HARMONEY ANNUAL REPORT FY23
PAGE 1
Contents
HMY 2023 Highlights ............................................. 3
Board of Directors ................................................... 5
From the Chair.......................................................... 7
From the CEO ........................................................... 8
Review of Operations ............................................ 11
Environmental, Social and Governance ........... 19
Directors’ Report .................................................. 29
Directors’ Responsibility Statement ................ 32
Consolidated Group Financial Statements .... 33
Notes to the Consolidated Group Financial
Statements .............................................................. 37
Independent Auditor’s Report ........................... 65
Shareholder Information ..................................... 70
Corporate Information ......................................... 72
Directory ..................................................................76
HARMONEY ANNUAL REPORT FY23
PAGE 2
HMY 2023
Highlights
Performance
Attractive risk adjusted margin and
scalable platform deliver
Cash NPAT $4.7m.
Group loan book grew to
a record $744 million.
Cash NPAT profitability and
efficiency funding deliver
Cash RoE 8.4%.
Personalised rates and efficient
funding producing a leading
net interest margin.
Group arrears of 0.58%1 significantly
lower than peers and the personal
loan market average of 1.4%.2
Stand out 28% cost to income ratio
on operating leverage from highly
automated Stellare® platform.
$4.7m
Cash NPAT
$744m
Group Loan Book
8.4%
Cash RoE
9.6%
Net Interest Margin
0.58%
Group 90+ Arrears
28%
Cost to income ratio
1 Excludes accrued interest
2 Equifax Australian Consumer Credit Quarterly Report Q2 2023
HARMONEY ANNUAL REPORT FY23
PAGE 3
Achievements
4.7/5
Customers rate us! Google & Shopper
Approved scores of 4.7/5 from more than
53,000 reviews
87%
Employee Engagement score
70%
New originations from Australian
customers
$140m
New $140 million facility from a “Big-4”
Bank and a new global mezzanine funder,
further enhancing funding diversity.
3 of the “Big-4”
Diverse funding with warehouses from 3 of
the “Big-4” banks
NZ ABS
First public, non-credit card, consumer
Asset Backed Securitisation transaction
in New Zealand, NZ$200m priced 17 August,
settled 24 August 2023.
HARMONEY ANNUAL REPORT FY23
PAGE 4
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 is the Lead Independent Director of
payments company Sezzle Inc. He is also the Chair of UBank,
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 is a member of Harmoney’s Audit and Risk Committee and
the Nomination and Remuneration Committee.
Tracey is a professional director and family office adviser. She
has a portfolio of non-executive governance roles (listed and
private) in the finance, property, funds management, 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 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, Aeroqual Limited and a
Director of Television New Zealand. Previous roles have
included Chair of Kordia Group, Clearpoint Group, SMX Limited,
FrameCAD Group, Cumulo9, merlot.aero, WhereScape
Software, Farm-IQ Systems and Axon Computers. John is a
Chartered Member of the Institute of Directors.
HARMONEY ANNUAL REPORT FY23
PAGE 5
Monique Cairns
Independent Director
Neil Roberts
Founder, Chief
Strategy Officer &
Executive
Director
Monique has 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 and the Chair of their People and Culture
Committee. Monique is also a Trustee of the NZ Portrait Gallery
and a Committee Member of the Northern Club. Previously she
was a Director of DEC International, Unitec Institute of NZ,
Manukau Institute of Technology, Lotto NZ and SPCA.
Monique owns Caribou, a consulting provider in New Zealand,
providing business strategy, brand marketing, communication,
people and culture advice to clients from diverse industry
sectors, including Fintech and personal lending. Monique’s
unique experience across governance and marketing provides
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, and 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.
HARMONEY ANNUAL REPORT FY23
PAGE 6
From the Chair
Paul Lahiff
Dear Shareholders,
Harmoney continues to disrupt the personal lending market across Australia and New
Zealand with its innovative 100% direct-to-consumer business model.
As anticipated, our Australian loan book continued to grow strongly in FY23, with growth
originating from both existing and new customers, and surpassing the New Zealand loan
book in size. There is a significant opportunity to take further share from banks and
traditional lenders in the Australian market with our personalised and competitive rates,
backed by the highly automated Stellare® platform and our excellent customer service.
Importantly, we aim to provide a positive experience which drives high customer satisfaction
and ensures Harmoney is top of mind when customers are considering new loans.
With existing customer originations making up an increasing portion of our total originations
in both markets, Harmoney is creating an attractive and growing annuity stream for the
business. This is particularly appealing given returning customers require very minimal
acquisition costs, in turn driving improved profitability for the Company.
The Company continues to invest in growth to capitalise on the enormous potential existing
within the personal loans market. While already highly automated and scalable, Harmoney is
working on additional technology improvements to drive further operating efficiencies and
capability enhancements.
The Company is also expanding its offering beyond unsecured personal loans with new
innovative financial products. Earlier this year, Harmoney launched its first secured product,
a car loan which empowers customers with cash buyer confidence when purchasing a
vehicle.
FY24 is set to be another year of growth for Harmoney. Although the Company has grown
rapidly in Australia, there remains significant opportunity for further growth in both Australia
and New Zealand. I believe that as Harmoney continues to scale and deliver on its strategy
the Company’s strong operational and financial performance will inevitably be reflected in its
share price, thereby creating long-term value to shareholders.
I would like to thank my fellow Board members for their strong contribution this year. I would
especially like to acknowledge the valuable insights by Monique Cairns and John Quirk who
both joined the Board in August 2022. On behalf of the Board, I would like to congratulate
David Stevens, our CEO, and the entire Harmoney team for a successful year and thank
them for all their hard work and commitment. And finally, I want to thank our shareholders for
their continued support.
Paul Lahiff,
Chair
HARMONEY ANNUAL REPORT FY23
PAGE 7
From the CEO
David Stevens
Harmoney delivers record Cash NPAT in FY23
Harmoney had a successful year of continued growth and improved profitability with the
Company increasingly benefiting from the scalability and efficiency of its 100% consumer-
direct business model. In the 12 months to 30 June 2023 (FY23), Harmoney delivered a
record Cash NPAT result of $4.7 million ($0.2 million in FY22) and an annualised Cash ROE
of 8.4% (0.3% in FY22). As the Company continues to scale and benefit from its highly
automated platform and desirable annuity stream model, we have set ourselves a medium-
term ROE target of 20%.
Australia overtakes New Zealand in loan book size driven by
customer re-engagement
Harmoney finished the year with a loan book of $744m, up 28% from prior year. As
predicted, Australia surpassed New Zealand in loan book size, with our larger market now
representing 51% of the total book. Pleasingly, Australia has followed the trend experienced
in New Zealand with existing customers increasingly coming back for new loans. Existing
customer originations are particularly appealing as they typically require minimal costs to
acquire, making this group of customers highly profitable to us. We expect existing
originations to make up an increasing portion of our loan book as the Company grows.
As our unique data driven Stellare® platform is continuously getting more sophisticated with
targeting new and existing customers, we are spending less to acquire them. Customer
acquisition costs reduced 41% driven by improved marketing efficiency and Harmoney’s
conscious decision to focus on profitability and ease back on chasing new customers.
Notwithstanding the substantially lower spend on acquisitions, existing customer originations
grew 9% while new customer originations fell only 11%.
Solid credit performance despite cash rate increases putting
pressure on consumers
Over the past year, the Reserve banks in Australia and New Zealand have increased cash
rates multiple times to combat inflation. This has resulted in our funding costs increasing
faster than the average lending rate in our portfolio. However, supported by our efficient
hedging strategy and ability to promptly pass on rate increases, we were able to minimise
the impact on our financial performance. Overall, our average funding rate increased by just
150bps in FY23, which is substantially lower than the 325bps increase in the Australian cash
rate over the same period. While rising cash rates had an adverse impact on our funding
costs, we benefited from reduced levels of early repayments given a reduction in mortgage
refinancing activity across both markets.
Harmoney maintained its solid credit performance thanks to the high quality of the loan
book. Impairments were within the Company’s target range at 3.6% and 90+ day arrears
remain well below the personal loan market average.
HARMONEY ANNUAL REPORT FY23
PAGE 8
Harmoney well placed to benefit from continued growth
momentum
I am very excited about the year ahead, with Harmoney set to realise further benefits from
scale and automation. We are actively working with Google on opportunities to apply the
latest developments in artificial intelligence to further augment and enhance automation
within the Stellare® platform. We are also increasingly benefiting from the power of
automation and machine learning in attracting new and existing customers, and importantly,
doing so sustainably and profitably.
We finished the year with over $27 million unrestricted cash on hand and we have ample
capacity for lending growth with total warehousing facilities of over $900 million from
multiple high-quality lenders, including three of the ‘Big-4’ banks in Australia. The ongoing
support by the Big-4 banks and their willingness to expand our facilities is a great
endorsement of the strength and quality of Harmoney’s lending platform.
After year end, in August 2023, we also priced our inaugural New Zealand asset-backed
securitisation of NZ$200 million in loans. This was rated by Moody’s and placed to a number
of new and existing investors and sets us up for further securitisations in both Australia and
New Zealand as we continue to grow in the coming year.
On behalf of the Management Team, I would like to thank the entire Harmoney team for
another year of hard work and commitment. I would also like to thank our shareholders for
their support over the past year. I’m looking forward to another year of growth and success
for Harmoney.
David Stevens,
CEO and Managing Director
HARMONEY ANNUAL REPORT FY23
PAGE 9
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HARMONEY ANNUAL REPORT FY23
PAGE 10
Review of Operations
Review of
Operations
HARMONEY ANNUAL REPORT FY23
PAGE 11
Financial performance
The table below sets out the financial results for the year compared to the prior comparative period (pcp). Effective 1 July 2022,
the Group has changed its presentation currency from New Zealand dollars (NZD) to Australian dollars (AUD). Therefore, all
amounts presented in this report are in AUD except where otherwise indicated.
Interest income
Other income
Total income
Interest expense
Incurred credit losses
Risk adjusted income
Year ended
Year ended
Change
Change %
30 June 2023
30 June 2022
$'000
$'000
$'000
105,539
68,943
36,596
53%
1,534
3,877
(2,343)
(60%)
107,073
72,820
34,253
39,824
18,122
21,702
24,552
10,611
13,941
42,697
44,087
(1,390)
47%
120%
131%
(3%)
(47%)
89%
10%
60%
-
60%
(47%)
(29%)
Movement in expected credit loss provision
7,827
14,856
(7,029)
Risk adjusted income after expected credit loss provision
34,870
29,231
5,639
19%
Customer acquisition expenses
12,316
20,716
(8,400)
(41%)
Net operating income
Personnel expenses
Share-based payment expenses
Customer servicing expenses
Technology expenses
22,554
8,515
14,039
10,993
9,809
1,184
165%
12%
1,937
2,744
(807)
(29%)
6,174
5,166
1,008
4,816
4,179
637
20%
15%
General and administrative expenses
3,670
4,042
(372)
(9%)
Depreciation and amortisation expenses
2,545
1,349
1,196
Operating expenses
Statutory loss before income tax
Income tax expense
Statutory loss after income tax
Non-cash adjustments
30,135
27,289
2,846
(7,581)
(18,774)
11,193
-
-
-
(7,581)
(18,774)
11,193
Movement in expected credit loss provision
7,827
14,856
(7,029)
Share-based payment expenses
Depreciation and amortisation expenses
Cash NPAT
Cash RoE
1,937
2,744
(807)
2,545
1,349
1,196
89%
4,728
175
4,553
2,602%
8.4%
0.3%
8.1%
N/A
For the year ended 30 June 2023 the Group reported Cash Net Profit After Tax (NPAT) of $4.7m (FY22: $0.2m), a $4.5m
increase on the pcp, with annualised cash return on equity of 8.4%.
Total income grew by 47% on pcp to $107.1m (FY22: $72.8m), driven by strong loan portfolio growth in both the Australian and
New Zealand markets.
