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Triton International2014 Shareholder Review
BUILDING
FOR THE
FUTURE
CONTENTS
04 Key Results
04
Financial highlights and
Operational highlights
05 Chairman’s Report
06 Managing Director’s Report
08 Radio Rentals and Rentlo
12 Thorn Equipment Finance
13 Thorn Financial Services
14 NCML
15
People and the Community
20 Financial Summary
22 Four Year Performance Summary
IBC Corporate Directory
NOTICE OF MEETING
Notice is hereby given that the Annual
General Meeting will be held at
Four Points by Sheraton, 161 Sussex
Street Sydney on 26th August 2014,
commencing at 11.00am.
2
Thorn Group 2014 Shareholder Review Thorn is one of Australia’s leading financial services
providers, meeting the needs of niche consumer and
commercial markets.
In 2014, Thorn demonstrated both the resilience and the
potential of its business model, by delivering strong growth
in revenue and a significant increase in receivables. Thorn’s
core business, Radio Rentals, continued its growth path as
the main contributor to group results, while newer business
divisions continue to grow and gain scale.
Over the past three years Thorn’s strategy has been to
diversify and invest in the extension of its financial services
to target a wider demographic. Benefits from this are now
apparent, as Thorn builds for the future it reaches out to
more customers and delivers growing financial rewards
for shareholders.
KEY FACTS:
Thorn Group has over
110,000
customers and
90
outlets nationally
3
2014
RESULTS & HIGHLIGHTS
AVERAGE CONTRACTED TERM
(months)
NET PROFIT AFTER TAX
(A$m)
25
20
15
10
5
0
300
250
200
150
100
50
0
26.0
’10
’11
’12
’13
’14
AVERAGE UNITS ON RENT
(’000s)
271
’10
’11
’12
’13
’14
FINANCIAL
HIGHLIGHTS
•
Revenue up 16% to $235M
• Net profit after tax $28.15M
•
•
Net cash from operating
activity $104M
Gearing levels remain conservative
at 22%
• Earnings per share up to 18.94c
•
Full year dividend 11 cents
fully franked
4
40
30
20
10
0
14
12
10
8
6
4
2
0
28.15
’10
’11
’12
’13
’14
AVERAGE RENTAL DUES
(A$m)
13.0
’10
’11
’12
’13
’14
OPERATIONAL
HIGHLIGHTS
•
•
•
•
•
Group receivables up 32% to $217M
Record installations and earnings for
Radio Rentals/Rentlo
Launch of Thorn Money as part of
Thorn Financial Services
Thorn Equipment Finance strong
book build to $63.55M
Higher earnings from NCML,
improved operational performance
Thorn Group 2014 Shareholder Review CHAIRMAN’S REPORT
“ THORN HAS
DELIVERED A
SOLID RESULT
IN A YEAR OF
INVESTMENT”
W
ith business origins nearly
80 years ago, this is Thorn
Group’s eighth Annual Report
as an ASX listed company,
presenting another year of
strong financial performance and returns
for investors.
The core consumer rental division has again
delivered a record performance and, with a
strong base of recurring revenue streams and
significant cash flows. This result underscores
its resilience and strength. This continued
strong performance has enabled the business
to maintain investment in new initiatives,
which has laid the foundation for sustainable
future growth.
In financial year 2014, Thorn recorded some
significant achievements:
• Radio Rentals/Rentlo, achieved record
installations and revenue during the year
• Cashfirst now has an unsecured personal
loan book of $23 million, creating a solid
cornerstone for broader development of
Thorn Financial Services
• Thorn Money was launched to further
expand the financial services capability
of the group and expand the consumer
financial services offerings.
• Thorn Equipment Finance is growing
strongly with new financing up 22.9 per
cent to $63.55 million, and further growth
will be assisted by the establishment of a
SPV finance facility.
• The restructure of NCML is progressing well
as it resumes a longer term growth path.
EARNINGS, BALANCE SHEET
Thorn has been able to keep profit steady
at $28.15 million in financial year 2014, even
after investing to build the business. The
soundness of the group’s business model
is reflected in the return on average capital
employed of 21.83 per cent. The ongoing
strength of Thorn’s balance sheet, with
relatively low gearing, is a reflection of
Thorn’s conservative approach to capital
management as well as indicating a potential
to fund future growth.
DIVIDEND
Final dividend was increased to 6.5 cents,
taking full year dividend to 11 cents a share
fully franked. The dividend reinvestment
plan continues at a discount of 2.5 per cent,
providing further opportunity for investors to
share in future growth.
CORPORATE GOVERNANCE
AND SUSTAINABILITY
Investors have a right to expect a high degree
of attention to the best standards of corporate
governance and as a board we seek to foster
and uphold those standards. The financial
report component of this Shareholder Review
sets out our policies and practices, including
those related to remuneration. This year we
have considerably enhanced this section of the
report to provide greater transparency to our
remuneration strategies.
We also see great importance in Thorn
embracing corporate social responsibility,
which the group achieves through a number
of endeavours. We adhere strictly to a code
of responsible lending in the way we relate
to customers. Our caring attitude has been
reinforced by the introduction of a hardship
contract which assists customers during
a time of financial difficulty. It is pleasing
to note that this initiative was actually
suggested by our staff which shows their
genuine concern for customer welfare. We
actively seek to empower and support our
staff and so provide a range of learning and
development opportunities which is key to
developing a positive culture. Our priority is
to ensure Thorn is a sustainable business and
a positive contributor to the community. This
incorporates financial support for charitable
organisations and local welfare groups,
integrating environmental considerations
into purchasing and supply decisions,
participation in industry associations and
pro-active consultation with legislative bodies
and regulators.
DAVID CARTER
CHAIRMAN
OUTLOOK
The board has a very positive view of the
medium term outlook for Thorn as it begins
to see the outcomes of its strategy to build
a broader based financial services business.
This has involved absorbing costs from
investing in the future but, as our track record
shows, we have a strong and profitable
base which has allowed us to proceed in
this direction without it being significantly
detrimental to overall performance.
In coming years, Thorn will continue its drive
to become a broader based contemporary
style business which will enable it to meet
the needs of many more Australians and
becoming a significant industry participant in
financial services.
PEOPLE
The strategy on which Thorn is embarking
would not have been possible without the
foresight and capabilities of a talented
management team. Mr John Hughes, our
Managing Director since ASX listing in 2006,
retired on 30 June 2014. Mr Hughes has been
a strong driver and innovator of the business
and the Board is grateful for his hard work
and contribution over the preceding 8 years.
Mr James Marshall has been appointed as
Managing Director with effect from 1 June
2014. Mr Marshall was previously the Chief
Operating Officer and prior to that, General
Manager of the Radio Rentals/Rentlo
business. He has been with the business for
20 years and will continue to lead Thorn as
it develops its current strategic path. The
Company is very fortunate to have a strong
group of senior executives and staff who are
committed and passionate about the business
and we thank our staff for their efforts in
driving our business forward.
David Carter
Chairman
5
MANAGING DIRECTOR’S REPORT
“OUR INVESTMENT
IN EXPANSION WILL
GIVE US A BIGGER
BUSINESS OVER THE
NEXT FEW YEARS.”
I
n financial year 2014,
Thorn has recorded a solid
result while demonstrating
that the investment in its
diversification strategy was
now producing higher revenue
and strong receivables growth in all divisions.
It is very rewarding to see our “investing for
expansion” strategy gaining momentum and
showing positive results. Over the past few
years we have concentrated our efforts on a
number of critical areas for Thorn to achieve
its strategic objectives and there is now clear
evidence of these initiatives adding value to
the framework of the organisation.
FINANCIAL PERFORMANCE
Radio Rentals was again the standout
performer and remains the main contributor
to group performance. After more than 75
years, Radio Rentals, is still going strong,
defying industry trends and continuing to
grow each year, which shows its relevance
to the market, particularly through its “Rent,
Try, $1Buy” offering. Confirming this, is our
While additional investment costs relating
to systems, people and marketing have
impacted the short term profit performance
of Thorn Financial Services, the investment
was essential to develop a platform to launch
new products, including the introduction
of Thorn Money, which offers higher value
consumer loans as well as a tailored solution
for solar financing. Notably, NCML profit grew
after a restructure of the business last year,
which has resulted in improved operational
performance. The Thorn Equipment Finance
book is now at $63.55 million, continuing to
build towards the $100 million target which
would substantiate its position as a significant
contributor to growth.
BUSINESS RENEWAL
We understand that every business
needs renewal and reinvention to remain
contemporary and relevant. Last year, we
started a rigorous review of the core business
to ensure we stayed in a leadership position.
This review highlighted a strong potential
existed in new demographic markets where
identified consumers were
finding it difficult to access
contemporary products
and services from existing
providers. Consequently,
we have been developing a
suite of financial products
to expand our offering and
we are looking to test these
IT IS VERY REWARDING TO SEE
OUR “INVESTING FOR EXPANSION”
STRATEGY GAINING MOMENTUM
AND SHOWING POSITIVE RESULTS.
customer retention rate which has been
maintained at over 48 per cent, which means
nearly half of all our customers who complete
a contract sign up to take out a new contract
for another product.
Pleasingly we have seen strong revenue
growth across all business divisions and
higher earnings from Radio Rentals,
Thorn Equipment Finance and NCML.
initiatives, together with an evolution of the
Radio Rentals brand in two selected markets,
later this year.
We have also taken the concept of renewal
beyond Radio Rentals to the rest of our
business with plans to further expand the
range of products we offer in financial
services. This year we launched a higher value
loan offering through Thorn Money, and we
are now developing a ‘Small Amount Credit
6
JAMES MARSHALL
MANAGING DIRECTOR
Contract’ to leverage off the significant levels
of inquiry generated by Cashfirst advertising.
This will see the introduction of short term
loans with risk being mitigated through
lower balances and shorter terms, typically
between $1000 and $2000 for periods less
than 12 months.
In Thorn Equipment Finance, we are
broadening our business development
relationships to further improve our reach and
source of origination. Improved origination
has enabled the business to expand the
product range across leasing, rental, chattel
mortgages, commercial hire purchase and
funding packages tailored for franchising
operations. While maintaining strong
relationships with business introducers, the
company also sees opportunity in developing
a “commercial direct” model to meet the
needs of small and medium sized enterprises
in the market.
Among our new business initiatives, one
we are reviewing closely is Rent, Drive, Buy.
The success of this proposition depends
principally on customers being eligible and
able to buy their rented motor vehicle at the
end of the initial contract term. Initial results
from this trial have not met our sell-through
expectations and coupled with increasing
competition driving up customer acquisition
costs in the market, it is likely this trial will be
concluded in the coming months.
VISION
At Thorn, we take great pride in the
relationships we have with our retail and
business customers. We are passionate about
our values and maintaining a responsible
attitude to providing products and services
that meet the needs and financial capacity
of our customers. While we provide the
goods and services our customers want,
our overriding intention is to treat them
Thorn Group 2014 Shareholder Review fairly. This links to our vision of developing a
broader based financial services organisation,
taking a wider range of products and services
to a broader range of customers nationally, all
based on the values we stand for and utilising
the credit skills we have in the group.
Thorn is a people business and there are
many stories of how we have helped people
over the years, with just a few of them
highlighted in this report.
OUTLOOK
While our transformation strategy to become
a broader based financial services group
is gaining momentum with strong growth
across consumer and commercial portfolios,
continued investment in systems, people and
marketing to further develop these platforms
has seen profit held steady over the past few
years. In 2015, we are expecting a resumption
of profit growth as revenue increases flow to
the bottom line to deliver NPAT growth above
$30 million.
Our investment to diversify and expand our
operations will result in a bigger business
over the next few years, extending rewards to
shareholders, customers and employees while
substantiating a national presence across a
wider array of financial services.
This annual report marks the retirement of
John Hughes. John has been instrumental
in re-shaping the organisation since listing
in 2006 and he has been central to Thorn’s
success over that period. John’s leadership
has included developing a strong executive
team and culture to take the company
forward. I have been appointed Managing
Director of Thorn from 1 June 2014, which
follows having worked with the company for
the past 20 years and for the past year in the
role of Chief Operating Officer. The board and
management are confident Thorn will deliver
strong results as we execute our strategy to
expand and diversify into new markets.
James Marshall
Managing Director
7
BUSINESS REPORTS
RADIO RENTALS AND
RENTLO
BUSINESS PERFORMANCE
Record installations, revenue and earnings
Strong demand for smartphones and tablets
Introduction of 48 month Rent, Try,
$1Buy contract
R
adio Rentals provides an
extensive range of technology,
home and office needs,
through a range of consumer
lease products, principally
under the Rent, Try $1Buy!®
banner. Radio Rentals operates over
90 outlets nationally and has been a market
leader since 1937.
