,082
921
(4,000)
893
25
982
752
-
-
4
(1,079)
1,738
2,064
1,673
(4,000)
893
29
659
Year ended
30 June 2022
$'000
Year ended
30 June 2021
$'000
73,624
37,643
Year ended
30 June 2022
$'000
Year ended
30 June 2021
$'000
18,682
8,960
716
10
624
63
19,408
9,647
Interest income includes interest and loan origination fees. Interest income and interest expense are recognised in the Income
Statement for all financial assets and liabilities measured at amortised cost using the effective interest method. The effective
interest method allocates interest income or interest expense over the life of the contract, or when appropriate a shorter period,
using the effective interest rate. The effective interest rate is the discount rate at which the present value of the future cash
flows equals the net carrying amount of the financial asset or liability. Origination fees are required to be amortised over the
expected life of the finance receivable in accordance with NZ IFRS 9 Financial Instruments. The deferred amount is recognised
as a reduction to the finance receivable (note 16).
PAGE 43
HARMONEY ANNUAL REPORT FY22
6 Fee income
Borrower fee income
Establishment services
Borrower establishment fee rebate
Protect fees
Other fees
Total borrower fee income
Lender fee income
Distributing services
Total fee income
Year ended
30 June 2022
$'000
Year ended
30 June 2021
$'000
-
-
686
-
686
2,952
3,638
1,673
(4,000)
893
29
(1,405)
2,064
659
Establishment services
Establishment fees were a brokerage fee charged to borrowers on peer-to-peer loans for arranging the loan. The performance
obligation of arranging the loan is fulfilled at the point in time the loan is matched. Given only one material performance obligation
the transaction price is allocated to the single performance obligation. The Borrower establishment fee rebate relates to
movements in the provision for rebate and the basis for the rebate is disclosed in note 21.
Distributing services
Distributing services refer to Harmoney facilitating the matching of credit worthy borrowers with peer-to-peer lenders within
criteria chosen by the lender. The fees charged for this service are recognised at the point matching is complete and to the
extent that it is highly probable that a significant reversal will not occur. Given only one material performance obligation the
transaction price is allocated to the single performance obligation.
Payment for distributing services is made by the lender via a combination of fees payable at the point of matching with a borrower
when borrower repayments are received and on a monthly invoice cycle where fees are calculated based on lender portfolio
performance.
Certain fees charged at the point of matching lenders with borrowers are rebateable if the lender does not achieve the required
return on their investment. This is typically due to the borrower loan closing earlier than stated on their contract due to early
repayment or default. At the point the performance obligation of matching the lender with a borrower is satisfied, the Group
estimates and records as revenue the amount of variable consideration to the extent that it is highly probable that a significant
reversal in the cumulative revenue recognised will not occur. The Group's estimate of rebateable amounts are booked as
distributing services rebate provision (note 21).
PAGE 44
HARMONEY ANNUAL REPORT FY22
7 Other income
Grant income
Wage subsidy
Total other income
Grant income
Year ended
30 June 2022
Year ended
30 June 2021
$'000
483
-
483
$'000
476
369
845
Grants from the New Zealand Government are recognised at their fair value where there is reasonable assurance that the grant
will be received, and the Group will comply with all attached conditions. Harmoney received grants related to the R&D Loss Tax
Credit as funded by Inland Revenue.
Wage subsidy
The Group did not receive any wage subsidies in the current reporting period. During the 2021 financial year, the Group received
$239,006 of wage subsidies funded by the Ministry of Social Development for New Zealand operations. The subsidy was part
of the New Zealand Government's COVID-19 response plan. The Group also received $23,813 of JobKeeper subsidies and
$106,361 of Cash flow boost grant funded by the Australian Tax Office in the 2021 financial year. These are recognised as wage
subsidies in the prior period above. The subsidy and grant were predicated on certain criteria which were considered in the
Group's application.
8
Impairment expense
Change in expected credit loss provision
Incurred credit loss
Change in protect claims provision
Impairment expense
Year ended
30 June 2022
$'000
16,023
11,457
(103)
27,377
Year ended
30 June 2021
$'000
8,285
4,853
(66)
13,072
Change in expected credit loss provision
The expense is recognised when there is a movement in the provision due to the composition of the finance receivables (note
16). For example, due to the growth in the finance receivable and change in macroeconomic conditions.
Incurred credit loss
Financial assets are written off when there is no reasonable expectation of recovery, such as the borrower failing to engage in
a repayment plan with the Group. The Group categorises a finance receivable as incurred credit loss when the borrower fails to
make contractual payments more than 120 days past due. Where finance receivables have been written off, the Group continues
to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised
in profit or loss.
PAGE 45
HARMONEY ANNUAL REPORT FY22
9 Depreciation and amortisation
Depreciation charge on right-of-use assets
Buildings
Equipment
Depreciation charge on property and equipment
Furniture and fixtures
IT equipment
Amortisation charge
Software development
Total depreciation and amortisation expense
Amounts recognised in the consolidated statement of comprehensive income
relating to leases
Interest expense (included in interest expense)
Expense relating to short-term leases
Cash outflows relating to leases
Cash outflow for leases in the year
10 Research and development
Research and development costs capitalised
Research and development costs expensed
Total research and development
Year ended
30 June 2022
$'000
Year ended
30 June 2021
$'000
691
9
8
39
779
8
9
23
691
1,438
227
1,046
10
3
891
63
4
1,032
Year ended
30 June 2022
Year ended
30 June 2021
$'000
6,652
738
7,390
$'000
3,682
544
4,226
Research and development costs capitalised are discussed in note 18. Expenditure on research activities is recognised as an
expense in the period in which it is incurred.
PAGE 46
HARMONEY ANNUAL REPORT FY22
Income taxes
11
11.1
The income tax benefit for the year can be reconciled to the accounting loss as follows:
Income tax recognised in profit or loss
Current tax
In respect of the current year
Deferred tax
In respect of the current year
Total income tax benefit
Loss before income tax
Income tax benefit calculated
Effect of expenses that are not deductible
Research and Development Tax Credits
Movement in temporary differences
Prior period adjustment
Income tax benefit not recognised
Other
Total income tax benefit
Year ended
30 June 2022
$'000
Year ended
30 June 2021
$'000
82
27
(82)
(2,313)
-
(2,286)
Year ended
30 June 2022
$'000
Year ended
30 June 2021
$'000
(20,179)
(29,320)
(6,080)
(1,223)
483
-
(924)
7,859
(115)
-
(8,333)
(8,227)
476
263
-
13,503
32
(2,286)
The tax rate used for the reconciliation above is the corporate tax rate of 28% payable by corporate entities in New Zealand
and 30% for those in Australia, on taxable profits under tax law in their respective jurisdictions.
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit/(loss) before tax’ as reported
in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible
in other periods and items that are never taxable or deductible. The Group's current tax is calculated using tax rates that have
been enacted or substantively enacted by the end of the reporting period.
The current tax for this reporting period relates to foreign tax credits utilised. No cash income tax was paid by the Group.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that there is convincing other evidence that taxable profits will be available against which
those deductible temporary differences can be utilised.
PAGE 47
HARMONEY ANNUAL REPORT FY22
11.2 Deferred tax balances
The following is the analysis of deferred tax assets/(liabilities) presented in the consolidated statement of financial position:
Deferred tax assets
Expected credit loss (ECL) provision
Accruals and other
Share-based payments
Losses
Deferred R&D expenses
Deferred tax assets
Deferred tax liabilities
Derivatives
Distributing services
Plant & equipment and intangibles
Deferred tax liabilities
Net deferred tax assets
30 June 2022
30 June 2021
$'000
$'000
9,296
1,727
407
286
-
11,716
(2,527)
(49)
(6)
(2,582)
9,134
4,404
938
-
6,800
2,283
14,425
-
(2,870)
(65)
(2,935)
11,490
The recognised tax losses are subject to meeting the requirements of the applicable tax legislation. The carrying amount of
deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax asset recognised to be utilised. The Group has further tax
losses of $19.8m at 30 June 2022 (June 2021: $11.9m) which have not been recognised and are available to offset future taxable
profits.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
11.3 Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not
recognised in net profit or loss or other comprehensive income but directly
debited or credited to equity:
Share-based payments
-
371
30 June 2022
30 June 2021
$'000
$'000
11.4 Amounts recognised in other comprehensive income
30 June 2022
30 June 2021
$'000
$'000
Aggregate current and deferred tax arising in the reporting period relating to
components of other comprehensive income:
Cash flow hedge reserve
2,527
-
PAGE 48
HARMONEY ANNUAL REPORT FY22
12 Cash flow hedge
Cash flow hedge reserve
The Group borrows funds (note 20) in order to purchase finance receivables (note 16). The interest rate payable on the
borrowings is floating while the interest receivable is fixed at the point the funds are lent. The interest rate risk is managed and
mitigated through the use of interest rate swaps, which exchange floating interest payments with fixed interest payments. The
swaps are entered into to match the maturity profile of estimated repayments of the Group's borrowings. These are accounted
for at trade date.