While risk adjusted income fell 3% on pcp to $42.7m (FY22: $44.1m), predominantly driven by increased market funding costs,
and to a lesser extent increased credit losses as the portfolio seasoned following accelerated growth in the prior year, remaining
costs fell by $12.6m delivering an $11.2m (60%) pcp improvement in Statutory NPAT to ($7.6m) (FY22: ($18.8m)). On a Cash
NPAT basis, remaining costs fell by $5.9m delivering a $4.5m (2,602%) improvement in Cash NPAT to $4.7m (FY22: $0.2m),
Harmoney's third consecutive half of Cash NPAT profitability.
Cost reductions were led by the increasing efficiency of Harmoney's data-driven marketing platform and consumer-direct
origination model, and by tempering loan book growth to $163m (28%) with an emphasis on profitability in response to sustained
reserve bank rate increases.
HARMONEY ANNUAL REPORT FY23
PAGE 12
Loan originations
Total originations ($'000)
New customer originations ($'000)
Existing customer originations ($'000)
Number of originations
Average value of new customer originations ($)
Year ended
Year ended
Change
Change %
30 June 2023
30 June 2022
426,234
442,540
253,595
283,607
172,639
158,933
26,202
26,642
21,158
20,707
(16,306)
(30,012)
13,706
(440)
451
(133)
(4%)
(11%)
9%
(2%)
2%
(1%)
Average value of existing customer incremental originations ($)
12,144
12,277
Loan originations for the year were $426m, a reduction of 4% on the prior year, with a moderation of new customer growth to
focus on profitability, particularly in the second half of the year.
Customer acquisition costs were reduced by 41% on pcp to $12.3m (FY22: $20.7m), while new customer originations fell only
11% to $254m (FY22: $284m), as efficiency gains continue to be delivered by Harmoney’s data-driven, machine learning
Stellare® marketing platform.
Existing customer originations grew 9% to $173m (FY22: $159m), making up 41% of total originations in the year, up from 36%
in the prior year, with Australian existing customer originations growing by 28% to $68m (FY22: $53m), following the trend
experienced in New Zealand, where more than half of originations come from existing customers. Importantly, existing customer
originations have near zero acquisition costs due to the existing direct relationship with the customer, generating high return
loan portfolio growth.
$300M
$250M
$200M
$150M
$100M
$50M
-
$106M
$87M
FY22
$105M
$76M
FY23
NZ
$53M
$68M
$196M
$177M
FY22
AU
FY23
Existing customer originations
New customer originations
HARMONEY ANNUAL REPORT FY23
PAGE 13
Portfolio
Year ended
Year ended
Change
Change %
30 June 2023
30 June 2022
Loan book (period end) ($'000)
Loan book (average) ($'000) - Group
Loan book (average) ($'000) - Australia
744,000
580,971
163,029
683,097
432,501
250,596
342,361
161,993
180,368
Loan book (average) ($'000) - New Zealand
340,736
270,508
70,228
28%
58%
111%
26%
At 30 June 2023 the loan portfolio was $744m, up $163m (28%) from 30 June 2022, led by strong growth in the key Australian
market where Harmoney continues to see the largest growth opportunities, with the Australian portfolio growing by $108m
(39%) during the year.
The loan portfolios in both countries benefited from reduced levels of early repayments compared with the prior year, with
reducing mortgage refinancing activity due to rising interest rates.
The strong growth in the Australian loan portfolio enabled it to reach 51% of the total loan portfolio at 30 June 2023, up from
47% at the end of the prior year.
$800M
$700M
$600M
$500M
$400M
$300M
$200M
$100M
-
Portfolio by geography
$307M
$274M
FY22
New Zealand
Australia
$362M
$382M
FY23
HARMONEY ANNUAL REPORT FY23
PAGE 14
Risk adjusted income
Average interest rate (%)
Funding debt (period end) ($'000)
Funding debt (average) ($'000)
Average funding rate (%)
Net interest income (%)
Incurred credit loss ($'000)
Incurred credit loss to average gross loans (%)
Risk adjusted income (%)
Year ended
Year ended
Change
Change %
30 June 2023
30 June 2022
15.5%
15.9%
(40bps)
720,503
564,211
156,292
660,269
401,021
259,248
6.0%
4.5%
150bps
9.6%
24,552
3.6%
6.0%
11.8%
10,611
(220bps)
13,941
131%
2.5%
110bps
9.3%
(330bps)
N/A
N/A
N/A
28%
65%
N/A
N/A
Risk adjusted income, being interest income after funding costs and incurred credit losses, was $42.7m (FY22: $44.1m), a
reduction of 3% on pcp, predominantly driven by rising market interest rates increasing funding costs at a faster pace than the
impact of increased new lending rates on the average portfolio interest rate. Incurred credit losses as a percentage of the
average loan portfolio also increased compared with the prior year, driven by the increasing maturity “seasoning” of the
Australian portfolio following stronger growth in the prior year.
Interest income for the year was $105.5m, up 53% on pcp driven by the higher average portfolio size over the period, partially
offset by a lower average interest rate of 15.5% (FY22: 15.9%). Interest rate increases for new lending during FY23 have started
to lift the average portfolio rate with 2H23 average interest rate of 15.5% (1H23: 15.4%) and a June 2023 average of 15.7%.
Interest expense for the year was $39.8m, up $21.7m on the pcp driven by both the increased average portfolio size and by a
material upward shift in market interest rates. However, Harmoney’s diversified warehouse funding facilities and efficient
hedging strategies have enabled it to constrain its average funding rate increase to 150bps despite the Australian and New
Zealand official cash rates increasing by 325bps and 350bps respectively from the end of June 2022.
Incurred credit losses, which represent actual losses on loans written off during the period, were $24.6m (FY22: $10.6m)
increasing predominantly due to loan portfolio growth but also due in part to higher losses in Australia driven by an increased
weighted average age “seasoning” of the Australian portfolio compared with the prior year, following stronger growth in that
prior year. Personal lending tends to reach “peak hazard” for loss during the period 12 to 18 months after origination. The resulting
incurred credit loss to average loan portfolio rate increased to 3.6% (FY22: 2.5%), still well within Harmoney’s target range of
3% to 4%.
Credit provisioning
Movement in expected credit loss (ECL) provision ($'000)
7,827
14,856
(7,029)
(47%)
Provision rate (%)
4.9%
4.9%
0bps
Risk adjusted income after ECL provision ($'000)
34,870
29,231
5,639
N/A
19%
Year ended
Year ended
Change
Change %
30 June 2023
30 June 2022
The expected credit loss (ECL) provision represents Harmoney’s modelled expectation of future period credit losses to occur
from the current portfolio. The provision does not account for future period interest income that Harmoney also expects to
derive from the current portfolio. Movements in the provision are driven by changes in the size of the loan portfolio and changes
in Harmoney’s expectation of the level of future period loss to occur from within that portfolio. As movements in the provision
do not impact cash, it is excluded from the calculation of Cash NPAT, which recognises only credit losses actually incurred
during the period.
The Group’s ECL provision at 30 June 2023 was $36.9m, representing 4.9% of the portfolio consistent with 30 June 2022, and
consequently the $7.8m movement in the expected credit loss provision for the year is a function of the loan portfolio's growth
over the year.
HARMONEY ANNUAL REPORT FY23
PAGE 15
Customer acquisition metrics
Customer acquisition expenses to origination ratio
Customer acquisition expenses to income ratio
Year ended
Year ended
Change
Change %
30 June 2023
30 June 2022
2.9%
11.5%
4.7%
28.4%
(1.8%)
(16.9%)
N/A
N/A
Harmoney’s machine learning Stellare® marketing platform analyses application data to make ongoing improvements to its
online media buying algorithm focusing on attracting high-intent, highly eligible customers, continuously improving online media
buying efficiency. Coupled with this, Harmoney’s consumer-direct relationship, which empowers Harmoney to meet customers’
subsequent borrowing needs with little or no additional customer acquisition costs, has consistently driven down Harmoney’s
customer acquisition costs in both New Zealand and Australia as its portfolio of customers in each market has grown.
Customer acquisition expenses decreased by 41% on pcp to $12.3m (FY22: $20.7m) on both a decision to moderate loan book
growth to focus on profitability, and on the realisation of Stellare® efficiency gains as evidenced by the 41% reduction in
expenditure translating to only a 4% reduction in originations.
A reporting headwind Harmoney continues to face with its consumer-direct model when compared with broker intermediated
origination models is that Harmoney’s customer acquisition expenses are recognised when incurred, rather than spread over
the expected life of the loans originated. This causes Harmoney’s customer acquisition expenses to significantly lead the
associated interest income generated. Accordingly, Harmoney believes that for customer acquisition expenditure, the cost to
loan origination ratio, comparing expenditure in the period to the loans originated in the period, is the most appropriate
performance measure. The customer acquisition expenses to origination ratio decreased to 2.9%, a reduction of 180bps on
FY22 and 350bps on FY21.
The chart below illustrates the twin benefits of Harmoney's Stellare® marketing platform and consumer-direct model. In the
longer established New Zealand portfolio, where existing customer loan originations are a much higher proportion of total
originations, the customer acquisition expenses to total originations ratio is lower. It is expected that as the Australian portfolio
continues to grow, the proportion of Australian existing customer loan originations will increase and Australia will continue to
trend towards New Zealand's lower ratio.
Customer acquisition expenses to originations ratio
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
FY21
FY22
FY23
Australia
New Zealand
HARMONEY ANNUAL REPORT FY23
PAGE 16
Cost to income metrics
Cost to income ratio
Year ended
Year ended
Change
Change %
30 June 2023
30 June 2022
28.1%
37.5%
(9.4%)
N/A
The scalability of Harmoney’s highly automated Stellare® platform is further demonstrated in FY23 with its cost to income ratio
reducing to 28%, down from 37% in the pcp. This was achieved by delivering a 47% increase in revenue with only 10% increase
in operating expenses, largely due to inflationary pressures. Harmoney’s cost to income ratio includes all costs below net
operating income (personnel expenses, share-based payment expenses, customer servicing expenses, technology expenses,
administrative expenses and depreciation and amortisation expenses).
Personnel expenses were $11.0m (FY22: $9.8m) with the current year increase driven by investment in additional development
capabilities as well as inflationary pressure on salaries.
Customer servicing expenses were $6.2m (FY22: $5.2m) with the current year increase predominantly driven by loan portfolio
growth.
Technology expenses increased $0.6m on the pcp to $4.8m, with ongoing investment in the Group’s proprietary Stellare®
platform intended to create future operating efficiencies and capability enhancements.
General and administrative expenses fell 9% to $3.7m (FY22: $4.0m) as one-off prior year investments to establish Harmoney’s
funding structures did not need to be replicated in the current year.
Financial position
Assets
Cash and cash equivalents
Finance receivables
Expected credit loss provision
Other assets
Total assets
Liabilities
Borrowings - Receivables funding
Borrowings - Corporate debt facility
Other liabilities
Total liabilities
Net assets
30 June 2023
$'000
30 June 2022
$'000
Change
$'000
Change %
43,454
56,805 (13,351)
(24%)
745,790
580,309 165,481
29%
(36,919)
(28,862)
(8,057)
(28%)
33,397
26,658
6,739
785,722
634,910 150,812
700,692
549,496 151,196
19,811
14,715
5,096
11,464
11,574
(110)
731,967
575,785 156,182
25%
24%
28%
35%
(1%)
27%
53,755
59,125
(5,370)
(9%)
Cash and cash equivalents of $43.5m consists of unrestricted cash of $27.5m (30 June 2022: $31.2m), and restricted cash of
$15.9m (30 June 2022: $25.6m); the latter may only be used for funding finance receivables and other purposes defined in the
relevant trust documents.
During the year Harmoney invested $28.0m of its unrestricted cash to support loan portfolio growth and $5.0m in Stellare®
development, however unrestricted cash only reduced by $3.7m as these investments were largely offset by $23.9m cash
generated from operating activities and $5m drawn on Harmoney’s corporate debt facility, taking the total drawn on that facility
to $20m.