A feature of the core Radio Rentals and Rentlo
division, which becomes more apparent each
year, is its resilience. Radio Rentals has been
a household brand in Australia since 1937 and
continues to show it provides a service that
many Australians value greatly.
The division has defied industry trends,
challenging economic conditions, and once
again posted record revenue of $197 million
($170M) with record installations achieved
in 10 of the 12 months, driving growth in
operating lease and finance lease revenue for
financial year 2014. Furniture and technology
products remain the main contributors, with
significantly increasing demand for quality
“smart enabled” devices.
Over the past few years we have
experienced low levels of consumer
confidence across the country, with increasing
costs of living, especially utility costs,
continuing to have an impact and making it
harder for families to budget.
This year we have introduced a 48 month
Rent, Try, $1Buy! contract with a view to
improving affordability while still applying our
responsible lending policy. This gives some
customers a greater ability to enjoy larger size
products, whole room packages or additional
items they were unable to afford on shorter
term contracts.
8
I couldn’t afford to buy a new fridge and didn’t qualify for the interest free deals
advertised by retailers on TV. I was walking two kilometres a day to get bags
of ice which were costing me $6 a day, but Radio Rentals were able to help me
with a 250 litre fridge for just $1 per day, delivered and installed! (Radio Rentals
customer, Victoria)
Thorn Group 2014 Shareholder Review
STORE NETWORK AND PRODUCT DEVELOPMENT
Hub and Spoke store structure as shopping
habits change
Rent, Try, $1Buy – Industry Icon
Expanding financial products offering
financial products, such as take home layby,
interest free, savings club and extended
length contracts, which will give our
customers different alternatives to access
household goods. We will be looking to trial
these initiatives in selected markets later
this year.
are coming from online and telephone,
with our website recording over a million
visits a year. Marketing is also supported by
advertising, with television continuing to be a
powerful medium.
The Rent, Try, $1Buy™ offering continues to
be very popular with our customers as they
enjoy the benefits and flexibility of rental
as well as the potential
to obtain ownership. In
line with our “Responsible
Rental Policy”, we ensure
customers are provided
with products that suit
their needs and budget
and that they are not
over committed. Difficult
economic conditions
combined with customer
interest has led to us
Changing shopping habits over the years
have led us to rethink shop structures
in metropolitan areas and introduce the
‘hub and spoke’ business model. We are
moving away from full service branches
in metropolitan suburbs to kiosks and
showrooms in high traffic shopping centres,
which are supported by distribution
centres located in neighbouring industrial
THE DIVISION HAS DEFIED
INDUSTRY TRENDS,
CHALLENGING ECONOMIC
CONDITIONS, AND ONCE AGAIN
POSTED RECORD REVENUE OF
$197 MILLION
areas. This has led to a more efficient cost
structure while achieving a higher level of
customer interface.
At the same time as evolving our store
footprint, we have completely redesigned and
enhanced our website. Our current experience
is that around 70 per cent of new inquiries
introducing a hardship contract in the past
year, which has been helpful in assisting
customers at a time of need by giving them
extended terms.
In line with our strategy to expand our
offering and access a broader demographic,
we are developing a number of additional
*
I couldn’t get a mobile phone
because of a ‘black mark’ on my
credit rating from global roaming
charges years ago, I desperately
needed a mobile phone to keep
in touch and Radio Rentals were
able to help me out. (Radio Rentals
customer, NSW)
9
CUSTOMERS & PRODUCTS
Thorn Branded Smartphones
Introduction of new product categories
“Fair Go” credit policy appreciated
by customers
Leveraging off the popularity of the Apple
and Samsung smartphone range and the
growing technology category, we are looking
to introduce a high quality Thorn branded
smartphone. Our experience with Thorn
branded products has been very positive over
the years, especially with flat panel televisions
and refrigerators. We believe there is scope
to expand this concept further, offering the
products to a broader range of consumers,
with it having a positive effect on margins
and supporting the business.
As part of reviewing our product offering to
ensure we are responding to our customers’
needs we are reintroducing gaming products
such as the new PlayStation 4. Advances in
technology have improved the quality and
reliability of these types of machines meaning
we can more effectively allow customers to
enjoy a gaming experience.
We know from our market research
and customer surveys that new product
development and product range expansion
is appreciated by consumers. This is further
supported by our “fair go” credit policy
which provides affordable access to goods
and services that might not otherwise have
been available.
10
Thorn Group 2014 Shareholder Review
EVOLUTION OF CONSUMER RENTAL
Potential Second Brand
Expanding Demographic
Increasing Affordability
We recognise that while Radio Rentals has
been very successful for nearly 80 years,
the market and the demographics have
changed. We particularly see potential in
higher demographic markets where people
are currently finding it hard to access
some products.
Coinciding with the trial of new products, we
will test a new branding treatment for our
core business in two different market areas.
Additionally, we believe there is an
opportunity to launch a second rental brand
that would cater for consumers who may find
themselves in challenging circumstances and
need access to essential household goods.
To this end, work has commenced to further
explore this opportunity.
11
BUSINESS REPORTS
THORN EQUIPMENT
FINANCE
Building towards a $100M receivables book
New ‘Rental Advantage’ product
Ongoing relationships with brokers,
introducers and vendors
T
Thorn Equipment Finance
provides rental and financing
solutions for businesses and
government, with SMEs a key
target market for supply of a
diversified range of products.
Examples of equipment financed over the
past year are information technology systems,
telephony, point of sale systems, printers
and copiers and equipment ranging across
gaming, audio visual, hospitality, industrial
and commercial uses. The key target market
is small to medium enterprises and meeting
their funding requirements under $100,000,
an area we consider underserviced by the
major financial institutions and consequently
representing a considerable opportunity for
growth. The business also continues its long
standing relationship with TABs to which we
supply technology equipment and provide a
high level of service support. An opportunity
to expand on this platform to include an
integrated ‘Commercial Direct’ model offering
a full suite of commercial financing products
directly to a broader base of SME’s is being
developed and is expected to be launched in
the coming year.
After investing in a specialist team to drive
growth and quality business, strategic
alliances with vendors and brokers have been
expanded and place the business in a sound
position for attracting clients and lifting its
size and positioning in the market.
Financial performance has reflected this
investment, with the loan book now at
$63.55 million compared with $36 million
a year ago and the average deal size being
$27,000 compared with $22,000 in FY13.
Our focus on being a significant player in
hospitality equipment leasing has led to the
release of the ‘Rental advantage’ product
which provides a cost effective alternative
financing option to the hospitality industry.
12
Given the group’s strength in credit
assessment, financing and collections, a key
area for potential development is invoice
discounting, which we see as a significant
opportunity to link with other forms of
financial packages, to assist our clients with
their cash flow positions.
Additionally, we believe an opportunity exists
within the franchise network space to provide
a one-stop financing solution for franchisees
and franchisors, and we are currently holding
discussions with key stakeholders to explore
this opportunity further.
We were having cash flow issues
in the business and needed new
equipment to improve our situation
but were finding it difficult to get
finance. Thankfully we were able to
lease the products through Thorn
Equipment Finance and now the
business is growing and cash flow
is improving. (Thorn Equipment
Finance customer, NSW)
Thorn Group 2014 Shareholder Review
THORN FINANCIAL
SERVICES
Three brand strategy
New partnerships
Expansion of Thorn Money
T
horn Financial Services
comprises Thorn Money, which
provides unsecured loans up
to $15,000 and secured loans
up to $25,000, and Cashfirst,
which provides unsecured loans between
$2,000 and $5,000.
Expansion in financial services is a key driver
of Thorn’s business strategy and involves the
introduction of new products and targeting new
market segments, which our research shows is
underserviced by other financial institutions.
As part of our expansion strategy, we
have launched Thorn Money to expand the
consumer financial services offerings, targeting
the mid-prime demographic. Thorn Money
provides unsecured loans up to $15,000
and secured loans up to $25,000, as well as
specific loans for solar power up to $20,000.
Our cornerstone business, Cashfirst, which
provides unsecured term loans of $2,000
to $5,000 has continued its strong growth
trajectory with the loan book exceeding
$23 million by year-end, compared with
$21 million 12 months earlier, representing
growth of 9.5 per cent. The loan approval
rate was maintained at 15-20 per cent of
applications, with customer arrears and bad
debts remaining within budgeted levels and
demonstrating Thorn’s ongoing commitment
to responsible lending policies.
This year, a Cashfirst pilot store opened in
Campbelltown, NSW, and further expansion
of this program through a ‘store-in-store’
concept is being considered in conjunction
with the Radio Rentals review process.
In addition to these two distinct brand
strategies under the financial services
umbrella, which focus on the distinct
needs of different demographics, we are
also developing a third brand. This will be
driven via a ‘Small Amount Credit Contract’
(SACC) loan product and will leverage off
the significant levels of inquiry generated
by Cashfirst advertising. This product has
the potential to build volume at lower
acquisition costs while meeting the needs
of customers for smaller loan amounts
and shorter terms. SACC will provide loans
between $1,000 and $2,000, over periods
less than 12 months, for customers who find
themselves in unexpected circumstances.
We believe the SACC product is also very
applicable to the Radio Rentals demographic
and we are exploring opportunities to offer
this loan product through the Radio Rentals
store network later in FY15. SACC is distinctly
different from the payday lending market,
where loans of less than $1,000 are offered
for very short periods.
Investments in a new core loan system,
origination system and decisioning system
have provided TFS a new level of capability and
enabled the business to form a new partnership
with a national phone provider with a view to
providing retail finance. Initial results of this
trial have been positive and suggest we will be
in a position to expand this offering nationally
in coming months. Thorn’s growing technology
capability and capacity will support more of
these partnerships into the future.
In addition to Thorn Money’s solar power
and telecommunications partnerships, we
are currently looking at a number of other
alliances that will further broaden our footprint
in offering a wide range of financial services.
New online platforms have recently been
introduced to further improve our digital
presence and transactional capability.
In addition to advancements in online
capability, we are actively exploring
opportunities to establish or acquire a
broader geographic presence in the domestic
market to provide customers greater access
to products and services.
I recently started a plumbing
apprenticeship and the engine in my
car just gave up. Without a car my
job was at risk and it was hopeless
relying on public transport. I got a
Cashfirst loan to get the car fixed
and now I’m back at work. (Cashfirst
customer, NSW)
13
BUSINESS REPORTS
NCML
Better results
Increased focus on business development
Complete systems review
N
CML is a provider of credit
and receivables management
services throughout Australia.
While NCML encountered a
number of challenges during
FY14, the business is now positioned for
stronger growth in the future.
A restructure of NCML, which began in
the second half of FY13, has resulted in
improved operational performance in FY14,
with revenue growth of 9.2 per cent to
$20.6 million compared with $18.9 million
in FY13.
Along with significant streams of activity
coming from the NSW Government, in the
areas of State Debt Recovery and Roads and
Maritime, and a substantial lift in local council
work in South Australia, there has been a
greater variety of revenue sources for NCML
contributing to its 2014 performance. We
believe new business opportunities in the
commercial and consumer debt recovery as
well as purchased debt ledgers will contribute
to continuing growth.
An ongoing focus on improving our
operational execution has led to a complete
systems review, with a view to introducing
new IT platforms to improve transactional
capability in the year ahead. We have also
appointed dedicated General Managers to
improve the areas of operations as well as
business development.
The acquisition of new business development
tools and systems will support the team in
expanding our geographical footprint and
tap into new market areas leveraging off our
strengths and competencies in specialised
areas of credit management.
14
Thorn Group 2014 Shareholder Review
OUR COMMUNITY
PEOPLE AND THE
COMMUNITY
T
horn recognises that it has
many responsibilities as an
organisation, encompassing
shareholders, customers,
employees and the wider
community and environment.
In all that it does, Thorn sets high standards
of ethical behaviour and is mindful of
how it can have a positive impact on the
surrounding world.
Thorn is built on basic principles of openness,
honesty and trust, enhanced by a strong
“challenge” culture where everyone within
the organisation is encouraged to create and
advocate ideas that can improve reputation
and performance. In addition, there is a
philosophy of “Above the Line” behaviour
which focuses on taking responsibility,
accountability and ownership for whatever
we do.
Thorn is committed to operating its
businesses honestly, efficiently and fairly
with high moral, ethical and legal standards.
Our Code of Conduct sets clear expectations
for all of our people in their interactions with
each other, with customers and the wider
community. In return we provide our people
with training, support and opportunities to
fulfil their potential. We recognise and value
the unique contribution people can make
because of their individual backgrounds and
different skills, experiences and perspectives.