The cash flow hedge reserve is used to recognise the effective portion of gains or losses on derivatives (interest rate swaps)
that are designated and qualify as cash flow hedges.
At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and
hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes in the
cash flows of hedged items. The Group documents its risk management objective and strategy for undertaking its hedge
transactions.
The valuations for New Zealand were based on market rates at 30 June 2022 of 2.39% for the 1-month BKBM and 4.00% for
the 5-year swap rate (2021: 0.26% and 5-year swap rate 1.35%) and for Australia 1.14% for the 1-month BBSW and 3.67% for
the 5-year swap rate (2021: 0.01% and 5-year swap rate 0.92%).
13 Earnings per share
Loss after tax for the year attributable to the owners of the Group
30 June 2022
$'000
30 June 2021
$'000
(20,179)
(27,034)
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
101,049,485
93,358,795
Weighted average number of ordinary shares used in calculating diluted earnings per share
101,049,485
93,358,795
Basic earnings per share
Diluted earnings per share
Cents
(20)
(20)
Cents
(29)
(29)
Options
Performance rights (zero strike price options) under the Group’s share-based compensation plan as detailed in note 23 are
considered to be potentially ordinary shares. They have been included in the determination of diluted earnings per share to the
extent to which they are dilutive. The calculation of diluted earnings per share does not include 3,386,095 options (2021:
4,224,000) granted on 15 June 2021 because they are antidilutive for the year ended 30 June 2022. These options could
potentially dilute basic earnings per share in the future.
Convertible notes
Convertible notes issued, as detailed in note 20, are considered to be potentially ordinary shares. They have been included in
the determination of diluted earnings per share to the extent to which they are dilutive. The calculation of diluted earnings per
share does not include 2,500,000 note options granted during the year because they are antidilutive for the year ended 30 June
2022. These options could potentially dilute basic earnings per share in the future.
PAGE 49
HARMONEY ANNUAL REPORT FY22
14 Cash and cash equivalents
Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be
reconciled to the related items in the consolidated statement of financial position as follows:
Cash on hand and demand deposits
Restricted cash
Total cash and cash equivalents
30 June 2022
30 June 2021
$'000
$'000
34,506
28,241
62,747
44,343
32,121
76,464
No adjustment has been made for counterparty credit risk in cash and cash equivalents as the risk of impairment is not expected
to be material.
Short-term demand deposits are presented as cash equivalents if they have a maturity of three months or less from the date of
acquisition and are repayable with 24 hours’ notice with no loss of interest.
Restricted cash is held by the Warehouse Trusts (note 25). These funds may only be used for purposes defined in the trust
documents, and are therefore not available for general use by the Group.
Reconciliation of loss for the year to net cash generated by operating activities
Loss for the year
Non-cash adjustments:
Impairment expense
Share-based payments
Depreciation and amortisation
Change in deferred establishment fee
Borrowing establishment fees
Other movements
Change in operating assets and liabilities:
Decrease in trade and other assets
Increase in deferred tax assets
(Decrease)/Increase in payables and accruals
(Decrease)/Increase in provisions
Increase in accrued interest
Net cash generated by / (used in) operating activities
Year ended
30 June 2022
$'000
(20,179)
Year ended
30 June 2021
$'000
(27,034)
27,377
3,312
1,438
1,680
145
3
55
(171)
(267)
(7,605)
(412)
5,376
13,072
4,925
1,046
1,471
(497)
2
3,329
(2,316)
4,783
640
(1,009)
(1,588)
Non-cash transactions
During the current year, the Group did not enter into any non-cash investing and financing activities (2021: Nil).
PAGE 50
HARMONEY ANNUAL REPORT FY22
Changes in liabilities arising from financing activities
Balance at 1 July 2020
Operating cash flows
Financing cash flows
Non-cash adjustments
Balance at 30 June 2021
Operating cash flows
Financing cash flows
Non-cash adjustments
New leases
Balance at 30 June 2022
15 Trade and other assets
Trade receivables
Prepayments
GST receivable
Current tax assets
Borrowings
Lease liability
$'000
$'000
Total
$'000
(132,630)
(1,684)
(134,314)
985
-
985
(159,533)
1,030
(158,503)
(363)
(63)
(426)
(291,541)
(717)
(292,258)
536
-
536
(330,334)
891
(329,443)
(1,892)
(10)
(1,902)
-
(402)
(402)
(623,231)
(238)
(623,469)
30 June 2022
30 June 2021
$'000
49
972
695
123
$'000
1,059
654
87
94
Total trade and other assets
1,839
1,894
No adjustment has been made for counterparty credit risk in the financial assets above as all counterparties are considered to
be of good credit standing and the risk of impairment is expected to be not material.
16 Finance receivables
Finance receivables
Accrued interest
Deferred establishment fees
Expected credit loss (ECL) provision
Total finance receivables
Credit risk management
30 June 2022
30 June 2021
$'000
$'000
641,744
310,513
3,317
(4,048)
2,051
(2,368)
(31,881)
(15,375)
609,132
294,821
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group.
The Group's main exposure to credit risk arises from finance receivables. The finance receivable credit risk management
framework comprises underwriting and risk policies; anti-money laundering (AML) and counter-terrorism financing (CTF)
protocols; collection and recovery policies; a proprietary credit scorecard; a risk-based pricing model; and fraud detection
services.
PAGE 51
HARMONEY ANNUAL REPORT FY22
ECL provision
The Group measures the allowance for expected credit losses (ECL) using an expected credit loss impairment model as
required by NZ IFRS 9 Financial Instruments (NZ IFRS 9).
Under the ECL model, the Group applies a three-stage approach to measuring the ECL based on credit migration between the
stages. The ECL model is based on loan performance history calculated separately for New Zealand and Australia. As the
product is unsecured personal loans there is no further segmentation. Management then applies a further adjustment to
incorporate future macroeconomic factors using forward looking inputs.
Stage 1: 12 month ECL - No significant increase in credit risk
Finance receivables in this category have not had a significant increase in credit risk since initial recognition. ECL resulting from
default events that are possible within the next 12 months (‘12-month ECL’) are recognised for financial instruments that remain
in stage 1.
Stage 2: Lifetime ECL - Significantly increased credit risk
An assessment of whether credit risk has increased significantly since initial recognition is performed at the end of each
reporting period by considering the change in the risk of default occurring over the remaining life of the finance receivable.
Unless identified at an earlier stage, all financial assets are deemed to have suffered a significant increase in credit risk when
30 days past due but less than 90 days past due, or where a payment deferral has been granted following a successful hardship
application. A lifetime ECL provision is recorded for stage 2 receivables.
Stage 3: Lifetime ECL - Credit-impaired
The Group determines that a financial instrument is credit-impaired and in stage 3 by considering relevant objective evidence,
primarily whether contractual payments of either principal or interest are past due for more than 90 days. If such unlikeliness to
pay is not identified at an earlier stage, it is deemed to occur when an exposure is 90 days past due.
Movement between stages
The Group determines that loans may move in both directions through the stages of the impairment model. Loans previously in
Stage 2 may move back to Stage 1 if it is no longer considered that there has been a significant increase in credit risk. Similarly,
loans in Stage 3 may move back to Stage 1 or Stage 2 if they are no longer assessed to be nonperforming.
Forward-looking economic inputs (FLI)
The Group has a process for incorporating forward-looking economic scenarios and determining the probability weightings
assigned to each scenario in determining the overall ECL. The economic overlay is a forward-looking provision in addition to the
standard modelled provision.
The Group has identified a number of key indicators that are considered in modelling the overlay, the most significant of which
are gross domestic product, unemployment rate, employment and hours worked, public demand, household consumption,
income and savings rate, investment and inflation which are obtained from publicly available data (range of market economists
and official data sources). These indicators are assessed semi-annually and judgement is applied in determining the probability
weighting assigned across the four economic scenarios detailed below (Base Case, Worst Case, Poor Case and Best Case).