HARMONEY ANNUAL REPORT FY23
PAGE 17
Finance receivables (including accrued interest and deferred establishment fees) increased 29% to $746m (FY22: $580m). The
related expected credit loss provision grew by 28%, commensurate with the movement in finance receivables, with the June
2023 provision rate of 4.9% remaining consistent with the prior year.
Other assets consist of software intangibles, derivative financial instruments, deferred tax assets, property and equipment and
trade and other assets. Property and equipment grew by $3.4m due to a new right of use asset for a six year lease commenced
in January 2023 for Harmoney’s Auckland head office and software intangibles grew by $3.0m from ongoing investment in
Harmoney’s proprietary Stellare® platform.
Receivables funding borrowing increased 28% to $701m at 30 June 2023, up from $549m at 30 June 2022, in line with the
increase in finance receivables. Corporate debt borrowing increased $5m during 1H23, with that facility now fully drawn at $20m.
Other liabilities consist of payables, accruals, non-credit provisions and lease liabilities. Non-credit provisions reduced by $3.6m,
bringing the balance at 30 June 2023 down to $1.5m. This was largely offset by the new lease liability, up $3.3m on the pcp,
related to the aforementioned new office headquarters.
HARMONEY ANNUAL REPORT FY23
PAGE 18
Environmental, Social and Governance
Environmental,
Social and
Governance
HARMONEY ANNUAL REPORT FY23
PAGE 19
Since Harmoney was founded in 2014, we have been guided by
our foundational principles of providing fair and simple financial
services directly to consumers with market-leading technology.
Our purpose is to help and inspire people to start now on their
dreams or start fresh - through financial products that are
simple, smart and secure.
We’re passionate about transforming the customer experience
using data and machine-learning to make better decisions,
faster, and help people access financial services at the right
time to achieve their goals.
Harmoney is committed to doing this in a way that creates a
positive impact on our customers, stakeholders, communities,
and planet. Our Environmental, Social and Governance (ESG)
report explores the sustainability risks and opportunities
identified in the focus areas considered material to our
business. We are excited to share our progress on this journey
with you.
HARMONEY ANNUAL REPORT FY23
PAGE 20
Environment
At Harmoney, we acknowledge the pressing
We are proud to announce that we have obtained
climate-related challenges that our planet
Net Zero Carbon certification from Ekos Kamahi
faces, and we recognise that every business
Limited NZ for FY23 and have offset our remaining
has a role to play in safeguarding the
environment. We are dedicated to
emissions for the period. We engaged Ekos for a
comprehensive carbon footprint measurement for
contributing to the shift towards a low carbon
our Scope 1, 2 and 3 greenhouse gas (GHG)
future.
As a 100% online consumer-direct personal
emissions. The results of our Carbon Inventory
Report are presented below.
lender, we take pride in the fact that our
In a significant step towards reducing our carbon
operations have minimal direct impact on the
footprint, we transitioned to a 100% renewable and
environment.
Moving forward, we are determined to solidify
our ESG strategy, establishing clear metrics
and targets that will enable us to assess our
climate positive electricity provider starting from
January 2023. This switch led to a notable 32%
reduction in purchased electricity emissions during
FY23.
performance and progress. We believe that
We also relocated to a purpose-designed premises
by setting ambitious goals and continually
in Auckland to optimise the utilisation of our office
measuring our impact, we can further
space. Additionally, we actively encourage our staff
enhance our contribution to sustainability and
to adopt environmentally friendly commuting
responsible business practices.
methods, such as public transportation and
walking/cycling, and have implemented an initiative
supporting Earth Day 2023, engaging our employees
in these efforts.
HARMONEY ANNUAL REPORT FY23
PAGE 21
An important indicator of our environmental
performance is the carbon intensity for Scope 1, 2 and 3
emissions per $1 million of revenue, which stood at 0.70
Emissions Inventory Report
tCO2e (FY22: 0.57 tCO2e). Furthermore, our Scope 1, 2
Emissions breakdown
and 3 emissions per employee were measured at 0.85
tCO2e (FY22: 0.48 tCO2e), maintaining a low
environmental impact, with the increase per employee
driven by a resumption of limited business air travel post
COVID-19.
While we have measured mandatory Scope 3 emissions
for the Ekos Net Zero Carbon Certification, we
recognise the need to further enhance our reporting on
these. We will focus on capturing optional and
recommended areas to comprehensively account for
indirect emissions. Our emissions inventory report
currently excludes any outsourced services. It is worth
noting that our Scope 3 emissions remained consistent
with the previous year, with the exception of increased
FY23
(tCO2e)
FY22
(tCO2e)
Total Scope 1 emissions
-
-
Purchased electricity
10.16
14.84
Total Scope 2 emissions
10.16
14.84
Air travel
35.66
6.66
Cloud computing services
21.97
20.00
Other scope 3 emissions
7.31
N/A
Total Scope 3 emissions
64.94
26.66
Total Scope 1, 2 and 3
emissions
75.10
41.50
Only the FY23 emissions have been externally reviewed
by Ekos. FY22 emissions are based on management’s
calculations.
business air travel as business operations resumed post
The emissions report disclosed above has been
COVID-19.
reported using the location-based methodology.
Overall, these accomplishments underscore
Harmoney's commitment to environmental stewardship
and our dedication to promoting sustainability within our
operations. We will continue to refine our environmental
strategies and pursue further improvements to ensure
we contribute positively to the global effort in
addressing climate change.
Emissions can be calculated using a market-based or a
location-based methodology. In Harmoney's case our
emissions are higher under the location-based
methodology disclosed above, which is what we have
offset.
HARMONEY ANNUAL REPORT FY23
PAGE 22
Social
At Harmoney, we aim to provide simple and easy access to our
financial services to customers from diverse backgrounds. We
envision a future where technology responsibly and invisibly analyses
financial information to optimise customers’ choices and
opportunities. We have always believed that access to money at the
right time can make a huge difference in someone’s life.
Our main goal is to offer all customers a fair and transparent
experience. To achieve this, we have implemented a new quote
application process in Australia that does not affect customers' credit
scores when they get an interest rate. This has proven to be a crucial
factor in reducing complaints and solving one of the biggest pain
points for our customers.
Additionally, we have introduced a feature to account for a partner's
share of expenses in affordability calculations, making these more
accurately reflect our customers' financial situations.
We regularly conduct user research, surveys,
and feedback calls to understand what is
important to our customers.
As a result, we have made improvements to our identification
verification process and bank connection flow, making it easier for
our customers to complete their applications with less effort.
We also recognise the responsibilities of providing safe and secure
financial services. Our broad-based online application process utilises
modern technology to assess creditworthiness on the basis of reliably
sourced financial data, with machine learning-developed scoring
systems supporting customer suitability. We also ensure that
customer information is secure to the best of our ability.
Harmoney has a Complaints and Internal Dispute Resolution Policy to
ensure consistent handling of customer complaints, and performs call
quality assessments to monitor calls against policies.
Harmoney embraces a culture of developing products and product
features to deliver good customer outcomes for the market they were
designed for, including support through periods of financial difficulty.
HARMONEY ANNUAL REPORT FY23
PAGE 23
We are committed to supporting our customers through
Harmoney promotes customer financial literacy to help
periods of unforeseen financial hardship. Whether it’s
our customers make good financial decisions and build
personal hardship (such as illness or injury), or a major life
financial resilience. We provide a number of financial
event (such as loss of employment or the death of a loved
literacy blog articles and Credit Score education content
one), we assess the circumstances on a case-by-case
on our website for customers. 54,866 customers have
basis and work together with customers to get through
accessed this content throughout the year.
difficult situations.
The assistance we provide can include term extensions,
currently provide to customers and have initiated a
thereby reducing regular loan repayments to a more
continuous review process to keep these resources
manageable amount, a postponement of repayments for a
relevant and up-to-date.
In FY23, we conducted a review of the resources we
set time, or a combination of the two.
We apply our responsible lending and credit policies to
prevent extending credit where doing so could place a
borrower in a worse financial position or at a greater risk
of hardship. We also apply analytics to identify potentially
vulnerable borrowers, such as where they exhibit traits of
problem gambling or engaging in unstable financial
behaviours, and to identify applicants who are presently in
financial hardship.
Improving access to financial services across all
consumer segments is important to us. Our design
system implementation takes the Web Content
Accessibility Guidelines into consideration to improve the
accessibility and consistency of our product. Our goal is
to offer an inclusive and enjoyable experience to
everyone, with readable and understandable content.
HARMONEY ANNUAL REPORT FY23
PAGE 24
This is an area of paramount importance to Harmoney, as
As at 30 June 2023, Harmoney’s total workforce
a 100% online lending business entrusted with sensitive
consisted of 88 full-time employees across Australia and
customer financial information. Safeguarding customer
New Zealand. We have a clear purpose and vision with
data is not only a legal and ethical obligation but also
highly engaged employees. Engagement is a measure of
crucial for maintaining trust and credibility.
the level of involvement, motivation and positivity
Harmoney has a comprehensive set of cyber security
policies in place, and has implemented stringent
measures to secure and protect customer financial and
credit-related data.
To ensure the security, availability, and integrity of
customer data, we have various technical and policy
controls:
Our security approach aligns with the NIST
employees feel towards their work.
Our goal is to deliver a positive
experience that keeps our people
safer, healthier, and more
engaged.
We conduct regular employee surveys to identify areas of
focus and improvement and for measuring progress. Our
overall company engagement score was 87% for the year
Cybersecurity Framework 1.1.
(2022: 86%).
We have endpoint protection on employee devices to
stop ransomware, malware, exploits, and other
threats.
In FY23, we enhanced our employee benefits by
introducing health insurance. Our parental leave policy
was updated to provide extended paid leave for
We require multi-factor authentication (MFA).
secondary caregivers, and improvements were made in
We utilise a modern cloud-native technology stack,
with web application firewalls and threat detection
systems.
relation to primary caregivers’ leave. We also
implemented a flexi-return policy to accommodate
employees returning from parental or partner's leave,
allowing them to customise their work arrangements post
We regularly undergo external penetration testing to
return to work, including reduced hours or remote work
assess and fortify our security measures.
We have business continuity, incident response, and
disaster recovery policies, which we test annually.
options. In addition, Harmoney publicly disclosed the
details of our parental leave policy on Crayon, New
Zealand’s Parental Leave Register.
We carry out recoverability testing of major system
To maintain high performance, we recognise the
backups, at least annually.
We have a staff cybersecurity training programme,
including an internal simulated phishing programme.
importance of cultivating a culture that rewards and
recognises our people, creating a continuous learning
environment that encourages innovation, creativity and
collaboration.
Our People and Culture team's approach supports a
people-first approach and aligns with both the employees'
and the organisation's goals.
HARMONEY ANNUAL REPORT FY23
PAGE 25
Placing people at the core of Harmoney's operations is
workplace diversity and inclusion as an employee
essential for fostering a positive and productive work
value proposition to potential candidates.
environment. This approach demonstrates that the well-
being and growth of employees are valued and prioritised.
To support equality initiatives, we provide leadership
training to hiring managers, including unconscious bias
Key elements of our approach include, leadership
training.
involvement, employee development and performance
We are dedicated to reviewing pay equality to retain
development plans.
Overall, the People and Culture team have a
comprehensive strategy in place to create a supportive
and engaging work environment. By continuing to
prioritise employee development, regularly evaluating
compensation packages, and maintaining a people-first
approach, the team can foster a positive and thriving
workplace culture.
We prioritise the wellbeing of our employees and strive to
promote work-life balance through flexible work
arrangements. To further support a productive workforce,
we offer a comprehensive benefits programme that
encompasses wellness days, Employee Assistance
Programmes, flu vaccinations, first aid certifications and
health insurance. We actively gather employee feedback
as part of our ongoing commitment to fostering a
supportive and thriving work environment.