This operates at all levels of the organisation,
with our Board of Directors also reflecting our
gender diversity policy.
A key part of Thorn’s philosophy is in
providing optimum service to customers to
ensure they get a “fair go”, particularly those
people who may have encountered difficulties
in their lives and need assistance to obtain
basic household items. Our “Responsible
Lending & Rental Policy” is in place to ensure
we provide customers with products that
meet their needs and financial capacity. This
has been an important component of building
our customer base and generating long term
customer loyalty. Another element is also our
“Mum Test” which staff are encouraged to
consider whenever dealing with a customer
who is experiencing difficulties. Put simply,
it is to treat customers “as if they were your
mum” and do whatever is reasonable to
assist them. In addition, Radio Rentals/Rentlo
has introduced a specific ‘hardship contract’
that enables customers of good standing to
extend the balance of their contract at a lower
payment without any charges or penalties.
COMMUNITY
We believe community involvement is
a component of good business practice.
Consequently, we are committed to
developing and maintaining long term
strategic partnerships with community
organisations where we can utilise our
networks, resources and expertise to create
mutual benefit. As part of our commitment,
staff are encouraged to participate in
community activities along with Thorn
providing direct financial support, including
matching staff donations dollar for dollar for
approved activities.
Two of the major initiatives supported by
Thorn are the Children’s Tumour Foundation
of Australia and Project New Dawn.
CHILDREN’S TUMOUR FOUNDATION
OF AUSTRALIA
The Children’s Tumour Foundation and NF
Australia have as their objectives the funding of
research to find a cure for Neurofibromatosis
(NF) and the support of people affected by NF.
If you said “Neuro-what?” you are not alone.
Although Neurofibromatosis (NF) affects
one in every 3000 births, and more people/
kids have NF than Cystic Fibrosis, Duchenne
Muscular Dystrophy, Tay Sachs Disease
and Huntington’s disease combined – it is
relatively unknown. In a nutshell, NF is a
genetic disorder that causes tumours to grow
on the nerves throughout the body. Every
nerve cell in a child’s body has the potential
to become a tumour causing blindness,
deafness, bone deformities, learning
disabilities and severe chronic pain. NF is a
lifetime condition, and there is no cure.
Radio Rentals is the major sponsor of The
Children’s Tumour Foundation and Thorn
Corporate along with other divisions is
lending its support. Importantly sponsorship
activities are tangible and many involve direct
store and local community participation.
PROJECT NEW DAWN
Radio Rentals is also proud to be a founding
partner in Project New Dawn which was
created as an enterprise that could offer both
jobs and accommodation to the homeless.
The core partners are The Salvation Army
(accommodation management and personal
coaching), Radio Rentals (white goods and
furniture) and BP (rental guarantee, training
and employment opportunities). Participants
selected for the project receive 12-18 months
of employment and housing. With a stable
source of income, participants pay their own
rent and utilities which gives them a suitable
rental history acceptable to other landlords
when they graduate from the program.
The first house went live in 2008 in Melbourne
and there are now six houses across
Australia – two in Melbourne and one each in
Newcastle, Adelaide, Perth and Brisbane. Since
2008, 26 people have been recruited nationally
and roughly half of those selected have stayed
on or graduated from the program. The project
aims to have 30-40 properties Australia wide,
giving 60-80 homeless men and women the
opportunity to move from the street and into
regular employment.
15
OUR COMMUNITY
NATURAL DISASTER
GOVERNMENT AND INDUSTRY
As a market leader, Thorn believes it has
an important role to play in having a pro-
active relationship with Government bodies
in crafting and reviewing legislation and
regulations. Thorn is an active member
of the Australian Finance Conference
(AFC) and Australian Equipment Leasing
Association (AELA). Thorn has provided
input and feedback to Federal Treasury and
ASIC in relation to a number of matters
including proposed enhancements to the
National Consumer Credit Protection Act and
enforcement of current regulations.
Ultimately Thorn’s objective is to create
a positive working environment where
everyone can feel fulfilled about the work
they do and the contribution Thorn as a whole
is making to society.
When disaster strikes across Australia, such
as the Victorian Bushfires and Queensland
Floods or there is a worthwhile cause needing
assistance, then there is a good chance that
someone from Thorn will be there to assist
our customers and the community in general.
Over the years assistance has been provided
in various forms including the loan of bedding
and refrigerators for relief centres, three
month goodwill credits on customer accounts
and donation of products for fundraising.
ENVIRONMENT
As an importer of product under the Thorn
brand, the Company is heavily focused on
integrating environmental considerations into
our purchasing and supply strategies. Thorn is
also a member of the Australia New Zealand
Recycling Platform (ANZRP), which has
responsibility for recycling end of life televisions.
HEALTH AND SAFETY
Thorn recognises its responsibility to
provide a safe environment for our people,
our customers and others who come into
contact with our business. Our Health and
Safety program is regularly reviewed and
our Regional Safety Teams provide two way
feedback on managing potential hazards and
best practices.
Left: Treadmill Challenge May 2014; Above: Children’s Tumour Foundation Cupids Undie Run 2014
(Red – Queensland, Blue – Victoria).
16
Thorn Group 2014 Shareholder Review OUR BRANDS
TM
17
Providing
a Positive Working
Environment for
our People
Providing
Support for
the Community
• Children’s
Tumour Foundation
Sponsorship
• Project New Dawn
• Local Activities
Providing
Optimum Service
for our Customers
• Responsible Lending
& Rental Policy
• “The Mum Test”
• New Hardship Policy
Health,
Safety and
Environmental
Responsibility
Contributing
to Legislative
and Regulatory
Improvement
Providing
a Positive Working
Environment for
our People
Providing
Support for
the Community
• Children’s
Tumour Foundation
Sponsorship
• Project New Dawn
• Local Activities
18
Providing
Optimum Service
for our Customers
• Responsible Lending
& Rental Policy
• “The Mum Test”
• New Hardship Policy
Health,
Safety and
Environmental
Responsibility
Contributing
to Legislative
and Regulatory
Improvement
Thorn Group 2014 Shareholder Review Providing
a Positive Working
Environment for
our People
Providing
Support for
the Community
• Children’s
Tumour Foundation
Sponsorship
• Project New Dawn
• Local Activities
Providing
Optimum Service
for our Customers
• Responsible Lending
& Rental Policy
• “The Mum Test”
• New Hardship Policy
Health,
Safety and
Environmental
Responsibility
Contributing
to Legislative
and Regulatory
Improvement
Providing
a Positive Working
Environment for
our People
Providing
Support for
Providing
the Community
a Positive Working
Environment for
Tumour Foundation
• Children’s
our People
Sponsorship
• Project New Dawn
• Local Activities
Providing
Support for
the Community
• Children’s
Tumour Foundation
Sponsorship
• Project New Dawn
• Local Activities
THORN’S 2014
CSR FOCUS AREAS
Providing
Optimum Service
for our Customers
• Responsible Lending
& Rental Policy
• “The Mum Test”
• New Hardship Policy
Providing
Optimum Service
for our Customers
• Responsible Lending
& Rental Policy
• “The Mum Test”
• New Hardship Policy
Health,
Safety and
Environmental
Responsibility
Health,
Safety and
Environmental
Responsibility
Contributing
to Legislative
and Regulatory
Improvement
Contributing
to Legislative
and Regulatory
Improvement
Providing
Providing
a Positive Working
a Positive Working
Environment for
Environment for
our People
our People
Providing
Providing
Support for
Support for
the Community
the Community
• Children’s
• Children’s
Sponsorship
Sponsorship
Tumour Foundation
Tumour Foundation
• Project New Dawn
• Project New Dawn
• Local Activities
• Local Activities
Providing
Providing
Optimum Service
Optimum Service
for our Customers
for our Customers
• Responsible Lending
• Responsible Lending
& Rental Policy
& Rental Policy
• “The Mum Test”
• “The Mum Test”
• New Hardship Policy
• New Hardship Policy
Health,
Health,
Safety and
Safety and
Environmental
Environmental
Responsibility
Responsibility
Contributing
Contributing
to Legislative
to Legislative
and Regulatory
and Regulatory
Improvement
Improvement
19
For the year ended 31 March 2014
FINANCIAL SUMMARY
INCOME STATEMENT
For the year ended 31 March
In thousands of AUD
Revenue
Profit before income tax
Income tax expense
Profit for the period
BALANCE SHEET
As at 31 March
In thousands of AUD
Assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Trade and other receivables
Deferred tax assets
Property, plant and equipment
Rental assets
Intangible assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Loans and borrowings
Employee benefits
Income tax payable
Provisions
Total current liabilities
Loans and borrowings
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
20
Thorn Group 2014 Financial Report
2014
2013
234,855
203,203
41,032
(12,881)
28,151
40,788
(12,767)
28,021
2014
2013
2,393
68,981
71,374
89,015
3,260
4,423
52,644
31,734
181,076
252,450
25,903
9,099
5,621
7,039
498
48,160
31,397
248
1,025
32,670
80,830
171,620
99,060
2,851
69,709
171,620
4,871
58,463
63,334
67,139
2,898
3,655
52,929
31,401
158,022
221,356
26,117
–
4,719
4,520
502
35,858
28,900
338
887
30,125
65,983
155,373
95,483
2,769
57,121
155,373
STATEMENT OF CASH FLOWS
As at 31 March
In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest paid
Interest received
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of assets
Acquisition of rental assets
Thorn Equipment Finance settlements
Acquisition of property, plant and equipment
Acquisition of software
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at April 1
Cash and cash equivalents at 31 March
2014
2013
255,109
(138,438)
116,671
(2,073)
151
(10,724)
104,025
1,655
(70,178)
(32,325)
(2,538)
(2,727)
(106,113)
24,996
(13,400)
(11,986)
(390)
(2,478)
4,871
2,393
222,660
(120,612)
102,048
(1,807)
260
(7,173)
93,328
1,126
(60,463)
(33,161)
(1,874)
(1,784)
(96,156)
18,900
(4,000)
(13,071)
1,829
(999)
5,870
4,871
21
For the year ended 31 March 2014
FOUR YEAR
PERFORMANCE SUMMARY
In thousands of AUD
Operating Performance
Total revenue
Normalised net profit (before significant items)
Significant items
Reported net profit
Operating cash flow
Capital expenditure – rental assets
Balance Sheet Structure
Total assets
Capital employed
Equity
Net debt
Per Share Performance
Number of shares
Weighted average number of shares – basic
Weighted average number of shares – diluted
Basic earnings per share
Diluted earnings per share
Share price at year end
Dividend per share1
Dividend payout ratio
Financial Ratios
Interest cover based on EBITA
Net debt to equity
Debt to equity
Return on capital employed2
Return on equity3
1
Dividends declared during the year.
2014
2013
2012
2011
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
m
m
m
cents
cents
cents
cents
%
x
%
%
%
%
234.9
28.4
–
28.2
104.0
70.2
252.5
209.7
171.6
38.1
149.5
148.6
148.8
18.94
18.91
2.15
11.00
55
22.4
22.2
23.6
21.8
26.2
203.2
28.0
–
28.0
93.3
60.5
221.4
179.4
155.4
24.0
147.6
146.6
146.8
19.11
19.09
2.06
10.50
55
24.4
15.4
18.6
24.8
28.1
188.4
27.8
–
27.8
71.6
54.8
185.3
148.4
140.2
8.2
146.4
144.7
146.5
19.24
19.01
1.57
9.50
50
27.2
6.0
10.0
30.3
33.0
157.6
23.0
(1.0)
22.0
68.4
52.6
171.8
122.0
95.0
27.0
129.9
130.8
132.0
16.84
16.69
2.19
8.49
50
53.1
28.4
37.8
35.0
37.0
Calculated as total profit before interest and tax divided by the average capital employed.
Calculated as total profit before interest and tax divided by the average equity.