The Group’s Assets and Liabilities Committee provides ultimate approval for FLI inputs and the resulting overlay applied.
Base scenario: This scenario considers Reserve Bank and Fitch Global forecasts. This scenario assumes that there is little to
no impact to households with respect to increasing cost of living or increased net interest expense from mortgage rate increases
in the medium term.
Poor scenario: This scenario contemplates the degree of impact to borrowers of adverse macroeconomic conditions such as
rising inflation, constrained supply chains, rising mortgage interest rates and the consequent impacts to household cost of living
pressures.
PAGE 52
HARMONEY ANNUAL REPORT FY22
Best scenario: This scenario is included to account for the potential impact of more favourable macroeconomic conditions for
specific segments, such as those households that have benefitted from constrained consumption resulting in increased savings
rates as a cushion for increased cost of living pressures; and
Worst scenario: This scenario contemplates the potentially severe impact of remote, extremely adverse macroeconomic
conditions.
The table below presents the gross exposure and related ECL allowance for finance receivables:
30 June 2022
Expected loss rate
Stage 1
3.71%
$'000
Stage 2 1
60.04%
$'000
Stage 3
99.68%
$'000
Total
4.94%
$'000
Gross carrying amount
632,316
10,395
2,173
644,884
Expected credit loss provision
(23,474)
(6,241)
(2,166)
(31,881)
Net carrying amount
608,842
4,154
7
613,003
30 June 2021
Expected loss rate
Stage 1
4.18%
$'000
Stage 2 1
17.32%
$'000
Stage 3
70.50%
$'000
Total
4.92%
$'000
Gross carrying amount
299,200
11,819
1,156
312,175
Expected credit loss provision
(12,513)
(2,047)
(815)
(15,375)
Net carrying amount
286,687
9,772
341
296,800
1 Expected loss rate was lower in 2021 as 74% of Stage 2 finance receivables were in hardship, compared to 25% in 2022. The change in the mix in
Stage 2 impacts the ECL rate, as loans in arrears have a much higher loss expectation than the lifetime loss on a loan that has been in hardship but is
not in arrears.
Movements in the expected credit loss provision are as follows:
Opening balance
Additional provision recognised due to:
Increase/(Decrease) in economic overlay
Increase in gross finance receivables
Finance receivables written off during the period as uncollectible
Total provision
30 June 2022
30 June 2021
$'000
$'000
15,375
7,075
2,224
25,739
(11,457)
31,881
(831)
13,984
(4,853)
15,375
PAGE 53
HARMONEY ANNUAL REPORT FY22
The reconciliation of the provision for ECL and finance receivables by stage are presented below. The key line items in the
reconciliation are:
• The “transfers between stages” lines represent transfers between Stage 1, Stage 2 and Stage 3 prior to remeasurement
of the provision for ECL.
• The “business activity during the year” line represents new accounts originated during the year net of those that were
derecognised due to final repayments during the year.
• The “net remeasurement of provision for ECL” line represents the impact on the provision for ECL due to changes in
credit quality during the year (including transfers between stages) and changes due to forward-looking economic
scenarios.
•
“Incurred credit loss” represent a reduction in the provision for ECL as a result of derecognition of exposures where
there is no reasonable expectation of full recovery.
Total provisions for ECL on loans as at 30 June 2020
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Business activity during the year
Performing
Performing Non Performing
Stage 1
$'000
4,993
3,142
Stage 2
$'000
1,358
(2,460)
(689)
892
Stage 3
$'000
724
(682)
(203)
-
(3,601)
3,601
9,685
(158)
-
Net remeasurements of provision for ECL
(4,553)
6,475
1,685
Total
$'000
7,075
-
-
-
9,527
3,607
Incurred credit loss
Exchange rate and other adjustments
Total provisions for ECL on loans as at 30 June 2021
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Business activity during the year
Net remeasurements of provision for ECL
Incurred credit loss
Exchange rate and other adjustments
Total provisions for ECL on loans as at 30 June 2022
(460)
(4,311)
(4,853)
(82)
17
12,513
4,542
1
2,047
(3,642)
1
815
(900)
(396)
19
15,375
-
-
-
(2,708)
3,104
-
(7,706)
7,706
13,056
(226)
(4,074)
13,516
(111)
3,002
12,719
12,444
(209)
354
23,474
(949)
(7,994)
(9,152)
97
6,241
44
495
2,166
31,881
PAGE 54
HARMONEY ANNUAL REPORT FY22
Gross carrying amount as at 30 June 2020
122,345
12,965
775
136,085
Stage 1
12-month ECL
$'000
Stage 2
Lifetime ECL
$'000
Stage 3
Lifetime ECL
$'000
Total
$'000
Movements with P&L impact
Transfers from Stage 1 to Stage 2
Transfers from Stage 1 to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 2 to Stage 3
Transfers from Stage 3 to Stage 1
Transfers from Stage 3 to Stage 2
(12,334)
12,334
-
5,509
-
670
-
-
(5,509)
(4,770)
-
179
Net of new financial assets and repayments during the year
184,067
(2,546)
-
-
-
4,770
(670)
(179)
147
-
-
-
-
-
-
-
181,668
448
Gross carrying amount as at 30 June 2021
299,200
11,819
1,156
312,175
445
3
(1,502)
(837)
(3,687)
(6,026)
FX movements
Incurred credit loss
Movements with P&L impact
Transfers from Stage 1 to Stage 2
Transfers from Stage 1 to Stage 3
Transfers from Stage 2 to Stage 1
Transfers from Stage 2 to Stage 3
Transfers from Stage 3 to Stage 1
Transfers from Stage 3 to Stage 2
FX movements
Incurred credit loss
(28,270)
28,270
-
-
8,025
(8,025)
-
-
-
(11,400)
11,400
-
968
-
-
410
(968)
(410)
(168)
44
-
-
-
-
-
-
339,684
8,128
7,920
164
(4,600)
(1,622)
(8,881)
(15,103)
Net of new financial assets and repayments during the year
349,073
(9,221)
Gross carrying amount as at 30 June 2022
632,316
10,395
2,173
644,884
17 Property and equipment
Right of use asset
Furniture and fixtures
IT equipment
Total property and equipment
30 June 2022
30 June 2021
$'000
235
60
94
389
$'000
534
62
46
642
Property and equipment are recognised at historic cost less depreciation. Depreciation is calculated on a diminishing balance
method using the following rates:
Furniture and fixtures
13-67%
IT equipment
40-50%
PAGE 55
HARMONEY ANNUAL REPORT FY22
Furniture and fixtures & IT equipment
Cost
Depreciation
Net book amount
Opening net book amount
Additions
Depreciation
Closing net book amount
Leases
30 June 2022
30 June 2021
$'000
509
(355)
154
108
93
(47)
154
$'000
416
(308)
108
129
287
(308)
108
The consolidated statement of financial position shows the following amounts relating to leases:
Right of use asset
Buildings
Equipment
Total right of use asset
Lease liabilities
Current lease liabilities
Non-current lease liabilities
Total lease liability
30 June 2022
30 June 2021
$'000
229
6
235
$'000
519
15
534
30 June 2022
30 June 2021
$'000
238
-
238
$'000
710
7
717
The lease payments are discounted using the incremental borrowing rate, being the rate that the individual lessee would have
to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security, and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability and any lease
payments made at or before the commencement date less any lease incentives received.
Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Payments associated with short-term leases and all leases of low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
The Group has entered into a new Agreement to Lease of Premises in June 2022 for its Auckland office for a lease term of six
years. The new lease has not been recognised in the financial statements as the commencement date of the lease is after
reporting date. The undiscounted estimated lease liability at commencement will be $5,014,944 with a right-of-use asset of the
same amount.
PAGE 56
HARMONEY ANNUAL REPORT FY22
18
Intangible assets
The intangible assets held consist of internally developed software. The carrying amount of the Group’s software is:
Cost - completed
Cost - work in progress
Total cost
Accumulated amortisation
Net book amount
Opening net book amount
Additions - internal development
Amortisation charge
Closing net book amount
30 June 2022
30 June 2021
$'000
6,142
4,266
10,408
$'000
3,300
1,246
4,546
(992)
(1,091)
9,416
3,455
6,652
(691)
9,416
3,455
-
3,682
(227)
3,455
The Group has incurred and will continue to incur significant costs on software development projects.