People drive Harmoney: their
inspiration, imagination,
creativity and passion powers
what we do.
our talent. We regularly review competitive salaries
and stay updated on changing market rates to ensure
fair compensation.
We offer mentor-mentee programs, with a specific
focus on gender equality. These programs include
events such as “Women in Tech” and female-led
“lunch n learn” sessions.
We actively support the growth of young women
leaders through partnering with organisations like
Matchstiq, Summer of Tech, and AUT, to offer
internships to targeted groups and communities,
building interest and skills while establishing a long-
term pipeline of diverse job candidates.
We celebrate a range of festivals to enrich our cultural
understanding and mark important dates, such as
International Women’s Day, to build awareness and
create a company culture that celebrates diversity and
cultivates an inclusive and equitable workplace.
As part of our continued progress, we are working on
finalising our Diversity, Equity, and Inclusion (DEI)
strategy, and setting metrics and targets for
measurement, which will include commencing reporting
on our gender diversity position and public pay gap
reporting. We recognise the importance of gender
balance and have strategic plans to enhance the
representation of women in leadership positions through
Harmoney makes a conscious effort to create an inclusive
proactive succession planning.
workplace that represents the communities we serve, and
values diverse perspectives to drive innovation and
business success, and contribute to a fairer society.
In our commitment to fostering diversity and inclusion, we
have implemented various initiatives and strategies:
Harmoney will be publishing our inaugural Modern Slavery
Statement under Australia's Modern Slavery Act 2018
Our recruitment strategy and processes focus on
later this year.
attracting diverse candidates. Our job descriptions are
gender-neutral and inclusive, and we communicate our
HARMONEY ANNUAL REPORT FY23
PAGE 26
Governance
Good governance is vital in achieving long-term value by aligning financial and
societal performance, ensuring accountability, and building stakeholder legitimacy,
to drive purposeful business strategies.
Harmoney manages financial and non-financial risks through our governance
framework. In FY23, we have finalised our ESG governance framework (overleaf)
and embedded it into our overall governance framework.
We are committed to acting honestly, ethically and responsibly, and our
governance framework is designed to ensure that our statutory obligations are
met, and that a culture of corporate integrity is reinforced.
This framework is set out on our website (https://www.harmoney.com.au/investor)
and comprises our Code of Conduct, various charters and policies.
Harmoney has elected to comply with all of the ASX Corporate Governance
Council’s “Corporate Governance Principles and Recommendations (4th Edition)”
(the ASX Recommendations). We publish our Corporate Governance Statement on
our website, which sets out the details of our practices with respect to the ASX
Recommendations, which was last updated on 30 June 2023.
Harmoney maintains comprehensive policies to ensure compliance with relevant
statutory requirements, the ASX Listing Rules, and obligations arising under our
Australian Financial Services Licence, Australian Credit Licence, and Market
Services Licence (New Zealand). These policies undergo regular review by
external providers, including law firms, and AML specialists, to ensure their
currency and effectiveness.
The Board delegates the responsibility for reviewing and approving Harmoney's
risk management system (including policies and frameworks) to the Audit and Risk
Committee, for identifying, assessing, and managing financial and non-financial
risks.
Harmoney is dedicated to developing and implementing a risk and compliance
assurance testing program, establishing a Compliance Manager role in FY22 to
develop this. We already conduct regular automated and manual audits, both
internally and externally, and this program will further align and enhance these
efforts. For FY23, we are introducing accurate and independently-validated
regulatory obligations registers across the enterprise and have already
commenced policy and training refreshes across a number of them, as well as
controls testing.
As part of our strategic initiatives, we are working on revising our enterprise-wide
risk framework with a specific focus on ‘risk to people’, enabling a more
comprehensive analysis of risks. This framework redesign aims to provide
improved visibility into risks and opportunities related to ESG factors.
HARMONEY ANNUAL REPORT FY23
PAGE 27
Board of Directors
The Board retains the ultimate responsibility for the oversight of sustainability-related risks and opportunities and
approval of ESG reporting and objectives.
Audit & Risk Committee
The Board delegates to the Audit & Risk Committee (ARC) – a Board Committee - which assesses and
manages sustainability-related risks and opportunities and monitors progress towards targets.
Senior Leadership Team and ESG Officer
Operationalises ESG risks and opportunities identified by the ARC, drives progress to meet reporting
obligations and targets.
Ethics and integrity underpin Harmoney’s values and is
Harmoney actively engages with diverse stakeholder
foundational for building and maintaining trust and
respect, ensuring responsibility and accountability.
Harmoney’s corporate governance framework includes a
Code of Conduct, Anti-Bribery & Corruption Policy,
groups to gain insights into their concerns and priorities.
We provide regular updates and information to our
stakeholders through the Investor Centre on our website,
which includes details about our Board members,
business performance, governance practices, and other
Disclosure and Communication Policy, Trading Policy, and
relevant news related to Harmoney.
Whistleblower Policy.
Harmoney ensures that all applicable legal obligations are
met through:
Regular review and reporting of our adherence to
our licence obligations.
Regular review of our Responsible Lending Policy
and procedures.
Continuous improvement of our systems to
recognise potentially vulnerable applicants.
Ongoing staff training across all relevant
regulations.
Harmoney is a signatory to the Principles of Reciprocity
and Data Exchange with RDEA (a subsidiary of the
Australian Retail Credit Association). Harmoney is also a
member of the Financial Services Federation in New
Zealand, the industry body for responsible non-bank
lenders.
To ensure effective communication, we have established
dedicated channels for our shareholders to contact us
and share their enquiries or feedback, including a
designated shareholder email address.
As part of our Product Governance Framework, we
conduct systematic qualitative surveys among customers
to identify market needs and preferences, which inform
the development of our product offerings.
Harmoney has a Complaints and Internal Dispute
Resolution Policy to ensure consistent and fair handling
of customer queries. We value feedback from all sources
and are committed to responding to customer feedback
and complaints in a timely manner, in line with our policy.
Our Feedback and Complaints Committee meets
regularly to analyse customer feedback, identify patterns,
address systemic issues, and identify areas for
improvement. Any significant matters are reported to the
Board.
Harmoney is a member of two independent external,
dispute resolution schemes, the Australian Financial
Complaints Authority (AFCA) in Australia, and the
Financial Services Complaints Limited (FSCL), a financial
ombudsman service, in New Zealand.
HARMONEY ANNUAL REPORT FY23
PAGE 28
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 2023 (“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 secured and unsecured personal loans that are competitively priced using risk-adjusted
interest rates and accessed 100% online. The Group operates across New Zealand and Australia.
Change in presentation currency
Effective 1 July 2022, the Group changed the currency in which it presents its consolidated financial statements from New
Zealand dollars (NZD) to Australian dollars (AUD), to reflect the growth in the Group’s Australian loan book and to provide
better comparability with industry peers.
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 2023.
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
24 August 2023
HARMONEY ANNUAL REPORT FY23
PAGE 29
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HARMONEY ANNUAL REPORT FY23
PAGE 30
Financial Report
HARMONEY ANNUAL REPORT FY23
PAGE 31
Directors’ Responsibility Statement
The Directors are pleased to present the consolidated financial statements of Harmoney Corp Limited for the year ended 30
June 2023.
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 2023 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 consolidated financial statements set out on pages 33-64
for issue on 24 August 2023.
For and on behalf of the Board
Paul Lahiff
Chairman
24 August 2023
Tracey Jones
Chair of the Audit and Risk Committee
HARMONEY ANNUAL REPORT FY23
PAGE 32
Consolidated Group Financial Statements
Consolidated Statement
of Comprehensive Income
For the year ended 30 June 2023
Interest income
Other income 1
Total income
Interest expense
Impairment expense
Customer acquisition expenses 2
Personnel expenses
Customer servicing expenses 3
Technology expenses
General and administrative expenses
Depreciation and amortisation expenses
Loss before income tax
Income tax expense
Year ended
Year ended
30 June 2023
30 June 2022
Notes
$'000
$'000
5
6
5
7
8
9
105,539
68,943
1,534
3,877
107,073
72,820
39,824
18,122
32,379
25,467
12,316
20,716
12,930
12,553
6,174
4,816
3,670
2,545
5,166
4,179
4,042
1,349
(7,581)
(18,774)
-
-
(7,581)
(18,774)
962
(145)
817
(1,228)
5,640
4,412
(6,764)
(14,362)
Loss for the year attributable to shareholders of Harmoney Corp
Limited
Other comprehensive income / (loss)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
(Loss) / Gain on cash flow hedge reserve, net of tax
10
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:
Cents
Cents
Basic earnings per share
Diluted earnings per share
11
11
(7)
(7)
(19)
(19)
1 ‘Other income’ is a combination of ‘Fee income’ and ‘Other income’ presented in the prior year and has been reclassified for simpler presentation.
2 ‘Customer acquisition expenses’ were referred to as ‘Marketing expenses’ in the prior year.
3 ‘Customer servicing expenses’ were referred to as ‘Verification and servicing expenses’ in the prior year.
THE ABOVE CONS OLIDATED STATEMENT OF COMPREHENSIVE INCOME SHOULD BE READ IN CONJUNCT ION WITH THE ACCOMPANYING NOTES.
HARMONEY ANNUAL REPORT FY23
PAGE 33
Consolidated Statement
of Financial Position
As at 30 June 2023
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
Equity
Share capital
Foreign currency translation reserve
Share-based payment reserve
Cash flow hedge reserve
Accumulated losses
Total equity
30 June 2023
30 June 2022
30 June 2021
Notes
$'000
$'000
$'000
12
13
14
15
16
9
10
17
18
19
15
10
20
21
21
10
43,454
56,805
71,122
1,968
1,665
1,762
708,871
551,447
274,225
3,717
352
598
11,568
8,524
3,213
8,467
8,269
10,687
7,677
7,848
-
785,722
634,910
361,607
6,434
6,198
6,813
720,503
564,211
271,174
1,524
5,160
12,469
3,506
216
-
-
667
79
731,967
575,785
291,202
53,755
59,125
70,405
123,985
123,265
123,112
(367)
(1,329)
3,820
3,146
5,416
5,561
(101)
217
(79)
(79,099)
(71,518)
(52,744)
53,755
59,125
70,405
THE ABOVE CONS OLIDATED STATEMENT OF FINANCIAL POS ITION SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES.
HARMONEY ANNUAL REPORT FY23
PAGE 34
Consolidated Statement
of Changes in Equity
For the year ended 30 June 2023
Share
capital
Foreign
currency
translation
reserve
Share-
based
payment
reserve
Cash
flow
hedge
reserve
Accumulated
losses
Total
Notes
$'000
$'000
$'000
$'000
$'000
$'000
Balance at 30 June 2021
Loss for the year
Other comprehensive (loss) / income,
net of income tax
Total comprehensive (loss) / income
Recognition of share-based payments
Transfer to share capital
Share option cancellations
Balance at 30 June 2022
Loss for the year
Other comprehensive income / (loss),
net of income tax
Total comprehensive income / (loss)
Recognition of share-based payments
Transfer to share capital
Share option cancellations
Balance at 30 June 2023
21
21
21
21
21
21
123,112
(101)
217
(79)
(52,744)
70,405
-
-
-
-
153
-
-
(1,228)
(1,228)
-
-
-
-
(18,774) (18,774)
5,640
-
4,412
5,640
(18,774) (14,362)
-
-
-
3,442
(153)
(360)
-
-
-
-
-
-
3,442
-
(360)
123,265
(1,329)
3,146
5,561
(71,518)
59,125
-
-
-
-
720
-
-
962
962
-
-
-
-
-
-
-
(7,581)
(7,581)
(145)
-
817
(145)
(7,581)
(6,764)
3,009
(720)
(1,615)
-
-
-
-
-
-
3,009
-
(1,615)
123,985
(367)
3,820
5,416
(79,099)
53,755
THE ABOVE CONS OLIDATED STATEMENT OF CHANGES IN EQ UITY SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES.