2
3
22
Thorn Group 2014 Shareholder Review CORPORATE DIRECTORY
Directors
David Carter
Chairman
James Marshall
Managing Director
Peter Henley
Non-Executive Director
Joycelyn Morton
Non-Executive Director
Stephen Kulmar
Non-Executive Director
Company Secretary
Peter Eaton
Registered office
Thorn Group Limited
Level 1
62 Hume Highway
Chullora NSW 2200
www.thorn.com.au
Telephone:
+61 2 9101 5000
Facsimile:
+61 2 9101 5033
Auditor to Thorn Group Limited
KPMG
10 Shelley Street
Sydney NSW 2000
Registry
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
Designed and produced by FCR
www.fcr.com.au
23
2014 Financial Report
BUILDING
FOR THE
FUTURE
For the year ended 31 March 2014
FINANCIAL SUMMARY
REVENUE
(A$m)
NET PROFIT AFTER TAX
(A$m)
260
240
220
200
180
160
140
120
100
234.8
’10
’11
’12
’13
’14
40
30
20
10
0
28.15
’10
’11
’12
’13
’14
BASIC EARNINGS PER SHARE
(cents)
DIVIDENDS PAID PER SHARE
(cents)
21
19
17
15
13
11
9
7
5
18.94
’10
’11
’12
’13
’14
11
10
9
8
7
6
5
10.5
’10
’11
’12
’13
’14
RESULTS SUMMARY FOR THE YEAR
In thousands of AUD
Revenue
Profit before Tax
Net Profit after Tax
Earnings per Share (cents)
Net Cash from Operating Activities
Thorn Group 2014 Financial Report
2014
2013
234,855
203,203
41,032
28,151
18.94
40,788
28,021
19.11
104,025
93,328
Thorn Group Limited and its Controlled Entities
ACN 072 507 147
Contents
01
28
29
30
31
32
33
61
62
64
65
Directors’ report
Lead auditor’s independence declaration
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report
Additional ASX information
Corporate directory
Notice of meeting
Notice is hereby given that
the Annual General Meeting
will be held at Four Points by
Sheraton, 161 Sussex Street
Sydney on 26 August 2014,
commencing at 11:00am.
DIRECTORS’
REPORT
The directors present their report together with the
financial report of Thorn Group Limited (the ‘Company’)
and its controlled entities (together referred to as
the ’consolidated entity’) for the financial year ended
31 March 2014 and the auditor’s report thereon.
Contents of directors’ report
Page Note
02
04
04
04
04
06
07
09
15
17
17
18
19
20
21
22
22
25
25
25
25
26
26
26
27
27
1
2
Directors
Company secretary
3 Directors’ meetings
4
Corporate governance statement
4.1 Board of directors
4.2 Remuneration and
Nomination Committee
4.3 Remuneration report – audited
4.3.1 Principles of remuneration
4.3.2 Directors’ and executive
officers’ remuneration – audited
4.3.3 2013 STI outcomes – audited
4.3.4 Equity Instruments
4.4 Audit, Risk and Compliance Committee
4.5 Risk management
4.6 Ethical standards
4.7 Communication with shareholders
5
Principal activities
5.1 Operating and financial review
5.2 Shareholder returns
Events subsequent to reporting date
Likely developments
6
7
8 Directors’ interests
9
Performance rights
10
Indemnification and Insurance of Officers
and Auditors
11 Non-audit services
12 Lead auditor’s independence declaration
13 Rounding off
1
1. Directors Information
The directors of the Company at any time during or since the end of the financial year are:
David Carter (Age 60)
Chairperson
Independent
Non-Executive
Appointed:
3 November 2006
Qualifications
Bachelor of Economics, Bachelor of Law
(Hons), Masters of Law, and a Bachelor
of Civil Law
Experience
David is a lawyer and corporate
advisor who was previously a partner
of a major international law firm.
David currently runs his own legal and
corporate advisory practice. David
has significant experience in corporate
governance, M&A, commercial
and international law. David is a
Member of the Australian Institute of
Company Directors.
John Hughes (Age 62)
Managing Director
Appointed:
3 November 2006
Qualifications
Bachelor of Commerce
Joycelyn Morton (Age 55)
Independent
Non-Executive
Appointed:
1 October 2011
Qualifications
Bachelor of Economics
Experience
John has over 35 years experience as a
senior executive in a number of leading
Australian and international companies
including Rural Holding Limited,
Thorn EMI Rentals Australasia, Sharp
Corporation, Competitive Foods, and
Grace Bros.
Experience
Joycelyn began her career with Coopers
& Lybrand (now PwC), before joining
Woolworths Limited and later the Shell
Group in Australia and the Netherlands.
She is a Fellow of CPA and ICAA in
Australia, the Australian Institute of
Company Directors and the Governance
Institute of Australia.
Other current directorships
N/A
Other current directorships
N/A
Former directorships
Azure Healthcare Limited
Victorian Energy Network Corporation
Former directorships
N/A
Other current directorships
Argo Investments Limited,
Noni B Limited
Snowy Hydro Limited
Former directorships
Crane Group Limited
Count Financial Limited
Interests in shares and options
192,729 ordinary shares
Interests in shares and options
3,429,113 ordinary shares
Interests in shares and options
39,000 ordinary shares
2
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) Peter Henley (Age 67)
Independent
Non-Executive
Stephen Kulmar (Age 61)
Independent
Non-Executive
James Marshall (Age 41)
Executive
Appointed:
21 May 2007
Appointed:
15 April 2014
Appointed:
5 May 2014
Paul Lahiff (Age 61)
Independent
Non-Executive
Appointed:
21 May 2007
Retired:
22 August 2013
Qualifications
Qualifications
Qualifications
Dip. Financial Services
Qualifications
Bachelor of Science
Experience
Peter has had a long and
distinguished career in
financial services generally
and in consumer and
commercial finance in
particular, having held senior
management positions with
AGC, Nissan Finance and
most recently GE Money.
Peter is a Fellow of the
Australian Institute of
Management and a member
of the Australian Institute of
Company Directors.
Experience
Stephen is the former
Managing Director and
Chairman of IdeaWorks and
is currently the Managing
Director of Retail Oasis, a
boutique retail marketing
services company.
Steve has over 30 years
experience in advertising and
has extensive experience
in retail strategy, brand
strategy, channel to market
strategy, business re-
engineering and new retail
business development.
Experience
Paul operates his own
consultancy firm specialising
in financial services strategy.
He has over 30 years
experience in the financial
services industry and has held
senior executive roles with
Westpac Banking Corporation
(in Sydney and London) and
the credit union sector.
He is a Fellow of the Financial
Services Institute of Australia
(FINSIA) and is a member of
the Australian Institute of
Company Directors (AICD).
Experience
James joined the company
in 1993 and held several
frontline and senior
management positions prior
to joining the Executive Team
which took the company to
public listing in 2006.
James has extensive
knowledge of the consumer
leasing and receivables
management industries
and has been instrumental
in driving the development
and growth of Thorn’s core
Radio Rentals business since
the IPO.
Most recently as Chief
Operating Officer, James
has led the development
and implementation of
the Group’s strategic
initiatives in financing and
receivables management.
Other current directorships
AP Eagers Limited
MTA Insurances Limited
Other current directorships
RCG Corporation Limited
Retail Oasis Pty Ltd
Other current directorships
N/A
Other current directorships
N/A
Former directorships
Charles Parsons Pty Ltd
Former directorships
N/A
Former directorships
N/A
Former directorships
GE Motor Solutions Australia
GE Money Singapore
and Malaysia.
United Financial
Services Limited
Interests in shares and
options
60,278 ordinary shares
Interests in shares
and options
Nil ordinary shares
Interests in shares
and options
126,887 ordinary shares
Interests in shares
and options
Nil ordinary shares
3
2. Company Secretary
Peter Eaton joined the Company in 1999 and was the Company’s Finance Manager before assuming the role of Group Financial
Controller in 2005 and the positions of Chief Financial Officer and Company Secretary in August 2006. Peter’s role encompasses
Finance, Information Technology, Business Development and Risk Management. Peter holds a Bachelor of Commerce degree from
the University of Western Sydney, is a member of CPA Australia and has undertaken the Senior Executive programme at London
Business School.
3. Directors’ Meetings
The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of
the directors of the Company during the financial year are detailed below.
Director
John Hughes
David Carter
Joycelyn Morton
Peter Henley
Paul Lahiff
Board Meetings
Audit Risk and Compliance
Committee Meetings
Remuneration and
Nomination Committee
Meetings
A
13
13
13
13
4
B
13
13
13
13
4
A
5a
5
5
5
2
B
5a
5
5
5
3
A
6a
6
6
6
1
B
6a
6
6
6
1
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year
(a)
Mr John Hughes was not a member of the Audit Risk and Compliance Committee or the Remuneration and Nomination Committee but
attended the meetings by invitation.
(b) Mr Stephen Kulmar was appointed as a non-executive director on 15 April 2014.
(c)
James Marshall was appointed as an executive director on 5 May 2014.
4. Corporate Governance Statement
This statement outlines the main corporate governance practices in place throughout the financial year, which comply with the
ASX Corporate Governance Council recommendations, unless otherwise stated.
4.1 Board of Directors
Role of the Board
The Board’s primary role is the protection and enhancement of long-term shareholder value.
To fulfil this role, the Board is responsible for the overall corporate governance of the Company including formulating its strategic
direction, approving and monitoring capital expenditure, setting remuneration, appointing, removing and creating succession
policies for directors and senior executives, establishing and monitoring the achievement of management’s goals and ensuring
the integrity of risk management, internal control, legal compliance and management information systems. It is also responsible
for approving and monitoring financial and other reporting.
In order to ensure that the Board functions and responsibilities are clearly identified, the Company has adopted a formal
Board Charter.
A copy of the Board Charter is located on the Company’s website (www.thorn.com.au).
The Board has delegated responsibility for operation and administration of the Company to the Managing Director and executive
management. Responsibilities are delineated by formal authority delegations.
4
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) Board Processes
To assist in the execution of its responsibilities, the Board has established an Audit, Risk and Compliance Committee and a
Remuneration and Nomination Committee. These committees have written mandates and operating procedures, which are
reviewed on a regular basis. The Board has also established a framework for the management of the Company including a system
of internal control, a business risk management process and the establishment of appropriate ethical standards.
The full Board currently holds scheduled meetings each year, 10-14 per annum, plus strategy meetings and any extraordinary
meetings at such other times as may be necessary to address any specific significant matters that may arise. The Board Charter
requires the full Board to meet at least once per year to review the performance of the directors, committees, and senior
executives, as well as, the relationship between the Board and management and matters of general corporate governance.
The agenda for Board meetings is prepared in conjunction with the Chairperson, Managing Director and Company Secretary.
Standing items include the divisional report, finance report, strategic matters, governance, compliance and continuous
disclosure. Submissions are circulated in advance. Executives are regularly involved in Board discussions and directors have other
opportunities, including visits to business operations, for contact with a wider group of employees.
Director and Executive Education
The Company has a formal process to educate new directors about the nature of the business, current issues, the corporate
strategy, the culture and values of the Company, and the expectations of the Company concerning performance of directors. In
addition, Directors are also educated regarding meeting arrangements and director interaction with each other, senior executives
and other stakeholders. Directors also have the opportunity to visit the Company’s facilities and meet with management to gain
a better understanding of business operations. Directors are given access to continuing education opportunities to update and
enhance their skills and knowledge.
The Company also has a formal process to educate new senior executives upon taking such positions. The induction program
includes reviewing the Company structure, strategy, operations, financial position and risk management policies. It also
familiarises the individual with the respective rights, duties, responsibilities and roles of the individual and the Board.
Independent Professional Advice and Access to Company Information
Each director has the right of access to all relevant Company information and to the Company’s executives and, subject to prior
consultation with the Chairperson, may seek independent professional advice from a suitably qualified adviser at the Company’s
expense. The director must consult with an advisor suitably qualified in the relevant field, and obtain the Chairperson’s approval
of the fee payable for the advice before proceeding with consultation. A copy of the advice received by the director is made
available to all other members of the Board.
Composition of the Board
The names of the directors of the Company in office at the date of this report, specifying which are independent, are set out on
pages 2 to 3 of this report. The composition of the Board is determined using the following principles:
– a minimum of three directors, with a broad range of expertise both nationally and internationally;
– a majority of independent non-executive directors;
– a majority of directors having extensive knowledge of the Company’s industries, and/or extensive expertise in significant
aspects of auditing and financial reporting, or risk management of large companies;
– a non-executive independent director as Chairperson; and
– directors are subject to re-election every three years (except for the Managing Director).
The Board considers the mix of skills and diversity of Board members when assessing the composition of the Board. The
Board assesses existing and potential directors’ skills to ensure they have appropriate industry expertise in the Company’s
operating segments.
The Board considers the diversity of existing and potential directors to ensure they are in-line with the geographical and
operational segments of the Company. The Board’s policy is to seek a diverse range of directors who have a range of ages,
genders and ethnicity which mirrors the environment in which the Company operates.
5
An independent director is a director who is not a member of management (a non-executive director) and who:
1.
holds less than five per cent of the voting shares of the Company and is not an officer of, or otherwise associated, directly or
indirectly, with a shareholder of more than five per cent of the voting shares of the Company;
2. has not within the last three years been employed in an executive capacity by the Company or a related body corporate or
has become a director within three years of ceasing to hold any such employment;
3. within the last three years has not been a principal of a material professional adviser or a material consultant to the
Company or another Company member or an employee materially associated with the service provided;
4.
is not a material supplier or customer of the Company or another member of the consolidated entity, or an officer of or
otherwise associated, directly or indirectly, with a material supplier or customer;
5. has no material contractual relationship with the Company or a related body corporate other than as a director of the
Company; and
6.
is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially
interfere with the director’s ability to act in the best interests of the Company.