Internally developed software is capitalised using an internal framework, which was established in March 2017.
An internally-generated intangible asset arising from development is recognised if, and only if, all of the following have been
demonstrated:
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial, and other resources to complete the development and to use or sell the
intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date
when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can
be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and
accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
For capitalised development costs which are considered work in progress, amortisation of the asset begins when the
development is complete, and the asset is available for use.
The Group amortises development with a limited useful life using straight-line method over 5 years.
PAGE 57
HARMONEY ANNUAL REPORT FY22
19 Payables and accruals
Accruals
Employee benefits accrual
Trade and other payables
Total payables and accruals
Employee benefits accrual
Current employee incentives
Employee incentive accrual
Annual leave accrual
Long service leave accrual
Total current employee incentives
Non-current employee incentives
Long service leave accrual
Total employee benefits accrual
20 Borrowings
Receivables funding
Corporate debt
Convertible notes
Total borrowings
Receivables funding
30 June 2022
30 June 2021
$'000
$'000
3,691
1,780
1,375
6,846
4,839
1,531
954
7,324
30 June 2022
30 June 2021
$'000
$'000
847
865
47
767
693
63
1,759
1,523
21
1,780
8
1,531
30 June 2022
30 June 2021
$'000
$'000
606,976
291,541
9,627
6,628
-
-
623,231
291,541
Receivables funding relates to borrowings specific to the Warehouse Trusts (note 25) and are secured by their assets. The
maturity profile of the receivables funding borrowings is aligned with the receivables held in the relevant Warehouse Trusts, and
therefore considered current. As detailed in note 27, the borrowings have a contractual maturity which may be more than 12
months from the reporting date. The contractual maturity date refers to the date until which the Warehouse Trusts may continue
to purchase further receivables using principal payments of the finance receivables and further drawdowns of the facility. After
that date, unless the agreement terms are extended, the borrowings are required to be paid down as customers make
repayments on the finance receivables.
Corporate debt facility
Corporate debt and convertible notes relate to a A$20m facility entered into in December 2021 which expires in December
2024. The facility is structured as 60% debt notes and 40% convertible notes.
As at 30 June 2022, A$15m of the facility was drawn down including A$6m of convertible notes. The maximum number of shares
that would be issued on conversion of the drawn down convertible notes would be 2,500,000.
PAGE 58
HARMONEY ANNUAL REPORT FY22
The facility is guaranteed by way of a performance and payment guarantee by Harmoney Corp Limited and each of its Subsidiary
Companies (note 25).
Under the terms of the corporate debt and warehouse facilities, the Group is required to comply with financial and non-financial
covenants.
Warehouse financing arrangements
Unrestricted access was available at reporting date to the warehouse facilities as detailed below:
Warehouse facilities
Total facilities
Drawn at reporting date
Undrawn at reporting date
30 June 2022
30 June 2021
$'000
$'000
978,547
543,214
655,387
338,371
323,160
204,843
The undrawn amount of the warehouse facilities relates to amounts that are available for drawdown from funders but does not
include restricted cash that has already been drawn but has not yet been utilised for funding purposes. Refer to note 14 for
further information.
21 Provisions
Distributing services rebate provision
Borrower establishment fee rebate provision
Total provisions
Carrying amount at start of the year
Charged/(credited) to profit or loss
- additional provisions recognised
- unused amounts reversed
Amounts used during the year
Carrying amount at end of the year
30 June 2022
30 June 2021
$'000
1,023
4,677
5,700
$'000
6,405
7,000
13,405
13,405
12,832
-
6,667
(2,857)
(4,848)
5,700
-
(6,094)
13,405
Distributing services rebate provision
The distributing services rebate provision represents an estimate of distributing services revenue which may be rebated as at
reporting date. The estimate has been made on the basis of historical trends across the existing loan portfolio and may vary.
These amounts have not been discounted for the purposes of measuring the provision because the effect is not material.
Borrower establishment fee rebate provision
The borrower establishment fee rebate relates to the compensation agreed with The New Zealand Commerce Commission in
settlement of the legal proceedings in 2021. The reduction in the provision relates to the repayments made by the Group.
PAGE 59
HARMONEY ANNUAL REPORT FY22
22 Share capital
30 June 2022
30 June 2021
Number of shares
Share capital
Number of shares
Share capital
Fully paid ordinary shares
Total issued capital
101,018,964
131,559
100,912,724
101,018,964
131,559
100,912,724
$'000
As at 30 June 2021
Shares issued under share-based payment arrangements
As at 30 June 2022
$'000
131,399
131,399
Ordinary shares
100,912,724
106,240
101,018,964
Shares issued under share-based payment arrangements
106,240 shares were issued in settlement of the options on 1 December 2021. The options were net settled on a cashless basis
based on the exercise price of each option. See note 23 for details.
Ordinary shares
Ordinary shares carry a right to one vote per share, to an equal share in dividends, and to a pro-rata share of net assets on wind
up.
23 Reserves
23.1 Foreign currency translation reserve
Exchange differences relating to the translation of the results and net assets of the Group's foreign operations from their
functional currencies to the Group's presentation currency (i.e. NZD) are recognised directly in other comprehensive income
and accumulated in the foreign currency translation reserve.
23.2 Share-based payments reserve
Opening balance
Arising on equity settled benefits
Deferred tax on share-based payments
Transferred to share capital
Closing balance
30 June 2022
30 June 2021
$'000
216
3,312
-
(160)
3,368
$'000
2,825
4,925
(372)
(7,162)
216
In relation to equity-settled share-based payment transactions, the Group recognised an expense of $2.9m (2021: $4.1m) within
the consolidated income statement for the year ended 30 June 2022.
Share-based compensation plan
The Group receives services from employees and Directors as consideration for equity instruments (zero strike price options)
of the Group. The fair value of the employee services received in exchange for the grant of the options is recognised as an
expense over the relevant vesting period. The total amount to be expensed is determined by reference to the fair value of the
options granted:
- including any market performance conditions;
- excluding the impact of any service and non-market performance vesting conditions; and
- including the impact of any non-vesting conditions.
PAGE 60
HARMONEY ANNUAL REPORT FY22
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based
on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any,
in the income statements, with a corresponding adjustment to equity. When the options are exercised, the company issues new
shares, or purchases shares from the market.
Set out below are summaries of options granted by the Group.
As at the start of the year
Granted during the year
Share consolidation
Exercised during the year
Forfeited during the year
As at 30 June
Year ended 30 June 2022
Year ended 30 June 2021
Average exercise
price per share option
Number of
options
Average exercise
price per share option
Number of options
8,900,000
65,524,733
$ nil
200,000
$ nil
8,900,000
-
(27,044,121)
$ nil
(106,240)
$0.02
(38,436,338)
$ nil
(620,802)
$ nil
(44,274)
8,372,958
8,900,000
The weighted average share price at the date of exercise of options exercised during the year the year ended 30 June 2022
was $1.91 (2021: $2.64). No options expired during the periods covered by the table above.
The following table provides details of the options granted by the Group as remuneration to employees and Directors.
30 June 2022
Grant date
Post IPO Scheme
15 Jun 2021
1 Dec 2021
Total
Exercise
price
Grant date
fair value
Opening
balance
01/07/2021
Number of share options
Granted
Exercised
Forfeited
Closing
balance
30/06/2022
Vested &
exercisable
$ nil
$ 1.51
8,900,000
- 106,240
620,802
8,172,958
$ nil
$ 1.85
-
200,000
-
-
200,000
-
-
8,900,000
200,000
106,240
620,802
8,372,958
-
On 29 October 2020, all Series A, B and C classes of shares were converted to ordinary shares and a 4:1 share consolidation
occurred for no consideration.