HARMONEY ANNUAL REPORT FY23
PAGE 35
Consolidated Statement
of Cash Flows
For the year ended 30 June 2023
Cash flows from operating activities
Interest received
Interest paid
Fee income rebated
Payments to suppliers and employees
Net cash generated by 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 debt financing
Principal element of lease payments
Net cash generated by financing activities
Cash and cash equivalents at the beginning of the period
Net decrease in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Year ended
Year ended
30 June 2023
30 June 2022
Notes
$'000
$'000
102,558
68,969
(38,734)
(17,233)
(1,684)
(2,151)
(38,203)
(44,612)
23,937
4,973
(181,634)
(312,612)
(5,019)
(6,284)
(186,653)
(318,896)
143,988
285,804
5,000
15,000
(474)
(828)
148,514
299,976
56,805
71,122
(14,202)
(13,947)
851
(370)
Cash and cash equivalents at the end of the period
12
43,454
56,805
THE ABOVE CONS OLIDATED STATEMENT OF CASH FLOWS SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES.
HARMONEY ANNUAL REPORT FY23
PAGE 36
Notes to the Consolidated Group
Financial Statements
For the year ended 30 June 2023
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.
Harmoney Corp Limited is a company incorporated in New Zealand and registered under the Companies Act 1993, whose shares
are publicly traded on the Australian Securities Exchange (ASX) 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 holds a peer-to-peer lending licence. The
Company was incorporated on 1 May 2014.
On 28 October 2022, the Company delisted from New Zealand’s Exchange (NZX) and consolidated its listings on the ASX.
2. Significant accounting policies
2.1. Basis of preparation
The consolidated financial statements of Harmoney Corp Limited comply with New Zealand equivalents to International Financial
Reporting Standards (NZ IFRS) and have been prepared in accordance with Generally Accepted Accounting Practice in New
Zealand (GAAP). The Company is a Tier 1 for-profit entity for the purposes of complying with GAAP. The consolidated financial
statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
The results and position of each Group entity are expressed in Australian dollars (AUD), which is the presentation currency for
the consolidated financial statements, unless otherwise stated. The financial statements of each of the Group’s entities are
measured using the currency of the primary economic environment in which that entity operates (the functional currency). The
functional currency of the Company is New Zealand dollars (NZD). The Group uses a different presentation currency to the
functional currency of the Company to reflect the significance of the Group’s Australian loan book and for better comparability
with industry peers (refer note 2.2 below).
All amounts disclosed in the financial statements and notes have been rounded to the nearest thousand Australian dollars
($’000) unless otherwise stated.
The consolidated group financial statements have been prepared on a going concern basis using a historical cost basis, except
for derivative financial instruments which are measured at fair value.
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 25.
HARMONEY ANNUAL REPORT FY23
PAGE 37
2.2. Presentation currency – change in accounting policy
Effective 1 July 2022, the Group changed the currency in which it presents its consolidated financial statements from NZD to
AUD, to reflect the growth in the Group’s Australian loan book and to provide better comparability with industry peers.
A change in presentation currency is a change in accounting policy, which is accounted for retrospectively. The financial
information included in this report, previously reported in NZD, has been restated into AUD using the procedures outlined below:
Assets and liabilities denominated in currencies other than AUD were translated into AUD at the closing rates of exchange
on the last day of the relevant accounting period.
Revenues and expenses in currencies other than AUD were translated into AUD at average exchange rates.
Share capital and reserves were translated at the historic rates prevailing at the transaction dates, except for the cash
flow hedge reserve. Cash flow hedge reserve has been translated at the closing rates for each reporting period with the
resulting exchange differences from re-translation recognised in the foreign currency translation reserve.
Cash flows were translated at exchange rates at the dates of the relevant transactions, although appropriate average
rates may be used.
The effects of translating the Group’s financial performance and financial position are recognised in the foreign currency
translation reserve.
2.3. 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;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The assets and liabilities of entities whose functional currency is not the Australian 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.
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.
2.4. 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.
2.5. Application of new and revised accounting standards
There are no new or revised accounting standards that are mandatory from 1 July 2022 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 2023 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.
HARMONEY ANNUAL REPORT FY23
PAGE 38
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 application of accounting policies and 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.
3.1. Expected credit loss provision
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 14 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 14.
3.2. Fair value measurement of derivatives
The fair value measurement of the Group’s interest rate swaps is a significant accounting estimate. For details on the valuation
method used see note 24. For interest rate sensitivity analysis see note 25.
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:
Australia and New Zealand.
The CODM assesses the business on a Cash Net Profit After Tax (NPAT) basis. Cash NPAT is a non-GAAP measure and
consists of profit/(loss) after income tax, adjusted for determined non-cash items. It is intended as a supplementary measure of
operating performance for readers to understand the underlying performance 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 and expenses are 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.
HARMONEY ANNUAL REPORT FY23
PAGE 39
The following tables present income and loss information for the Group’s operating segments.
Segmented income statement for the year ended 30 June 2023 $'000
Interest income
Other income
Total income
Interest expense
Incurred credit losses
Movement in expected credit loss provision
Customer acquisition expenses
Personnel expenses (excl. share-based payments)
Share-based payments expenses
Customer servicing expenses
Technology expenses
General and administrative expenses
Depreciation and amortisation expenses
Loss before income tax
Income tax expense
Australia
New Zealand
Group
52,687
52,852
105,539
50
1,484
1,534
52,737
54,336
107,073
17,490
22,334
39,824
16,750
7,802
24,552
8,023
(196)
7,827
8,518
3,798
12,316
424
10,569
10,993
-
1,937
1,937
2,963
3,211
6,174
-
4,816
4,816
751
2,919
3,670
49
2,496
2,545
(2,231)
(5,350)
(7,581)
-
-
-
Loss for the year attributable to shareholders of Harmoney Corp Limited
(2,231)
(5,350)
(7,581)
Non-cash adjustments
Movement in expected credit loss provision
Share-based payments expenses
Depreciation and amortisation expenses
Cash NPAT
8,023
(196)
7,827
-
1,937
1,937
49
2,496
2,545
5,841
(1,113)
4,728
HARMONEY ANNUAL REPORT FY23
PAGE 40
Segmented income statement for the year ended 30 June 2022 $'000
Interest income
Other income
Total income
Interest expense
Incurred credit losses
Movement in expected credit loss provision
Customer acquisition expenses
Personnel expenses (excl. share-based payments)
Share-based payments expenses
Customer servicing expenses
Technology expenses
General and administrative expenses
Depreciation and amortisation expenses
Loss before income tax
Income tax expense
Australia
New Zealand
Group
25,421
43,522
68,943
371
3,506
3,877
25,792
47,028
72,820
5,621
12,501
18,122
5,142
5,469
10,611
13,441
1,415
14,856
12,931
7,785
20,716
232
9,577
9,809
-
2,744
2,744
1,884
3,282
5,166
-
4,179
4,179
1,437
2,605
4,042
86
1,263
1,349
(14,982)
(3,792)
(18,774)
-
-
-
Loss for the year attributable to shareholders of Harmoney Corp Limited
(14,982)
(3,792)
(18,774)
Non-cash adjustments
Movement in expected credit loss provision
Share-based payments expenses
Depreciation and amortisation expenses
Cash NPAT
13,441
1,415
14,856
-
2,744
2,744
86
1,263
1,349
(1,455)
1,630
175
HARMONEY ANNUAL REPORT FY23
PAGE 41
5.
Interest
5.1.
Interest income
Interest income
5.2. Interest expense
Interest on receivables funding
Interest on corporate debt
Interest on lease liability
Total interest expense
Year ended
30 June 2023
$'000
Year ended
30 June 2022
$'000
105,539
68,943
Year ended
30 June 2023
$'000
Year ended
30 June 2022
$'000
37,498
17,450
2,170
156
663
9
39,824
18,122
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 14).
6. Other income
Fee income
Borrower fee income - Protect fees
Lender fee income - Distributing services
Total fee income
Grant income
Total other income
Year ended
30 June 2023
$'000
Year ended
30 June 2022
$'000
126
956
1,082
452
1,534
637
2,800
3,437
440
3,877
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.
HARMONEY ANNUAL REPORT FY23
PAGE 42
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 19).
Grant income
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 Tax
Incentive as funded by Inland Revenue.
7.
Impairment expense
Change in expected credit loss provision
Incurred credit loss
Impairment expense
Year ended
30 June 2023
$'000
7,827
24,552
32,379
Year ended
30 June 2022
$'000
14,856
10,611
25,467
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
14). For example, due to the growth in the finance receivables, change in likelihood of credit loss from the standard modelled
provision, 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 generally 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.
HARMONEY ANNUAL REPORT FY23
PAGE 43
8. 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
Year ended
30 June 2023
$'000
Year ended
30 June 2022
$'000
583
-
30
108
650
8
8
37
1,824
2,545
646
1,349
156
11
630
9
3
837
Refer to note 15 for further information on property and equipment, and leases.
9.
Income taxes
Income tax recognised in profit or loss
9.1.
The income tax expense for the year can be reconciled to the accounting loss as follows:
Current tax
In respect of the current year
Deferred tax
In respect of the current year
Total income tax expense
Loss before income tax
Income tax benefit calculated
Effect of expenses that are not deductible
Prior period adjustment
Income tax benefit not recognised
Foreign exchange differences
Total income tax expense
Year ended
30 June 2023
$'000
Year ended
30 June 2022
$'000
102
74
(102)
-
(74)
-
Year ended
30 June 2023
$'000
(7,581)
(2,273)
407
(626)
2,412
80
-
Year ended
30 June 2022
$'000
(18,774)
(5,659)
(1,214)
(438)
7,629
(318)
-
HARMONEY ANNUAL REPORT FY23
PAGE 44
9.2. Amounts recognised in other comprehensive income
Aggregate current and deferred tax arising in the reporting period relating to
components of other comprehensive income:
Cash flow hedge reserve
Other
30 June 2023
30 June 2022
$'000
$'000
(27)
(69)
2,287
205
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. The Group’s forecasts show taxable profits in the coming years.
9.3. Deferred tax balances
The following is the analysis of deferred tax assets/(liabilities) presented in the consolidated statement of financial position:
30 June 2022
30 June 2023
$'000
$'000
Deferred tax assets
Expected credit loss (ECL) provision
Accruals and other
Share-based payments
Losses
Deferred tax assets
Deferred tax liabilities
Derivatives
Distributing services
Plant & equipment and intangibles
Deferred tax liabilities
Net deferred tax assets
9,423
1,418
249
-
11,090
(2,260)
(61)
(302)
(2,623)
8,467
8,417
1,563
369
259
10,608
(2,287)
(46)
(6)
(2,339)
8,269
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 and temporary differences of $21.2m at 30 June 2023 (June 2022: $18.5m) 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.
HARMONEY ANNUAL REPORT FY23
PAGE 45
10. Cash flow hedge
Cash flow hedge reserve
The Group obtains financing (note 18) in order to fund finance receivables (note 14). 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 2023 of 5.61% for the 1-month BKBM and 4.66% for
the 5-year swap rate (2022: 2.39% and 5-year swap rate 4.00%) and for Australia 4.14% for the 1-month BBSW and 4.19% for
the 5-year swap rate (2022: 1.14% and 5-year swap rate 3.67%).
Refer to note 24 for further information on the fair value measurement of interest rate swaps.
11. Earnings per share
Loss after tax for the year attributable to the owners of the Group
30 June 2023
30 June 2022
$'000
$'000
(7,581)
(18,774)
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
101,556,798
101,049,485
Weighted average number of ordinary shares used in calculating diluted earnings per share
101,556,798
101,049,485
Basic earnings per share
Diluted earnings per share
Options
Cents
Cents
(7)
(7)
(19)
(19)
Performance rights (zero strike price options) under the Group’s share-based compensation plan as detailed in note 21 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. As at 30 June 2023, 1,725,080 options could potentially dilute basic earnings per share in the
future, but were not included in the calculation of diluted earnings per share in the current year because they are antidilutive for
the year ended 30 June 2023 (2022: 3,386,095).