The Board considers, ‘material’, in this context, to be where any director-related business relationship has represented, or is likely
in future to represent the lesser of at least ten per cent of the relevant segment’s or the director-related business’ revenue. The
board considered the nature of the relevant industries’ competition and the size and nature of each director-related business
relationship, in arriving at this threshold.
Applying these criteria, the Board is satisfied that David Carter, Peter Henley, Joycelyn Morton and Stephen Kulmar are
independent. In accordance with the ASX Corporate Governance Guidelines, the Chairperson is an independent director, and the
positions of Managing Director and Chairperson are held by different directors.
4.2 Remuneration and Nomination Committee
The Remuneration and Nomination Committee has a documented charter, approved by the Board. All members are non-
executive directors with a majority being independent. The Remuneration and Nomination Committee assists the Board in its
oversight responsibilities by monitoring and advising on:
– remuneration packages of senior executives, non-executive directors and executive directors;
– share option schemes and incentive performance packages;
– executive contracts;
– recruitment, retention and termination policies relating to the Board and senior executives; and
– monitoring the size and composition of the Board.
The members of the Remuneration and Nomination Committee during the year were:
– David Carter (Chairperson) – Independent, Non-Executive
– Peter Henley – Independent, Non-Executive
– Joycelyn Morton – Independent, Non-Executive
– Paul Lahiff – Independent, Non-Executive (Retired 22 August 2013)
The Managing Director, John Hughes, is also invited to Remuneration and Nomination Committee meetings, as required, to
discuss senior executives’ performance and remuneration packages but does not attend meetings involving matters pertaining
to him.
Stephen Kulmar was appointed the Chairperson on the Remuneration and Nomination Committee on 15 April 2014.
From time to time, the Committee takes advice from external consultants to identify potential candidates for the Board. The
Committee makes recommendations to the Board on the candidates, which votes on them. The Board then appoints the most
suitable candidates. Board candidates must stand for election at the general meeting of shareholders immediately following
their appointment.
Korn Ferry and Heidrick and Struggles were engaged during the financial year by the Board to assist in the recruitment of a
Non-Executive Director. Fees of $93,925 were incurred.
6
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) Korn Ferry were engaged during the financial year by the Board to assist in the recruitment of a new Managing Director and
Chief Executive Officer. Fees of $165,962 were incurred.
The terms and conditions of the appointment and retirement of non-executive directors are set out in a letter of appointment,
including expectations of attendance and preparation for all Board meetings, minimum hourly commitment, appointments to
other boards, the procedures for dealing with conflicts of interest and the availability of independent professional advice.
The Remuneration and Nomination Committee meets at least three times a year and as required. The Committee met six times
during the year and Committee members’ attendance record is disclosed in the table of directors’ meetings on page 4.
4.3. Remuneration Report – Audited
The directors are pleased to present the remuneration report setting out the remuneration information for key
management personnel (KMP), for the year ended 31 March 2014 and is prepared in accordance with section 300A of the
Corporations Act 2001.
The KMP of the Company and the consolidated entity for the year ended 31 March 2014 were:
Directors
David Carter
Peter Henley
Joycelyn Morton
Paul Lahiff (retired 22 August 2013)
Senior Executives
John Hughes
Chief Executive Officer (CEO)
James Marshall
Chief Operating Officer (COO)
Peter Eaton
Chief Financial Officer (CFO)
2013 Annual General Meeting (AGM) First Strike
Despite solid financial performance, at the 2013 AGM the Company received 27.47% of votes cast against our Remuneration
Report. In contrast, in 2012, only 1.5% of security holders voted against the Remuneration Report. This change in sentiment
concerned the Board.
As part of the review post the 2013 AGM, members of the Board including the Chairperson met with numerous stakeholders to
discuss Thorn’s remuneration arrangements. The Board appreciated the engagement with all stakeholders who have taken the
time to share their views.
The issues identified by shareholders and their representatives in respect of the 2013 remuneration structure, the remuneration
report and the actions taken by the Board to address these are:
STI disclosure including limits
Section 4.3.1 of this report provides comprehensive detail of the STI including, in particular,
that no amount of STI is paid unless budgeted NPAT is achieved. Further, only 30% of the
financial KPI is paid at target.
Retention payments to CEO
During 2013 the Board were advised to ensure the CEO and his corporate knowledge was
retained during a period of transition.
LTI scheme structure
A detailed explanation of the reasons for the retention payments to the CEO (CFO and
COO) is set out in this report.
The 2012 LTI grant has a performance period of 5 years and is only eligible to commence
vesting on the 3rd anniversary if a ROCE gateway is met. Importantly, only once that
gateway is met will the awards vest on the 3rd, 4th and 5th anniversary if relative TSR
hurdles are achieved.
No LTI was granted in the 2014 year.
Fee cap increase
The fee pool for NEDs has ensured the Board had the capacity to recruit a new director.
Disclosure of comparator group
The comparator group for the LTI, and against which KMP remuneration is benchmarked,
has been disclosed at www.thorn.com.au.
7
The board recognises its disclosure and explanation of the remuneration framework and rationale for its decisions did not meet
shareholder’s and their representative’s expectations in 2013.
At the time of the 2013 AGM, the 2014 remuneration packages had already been determined and it was not possible to make
significant changes for this year. The board has undertaken a comprehensive review of the remuneration framework and
structure and the disclosure of its current practices. The disclosure throughout this remuneration report seeks to transparently
explain how the remuneration has been structured and the rationale for various remuneration decisions.
The action taken, and decisions being considered, by the board for the 2015 financial year include:
– Further benchmarking of KMP remuneration; and
– Review and revision of the STI and LTI structure and framework with regard to:
– Market and industry practice; and
– More closely linking remuneration to Company strategy and shareholder interests in both the short and long term.
Details of any changes to the remuneration framework will be disclosed to the market, where required, and in the 2015
remuneration report, once approved by the Board.
2014 Remuneration highlights
CEO retirement
– John Hughes advised the Board of his retirement in November 2013, effective
30 June 2014.
Appointment of new CEO
– James Marshall, previously Chief Operating Officer was appointed to replace
John Hughes as Chief Executive Officer and Managing Director effective 1 June 2014.
– Mr Marshall’s annual remuneration was set at the time of his appointment and is
detailed on page 14.
Senior executive pay freeze
– Senior executives and General Manager salaries did not receive any fixed pay or
variable remuneration increases in the 2014 financial year except where there was a
change in responsibility.
Short term incentives (STI) reflect
on target performance for 2014
– 2014 financial performance was ahead of both the prior comparative period
and budget.
– The result was however impacted by the Company’s investment in new
business opportunities.
– Consequently the average short term incentive is at the bottom of the range.
Long term incentives (LTI)
– The final tranche of the 2010 plan was calculated and paid during the year. Any
performance rights that did not vest were forfeited.
– There was no grant of LTI during the 2014 year.
Senior Executives
retention payments
– A retention payment of $150,000 was paid to John Hughes, CEO
– A retention payment of $50,000 was paid to James Marshall, COO and
Peter Eaton, CFO.
– This is explained on page 12.
2013 AGM remuneration vote
first strike
– A first strike was registered after 27.47% voted against the remuneration report as
compared to 1.5% in 2012.
8
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) 4.3.1. Principles of remuneration
The remuneration framework is set out to ensure rewards are appropriate for results achieved and are aligned to corporate
strategic goals and shareholder wealth creation. The Board and Remuneration and Nomination Committee ensure sound
remuneration governance practice, that KMP remuneration is competitive and transparent, whilst aligning shareholder interests
through creation of sustainable growth and ensuring rewards reflect actual performance.
Remuneration levels for KMP are competitively set to attract and retain appropriately qualified and experienced directors
and executives. Independent advice is obtained on the appropriateness of remuneration packages, given trends in comparable
companies and the objectives of the Company’s remuneration strategy.
The remuneration structures explained below are designed to attract suitably qualified candidates, reward the achievement of
strategic objectives and achieve the creation of value for shareholders. The remuneration structures take into account:
– the capability and experience of the executive;
– the executive’s ability to influence the relevant performance; and
– the consolidated entity’s performance including:
– the consolidated entity’s earnings;
– the growth in share price and delivering constant returns on shareholder wealth; and
– the amount of incentives within each executive’s compensation.
Fixed remuneration
STI
LTI
– Includes base salary, superannuation
– Annual cash payment
– The LTI is a performance rights
and fringe benefits
– Eligibility for payment depends on
scheme with a 5 year vesting period
– Set with reference to the market,
internal relativities, qualifications,
the Company achieving its budgeted
– No LTI vests if a ROCE gateway
NPAT as well as achievement against
hurdle is not met
skills, performance and experience
individual KPIs
– Reviewed annually1
– KPIs are set at the start of each
financial year
– If the ROCE gateway hurdle is
met, vesting of the performance
rights depends on the Company’s
TSR performance relative to a
peer group1
1
Remuneration is reviewed annually against comparable ASX listed entities. A list of these entities is available on the Thorn website
(www.thorn.com.au)
The performance based STI and LTI components are described in more detail below.
i) Short Term Incentives
The STI is an annual cash incentive reviewed by the Board against operational and financial Key Performance Indicators (KPIs) for
the financial year. The following table outlines the major features of the 2014 STI:
Features
Description
Funding of the STI
– The STI pool is funded when the Company achieves its budgeted NPAT
– No STI is payable if the Company does not meet its budgeted NPAT
Minimum requirements
– No amount of STI is paid if budgeted NPAT is not met
STI that can be earned
– Below target performance – nil
– On target performance – 30 per cent of fixed base
– Maximum STI for stretch performance – 100 percent of fixed base
– A sliding scale is applied when performance is between “target” and “stretch”
What is target performance?
– Target performance is budget NPAT
9
Features
Description
What is stretch performance?
– Stretch performance is when actual NPAT is equal to or greater than 125% of
budget NPAT
KPIs
– Individual KPIs are set at the beginning of each financial year comprising financial and
non-financial measures
Weightings of KPIs
– 70 per cent relates to financial KPIs
– 30 per cent relates to non-financial KPIs
What is the financial KPI?
– Budgeted NPAT
What are the non-financial KPIs?
– The non-financial KPIs are agreed with the Board at the start of the financial year
– Vary with position and responsibility
– The KPIs relate to people, customer satisfaction, strategy, systems, risk and
staff development
Performance period
– 1 April 2013 to 31 March 2014
Assessment & Approval
– At the end of the financial year, the Remuneration and Nomination Committee
assesses the actual performance of the consolidated entity, and each individual’s
performance against the KPI’s to determine how much of the bonus pool is payable.
– The Board has the discretion to take into account unbudgeted extraordinary items
approved by the Board.
– The performance evaluation in respect of the year ended 31 March 2014 has taken
place in accordance with this process. The Remuneration and Nomination Committee
recommends the cash incentive to be paid to the individuals for approval by the Board.
2014 performance
– The financial hurdle was met
– The amounts payable to KMP are detailed on page 17
Deferred component
– The Board has determined that it is not appropriate to introduce a deferral due to:
– The nature of the business is such that it is very difficult to shift profit
between years;
– The profit budget is increased annually so that management is highly motivated to
achieve those budgets out of annual revenues; and
– The quality of earnings is high and the risk of deferral is low
– While the Board did not move to include a deferral of STI in 2014 and does not expect
it will do so in 2015, it has determined to keep the matter under review as it moves
forward with an overall review of the remuneration framework.
– The Board has not yet adopted a clawback policy as the Long Term Incentive, which
vests over 3, 4 and 5 years provides the capacity to clawback a component of
remuneration in the event of a matter of significant concern.
Clawback provisions
10
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) ii) Long Term Incentive (LTI)
The most recent grant of long-term incentives was in December 2012 in the form of performance rights. The grant is directly
linked to the performance of the Company, the returns generated and relative increases in shareholder wealth. This structure is
used to ensure appropriate alignment to shareholder value over a specified timeframe.
Performance rights provide the right to receive shares only if and when a particular performance based hurdle and vesting
condition are met. The holders of the performance rights are entitled to receive one ordinary share per performance right.
During the 2014 financial year, the final tranche of the 2010 plan was due for testing. This was undertaken in June 2013. Shares
were allotted to the participants of the scheme and any outstanding performance rights were forfeited. Details of the share
allotted and rights forfeited are available on page 18.