Exercise
price
Grant
date fair
value
Opening
balance
01/07/2020
Number of share options
Granted
Share
consolidation
Exercised
Forfeited
Closing
balance
30/06/2021
Vested &
exercisable
30 June 2021
Grant date
Post IPO
Scheme
15 Jun 2021
$ nil $ 1.51
- 8,900,000
-
-
- 8,900,000
-
Scheme 2
28 Feb 2020
Scheme 1
$ nil $ 0.11 36,103,102
- (27,044,121)
9,014,707 44,274
-
-
1 Apr 2020
$ nil $ 0.26
1,634,692
24 Feb 2020
$ nil $ 0.26
750,000
21 May 2018
$ 0.16 $ 0.09
2,000,000
21 Aug 2017
$ nil $ 0.17
8,860,423
21 Aug 2017
$ 0.10 $ 0.11
2,384,000
21 Aug 2017
$ 0.17 $ 0.09
1,792,516
-
-
-
-
-
-
- 1,634,692
-
-
-
- 750,000
-
-
-
- 2,000,000
-
-
-
- 8,860,423
-
-
-
- 2,384,000
-
-
-
- 1,792,516
-
-
-
Other options
1 Mar 2014
Total
$ nil $ 0.00 12,000,000
-
- 12,000,000
-
-
-
65,524,733 8,900,000
(27,044,121)
38,436,338
44,274
8,900,000
-
PAGE 61
HARMONEY ANNUAL REPORT FY22
Current schemes at 30 June 2022
Post IPO Scheme
The Post IPO Scheme was approved by the Board on 27 April 2021. The plan is designed to provide long-term incentives for
senior managers to attract, motivate and retain talent while also aligning interests of management and shareholders with regards
to Company performance. The Board may determine which persons will be eligible to participate in the plan from time to time
and will invite them to participate.
The amount of performance rights that will vest depends on the achievement of applicable performance hurdles over the
relevant period and continued employment. The performance hurdles are designed to align participants’ objectives with the
fundamental values of the Company and reward achievements which will deliver significant long-term value to the shareholders
of the Company. The hurdles relate to revenue and loan book growth as well as strategic initiatives. The rights expire 5 years
from grant date.
Options are granted under the plan for no consideration and carry no dividends or voting rights.
Completed schemes at 30 June 2021
Scheme 2
On 28 February 2020 share options were granted under a performance rights based share-based compensation plan. The
allocation of rights provided participants with an opportunity to be rewarded for company performance and aligned employee
interests with the interests of shareholders. The fair value at grant date was determined using a Monte Carlo simulation model
that took into account the exercise price, the term of the option, the share price at grant date, the vesting hurdles, the expected
price volatility of the underlying share, the expected dividend yield, and the risk-free interest rate for the term of the option.
Scheme 1
The scheme 1 share option plan was designed to provide long-term incentives for Directors and senior management to deliver
long-term shareholder returns. Under the plan, participants were granted options which vested when certain performance
standards were met.
Options were granted in August 2017, May 2018, February 2020 and April 2020 with their fair value determined using a Black-
Scholes option pricing model which took into account the exercise price, the term of the option, the share price at grant date,
expected price volatility of the underlying share and the risk-free interest rate for the term of the option. For options granted in
August 2017 the share price on grant date was based on a discounted cash flow valuation. For subsequent options granted the
share price on grant date was based on comparable arm's length transactions.
Other options
These options were granted in March 2014. As they carried a nil exercise price their value on grant date was determined as
equivalent to the Company's share price at grant date, which was calculated as a single share of the midpoint of the Company's
net assets and its capital.
PAGE 62
HARMONEY ANNUAL REPORT FY22
24 Related party transactions
Balances and transactions between the Company, its subsidiaries, and controlled entities which are related parties of the
Company, have been eliminated on consolidation and are not disclosed in this note.
Key management personnel (KMP) are defined as those persons having authority and responsibility for planning, directing, and
controlling the activities of the Group, directly or indirectly, and include the Executive Directors, Independent Directors and the
Chief Financial Officer.
The aggregate compensation made to KMP of the Group is set out below:
Short-term employee benefits
Share-based payments
Total remuneration of key management personnel
25 Controlled entities
30 June 2022
30 June 2021
$'000
3,107
2,148
5,255
$'000
2,276
1,698
3,974
Details of the Group's material subsidiaries and controlled entities at the end of the reporting period are as follows.
Subsidiary Companies
Harmoney Limited
Harmoney Services Limited
Harmoney Investor Trustee Limited
Harmoney Australia Pty Ltd
Harmoney Services Australia Pty Ltd
Harmoney Nominee Limited
Harmoney Warehouse Limited
Warehouse Trusts
Harmoney Warehouse No.1 Trust*
Harmoney Australia Warehouse No.1 Trust
Harmoney Collections Trust
Harmoney Warehouse No.2 Trust*
Harmoney Collections Trust*
Harmoney ABS Trust 2021-1PP
Harmoney Australia Warehouse No.2 Trust
Harmoney Warehouse No.3 Trust*
Date of
incorporation
Place of
incorporation
and operation
Proportion of ownership
interest and voting
power held by the Group
2022
2021
15-May-14
New Zealand
16-May-14
New Zealand
9-Jul-14
New Zealand
20-Feb-15
Australia
22-Sep-15
Australia
28-Nov-17
New Zealand
14-Mar-18
New Zealand
3-Dec-18
New Zealand
4-Dec-19
Australia
22-Jan-20
Australia
22-Dec-20
New Zealand
22-Dec-20
New Zealand
29-Sep-21
Australia
23-Nov-21
Australia
3-Jun-22
New Zealand
100%
100%
100%
100%
100%
100%
100%
n/a
100%
100%
n/a
n/a
100%
100%
n/a
100%
100%
100%
100%
100%
100%
100%
n/a
100%
100%
n/a
n/a
n/a
n/a
n/a
* Controlled Entities: Management have determined that Harmoney Warehouse No.1 Trust, Harmoney Warehouse No.2 Trust, Harmoney
Collections Trust, and Harmoney Warehouse No.3 Trust are controlled entities. Harmoney Group subsidiaries have been appointed Manager,
Servicer, and residual income beneficiary in each entity. Under NZ IFRS 10 Consolidated Financial Statements, an investor controls an investee
when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns
through its power over the investee. As the Group controls the financing and operating activities of the Trusts and is the residual income
beneficiary, the controlled entities are controlled by the Group and are required to be consolidated into the Group financial statements.
PAGE 63
HARMONEY ANNUAL REPORT FY22
26 Financial assets and liabilities
The total carrying amount of the Group’s financial assets and liabilities by category are detailed below:
Financial assets at amortised cost
Cash and cash equivalents
Trade and other receivables
Finance receivables
Financial liabilities at amortised cost
Payables and accruals
Borrowings
Lease liability
Financial assets at fair value
Derivative financial instruments
Financial liabilities at fair value
Derivative financial instruments
30 June 2022
30 June 2021
$'000
$'000
62,747
49
76,464
1,059
609,132
294,821
671,928
372,344
4,889
5,403
623,231
291,541
238
717
628,358
297,661
8,669
8,669
-
-
-
-
85
85
NZ IFRS 9 requires financial assets to be classified based on two criteria:
a)
b)
the business model within which financial assets are managed; and
their contractual cash flow characteristics (whether the cash flows represent solely payment of principal and interest
(SPPI)).
There are three resulting classifications of financial assets under NZ IFRS 9:
a) Amortised cost: financial assets with contractual cash flows that comprise SPPI, and which are held in a business model
whose objective is to collect their contractual cash flows, are measured at amortised cost;
b) Fair value through other comprehensive income (FVTOCI): financial assets with contractual cash flows that comprise
SPPI, and which are held in a business model whose objective is to both collect their contractual cash flows and to sell,
are measured at FVTOCI; and
c) Fair value through profit or loss (FVTPL): financial assets with contractual cash flows that do not represent SPPI, or
which are held under a different business model are measured at FVTPL. Financial assets can also be designated at
FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
Other than derivative financial instruments, which are held at fair value, all other financial assets and liabilities are held at
amortised cost. For these instruments, the fair values are not materially different to their carrying amounts since the interest
receivable/payable is either close to current market rates or the instruments are short-term in nature.
PAGE 64
HARMONEY ANNUAL REPORT FY22
The following table presents the Group’s financial assets and financial liabilities measured and recognised at fair value on a
recurring basis:
30 June 2022 $'000
Financial assets
Derivative financial instruments
Hedging derivatives - interest rate swaps
30 June 2021 $'000
Financial liabilities
Derivative financial instruments
Hedging derivatives - interest rate swaps
Level 1
Level 2
Level 3
-
8,669
-
Level 1
Level 2
Level 3
-
85
-
There have been no transfers between levels in the year (2021: Nil).
The Group’s policy is to recognise transfers into and out of fair value hierarchy levels as at the end of the reporting period.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and equity securities)
is based on quoted market prices at the end of the reporting period.
The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in
level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives)
is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on
entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in
level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
Fair value
The interest rate swaps are initially recognised at fair value through profit and loss on the date the derivative contract is entered
into and are subsequently measured at their fair value at each reporting date. All significant inputs required to measure their
fair value are observable, therefore the swaps are level 2 in the fair value hierarchy.