Convertible notes
Convertible notes issued, as detailed in note 18, are considered to be potentially ordinary shares. They are included in the
determination of diluted earnings per share to the extent to which they are dilutive. For the year ended 30 June 2023, none of
these note options were dilutive, therefore, the calculation of diluted earnings per share does not include 3,333,333 note options
granted because they are antidilutive (2022: 2,500,000). These options could potentially dilute basic earnings per share in the
future.
HARMONEY ANNUAL REPORT FY23
PAGE 46
12. 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:
30 June 2023
30 June 2022
$'000
$'000
Cash on hand and demand deposits
27,327
31,238
Short term deposits
Restricted cash
Total cash and cash equivalents
185
15,942
43,454
-
25,567
56,805
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 23). 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:
(Increase)/Decrease in trade and other assets
Increase/(Decrease) in payables and accruals
Decrease in provisions
Increase in accrued interest
Net cash generated by operating activities
Year ended
30 June 2023
$'000
(7,581)
Year ended
30 June 2022
$'000
(18,774)
32,379
1,401
2,545
(719)
377
63
(188)
177
(3,682)
(835)
23,937
25,467
3,082
1,349
1,469
145
23
56
(328)
(7,157)
(359)
4,973
Non-cash transactions
During the current year, the Group did not enter into any non-cash investing and financing activities (2022: Nil).
HARMONEY ANNUAL REPORT FY23
PAGE 47
Changes in liabilities arising from financing activities
Balance at 1 July 2021
Operating cash flows 1
Financing cash flows
Non-cash adjustments 2
New leases
Foreign exchange differences
Balance at 30 June 2022
Operating cash flows 1
Financing cash flows
Non-cash adjustments 2
New leases
Foreign exchange differences
Balance at 30 June 2023
Borrowings
Lease liability
$'000
$'000
Total
$'000
(271,174)
(667)
(271,841)
807
10
817
(300,804)
828
(299,976)
(1,726)
(9)
(1,735)
-
8,686
(366)
(12)
(366)
8,674
(564,211)
(216)
(564,427)
(125)
156
31
(148,989)
474
(148,515)
(1,129)
(156)
(1,285)
-
(3,748)
(3,748)
(6,049)
(16)
(6,065)
(720,503)
(3,506)
(724,009)
1 Operating cash flows include prepaid establishment fees and the interest element of lease payments.
2 Non-cash adjustments include accrued interest.
13. Trade and other assets
Trade receivables
Prepayments
GST receivable
Current tax assets
30 June 2023
30 June 2022
$'000
206
1,469
173
120
$'000
45
880
629
111
Total trade and other assets
1,968
1,665
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.
14. Finance receivables
Finance receivables
Accrued interest
Deferred establishment fees
Expected credit loss (ECL) provision
Total finance receivables
Credit risk management
30 June 2023
30 June 2022
$'000
$'000
744,000
580,970
4,748
(2,958)
3,003
(3,664)
(36,919)
(28,862)
708,871
551,447
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.
HARMONEY ANNUAL REPORT FY23
PAGE 48
ECL provision
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).
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 Australia and New Zealand. 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, or where the account has defaulted in the last 12 months. 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.
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
HARMONEY ANNUAL REPORT FY23
PAGE 49
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 2023
Expected loss rate
Stage 1
3.06%
$'000
Stage 2
52.32%
$'000
Stage 3 1
75.38%
$'000
Total
4.93%
$'000
Gross carrying amount
722,507
21,599
4,642
748,748
Expected credit loss provision
(22,119)
(11,301)
(3,499)
(36,919)
Net carrying amount
700,388
10,298
1,143
711,829
30 June 2022 2
Expected loss rate
Stage 1
3.65%
$'000
Stage 2
58.77%
$'000
Stage 3 1
99.69%
$'000
Total
4.94%
$'000
Gross carrying amount
571,743
10,263
1,967
583,973
Expected credit loss provision
(20,869)
(6,032)
(1,961)
(28,862)
Net carrying amount
550,874
4,231
6
555,111
1 The stage 3 expected loss rate is higher in the prior year, as an economic overlay was applied in addition to the standard modelled provision at 30 June
2022. The economic overlay is no longer applied to stage 3 from the current year, as the standard provision already considers lifetime expected credit
losses for finance receivables 90 days past due, and from the Group's experience, a further adjustment is no longer required. Harmoney has a monthly
process to sell finance receivables where there is no reasonable expectation of other recovery, further reducing the stage 3 expected loss rate.
2 There have been reclassifications from stage 1 to stage 2 in the prior year for comparability with the current year. This has not resulted in any changes
to the total gross carrying amount or total expected credit loss provision for the prior year.
Movements in the expected credit loss provision are as follows:
Opening balance
Additional provision recognised due to:
(Decrease)/Increase in economic overlay
Increase in gross finance receivables
30 June 2023
30 June 2022
$'000
$'000
28,862
14,301
(3,233)
35,842
2,327
22,940
Finance receivables written off during the period as uncollectible
(24,552)
(10,706)
Total provision
36,919
28,862
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.
HARMONEY ANNUAL REPORT FY23
PAGE 50
Total provisions for ECL on loans as at 30 June 2021
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
Performing
Performing
Non Performing
Stage 1
$'000
11,639
4,224
Stage 2
$'000
1,904
(3,387)
(2,874)
3,242
Stage 3
$'000
Total
$'000
758
14,301
(837)
(368)
-
(7,167)
7,167
Business activity during the year
12,144
(210)
(103)
11,831
Net remeasurements of provision for ECL
(3,816)
12,599
2,792
11,575
Incurred credit loss
Exchange rate and other adjustments
Total provisions for ECL on loans as at 30 June 2022
Transfers to Stage 1
Transfers to Stage 2
Transfers to Stage 3
(195)
(253)
20,869
14,476
(883)
(66)
(7,435)
(8,513)
(13)
(332)
6,032
1,961
28,862
(12,234)
(9,929)
11,015
(2,242)
(1,086)
(1)
(23,552)
23,553
Business activity during the year
10,191
17
227
10,435
Net remeasurements of provision for ECL
(13,364)
31,969
6,373
24,978
Incurred credit loss
Exchange rate and other adjustments
(246)
123
(2,009)
(25,304)
(27,559)
63
17
203
Total provisions for ECL on loans as at 30 June 2023
22,119
11,301
3,499
36,919
Gross carrying amount as at 30 June 2021
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
Gross carrying amount as at 30 June 2022
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
Stage 1
Stage 2
Stage 3
12-month ECL
Lifetime ECL
Lifetime ECL
$'000
Total
$'000
1,075
290,366
$'000
278,297
(27,121)
-
$'000
10,994
27,121
-
7,464
(7,464)
-
900
-
(10,603)
10,603
-
381
(900)
(381)
(8,326)
(122)
(13)
(8,461)
(4,279)
(1,508)
(8,260)
(14,047)
1,967
583,973
571,743
(66,703)
(44)
10,263
66,703
-
20,916
(20,916)
-
(29,578)
29,578
2,203
-
-
1,048
(2,203)
(1,048)
-
-
-
-
44
-
Net of new financial assets and repayments during the year
324,808
(8,536)
(157)
316,115
Net of new financial assets and repayments during the year
191,735
(3,001)
566
189,300
FX movements
Incurred credit loss
5,933
136
25
6,094
(3,276)
(3,056)
(24,287)
(30,619)
Gross carrying amount as at 30 June 2023
722,507
21,599
4,642
748,748
HARMONEY ANNUAL REPORT FY23
PAGE 51
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15. Property and equipment
Right-of-use assets
Furniture and fixtures
IT equipment
Total property and equipment
30 June 2023
30 June 2022
$'000
3,394
75
248
3,717
$'000
213
54
85
352
Property and equipment are recognised at historic cost less depreciation. Depreciation is calculated on a straight-line basis to
allocate the cost of the assets, net of their residual values, over their estimated useful lives.
Leases
The consolidated statement of financial position shows the following amounts relating to leases:
Right-of-use assets
Buildings
Equipment
Total right-of-use assets
Lease liabilities
Current lease liabilities
Non-current lease liabilities
Total lease liability
30 June 2023
30 June 2022
$'000
3,394
-
3,394
$'000
207
6
213
30 June 2023
30 June 2022
$'000
495
3,011
3,506
$'000
216
-
216
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 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 been recognised in the financial statements from the commencement date of the lease in January 2023.
Additions to the right-of-use assets during the year were $3,764,000 (2022: $377,000).
Refer to note 8 for further information on leases.
HARMONEY ANNUAL REPORT FY23
PAGE 52
16. 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
Foreign exchange differences
Closing net book amount
30 June 2023
30 June 2022
$'000
10,453
3,791
14,244
(2,676)
11,568
8,524
4,730
(1,824)
138
11,568
$'000
5,561
3,861
9,422
(898)
8,524
3,213
6,022
(646)
(65)
8,524
The Group has incurred and will continue to incur significant costs on software development projects.
Internally developed software is capitalised using an internal framework.
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.
HARMONEY ANNUAL REPORT FY23
PAGE 53
17. Payables and accruals
Accruals
Employee benefits accrual
Trade and other payables
GST payable
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
18. Borrowings
Receivables funding
Corporate debt
Convertible notes
Total borrowings
Receivables funding
30 June 2023
30 June 2022
$'000
$'000
2,779
1,813
1,747
95
6,434
3,341
1,612
1,245
-
6,198
30 June 2023
30 June 2022
$'000
$'000
943
756
45
768
782
43
1,744
1,593
69
1,813
19
1,612
30 June 2023
30 June 2022
$'000
$'000
700,692
549,496
11,811
8,000
720,503
8,715
6,000
564,211
Receivables funding relates to borrowings specific to the Warehouse Trusts (note 23) 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 25, 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 $20m facility entered into in December 2021, with final repayment due in June
2025. The facility is structured as 60% debt notes and 40% convertible notes.
The $12m corporate debt is reduced by unamortised prepaid establishment costs. Prepaid establishment costs are amortised
over the expected term of the facility through interest expense.
HARMONEY ANNUAL REPORT FY23
PAGE 54
As at 30 June 2023, $20m (2022: $15m) of the facility was drawn down including $8m (2022: $6m) of convertible notes. The
maximum number of shares that would be issued on conversion of the drawn down convertible notes would be 3,333,333 (2022:
2,500,000).
The facility is guaranteed by way of a performance and payment guarantee by Harmoney Corp Limited and each of its Subsidiary
Companies (note 23).
Under the terms of the corporate debt and warehouse facilities, the Group is required to comply with financial and non-financial
covenants. Harmoney has complied with these covenants as at 30 June 2023.
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 2023
30 June 2022
$'000
$'000
760,634
885,879
751,848
593,322
8,786
292,557
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 12 for
further information.
The drawn amount includes $53.0m (2022: $44.5m) of subordinated debt which is not presented on the consolidated statement
of financial position as it is within the Group and is eliminated on consolidation.
Subsequent to reporting date (note 28), an additional A$324m of capacity was added through Harmoney Australia Warehouse
No.3 Trust (A$140m) and Harmoney NZ ABS 2023-1 Trust (NZ$200m).
19. 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
- unused amounts reversed
Amounts used during the year
Foreign exchange differences
Carrying amount at end of the year
30 June 2023
30 June 2022
$'000
-
1,524
1,524
$'000
926
4,234
5,160
5,160
12,469
(712)
(2,986)
62
1,524
(2,675)
(4,556)
(78)
5,160
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 legal proceedings in 2021. The reduction in the provision relates to the repayments made by the Group.