No performance rights were granted during the 2014 financial year.
The following table sets out the key features of the LTI plan.
Features
Instrument
Description
– Performance rights – zero exercise price options
Maximum LTI award level
– LTI awards are capped at 50% of fixed remuneration at grant date using the face value
of the shares at grant date to calculate the number to be granted.
Dividend treatment
– No dividends are paid on unvested awards
Share dilution limits
– No share dilution limits are in place given the quantum of the LTI
Gateway Hurdle
– The average Return on Capital Employed (ROCE) for the measurement period must be
equal to or greater than 20%
– If ROCE < 20%: no performance rights vest
– If ROCE > 20%: performance rights are able to vest subject to the performance hurdles
(see below) being met
Why ROCE was chosen
– It is a key indicator of the quality and efficiency of the returns the consolidated entity
is achieving and is aligned to shareholder wealth
Why was ROCE set at 20%
– While the 20% ROCE hurdle appears to be lower than the ROCE performance in the
previous years, it appropriately reflects the change in business model
– The Company’s strategy to be a diversified financial services organisation has seen
lease and loan receivables grow substantially but ahead of earnings performance
– The Company has expanded its services to grow but margins will be lower than when
the business was primarily Radio Rentals
– The Remuneration and Nomination Committee and the Board therefore consider that
the 20% ROCE hurdle is appropriate
– It is important to recognise that 20% ROCE has been set as a gateway. It opens the
gate for testing against TSR
– The ROCE calculation will be audited
Performance Hurdles
– The company’s TSR performance is measured against 30 comparable ASX listed
securities (available at www.thorn.com.au)
– Where the Company’s TSR performance is rated below the 50th percentile, no
performance rights vest.
– Proportionate vesting occurs if the Company is ranked at or above the 50th percentile
until the 90th percentile, when 100% of the rights vest.
Why TSR was chosen
– It is widely accepted as an objective indicator of shareholder wealth criterion as it
includes share price growth, dividends and other capital adjustments
– TSR will be calculated by an independent expert
11
Features
Description
Performance period
– The performance period for the LTI is 5 years
Vesting Dates
– 1/3 of the grant vests at 3 years
– 1/3 of the grant vests at 4 years
– 1/3 of the grant vests at 5 years
Testing
– The LTI is currently structured to vest over 5 years to align with a shareholder’s long
term perspective
– The Board believes it is appropriate to vest the LTI if the gateway hurdle and
performance hurdle has been met over the 5 year period notwithstanding that it may
not have been met at 3 or 4 year test dates
– The current structure ensures the executive team remains focussed on improving
shareholder returns over a 5 year period
Termination
– In the event that a participant’s employment is terminated, any unvested performance
Clawback provisions
– There are no clawback provisions
rights will lapse
– The LTI has an extended vesting period, vesting in 3, 4 and 5 years
– The extended vesting period provides the capacity to clawback a component of
remuneration in the event of a matter of significant concern
CEO retention and retirement payments
The Board recognised that it needed to retain the services of the CEO, John Hughes during a period of strategic growth and
expansion after the expiry of his contract. The Board recognised that the LTI grant could not effectively retain the CEO due to
his contractual term only being for two years, therefore, sought his agreement to remain with the Company notwithstanding he
would not be eligible for his LTI.
Institutional shareholders advised they were concerned that the corporate knowledge and expertise of the CEO would be lost to
the Company. They recommended the Board should take steps to retain the CEO.
In determining the retention structure, the Board recognised that as the CEO was already a significant shareholder and his
interests were strongly aligned to the broader shareholder interests. It was resolved that retention and retirement payments
were appropriate and to be paid in cash. Therefore, in the 2014 financial year the CEO was paid a retention payment of $150,000.
In the 2015 financial year the CEO will be paid a retention payment of $37,500 and a retirement benefit of $300,000.
COO and CFO retention payments
The Board recognised that the continuing arrangement with the CEO may be perceived to impact the career paths of the COO and
CFO, both of whom the Board considered key to the ongoing success of the Company.
The Board recognised that the LTI grant in December 2012 did not have a strong retention effect as there were no other LTI
amounts vesting before May 2015. In order to address this, the COO and CFO would receive retention payments.
In the 2014 financial year, the COO and CFO were paid an additional $50,000 each.
In the 2015 financial year, the COO and CFO will be paid a further $100,000 each should they remain with the Company until
31 March 2015.
Services from Remuneration Consultants
The Remuneration and Nomination Committee engaged Executive Research Services (ERS) as remuneration consultant to
the Board to review the amounts and elements of the KMP remuneration and provide recommendations in relation thereto.
ERS provided valuable market analysis in relation to the remuneration of the KMP, non-executive directors and other general
managers of the consolidated entity.
12
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) The Remuneration and Nomination Committee also engaged KPMG Executive Remuneration Advisory to provide advice on the
remuneration framework and the remuneration report. KPMG did not provide remuneration recommendations pursuant to the
Corporations Act.
Consultant fees incurred for the financial year were $21,725 to ERS and $40,000 to KPMG. Other fees paid to KPMG are set out
in the financial statements.
The Board is satisfied that the remuneration recommendations made by ERS and the advice provided by KPMG Executive
Remuneration Advisory were free from undue influence by members of the KMP about whom the recommendations may relate
as the consultants were directly engaged by and reported to the Board.
Consequences of Performance on Shareholder’s Wealth
In considering the consolidated entity’s performance and benefits for shareholders’ wealth, the Board have regard to the
following indices in respect of the current financial year and the four previous financial years.
The profit performance for the 2014 was marginally better than 2013 and better than budget. The STI financial performance
hurdle was met.
Profit attributable to owners of the Company
$28,151,000 $28,021,000 $27,849,000 $22,038,000 $19,495,000
2014
2013
2012
2011
2010
Basic EPS1
Dividends paid
Dividends per share
Change in share price
Return on capital employed2
Return on equity3
18.94c
19.11c
19.24c
16.84c
15.12c
$15,563,000 $14,656,000 $12,272,000
$9,464,000
$7,059,000
10.50c
0.09
21.83%
26.17%
10.00c
0.49
24.78%
28.14%
8.95c
(0.62)
30.34%
33.00%
7.30c
1.07
35.02%
36.97%
6.32c
0.63
30.72%
32.59%
1
2
3
Although NPAT increased in 2014, Basic EPS decreased due to an additional 1,782,014 shares being issued under the Dividend
Reinvestment Plan.
Calculated as total profit before interest and tax divided by the average capital employed.
Calculated as total profit before interest and tax divided by the average equity.
Senior Executive Contract details
Name
John Hughes
Title
Term / Notice
Details
Chief Executive Officer and
Managing Director
31 March 2015
6 month notice period
James Marshall
Chief Operating Officer
Ongoing
3 month notice period
Annual base salary of
$617,000 inclusive of
superannuation.
A tenure bonus of $37,500 is
payable at 30 June 2014.
A termination benefit of
$300,000 is payable.
Annual base salary of
$309,000 inclusive of
superannuation.
A retention payment of
$100,000 is payable at
31 March 2015.
No termination benefit
is payable.
13
Name
Peter Eaton
Title
Term / Notice
Details
Chief Financial Officer
Ongoing
3 month notice period
Annual base salary of
$309,000 inclusive of
superannuation.
A retention payment of
$100,000 is payable at
31 March 2015.
No termination benefit
is payable.
James Marshall was appointed Chief Executive Officer and Managing Director from 1 June 2014 following the retirement of
John Hughes. The remuneration details of James Marshall from 1 June 2014 are:
Name
Title
Term / Notice
Details
James Marshall
Chief Executive Officer and
Managing Director
Ongoing
6 month notice period
Annual base salary of
$490,000 inclusive of
superannuation.
No termination benefit
is payable.
Eligible to participate in an STI
and LTI plan.
Non-Executive Directors
Total remuneration for all non-executive directors, last voted upon by shareholders at the 2013 AGM, is not to exceed $650,000
per annum and is set based on advice from external advisors with reference to fees paid to other non-executive directors of
comparable companies.
The following fee structure was applicable for the financial years:
Base fee per annum
Chair of the Board
Directors
Additional fees per annum
Chair of Audit, Risk and Compliance Committee
Member of the Audit, Risk and Compliance Committee
Chair of Remuneration and Nomination Committee
Member of the Remuneration and Nomination Committee
Notes to the Non-Executive Directors fees
2014
2013
$166,000
$140,000
$83,000
$70,000
$15,000
$20,000
–
$5,000
$10,000
–
–
$2,500
– Non-executive directors do not receive performance-related remuneration and do not participate in employee share based
payment schemes.
– The Chair of the Board was not paid an additional fee for undertaking the role of Chair of the Remuneration and
Nomination Committee.
– No Committee fees were paid in 2014 as they were incorporated into the base fees.
– The above fees do not include superannuation.
14
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued)
4.3.2 Directors’ and Executive Officers’ Remuneration (Company and Consolidated – Audited)
Details of the nature and amount of each major element of remuneration of each director of the Company and other KMP of the
consolidated entity are:
2014
Short-term
Post-
employment
Long-term benefits
Share-based
payments
Salary
& fees
$
STI cash
bonus
$(A)
Non-
monetary
benefits
$(B)
Super-
annuation
benefits
$
Long Service
Leave
$
Termination
benefits
$
Options and
rights
$(C)
Total
$
Name
Directors
Non-Executive Directors
David Carter (Chairman)
166,000
Peter Henley
Joycelyn Morton
Paul Lahiff1
Subtotal non-executive
directors
Executive Directors
83,000
98,000
33,200
380,200
–
–
–
–
–
–
–
–
–
–
15,259
7,630
9,008
3,023
34,920
–
–
–
–
–
–
–
–
–
–
John Hughes
590,526
208,916
3,379
17,474
8,510
150,000
Subtotal Executive
directors
Total directors
remuneration
590,526
208,916
3,379
17,474
8,510
150,000
970,726
208,916
3,379
52,394
8,510
150,000
Other Key Management Personnel
–
–
–
–
–
–
–
–
181,259
90,630
107,008
36,223
415,120
978,805
978,805
1,393,925
James Marshall
261,178
104,627
Peter Eaton
275,853
104,627
11,414
8,239
17,474
17,474
16,904
100,000
4,846
100,000
63,700
63,700
575,297
574,789
Subtotal other
Key Management
Personnel
Total Key Management
Personnel
compensation (group)
537,031
209,254
19,703
34,948
21,749
200,000
127,400
1,150,085
1,507,757
418,170
23,082
87,342
30,259
350,000
127,400
2,544,010
1
The remuneration for Paul Lahiff for 2014 reflects remuneration during the period to 22 August 2013, the date of his retirement.
15
Short-term
Post-
employment
Long-term benefits
Share-based
payments
Salary
& fees
$
STI cash
bonus
$(A)
Non-
monetary
benefits
$(B)
Super-
annuation
benefits
$
Long Service
Leave
$
Retention
payment
$
Options and
rights
$(C)
Total
$
2013
Name
Non-Executive Directors
David Carter,
(Chairman)
Peter Henley
Joycelyn Morton
Paul Lahiff1
Subtotal non-executive
directors
Executive Directors
147,500
72,577
89,539
77,346
386,962
–
–
–
–
–
–
–
–
–
–
13,275
6,532
8,059
6,961
34,827
–
–
–
–
–
John Hughes
591,025
200,000
3,556
16,283
7,845
Subtotal Executive
directors
Total directors
remuneration
591,025
200,000
3,556
16,283
7,845
977,987
200,000
3,556
51,110
7,845
Other Key Management Personnel
James Marshall
236,506
93,000
Peter Eaton
267,37 1
105,000
11,414
13,387
16,283
16,283
2,191
7,235
Subtotal other
Key Management
Personnel
Total Key Management
Personnel
compensation (group)
503,877
198,000
24,801
32,566
9,426
1,481,864
398,000
28,357
83,676
17,271
The below table summarise KMP remuneration split by Fixed, Short Term and Long Term.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
160,775
79.109
97,598
84,307
421,789
108,793
927,502
108,793
927,502
108,793
1,349,291
31,354
390,748
36,264
445,540
67,618
836,288
176,411
2,185,579
Name
John Hughes
James Marshall
Peter Eaton
Fixed % At Risk – STI % At Risk – LTI %
Total %
2014
2013
2014
2013
2014
2013
63
66
51
65
52
65
37
22
38
27
37
27
n/a
12
11
8
11
8
100
100
100
100
100
100
Notes in relation to the Table of Directors’ and Executive Remuneration
The short term incentive bonus for 2014 is for performance during the financial year.
A.