The fair value of the interest rate swaps is determined from valuations prepared by independent advisors. These are calculated
using a discounted cash flow model using forward interest rates extracted from observable yield curves. Discount rates include
an adjustment for counterparty credit risk.
PAGE 65
HARMONEY ANNUAL REPORT FY22
27 Financial risk management
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks, primarily market risk (including interest rate risk and foreign
currency risk), credit risk and liquidity risk. The Group’s risk management program focuses on understanding drivers of financial
risk and seeks to minimise potential adverse effects on the financial performance of the Group.
The Group uses derivative financial instruments (interest rate swaps) to hedge interest rate risk. Derivatives are exclusively used
for hedging purposes i.e. not as trading or other speculative instruments.
The Board have overall responsibility for the establishment and oversight of the risk management framework. The Board is
responsible for developing and monitoring risk management policies. Risk management procedures are established by the Board
and carried out by management to identify and analyse the risks faced by the Group and to set controls and monitor risks.
Market risk
Market risk is the risk that changes in market prices such as interest rates will affect the Group’s income or the value of holdings
in its financial instruments. The objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
Interest rate risk
Interest rate risk is the risk of changes in interest rates negatively impacting the Group's financial performance. The Group's
main interest rate risk arises from cash at bank, term deposits and borrowings. Cash at bank, term deposits and borrowings
obtained at variable rates expose the Group to interest rate risk. Cash at bank and term deposits obtained at fixed rates expose
the Group to fair value interest rate risk.
The Group originates loans to customers that have fixed interest rates that are repaid over a relatively short period.
As at the reporting date, the Group had the following financial assets and liabilities exposed to variable interest rate risk.
Financial assets
Cash on hand and demand deposits
Restricted cash
Total financial assets
Financial liabilities
Borrowings
30 June 2022
30 June 2021
$'000
$'000
34,506
28,241
62,747
44,343
32,121
76,464
(606,976)
(291,541)
Receivables funding are variable rate borrowings where the rates are reset monthly to current market rates. Interest rate risk is
managed on these borrowings by entering interest rate swaps, whereby the Group pays fixed rate and receives floating rate.
The contracts require settlement monthly of net interest receivable or payable. The settlement dates coincide with the dates on
which interest is payable on the underlying borrowings.
The gain or loss from remeasuring the hedging instruments at fair value is recognised in other comprehensive income and
deferred in equity in the cash flow hedge reserve, to the extent that the hedge is effective. It is reclassified into the Income
Statement when the hedged item effects it. In the year ended 30 June 2022, no amount was reclassified into profit or loss (2021:
Nil) due to hedge ineffectiveness.
The Group’s policy is to hedge a portion of the variability in future cash flows attributable to the interest rate risk on floating rate
borrowings using interest rate swaps. As at 30 June 2022, the notional value of swaps was 73% (2021: 33%) of floating rate
borrowings.
PAGE 66
HARMONEY ANNUAL REPORT FY22
The effects of the interest rate swaps on the Group’s financial position and performance are as follows:
Carrying amount held in derivative financial instruments
Notional amount
Hedge ratio
Change in fair value of outstanding hedging instruments during the year
Change in fair value of outstanding hedged item used to determine hedge effectiveness
30 June 2022
30 June 2021
$'000
8,669
$'000
(85)
444,299
95,629
1:1
8,754
8,754
1:1
841
841
The interest rate sensitivity analysis below has been determined based on the exposure to interest rates for both derivatives
and non-derivative instruments at the end of the reporting period and assumes that the amount of the liability outstanding at the
end of the reporting period was outstanding for the whole year. A 100 basis point increase or decrease is used which represents
management’s assessment of the reasonably possible change in interest rates.
If interest rates had been 100 basis points (2021: 50 bps) higher/lower and all other variables were held constant, the Group’s
profit for the year ended 30 June 2022 would decrease/increase by $1.6m (2021: $1m). This is attributable to the Group’s
exposure to interest rates on its variable rate borrowings.
Other components of equity change as a result of an increase/decrease in the fair value of the cash flow hedges through other
comprehensive income. If interest rates had been 100 basis points (2021: 50 bps) higher/lower and all other variables were held
constant, the Group’s equity for the year ended 30 June 2022 would increase/decrease by $5.4m (2021: $0.5m). This is
attributable to the Group’s exposure to interest rates on its interest rate swaps.
Foreign exchange risk
Foreign currency risk arises on financial instruments that are denominated in a currency other than the functional currency in
which they are measured. The Group's main foreign exchange risk arises from inter-company receivables and payables which
do not form part of a net investment in a foreign operation.
The Group has not hedged any foreign exchange risk during the year.
The Group has the following exposure to Australian dollars, expressed in New Zealand dollars. The Group's exposure to foreign
currency changes for all other currencies is not material.
Financial instruments
Foreign currency payable
Foreign currency receivable
Net exposure
AUD exposure
30 June 2022
30 June 2021
$'000
$'000
2,474
3,075
(2,686)
(5,788)
(212)
(2,713)
The following table demonstrates the sensitivity to a 5% increase or decrease in the Australian dollar exchange rate, which
represents management's assessment of the reasonably possible change in this exchange rate. The impact on the Group's loss
before tax is due to changes in the fair value of monetary assets and liabilities.
NZD/AUD +5%
NZD/AUD -5%
Impact on post-tax profit
Year ended
Year ended
30 June 2022
30 June 2021
$'000
11
(11)
$'000
136
(136)
PAGE 67
HARMONEY ANNUAL REPORT FY22
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 has a diversified
funding model and currently comprises of a mix of cash reserves and committed undrawn credit facilities to meet anticipated
funding requirements for new business. In addition, the Group can redraw against its committed credit limits if the principal
outstanding is reduced. Details of unused available loan facilities are set out in note 20.
The Group manages operational liquidity risk by maintaining cash reserves and available borrowing facilities and by continuously
monitoring actual and forecast cash flows. The Group seeks to have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions.
The finance receivable borrowings are required to be repaid from the finance receivable repayments. If these repayments are
not sufficient to repay borrowings Harmoney is not required to make repayments from funds outside the Warehouse Trusts.
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturities for its financial instrument liabilities. The tables are
based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are
required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and
therefore these totals may differ from their carrying amount in the statement of financial position.
Contractual maturities of financial liabilities at 30 June 2022
Less than 1 year
1 to 2 years
More than 2 years
Total
$'000
$'000
$'000
$'000
Non-derivatives
Non-interest bearing
Payables and accruals
Interest bearing
Borrowings
Lease liability
Total non-derivatives
Derivatives
Interest rate swaps - (inflow)
Total derivatives
4,889
-
-
4,889
249,776
385,788
240
-
254,905
385,788
-
-
-
635,564
240
640,693
(3,875)
(3,236)
(1,965)
(9,076)
(3,875)
(3,236)
(1,965)
(9,076)
Contractual maturities of financial liabilities at 30 June 2021
Less than 1 year
1 to 2 years
More than 2 years
Total
$'000
$'000
$'000
$'000
Non-derivatives
Non-interest bearing
Payables and accruals
Interest bearing
Borrowings
Lease liability
Total non-derivatives
Derivatives
5,403
-
-
5,403
141,229
155,591
722
9
147,354
155,600
-
-
-
296,820
731
302,954
Interest rate swaps - outflow/(inflow)
Total derivatives
225
225
(71)
(71)
(70)
(70)
84
84
Capital risk management
The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern and to maintain an
optimal capital structure to facilitate growth in the business while reducing the cost of capital. The Group’s capital structure
comprises equity raised by the issue of ordinary shares and external borrowings. There is significant capacity to fund finance
receivables growth with warehouse facility headroom of $323m (June 2021: $205m) as shown in note 20.
PAGE 68
HARMONEY ANNUAL REPORT FY22
28 Total fees paid to PricewaterhouseCoopers
Fees paid for audit and assurance services
Statutory annual audit fees
Statutory half-year review
Other non-audit assurance services
Agreed-upon procedures
Total audit and assurance services fees
Fees paid for other services
Investigating Accountant assurance services *
Tax related services paid in respect of the ASX IPO*
Tax related services paid in respect of warehouse facilities
Preparation of tax returns and other services
Total other services fees
Year ended
30 June 2022
$'000
Year ended
30 June 2021
$'000
385
98
109
155
747
-
-
3
89
92
351
113
95
-
559
426
283
102
57
868
Total fees paid to PricewaterhouseCoopers
839
1,427
* The portion of these fees related to the issue of new shares is included within equity transaction costs.