HARMONEY ANNUAL REPORT FY23
PAGE 55
20. Share capital
Number of shares
Share capital
Number of shares
Share capital
30 June 2023
30 June 2022
Fully paid ordinary shares
Total issued capital
101,555,587
123,985
101,018,964
101,555,587
123,985
101,018,964
$'000
As at 30 June 2022
Shares issued under share-based payment arrangements
As at 30 June 2023
$'000
123,265
123,265
Ordinary shares
101,018,964
536,623
101,555,587
Shares issued under share-based payment arrangements
536,623 shares were issued in settlement of the options on 13 September 2022. The options were net settled on a cashless
basis based on the exercise price of each option. See note 21 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.
21. Reserves
21.1. 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. AUD) are recognised directly in other comprehensive income
and accumulated in the foreign currency translation reserve.
21.2. Share-based payments reserve
Opening balance
Arising on equity settled benefits
Transferred to share capital
Share option cancellations
Closing balance
30 June 2023
30 June 2022
$'000
3,146
3,009
(720)
(1,615)
3,820
$'000
217
3,442
(153)
(360)
3,146
In relation to equity-settled share-based payment transactions, the Group recognised an expense of $1.9m (2022: $2.7m) within
the consolidated income statement for the year ended 30 June 2023.
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.
HARMONEY ANNUAL REPORT FY23
PAGE 56
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.
The weighted average exercise price was $Nil for all the groups of options presented in the table below.
The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2023 was $0.65
(2022: $1.83). No options expired during the periods covered by the table below.
The weighted average remaining contractual life of options outstanding at the end of the financial year was 3.08 years (2022:
3.83 years).
The following table provides details of the options granted by the Group as remuneration to employees and Directors.
30 June 2023
Grant date
Post IPO Scheme
15 Jun 2021
1 Dec 2021
1 Jul 2022
Total
30 June 2022
Grant date
Post IPO Scheme
15 Jun 2021
1 Dec 2021
Total
Exercise
price
Grant date
fair value
Opening balance
01/07/2022
Number of share options
Granted
Exercised
Forfeited
Closing balance
30/06/2023
Vested &
exercisable
$ nil
$ 1.40
8,172,958
- 513,443 1,153,015
6,506,500
$ nil
$ 1.77
200,000
- 23,180
14,820
162,000
$ nil
$ 0.71
- 360,000
-
-
360,000
-
-
-
8,372,958 360,000 536,623 1,167,835
7,028,500
-
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
$ 1.40
8,900,000
- 106,240
620,802
8,172,958
$ nil
$ 1.77
- 200,000
-
-
200,000
-
-
8,900,000
200,000
106,240
620,802
8,372,958
-
Current schemes at 30 June 2023
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.
HARMONEY ANNUAL REPORT FY23
PAGE 57
22. 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
23. Controlled entities
30 June 2023
30 June 2022
$'000
2,885
1,086
3,971
$'000
2,907
2,011
4,918
Details of the Group's material subsidiaries and controlled entities at the end of the reporting period are as follows.
Subsidiary Companies
Australia
Harmoney Australia Pty Ltd
Footnote
Date of
incorporation
Place of
incorporation and
operation
Proportion of
ownership interest
and voting power
held by the Group
2023
2022
20-Feb-15
Australia
100%
100%
Harmoney Services Australia Pty Ltd
22-Sep-15
Australia
100%
100%
New Zealand
Harmoney Services Limited
Warehouse Trusts
Australia
2
16-May-14
New Zealand
100%
100%
Harmoney Australia Warehouse No.1 Trust
4-Dec-19
Australia
100%
100%
Harmoney Collections Trust
Harmoney ABS Trust 2021-1PP
Harmoney Australia Warehouse No.2 Trust
Harmoney Australia Warehouse No.3 Trust
New Zealand
Harmoney Warehouse No.1 Trust
Harmoney Collections Trust
Harmoney Warehouse No.3 Trust
22-Jan-20
Australia
100%
100%
29-Sep-21
Australia
100%
100%
23-Nov-21
Australia
100%
100%
16-May-23
Australia
100%
n/a
3-Dec-18
New Zealand
22-Dec-20
New Zealand
3-Jun-22
New Zealand
n/a
n/a
n/a
n/a
n/a
n/a
3
1
1
1
1 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.
2 Harmoney Limited, Harmoney Investor Trustee Limited, and Harmoney Warehouse Limited were amalgamated with Harmoney Services Limited effective
30 December 2022. Harmoney Nominee Limited was amalgamated with Harmoney Services Limited on 31 January 2023.
3 Harmoney Warehouse No.2 Trust was wound up on 22 March 2023.
HARMONEY ANNUAL REPORT FY23
PAGE 58
24. 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
30 June 2023
30 June 2022
$'000
$'000
43,454
56,805
206
45
708,871
551,447
752,531
608,297
4,435
4,426
720,503
564,211
3,506
216
728,444
568,853
7,677
7,677
7,848
7,848
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.
The following table presents the Group’s financial assets and financial liabilities measured and recognised at fair value on a
recurring basis:
30 June 2023 $'000
Financial assets
Derivative financial instruments
Hedging derivatives - interest rate swaps
30 June 2022 $'000
Financial assets
Derivative financial instruments
Hedging derivatives - interest rate swaps
There have been no transfers between levels in the year (2022: Nil).
Level 1
Level 2
Level 3
-
7,677
-
Level 1
Level 2
Level 3
-
7,848
-
HARMONEY ANNUAL REPORT FY23
PAGE 59
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 calculated using a discounted cash flow model using forward interest rates extracted
from observable yield curves. Discount rates may include an adjustment for counterparty credit risk.
25. 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.
HARMONEY ANNUAL REPORT FY23
PAGE 60
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
Short term deposits
Restricted cash
Total financial assets
Financial liabilities
Borrowings - Receivables funding
Total financial liabilities
30 June 2023
30 June 2022
$'000
$'000
27,327
31,238
185
15,942
43,454
-
25,567
56,805
(700,692)
(549,496)
(700,692)
(549,496)
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 affects it. In the year ended 30 June 2023, no amount was reclassified into profit or loss (2022:
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 2023, the notional value of swaps was 76% (2022: 73%) of floating rate
borrowings.
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 2023
30 June 2022
$'000
$'000
7,677
7,848
532,480
402,224
1:1
(171)
171
1:1
7,927
(7,927)
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 higher/lower and all other variables were held constant, the Group’s profit for the
year ended 30 June 2023 would decrease/increase by $1.7m (2022: $1.5m). 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 higher/lower and all other variables were held constant, the
Group’s equity for the year ended 30 June 2023 would increase by $6.0m (2022: $5.0m) or decrease by $6.1m (2022: $5.1m).
This is attributable to the Group’s exposure to interest rates on its interest rate swaps.
HARMONEY ANNUAL REPORT FY23
PAGE 61
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 New Zealand dollars, expressed in Australian 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
NZD exposure
30 June 2023
30 June 2022
$'000
$'000
-
2,431
(642)
(38,799)
(642)
(36,368)
The following table demonstrates the sensitivity to a 5% increase or decrease in the New Zealand dollar exchange rate, which
represents management's assessment of the reasonably possible change in this exchange rate. The impact on the Group's
profit or loss is due to changes in the fair value of monetary assets and liabilities.
AUD/NZD +5%
AUD/NZD -5%
Liquidity risk
Impact on post-tax profit
Year ended
Year ended
30 June 2023
30 June 2022
$'000
32
(32)
$'000
1,818
(1,818)
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 18.
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.
HARMONEY ANNUAL REPORT FY23
PAGE 62
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 2023
Less than 1
1 to 2 years
More than 2
$'000
$'000
$'000
Non-derivatives
Non-interest bearing
Payables and accruals
Interest bearing
Borrowings
Lease liability
Total non-derivatives
Derivatives
4,435
-
548,915
229,423
767
764
554,117
230,187
-
-
2,857
2,857
Total
$'000
4,435
778,338
4,388
787,161
Interest rate swaps - (net inflow)
Total derivatives
(5,832)
(1,840)
(263)
(7,935)
(5,832)
(1,840)
(263)
(7,935)
Contractual maturities of financial liabilities at 30 June 2022
Less than 1
1 to 2 years
More than 2
$'000
$'000
$'000
Total
$'000
Non-derivatives
Non-interest bearing
Payables and accruals
Interest bearing
Borrowings
Lease liability
Total non-derivatives
Derivatives
4,426
-
-
4,426
230,829
356,669
11,419
598,917
218
-
-
218
235,473
356,669
11,419
603,561
Interest rate swaps - (net inflow)
Total derivatives
(3,508)
(2,930)
(1,778)
(8,216)
(3,508)
(2,930)
(1,778)
(8,216)
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. As shown in note 18, the Group has capacity
to fund finance receivables growth with warehouse facility headroom of $8.8m (June 2022: $293m). Subsequent to the reporting
date an additional A$324m of capacity was added through Harmoney Australia Warehouse No.3 Trust (A$140m) and Harmoney
NZ ABS 2023-1 Trust (NZ$200m).
Credit risk management
Refer to note 14 for details of the Group’s credit risk management.
HARMONEY ANNUAL REPORT FY23
PAGE 63
26. Remuneration of auditors
Fees for audit and assurance services
Statutory annual audit fees
Statutory half-year review
Other non-audit assurance services
Agreed-upon procedures
Total fees for audit and assurance services
Fees for other services
Preparation of tax returns and other services
Tax related services paid in respect of warehouse facilities
Total fees for other services
Total remuneration of auditors
Year ended
30 June 2023
$'000
Year ended
30 June 2022
$'000
282
117
85
-
484
-
-
-
484
363
92
101
153
709
84
3
87
796
Fees for audit and assurance services are paid to KPMG for the year ended 30 June 2023 (2022: PricewaterhouseCoopers).
27. Contingent liabilities and commitments
There are no contingent liabilities and capital commitments as at 30 June 2023 (2022: Nil).
28. Events after the reporting period
The Group established Harmoney Australia Warehouse No.3 Trust on 16 May 2023 with a facility limit of $140m, with final
transaction documents signed on 28 July 2023, and completed its first New Zealand Asset-Backed Securitisation (ABS)
transaction priced at NZ$200m on 17 August 2023.
There were no other material events subsequent to year end.
HARMONEY ANNUAL REPORT FY23
PAGE 64
Independent Auditor’s Report
Independent
Auditor’s Report
HARMONEY ANNUAL REPORT FY23
PAGE 65
Independent Auditor’s
Report
To the shareholders of Harmoney Corp Limited
Report on the audit of the consolidated financial statements
Opinion
In our opinion, the consolidated financial statements
of Harmoney Corp Limited (the ‘Company’) and its
subsidiaries (the ‘Group’) on pages 33 to 64:
i. present fairly, in all material respects the
Group’s financial position as at 30 June 2023
and its financial performance and cash flows for
the year ended on that date; and
ii. are in accordance with New Zealand Equivalents
to International Financial Reporting Standards
and International Financial Reporting Standards
issued by the New Zealand Accounting
Standards Board.
We have audited the accompanying consolidated
financial statements which comprise:
the consolidated statement of financial position
as at 30 June 2023;
the consolidated statements of comprehensive
income, changes in equity and cash flows for
the year then ended; and
notes, including a summary of significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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) issued by
the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for
Accountants’ International Code of Ethics for Professional Accountants (including International Independence
Standards) (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the Auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the Group in relation to the review of the Group’s consolidated
interim financial statements, regulatory assurance services and agreed upon procedure engagements. Subject to
certain restrictions, partners and employees of our firm may also deal with the group on normal terms within the
ordinary course of trading activities of the business of the Group. These matters have not impaired our
independence as auditor of the Group. The firm has no other relationship with, or interest in, the Group.
© 2023 KPMG, a New Zealand Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private
English company limited by guarantee. All rights reserved.
HARMONEY ANNUAL REPORT FY23
PAGE 66
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually
and on the consolidated financial statements as a whole. The materiality for the consolidated financial
statements as a whole was set at $3,770,000 determined with reference to a benchmark of the Group’s total
assets. We chose the benchmark because, in our view, this is a key measure of the Group’s performance.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements in the current period. We summarise below those matters and our key audit
procedures to address those matters in order that the shareholders as a body may better understand the process
by which we arrived at our audit opinion. Our procedures were undertaken in the context of and solely for the
purpose of our statutory audit opinion on the consolidated financial statements as a whole and we do not express
discrete opinions on separate elements of the consolidated financial statements.