Non-monetary benefits as disclosed in both tables includes cost of providing a motor vehicle and any fringe benefits tax
attributable thereto.
The fair value of the performance rights is calculated at the date of grant using a Monte Carlo simulation model and allocated to each
reporting period evenly over the period from grant date to the expected vesting date. The value disclosed is the portion of the fair value
of the performance rights allocated to this reporting period. In valuing the performance rights, market conditions have been taken into
account. The following factors and assumptions were used in determining the fair value of performance rights at grant date.
B.
C.
16
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) Grant Date
Initial Test Date Expiry Date
7 Dec 2012
1 Jun 2015
31 Dec 2017
7 Dec 2012
1 Jun 2016
31 Dec 2017
7 Dec 2012
1 Jun 2017
31 Dec 2017
4.3.3 2013 STI outcomes – audited
Fair Value Per
Performance
Right
Exercise
Price
Price of
Shares on
Grant Date
Expected
Volatility
Risk Free
Interest Rate
Dividend
Yield
$1.40
$1.28
$1.15
Nil
Nil
Nil
$1.910
$1.910
$1.910
32.0%
32.0%
32.0%
2.7%
2.7%
2.7%
6.0%
6.0%
6.0%
The STI pool was funded as the Company achieved its NPAT target. KMP achieved their personal KPIs which related to new
systems implementation for Radio Rentals, development of new offerings and further development of Company strategic
objectives. No bonus payments were forfeited in the period.
Directors
John Hughes
Executives
James Marshall
Peter Eaton
Short Term Incentive
Bonus paid
as a % of
maximum
opportunity
Included in
Remuneration
($)
Salary ($)
617,000
33.86%
208,916
309,000
309,000
33.86%
33.86%
104,627
104,627
4.3.4 Equity Instruments
Performance rights granted as compensation in the year
No performance rights were granted during the year ended 31 March 2014.
Analysis of performance rights available for vesting
Details of the performance rights available for vesting to each director of the Company and other KMP are detailed below:
Executive
James Marshall
Peter Eaton
Performance Rights
Granted
Financial Years In
Which Grant Vests
Values Yet To Vest
$
Number
Date
Min(a)
Max(b)
63,291
7 Dec 2012
63,291
7 Dec 2012
63,291
7 Dec 2012
63,291
7 Dec 2012
63,291
7 Dec 2012
63,291
7 Dec 2012
2015 – 2018
2016 – 2018
2017 – 2018
2015 – 2018
2016 – 2018
2017 – 2018
Nil
Nil
Nil
Nil
Nil
Nil
N/A
N/A
N/A
N/A
N/A
N/A
(a)
(b)
The minimum value of the performance rights to vest is nil as the performance rights criteria may not be met and consequently the
performance rights may not vest.
The maximum value of the performance rights yet to vest is not determinable as it depends on the market price of shares of the Company
on the Australian Securities Exchange at the date the performance rights are exercised.
(c) The performance rights that did not vest will be retested at the next vesting date.
(d) Due to his retirement, John Hughes’ performance rights were forfeited in the period.
(e) Due to their resignations Antoine Laval and Brenton Glaisters’ performance rights were forfeited in the period.
(f) The performance rights for Ian Scott were disclosed in the prior period as he was a key management person for the 2013 financial year.
17
Analysis of Movements in Performance Rights
The movement during the reporting period, by value, of performance rights over ordinary shares in Thorn Group Limited held by
each Company director and KMP are detailed below:
Value of Performance Rights
John Hughes
James Marshall
Peter Eaton
Granted in year(a)
$
Exercised in year(b)
$
Forfeited in year(c)
$
–
–
–
–
170,649
39,819
56,884
267,352
1,268,074
18,099
25,855
1,312,028
(a) The fair value of the performance rights is calculated at the date of the grant based upon the Monte Carlo simulation model.
(b)
The value of performance rights exercised during the year is calculated as the market price of shares of the Company as at close of trade
on the date the performance rights were exercised. The market price as at the close of trade on 17 June 2013 was $2.09, the date the
performance rights were exercised and ordinary shares were allotted.
The value of the performance rights forfeited during the year is calculated as the market price of the share of the Company as at the close of
trade on the date the performance rights were forfeited.
(c)
Performance Rights Over Equity Instruments Granted
The movement during the year in the number of performance rights over ordinary shares in Thorn Group Limited held directly,
indirectly or beneficially, by each key management person, including their related parties is as follows:
John Hughes1
James Marshall
Peter Eaton
Held at
1 April 2013
Granted as
Compensation
Exercised
Lapsed during
the year
Held at
31 March 2014
Vested during
the year
688,384
217,585
229,461
–
–
–
81,650
19,052
27,217
606,734
8,660
12,371
–
189,873
189,873
81,650
19,052
27,217
1.
569,620 performance rights of John Hughes lapsed during the year due to his planned retirement on 30 June 2014 and 37,114 lapsed due to
the end of the 2010 plan.
4.4 Audit, Risk and Compliance Committee
The Audit, Risk and Compliance Committee has a documented charter, approved by the Board. The charter is available on the
Company’s website. All members are non-executive directors with a majority being independent. The Chairperson may not be the
Chairperson of the Board. The Audit, Risk and Compliance Committee advises the Board on the establishment and maintenance
of a framework of internal control and appropriate ethical standards for the management of the Company.
The members of the Audit, Risk and Compliance Committee during the year were:
–
–
–
–
Joycelyn Morton (Chairperson) – Independent, Non-Executive
David Carter – Independent, Non-Executive
Peter Henley – Independent, Non-Executive
Paul Lahiff – Independent, Non-Executive (Retired 22 August 2013)
The Company Secretary, Peter Eaton, acts as Secretary to the Committee.
The internal and external auditors, the Managing Director and the Chief Financial Officer are invited to Audit, Risk and
Compliance Committee meetings at the discretion of the Committee. The Committee is required to meet at least twice during the
year and committee members’ attendance record is disclosed in the table of directors’ meetings on page 4.
The external auditor met with the Audit, Risk and Compliance Committee twice during the year without management
being present.
The Managing Director and the Chief Financial Officer have declared in writing to the Board that the financial records of the
Company and the consolidated entity for the financial year have been properly maintained, the Company’s financial reports for
the financial year ended 31 March 2014 comply with accounting standards and present a true and fair view of the Company’s
financial condition and operational results. This statement is required annually.
18
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) The responsibilities of the Audit, Risk and Compliance Committee include:
– reviewing the annual and half year financial reports and other financial information distributed externally;
– assessing management processes supporting external reporting;
– assessing corporate risk assessment processes;
– assessing the performance and objectivity of the internal audit function;
– establishing procedures for selecting, appointing and if necessary, removing the external auditor;
– assessing whether non-audit services provided by the external auditor are consistent with maintaining the external
auditor’s independence. Each reporting period the external auditor provides an independence declaration in relation to the
audit or review;
– providing advice to the Board in respect of whether the provision of the non-audit services by the external auditor is
compatible with the general standard of independence of auditors imposed by the Corporation Act 2001;
– assessing the adequacy of the internal control framework and the Company’s code of ethical standards; and
– organising, reviewing and reporting on any special reviews or investigations deemed necessary by the Board.
The Audit, Risk and Compliance Committee reviews the performance of the external auditors on an annual basis and meets with
them during the year to:
– discuss the external audit, identifying any significant changes in structure, operations, internal controls or accounting
policies likely to impact the financial statements and to review the fees proposed for the audit work to be performed;
– review the half-year and preliminary final report prior to lodgement with the ASX, and any significant adjustments
required as a result of the auditor’s findings, and to recommend Board approval of these documents, prior to announcement
of results;
– review the draft annual and half-year financial report, and recommend Board approval of the financial report; and
– review the results and findings of the external audit, the adequacy of accounting and financial controls, and to monitor the
implementation of any recommendations made.
4.5 Risk Management
Oversight of the Risk Management System
The Board oversees the establishment, implementation and review of the Company’s Risk Management System. Management has
established and implemented the Risk Management System for assessing, monitoring and managing all risks, including material
business risks, for the consolidated entity (including sustainability risk). The Managing Director and the Chief Financial Officer
have provided assurance, in writing to the Board, that the financial reporting, risk management and associated compliance and
controls have been assessed and found to be operating effectively. The operational and other risk management compliance and
controls have also been assessed and found to be operating effectively.
Risk Profile
Management provide the risk profile on a six monthly basis to the Audit, Risk and Compliance Committee that outlines the
material business risks to the Company. Risk reporting includes the status of risks through integrated risk management programs
aimed at ensuring risks are identified, assessed and appropriately managed. The Audit, Risk and Compliance Committee reports
the status of material business risks to the Board on a regular basis.
Material business risks for the Company may arise from such matters as actions by competitors, government policy changes, the
impact of exchange rate movements on the price of products and sales, difficulties in sourcing supply of products, environment,
workplace health and safety, property, financial reporting and the purchase, development and use of information systems.
Risk Management, Compliance and Control
The Company strives to ensure that its products and services are of the highest standard. The Board is responsible for the overall
internal control framework, but recognises that no cost-effective internal control system will preclude errors and irregularities.
The Board’s policy on internal control is comprehensive.
Comprehensive practices have been established to ensure:
19
– capital expenditure and revenue commitments above a certain size obtain prior Board approval;
– financial exposures are controlled;
– workplace health and safety standards and management systems are monitored and reviewed to achieve high standards of
performance and compliance with regulations;
– business transactions are properly authorised and executed;
– the quality and integrity of personnel;
– financial reporting accuracy and compliance with the financial reporting regulatory framework; and
– environmental regulation compliance.
Quality and Integrity of Personnel
Formal appraisals are conducted at least annually for all employees. Training and development and appropriate remuneration
and incentives with regular performance reviews create an environment of cooperation and constructive dialogue with
employees and senior management. A formal succession plan is in place to ensure competent and knowledgeable employees fill
senior positions when retirements or resignations occur.
Financial Reporting
The Managing Director and the Chief Financial Officer have provided assurance in writing to the Board that the Company’s
financial reports are founded on a sound system of risk management and internal compliance and control which implements the
policies adopted by the Board.
Monthly actual results are reported against budgets approved by the directors and revised forecasts for the year are
prepared regularly.
Environmental Legislation
The consolidated entity’s operations are not subject to significant environmental regulations under either Commonwealth or
State legislation. The Directors are of the belief that the consolidated entity has adequate systems in place for the management
of its environmental requirements and is not aware of any of those environmental requirements as they apply to the
consolidated entity.
Internal Audit
The internal auditors assist the Board in ensuring compliance with internal controls and risk management programs by regularly
reviewing the effectiveness of the above mentioned compliance and control systems. The results of internal audits are reported
on a monthly basis to the Board.
4.6 Ethical Standards
All directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to
enhance the reputation and performance of the Company and consolidated entity. In order to promote ethical and responsible
decision making, the Company has implemented a Code of Conduct to guide the directors and senior executives. Further, the
Company has implemented a formal Securities Trading policy in order to formalise the Company’s position on employees trading
in the Company’s securities. Every employee has a nominated supervisor to whom they may refer any issues arising from their
employment. The Board reviews the Code of Conduct and processes are in place to promote and communicate these policies.
Both of these policies are available on the Company’s website.
Conflict of Interest
Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the
Company. The Board has developed procedures to assist directors to disclose potential conflicts of interest.
Where the Board believes that a significant conflict exists for a director on a Board matter, the director concerned does not
receive the relevant Board papers and is not present at the meeting whilst the item is considered. Details of director-related
entity transactions with the Company and the consolidated entity are set out in note 28 to the financial statements.
20
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) Code of Conduct
The Company’s Code of Conduct aims to maintain appropriate core Company values and objectives. The Company has advised
each director, manager and employee that they must comply with the Code of Conduct.
The Company’s Code of Conduct covers issues such as delivering shareholder value, managing conflicts of interest, confidentiality,
fair and honest dealings, workplace health and safety, equal opportunity and compliance with laws. The Code encourages
reporting of unethical behaviour. The Company has a Whistleblower Policy and a confidential whistleblowing service which
provides its staff with an avenue to report suspected unethical, illegal or improper behaviour.
Securities Trading Policy
The Company and the consolidated entity has a Securities Trading policy, which sets out the circumstances under which
directors, senior executives, and employees of the Company and the consolidated entity may deal in securities with the objective
that no director, senior executive or other employee will contravene the requirements of the Corporations Act 2001 or the ASX
Listing Rules.
The policy outlines the restricted trading periods for the Company as the month immediately before the release of the Company’s
half yearly and yearly results.
The policy is reproduced in full on the Company’s website.
Diversity Policy
The Board is committed to having an appropriate blend of diversity on the Board and senior executive positions. The Board has
established a policy regarding gender, age, ethnic and cultural diversity.