29 Contingent liabilities and commitments
There are no contingent liabilities and capital commitments as at 30 June 2022 (2021: Nil).
30 Events after the reporting period
Monique Cairns and John Quirk were appointed as Directors of Harmoney Corp Limited on 1 August 2022. David Flacks resigned
as a Director of the Company on the same day.
There were no other material events subsequent to year end.
PAGE 69
HARMONEY ANNUAL REPORT FY22
Independent Auditor’s Report
Independent
Auditor’s Report
PAGE 70
HARMONEY ANNUAL REPORT FY22
Independent auditor’s report
To the shareholders of Harmoney Corp Limited.
Our opinion
In our opinion, the accompanying consolidated financial statements of Harmoney Corp Limited (the
Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial position
of the Group as at 30 June 2022, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and
International Financial Reporting Standards (IFRS).
What we have audited
The Group's consolidated financial statements comprise:
•
•
•
•
•
the Consolidated Statement of Financial Position as at 30 June 2022;
the Consolidated Statement of Comprehensive Income for the year then ended;
the Consolidated Statement of Changes in Equity for the year then ended;
the Consolidated Statement of Cash Flows for the year then ended; and
the notes to the consolidated financial statements, which include significant accounting policies and other
explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs NZ) and
International Standards on Auditing (ISAs). Our responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code
of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) (PES
1) issued by the New Zealand Auditing and Assurance Standards Board and International Code of Ethics for
Professional Accountants (including International Independence Standards) issues by the International Ethics
Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of other assurance services in relation to the
Group’s regulatory requirements in New Zealand and Australia and non-assurance services in relation to
preparation of tax returns, regulatory financial requirements and funding arrangements. The provision of these
other services has not impaired our independence as auditor of the Group.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T:
+61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
PAGE 71
HARMONEY ANNUAL REPORT FY22
Our audit approach
Overview
Overall Group materiality: $5.2 million, which represents approximately
0.75% of total assets.
We chose total assets as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark.
We utilised a 0.75% threshold based on our professional judgement, noting
it is within the range of commonly acceptable thresholds.
We have determined that there are three key audit matters:
• Expected credit loss provisions on finance receivables (note 16, $31.9m)
• Deferred tax assets (note 11, $9.1m)
•
Interest income (note 5, $73.6m)
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the consolidated financial statements. In particular, we considered where management
made subjective judgements; for example, in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain. As in all of our audits,
we also addressed the risk of management override of internal controls, including among other matters,
consideration of whether there was evidence of bias that represented a risk of material misstatement
due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance whether the financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit, the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion
on the consolidated financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industry in which the Group operates.
PwC
PAGE 72
HARMONEY ANNUAL REPORT FY22
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current year. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the
outcomes of a particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
Expected credit loss provisions on finance
receivables (note 16, $31.9m)
We have performed the following procedures, amongst
others:
•
Together with PwC credit modelling experts:
o Examined and assessed the ECL model
developed by the Group in considering key
judgements and assumptions supporting ECL.
o Assessed the appropriateness of modelled
outcomes by comparing its outcomes, and
underlying expected losses, to actual losses.
o Assessed the appropriateness of forward-
looking information incorporated into the
impairment calculations by assessing
macroeconomic assumptions and probability
weightings applied.
o Re-performed the calculations for ECL as at 30
June 2022 using the Group’s data, methodology
and assumptions, and our adjusted forward
looking information.
• Assessed the integrity of data used as inputs
into the models, including delinquency data, by
tracing a sample of inputs used in the models to
underlying audit evidence.
• Assessed the reasonableness of the Group’s
disclosures in the financial report in light of the
requirements of NZ IFRS.
This was a key audit matter because the
determination of the provision was driven
by subjective judgements made by the
Group in predicting expected credit losses
(ECL).
The majority of the customer loan
balances were low value and therefore the
provision was modelled and calculated on
a collective basis. Key elements in
determining ECL include:
•
•
•
•
Judgements applied in setting the
assumptions used in the ECL models,
including the application of expected
loss rates applied to each underlying
portfolio segment.
Judgements applied in model
changes, to reflect emerging trends or
particular situations which are not
otherwise captured.
Judgements applied in incorporating
forward-looking impacts, which use
macroeconomic forecasts for a range
of scenarios that are weighted to
consider the potential economic
outcomes that may impact ECL.
Judgements applied in determining
exposures that have had a significant
increase in credit risk, which is
assessed by the Group based on the
delinquency or hardship status of an
account.
PwC
PAGE 73
HARMONEY ANNUAL REPORT FY22
Key audit matter
How our audit addressed the key audit matter
Deferred tax assets (note 11, $9.1m)
The Group was subject to taxation in each
location in which it operated.
The assessment of the amounts expected
to be paid in the future to tax authorities
was considered by the Group in respect of
recognising deferred tax assets (DTAs),
including those related to tax losses, at 30
June 2022.
This was a key audit matter due to the
extent of judgement involved by the Group
in forecasting taxable profits.
Our procedures included evaluating the tax analysis
performed by the Group, which set out the basis for
judgements made in respect of DTAs by:
• Considering the appropriateness of forecasting
methods used by management to calculate
future taxable profits.
• Assessing certain judgements and, where
relevant, comparing them to available internal
and external data on a sample basis.
• Assessing management's forecasting accuracy
over time by comparing previous forecasts to
actual outcomes.
• Agreeing relevant input data to supporting
records on a sample basis.
• Assessed the reasonableness of the Group’s
disclosures in the financial report in light of the
requirements of NZ IFRS.
Interest income (note 5, $73.6m)
We performed the following procedures, amongst
others:
The Group’s main stream of revenue is
interest income from providing loans to
customers.
• Re-performed the automated calculation for
100% of interest income from loans to
customers.
The recognition of interest income over time
requires the Group to apply judgement and
determine an effective interest rate to be
applied in accordance with NZ IFRS.
• Assessed the Group’s methodology for
recognising revenue in light of the
requirements of NZ IFRS.
This was a key audit matter because of the
significance of interest income in the
context of the performance of the Group,
and the judgement involved in determining
an effective interest rate.
• Assessed that the effective interest rate
applied was determined in line with the
methodology used by the Group and assessed
its consistency with internal information.
•
Inspected and compared contract data
contained in the product system to a sample of
contracts, including interest rates and loan
period.
PwC
PAGE 74
HARMONEY ANNUAL REPORT FY22
Other information
The Directors are responsible for the other information. The other information comprises the information
included in the annual report, but does not include the consolidated financial statements and our
auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of audit opinion or assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with
the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If, based on the work we have performed on the other information that we
obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control
as the Directors determine is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements,
as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs NZ and ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the External
Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
PwC
PAGE 75
HARMONEY ANNUAL REPORT FY22
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken
so that we might state those matters which we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or
for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Rob Spring.
For and on behalf of:
Chartered Accountants
30 August 2022
Sydney
PwC
PAGE 76
HARMONEY ANNUAL REPORT FY22
Shareholder Information
The shareholder information set out below was applicable as at 31 July 2022.
Distribution of equitable securities
Analysis of number of equitable holders by size of holding.
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Ordinary shares
Options over ordinary shares
Number of
holders
% of total
shares issued
Number of
holders
% of total
shares issued
136
273
164
273
62
908
0.06
0.81
1.28
7.77
90.08
100
0
0
0
0
0
0
0
0
0
0
0
0
There were 94 holders of less than a marketable parcel of ordinary shares.
Equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Number of holders
Neil Roberts
Heartland Group Holdings Limited
Lookman Family Trust
Lisa Capital Pty Ltd
Trade Me Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Alternative Credit Investments Plc
HSBC Custody Nominees (Australia) Limited
Brad Hagstrom, Renai Hagstrom and Guy Hagstrom
David Stevens
Tap Capital Pty Ltd
Monde Five Limited
UBS Nominees Pty Ltd
Andrew Cathie
Duncan Gross
New Zealand Depository Nominee
Mono Lake Trustee Limited
David Flacks
FNZ Custodians Limited
Total
% of total shares issued
18.46
10.15
8.98
8.64
7.54
5.39
4.80
3.89
3.73
2.13
1.95
1.34
1.09
1.02
1.00
0.99
0.96
0.90
0.81
0.60
84.37
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HARMONEY ANNUAL REPORT FY22
Unquoted equity securities
Performance rights
Convertible notes
Substantial holders
Substantial holders in the Company are set out below:
Number on issue
Equity securities on
conversion
Number of holders
8,372,958
8,000,000
8,372,958
3,333,333
16
3
Name of holder
Number held
(as notified)
Number held
(actual)
% of total
shares issued
(as notified)
% of total
shares issued
(actual)
Date of
last notice
Neil Roberts
18,611,152
18,647,752
Heartland Group Holdings Limited
10,197,693
10,257,870
Lookman Family Trust
9,069,618
9,069,618
Lisa Capital Pty Ltd
Trade Me Limited
8,730,461
8,730,461
7,620,959
7,620,959
18.42
10.15
8.98
8.64
7.54
18.46
10.15
8.98
8.64
7.54
23-Nov-20
7-Jul-21
19-Nov-20
1-Sep-21
19-Nov-20
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and, upon a poll, each share
shall have one vote.
There are no other classes of equity securities.
Securities subject to voluntary escrow
Class
Fully paid ordinary shares
Expiry date 1
4:15pm on the trading day after Harmoney releases its full-year results to ASX
and NZX for the financial year ending 30 June 2022.
Total
Number of shares
16,433,293
16,433,293
1.
The expiry date is the day that the escrowed shares can be released.
PAGE 78
HARMONEY ANNUAL REPORT FY22
Corporate Information
For the year ended 30 June 2022
Directors
The following persons held office as Directors of the Company and the Company’s subsidiaries during the year ended 30 June
2022.
Harmoney Corp Limited
David Flacks (Resigned 1 August 2022)
Tracey Jones
Paul Lahiff
Neil Roberts
David Stevens
Harmoney Australia Pty Ltd
Brad Hagstrom
David Nesbitt
David Stevens (Appointed 13 January 2022)
Ben Taylor (Resigned 13 September 2021)
Simon Ward
Harmoney Services Australia Pty Ltd
Brad Hagstrom
David Nesbitt
David Stevens (Appointed 13 January 2022)
Ben Taylor (Resigned 13 September 2021)
Simon Ward
Harmoney Investor Trustee Limited
Brad Hagstrom
Neil Roberts
Simon Ward
Harmoney Limited
Brad Hagstrom
Neil Roberts
Simon Ward
Harmoney Services Limited
Brad Hagstrom
Neil Roberts
David Stevens (Appointed 13 January 2022)
Simon Ward
PAGE 79
HARMONEY ANNUAL REPORT FY22
Harmoney Nominee Limited
Brad Hagstrom
Neil Roberts
David Stevens (Appointed 13 January 2022)
Simon Ward
Harmoney Warehouse Limited
Brad Hagstrom
Neil Roberts
David Stevens (Appointed 13 January 2022)
Simon Ward
Directors’ shareholding
Directors are not compelled to hold shares in the Company, but informally it is encouraged (provided the Trading Policy is
complied with) as aligning the interests of non-executive directors with those of shareholders.
Directors’ attendances
The following table shows the Board and Committee meetings held and the Directors’ attendances during the financial year
ended 30 June 2022.
Board
Audit and Risk Committee
Nomination and Remuneration
Committee
Attended
Held
Attended
Held
Attended
David Flacks
Tracey Jones
Paul Lahiff
Neil Roberts
David Stevens
13
13
13
11
13
13
13
13
13
13
5
5
5
N/A
5
5
5
5
N/A
5
2
2
2
N/A
2
1.
Nomination and Remuneration Committee discussions were also held at Director-only sessions of Board meetings.
Held 1
2
2
2
N/A
2
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HARMONEY ANNUAL REPORT FY22
Directors’ interests
The following are particulars of general disclosures of interest by Directors of Harmoney Corp Limited holding office at 30
June 2022, pursuant to section 140(2) of the Companies Act 1993. Where applicable, the disclosures also include directorships
of subsidiaries of the relevant companies.
David Flacks
AFT Pharmaceuticals Ltd
Asteron Life Ltd
Collaborative Advanced Genetic Technologies Ltd
Flacks & Wong Ltd
Harmoney Share Sale Company Ltd
Project Janszoon Trust Company
The Todd Corporation Ltd
Todd Offshore Ltd
Vero Insurance New Zealand Ltd
Vero Liability Insurance Ltd
Zero Invasive Predators Ltd
Brad Hagstrom
Hagstrom Family Trust
Tracey Jones
Cove Road Soapworks Ltd
Harmoney Share Sale Company Ltd
Jones Family Office Partners Ltd
Kepa Investments Ltd
N’Godwi Trust
Nikko Asset Management NZ Ltd
Petal Foundation
Punakaiki Fund
RC Custodian Ltd
Sandat Consulting Ltd
Tutanekai Investments Ltd
Paul Lahiff
86 400 Holdings Ltd
86 400 Ltd
86 400 Technology Pty Ltd
AUB Group Limited
Lahiff Consulting Australia Pty Ltd
NESS Super Pty Ltd
P&R Lahiff Pty Ltd
RSW Lane Cove Pty Ltd
Sezzle Inc.
David Nesbitt
Neslan Pty Ltd
Chair
Chair
Director
Director
Director
Director
Director
Director
Chair
Chair
Director
Trustee
Director
Director
Director
Director
Trustee
Chair
Trustee and Chair
Director
Director
Director
Director
Chair
Director
Director
Director
Director
Chair
Director
Director
Director
Director
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HARMONEY ANNUAL REPORT FY22
Neil Roberts
Harmoney Share Sale Company Ltd
Minc Ltd
Neil Roberts Business Trust
Neil Roberts Trustee Company Ltd
Roberts Family Trust
David Stevens
Harmoney Share Sale Company Ltd
Liquid Asset Enterprises Pty Ltd
Simon Ward
Monde Five Ltd
Indemnities and insurance
Director
Director
Trustee
Director
Trustee
Director
Director
Director
Pursuant to section 162 of the Companies Act 1993 and the Constitution, Harmoney Corp Limited has entered into insurance
for the directors of the Group to indemnify them, against liabilities which they may incur in the performance of their duties as
directors of any company within the Group.
Remuneration and other benefits received by Directors during the year
Paul Lahiff
David Flacks
Tracey Jones
1.
Harmoney does not offer share options, or any benefits on retirement, to non-executive directors.
Directors’ fees $ 1
185,640
111,167
90,000
PAGE 82
HARMONEY ANNUAL REPORT FY22
Employee remuneration
Remuneration
100,000-110,000
110,000-120,000
120,000-130,000
130,000-140,000
140,000-150,000
150,000-160,000
160,000-170,000
170,000-180,000
180,000-190,000
190,000-200,000
210,000-220,000
220,000-230,000
290,000-300,000
320,000-330,000
360,000-370,000
390,000-400,000
460,000-470,000
480,000-490,000
570,000-580,000
970,000-980,000
1,880,000-1,890,000
2,400,000-2,410,000
Donations
Number of employees
4
5
4
8
5
3
3
1
2
1
1
1
1
1
2
2
1
1
1
1
1
1
The Group donated $3,750 during the year ended 30 June 2022 (2021: $Nil). $Nil donations were made to political parties
(2021: $Nil).
PAGE 83
HARMONEY ANNUAL REPORT FY22
Directory
Registered Office
Harmoney Corp Limited
Ground Floor, 79 Carlton Gore Road
Newmarket, Auckland 1023, New Zealand
Auditor
PricewaterhouseCoopers
One International Towers,
Watermans Quay
Barangaroo
NSW 2000
Australia
Share Register
Link Market Services Limited
ACN 083 214 537
Capital Markets Manager,
Link Market Services,
Level 21, 10 Eagle Street,
Brisbane,
QLD 4000,
Australia
Stock Exchange Listing
Harmoney Corp Limited shares are listed in the Australian Securities Exchange (ASX) and New Zealand's Exchange (NZX).
Harmoney Corp Limited was admitted to the official list of the ASX and NZX on 19 November 2020 (ASX and NZX issuer code
HMY).
Notice of Annual General Meeting
The Annual General Meeting of Harmoney Corp Limited will be held on 16 November 2022.
Corporate Governance Statement
www.harmoney.com.au/investor
Harmoney Websites
www.harmoney.co.nz | www.harmoney.com.au
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HARMONEY ANNUAL REPORT FY22
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HARMONEY ANNUAL REPORT FY22