The key audit
matter
How the matter was addressed
in our audit
The valuation of expected credit loss provision (30 June 2023: $36.9m)
Refer to Note 14 to the consolidated financial statements.
The expected credit loss (‘ECL’)
provision on finance receivables is a key
audit matter due to the financial
significance of finance receivables and
the high degree of judgement and
complexity involved in the Group’s ECL
models.
The models use historical data which is
adjusted for forward looking information
and arrears status.
Additionally, management apply
judgemental overlays incorporating
forward-looking information to reflect
future economic conditions across New
Zealand and Australia.
The level of judgement involved in
determining the provision requires us to
challenge the appropriateness of
management’s assumptions.
Our audit procedures, included:
Testing key controls relating to the Group’s lending, provision
and monitoring processes including the approval of new
lending, review of the provision and arrears calculation;
Developing, with the help of our technical specialists, an
alternative comparison ECL model using the observable
industry data relating to the probability of default and loss given
default. The provision derived from the alternative comparison
ECL model was compared to the Group’s provision to assess if
the Group’s provision is within an acceptable range;
Assessing the integrity of data used as inputs into the
alternative comparison ECL model by tracing a sample of inputs
including staging, term of loan and maturity date used to
underlying loan documents;
Assessing the Group’s significant accounting policies and ECL
modelling methodology against the requirements of the
standards and underlying accounting records; and
Evaluating the Group’s disclosures in the consolidated financial
statements using our understanding obtained from our testing
against the requirements of the accounting standards.
HARMONEY ANNUAL REPORT FY23
PAGE 67
Other information
The Directors, on behalf of the Group, are responsible for the other information included in the entity’s Annual
Report. Other information includes the Chairman’s report, Chief Executive’s report, review of operations and
disclosures relating to corporate governance. Our opinion on the consolidated financial statements does not
cover any other information and we do not express any form of 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 materially
misstated. If, based on the work we have performed, 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.
Other matter
The consolidated financial statements of the Group, for the year ended 30 June 2022, were audited by another
auditor who expressed an unmodified opinion on those statements on 30 August 2022.
Use of this independent auditor’s report
This independent auditor’s report is made solely to the shareholders as a body. Our audit work has been
undertaken so that we might state to the shareholders those matters we are required to state to them in the
independent 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 shareholders as a body for our audit work, this independent
auditor’s report, or any of the opinions we have formed.
Responsibilities of the Directors for the
consolidated financial statements
The Directors, on behalf of the Company, are responsible for:
the preparation and fair presentation of the consolidated financial statements in accordance with generally
accepted accounting practice in New Zealand (being New Zealand Equivalents to International Financial
Reporting Standards) and International Financial Reporting Standards issued by the New Zealand
Accounting Standards Board;
implementing necessary internal control to enable the preparation of a consolidated set of financial
statements that is free from material misstatement, whether due to fraud or error; and
assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate or to
cease operations or have no realistic alternative but to do so.
HARMONEY ANNUAL REPORT FY23
PAGE 68
Auditor’s responsibilities for the audit of
the consolidated financial statements
Our objective is:
to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error; and
to issue an independent 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 will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They 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 these consolidated financial statements is located at
the External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor's report is John Kensington.
For and on behalf of
KPMG
Auckland
24 August 2023
HARMONEY ANNUAL REPORT FY23
PAGE 69
Shareholder Information
The shareholder information set out below was applicable as at 31 July 2023.
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
124
217
131
241
53
766
0.05
0.64
0.99
7.90
90.42
100.00
0
0
0
0
0
0
0
0
0
0
0
0
There were 137 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
David Stevens
Brad Hagstrom, Renai Hagstrom, and Guy Hagstrom
HSBC Custody Nominees (Australia) Limited
Sharesies Nominee Limited
Tap Capital Pty Ltd
Monde Five Limited
Andrew Cathie
Duncan Gross
Mono Lake Trustee Limited
Australian Executor Trustees Limited
Denise Campbell
David Flacks
Total
% of total shares issued
18.54
10.10
8.93
8.60
7.50
5.51
5.37
3.87
2.23
2.23
2.06
1.49
1.33
1.15
1.03
1.01
0.94
0.86
0.84
0.80
84.39
HARMONEY ANNUAL REPORT FY23
PAGE 70
Unquoted equity securities
Performance rights
Convertible notes
Substantial holders
Substantial holders in the Company are set out below:
Name of holder
Neil Roberts
Heartland Group Holdings Limited
Lookman Family Trust
Lisa Capital Pty Ltd
Trade Me Limited
Number on issue
Equity securities on
conversion
Number of holders
7,028,500
8,000,000
7,028,500
3,333,333
16
3
Number held
% of total shares issued
18,821,602
10,257,870
9,069,618
8,730,461
7,620,959
18.54
10.10
8.93
8.60
7.50
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.
HARMONEY ANNUAL REPORT FY23
PAGE 71
Corporate Information
For the year ended 30 June 2023
This section is presented in NZD.
Directors
The following persons held office as Directors of the Company and the Company’s subsidiaries during the year ended 30 June
2023.
Harmoney Corp Limited
Monique Cairns (Appointed 1 August 2022)
David Flacks (Resigned 1 August 2022)
Tracey Jones
Paul Lahiff
John Quirk (Appointed 1 August 2022)
Neil Roberts
David Stevens
Harmoney Australia Pty Ltd
Brad Hagstrom
David Nesbitt
David Stevens
Simon Ward
Harmoney Services Australia Pty Ltd
Brad Hagstrom
David Nesbitt
David Stevens
Simon Ward
Harmoney Services Limited
Amalgamated with Harmoney Limited, Harmoney Investor Trustee Limited, and Harmoney Warehouse Limited on
30 December 2022, and amalgamated with Harmoney Nominee Limited on 31 January 2023.
Brad Hagstrom
Neil Roberts (Resigned 18 April 2023)
David Stevens
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.
HARMONEY ANNUAL REPORT FY23
PAGE 72
Directors’ attendances
The following table shows the Board and Committee meetings held and the Directors’ attendances during the financial year
ended 30 June 2023.
Board
Audit and Risk
Committee
Nomination and
Remuneration Committee 1
Attended
Held 2
Attended
Held 2
Attended
Held 2
Monique Cairns (appointed 1 August 2022)
David Flacks (resigned 1 August 2022)
Tracey Jones
Paul Lahiff
John Quirk (appointed 1 August 2022)
Neil Roberts
David Stevens
9
0
9
9
9
9
9
9
0
9
9
9
9
9
4
1
5
5
4
4
1
5
5
4
N/A
5
N/A
5
2
1
3
3
2
N/A
3
2
1
3
3
2
N/A
3
1 Nomination and Remuneration Committee discussions were also held at Director-only sessions of Board meetings.
2 Number of meetings held during the time the Director held office or was a member of the committee.
Directors’ interests
The following are particulars of general disclosures of interest by Directors of Harmoney Corp Limited holding office at 30
June 2023, pursuant to section 140(2) of the Companies Act 1993. Where applicable, the disclosures also include directorships
of subsidiaries of the relevant companies.
Monique Cairns
BoatCo R3500-5 Limited
Cairns Family Trust
Caribou Consulting Limited
DEC International NZ Limited
Kaihere Trust
Monstar Trust
The Almo Trust
Shareholder
Beneficiary
Director and Shareholder
Director
Trustee
Trustee and Beneficiary
Trustee and Beneficiary
The New Zealand Home Loan Company Limited
The New Zealand Portrait Gallery / Te Pūkenga Whakaata
Director
Trustee
The Northern Club
Tracey Jones
Cove Road Soapworks Limited
Evince Limited
Harmoney Share Sale Company Limited
Iris Group Holdings Limited
Iris Services Limited
Iris Life Limited
Jones Family Office Partners Limited
Kepa Investments Limited
LamCam Limited
N’Godwi Trust
Nikko Asset Management NZ Limited
Partners Group Holdings Limited
Partners Group Nominee Limited
Partners Life Limited
PGH Shareplan Trustee Limited
Punakaiki Fund Limited
Committee Member
Director and Shareholder
Director
Director
Director
Director
Director
Director and Shareholder
Director and Shareholder
Director
Trustee
Director
Director
Director
Director
Director
Director
HARMONEY ANNUAL REPORT FY23
PAGE 73
RC Custodian Limited
Sandat Consulting Limited
Stride Holdings Limited
Stride Property Limited
Stride Investment Management Limited
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.
John Quirk
Aeroqual Limited
Howard & Company Ventures Limited
Portainer.io Limited
Quirk International Limited
Neil Roberts
Harmoney Share Sale Company Limited
Neil Roberts Business Trust
Neil Roberts Trustee Company Limited
Roberts Family Trust
David Stevens
Harmoney Australia Pty Ltd
Harmoney Services Australia Pty Ltd
Harmoney Services Limited
Harmoney Share Sale Company Limited
Liquid Asset Enterprises Pty Ltd
Director
Director and Shareholder
Director
Director
Director
Director
Director
Director
Director
Director and Shareholder
Director
Director and Shareholder
Director and Shareholder
Director
Director and Shareholder
Director and Shareholder
Director and Shareholder
Director and Shareholder
Director
Trustee and Beneficiary
Director and Shareholder
Trustee and Beneficiary
Director
Director
Director
Director
Director and Shareholder
The following are particulars of general disclosures of interest by Directors of Harmoney Corp Limited's subsidiaries (other
than those who are also Directors of Harmoney Corp Limited) holding office at 30 June 2023, pursuant to section 140(2) of
the Companies Act 1993. Where applicable, the disclosures also include directorships of subsidiaries of the relevant companies.
Brad Hagstrom
Hagstrom Family Trust
David Nesbitt
Neslan Pty Limited
Nesbitt Family Trust
Simon Ward
Monde Five Limited
Trustee and Beneficiary
Director and Shareholder
Beneficiary
Director and Shareholder
HARMONEY ANNUAL REPORT FY23
PAGE 74
Indemnities and insurance
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
Tracey Jones
Monique Cairns
John Quirk
David Flacks
Directors' fees (NZ$)1
188,309
90,000
81,667
73,333
7,667
1 Harmoney does not offer share options, or any benefits on retirement, to non-executive directors.
Employee remuneration
Harmoney paid total remuneration for FY23 in excess of NZ$100,000 in the following bands:
Remuneration including share-based remuneration (NZ$)
Number of employees
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
200,000 - 210,000
210,000 - 220,000
220,000 - 230,000
310,000 - 320,000
320,000 - 330,000
350,000 - 360,000
360,000 - 370,000
380,000 - 390,000
440,000 - 450,000
460,000 - 470,000
540,000 - 550,000
890,000 - 900,000
1,090,000 - 1,100,000
2,210,000 - 2,220,000
Donations
4
3
7
10
6
3
4
1
2
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
The Group donated NZ$1,000 during the year ended 30 June 2023 (2022: NZ$3,750). $Nil donations were made to political
parties (2022: $Nil).
HARMONEY ANNUAL REPORT FY23
PAGE 75
Directory
Registered Office
Harmoney Corp Limited
Level 3, 110 Customs Street West
Auckland 1010
New Zealand
Auditor
KPMG
KPMG Centre
18 Viaduct Harbour Avenue
Auckland 1010
New Zealand
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).
Harmoney Corp Limited was admitted to the official list of the ASX on 19 November 2020 (ASX issuer code HMY).
Notice of Annual General Meeting
The Annual General Meeting of Harmoney Corp Limited will be held on 15 November 2023.
Corporate Governance Statement
www.harmoney.com.au/investor
Harmoney Websites
www.harmoney.co.nz | www.harmoney.com.au
HARMONEY ANNUAL REPORT FY23
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