The consolidated entity’s diversity performance is as follows:
Gender Representation
Board Representation1
Key Management Personnel Representation
Group Representation
2014
Male
83%
100%
53%
2014
Female
17%
–
47%
2013
Male
80%
100%
52%
2013
Female
20%
–
48%
1
The change in Board representation in 2014 is a due to the CEO transition process.
4.7 Communication with Shareholders
The Board provides shareholders with information using a comprehensive Continuous Disclosure Policy which includes
identifying matters that may have a material effect on the price of the Company’s securities, notifying them to the ASX,
posting them on the Company’s website and issuing media releases. The Continuous Disclosure Policy is available on the
Company’s website.
In summary, the Continuous Disclosure policy operates as follows:
– the policy identifies information that needs to be disclosed;
– the Managing Director, the Chief Financial Officer and the Company Secretary are responsible for interpreting the
Company’s policy and where necessary informing the Board. The Company Secretary is responsible for all communications
with the ASX;
– the full annual report provided via the Company’s website to all shareholders (unless a shareholder has specifically
requested to receive a physical copy or not to receive the document), including relevant information about the operations of
the consolidated entity during the year, changes in the state of affairs and details of future developments;
– the half-yearly report contains summarised financial information and a review of the operations of the consolidated
entity during the period. The half-year reviewed financial report is lodged with the Australian Securities and Investments
Commission and the ASX;
– proposed major changes in the consolidated entity which may impact the share ownership rights are submitted to a vote
of shareholders;
21
– all announcements made to the market, and related information (including information provided to analysts or the media
during briefings), are placed on the Company’s website after they are released to the ASX;
– the full texts of notices of meetings and associated explanatory material are placed on the Company’s website; and
– the external auditor attends the Annual General Meetings to answer questions concerning the conduct of the audit, the
preparation and content of the auditor’s report, accounting policies adopted by the Company and the independence of the
auditor in relation to the conduct of the audit.
The Company does not have a formal shareholder communication policy, however it provides information to shareholders via
the Company’s website, which has links to recent Company announcements and past annual reports, results presentations and
various ASX pages, including the current share price.
The Board supports full participation of shareholders at the Annual General Meeting, to ensure a high level of accountability and
identification with the Company’s strategy and goals. Important issues are presented to the shareholders as single resolutions.
The shareholders are requested to vote on the appointment and aggregate remuneration of directors, the granting of options
and shares to directors, the Remuneration Report and changes to the Constitution. Copies of the Constitution are available to any
shareholder who requests it.
5. Principal Activities
The principal activities of the consolidated entity during the course of the financial year were the leasing of household products,
leasing of motor vehicles, the provision of loans, equipment finance and the provision of receivables management services.
There were no other significant changes in the nature of the activities of the consolidated entity during the year.
5.1. Operating and Financial Review
Overview of the Group
The Thorn Group is a diversified financial services company providing alternative financial solutions to consumers and businesses.
Thorn operates through four core segments:
– Consumer leasing of household products through Radio Rentals and the leasing of motor vehicles through Rent Drive Buy.
– Credit management, debt recovery, credit information services, debt purchasing and other financial services through NCML.
– Equipment financing for small and medium enterprises through Thorn Equipment Finance.
– Personal loans through Thorn Financial Services.
Financial Performance
Revenue for the 2014 financial year increased by 16% on the previous corresponding period (“PCP”), growing from $203,203,000
to $234,855,000.
Revenue for the Consumer Leasing segment grew 16%, from $170,020,000 to $196,800,000 as Radio Rentals achieved 10 out
of 12 record installation months. Operating lease revenue grew, primarily attributable to increased units on rent, most notably
in the furniture category. The growth in finance lease revenue was driven by increased smartphone installations and the
introduction of RTB 48 month contract. The introduction of the longer term made larger products and whole room packages
more affordable. The change in mix impacted gross margin as a lower margin on sale for smartphones is realised.
Retention performance was again strong, with 48% of customers completing a Rent Try $1 Buy® agreement taking another item.
Write-off performance remained consistent with prior year, however provisioning increased in-line with receivables growth.
Costs increased in Radio Rentals as new stores operated and additional resources were required in the store network due to the
growth in the number of units on rent.
Operating expenses for the consumer leasing segment also increased versus PCP as Rent Drive Buy continues in its trial phase.
Reported segment earnings before interest, tax, depreciation and amortisation (“EBITDA”) increased by 3% from $47,998,000
to $49,450,000.
One-off factors impacted the underlying performance of the segment versus PCP. The table below shows the favourable
impact of a large non-recurring debt sale in the PCP. In the current year, losses pertaining to the trial costs associated with Rent
22
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) Drive Buy as well as depreciation and costs associated with the ERP implementation were incurred. Underlying EBITDA increased
by 5.8%.
In thousands of AUD
Consumer Leasing reported EBITDA
Debt sale
Rent Drive Buy trial
ERP Implementation
Consumer Leasing underlying EBITDA
2014
2013
49,450
–
239
358
47,998
(850)
136
–
50,047
47,284
A restructure of the Credit Management segment commenced in the second half of the 2013 financial year. This restructure, in
addition to improved operational performance resulted in a revenue increase of 9.2%, from $18,874,000 to $20,611,000. The
uplift was driven by increased contingent collections and PDL revenue. Segment EBITDA increased by 10.4% from $3,670,000
to $4,051,000.
One-off factors impacted the underlying performance of the segment versus PCP. The table below shows the favourable impact
of a large non-recurring debt sale. Underlying EBITDA grew by 4%.
In thousands of AUD
Credit Management reported EBITDA
Debt sale
Credit Management Underlying EBITDA
31 March 2014 31 March 2013
4,051
(810)
3,241
3,670
(554)
3,116
Revenue for Thorn Equipment Finance (“TEF”) grew by 35.7% from $6,129,000 to $8,317,000. The revenue increase is attributable
to the growth in receivables, which increased to $63,551,000 versus $46,521,000 in the PCP. Expenses were in-line with PCP,
resulting in segment EBITDA increasing by 182% from $1,051,000 to $2,964,000.
Thorn Financial Services (“TFS”) revenue increased by 18% from $7,920,000 to $9,346,000. The interest revenue increase was
attributable to growth in receivables, from $21,754,000 to $28,431,000 which was driven by the expanded range of offers under
the Thorn Money brand.
Bad debts slightly increased as a percentage of the receivables, whilst overheads were higher than PCP as a result of business
development initiatives which saw the addition of key personnel. Consequently, segment EBITDA decreased by 27.6% from
$1,637,000 to $1,185,000.
Corporate expenses were up 26.9% from $8,302,000 to $10,532,000 primarily increasing in-line with business growth,
recruitment and retirement costs in relation to the CEO.
Finance expenses increased by 14.7% due to higher borrowings compared to the PCP. Borrowings as at 31 March 2013 were
$28,900,000 versus $40,496,000 as at 30 March 2014.
As a result, consolidated profit before income tax increased by 0.6% from $40,788,000 to $41,032,000. Net profit after tax
increased by 0.5% from $28,021,000 to $28,151,000.
One-off factors impacted the underlying performance of the consolidated entity versus PCP. The table below shows the
favourable impact of a large non-recurring debt sale in the PCP and the loss pertaining to the trial costs associated with Rent
Drive Buy. Underlying NPAT increased 4.5%.
In thousands of AUD
Reported NPAT
Debt sale
Rent Drive Buy trial costs
CEO termination/recruitment costs
Software
Tax effect
Underlying NPAT
31 March 2014 31 March 2013
28,151
(810)
239
500
358
(86)
28,352
28,021
(1,404)
136
–
–
380
27,133
23
Financial Position
The key assets of the consolidated entity grew during the period.
The consumer lease receivables book grew by 31% to $125,356,000 due to increased installations of smartphones and
introduction of RTB 48 month contract. Commercial lease receivables grew by 37% to $63,551,000 through the continued
development of strategic partnerships with brokers and introducers. The consumer finance book grew 31% to $28,226,000.
Capital Management
Net cash from operating activities increased from $93,328,000 to $104,025,000. This was primarily attributable to increased
receipts from customers in all segments.
Borrowings increased to $40,496,000. Net debt to equity remained relatively low at 22.2%. The consolidated entity continues to
meet all debt covenants.
Dividends paid or recommended
Dividends paid by the Company to members during the financial year were:
2014
Final 2013
Interim 2014
Total amount
Cents per share
Total amount
$’000s
Franked/unfranked
Date of payment
6.0
4.5
8,863
6,700
15,563
Franked
18 July 2013
Franked
17 January 2014
After balance date the following dividend was proposed by the directors.
Final 2014
Risks
Cents per share
Total amount
$’000s
Franked/unfranked
Date of payment
6.5
9,717
Franked
17 July 2014
Credit risk is the most significant risk to the consolidated entity. Credit risk grew in-line with the growth of the loan and lease
receivables in all segments, except TFS where bad debts increased slightly as a percentage of the loan receivables.
Legislative changes
The consolidated entity continued to be involved in discussions with Federal Treasury in relation to the enhancements to the
National Consumer Credit Protection legislation, which primarily involves more disclosure around financial service products. No
changes are expected in the short term.
A review of Centrepay was undertaken by the Federal Government and a draft paper was released in August 2013. The
consolidated entity does not expect any changes to its current arrangements in the short term.
Strategic Initiatives
The following initiatives, which include the introduction of new products and the further expansion of each operating segment
continues the consolidated entity’s strategy of providing alternative financial solutions.
– Thorn Money was launched as an online brand offering unsecured loans to $15,000 and secured loans to $25,000;
– The first Cashfirst store opened in Campbelltown, NSW;
– A new website was launched in October for Radio Rentals, the primary brand of the Consumer Leasing segment, providing a
significantly better platform for Radio Rentals to attract new customers;
– An extended term, 48 month Rent Try $1 Buy® contract was launched in November, providing our customers with additional
payment flexibility; and
– Work relating to branding and products for Radio Rentals and TFS continues at various phases of the research and
development cycle.
24
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) Outlook
Despite soft economic conditions, the consolidated entity is trading solidly. The continued investments in new business
opportunities are expected to deliver solid NPAT growth.
5.2 Shareholder returns
Profit attributable to owners of the Company
$28,151,000
$28,021,000
$27,849,000
$22,038,000
$19,495,000
2014
2013
2012
2011
2010
Basic EPS1
Dividends paid
Dividends per share
Change in share price
Return on capital employed2
Return on capital employed3
18.94c
19.11c
19.24c
16.84c
15.12c
$15,563,000
$14,656,000
$12,272,000
$9,464,000
$7,059,000
10.50c
0.09
21.83%
26.17%
10.00c
0.49
24.78%
28.14%
8.95c
(0.62)
30.34%
33.00%
7.30c
1.07
35.02%
36.97%
6.32c
0.63
30.72%
32.59%
1.
Although NPAT increased in 2014, Basic EPS decreased due to an additional 1,782,014 shares being issued under the Dividend
Reinvestment Plan.
2. Calculated as total profit before interest and tax divided by the average capital employed.
3.
Calculated as total profit before interest and tax divided by the average equity.
6. Events Subsequent To Reporting Date
Subsequent to the reporting date, the Board of Thorn Group Limited appointed James Marshall as an executive director on
5 May 2014. James will become Chief Executive Officer and Managing Director on 1 June 2014. John Hughes will be an executive
director from 1 June 2014 to 30 June 2014, the date of his retirement.
In addition, the board appointed Stephen Kulmar as a new non-executive director of the Company on 15 April 2014.
On 17 April 2014, John Hughes entered into a consulting agreement with the consolidated entity. The agreement commences on
1 August 2014 for a period of 12 months. A consultancy fee of $90,000 per annum plus superannuation will be paid.
Other than the above, there has not arisen in the interval between the end of the financial year and the date of this report
any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect
significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated
entity, in future financial years.
7. Likely Developments
The consolidated entity will continue to pursue its policy of increasing the profitability and market share of its major business
sectors during the next financial year.
For further information about likely developments in the operations of the consolidated entity and the expected results of those
operations in future financial years, refer to section 5.1, the Operating and Financial Review on page 22.
8. Directors’ Interests
The relevant interest of each director in the shares and performance rights over shares as notified by the directors to the
Australian Stock Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:
25
David Carter
James Marshall
John Hughes
Peter Henley
Joycelyn Morton
Stephen Kulmar
Ordinary shares
Performance Rights
over ordinary shares
192,729
126,887
3,429,113
60,278
39,000
Nil
Nil
189,873
Nil
Nil
Nil
Nil
The Company has not granted any options over its shares.
9. Performance rights
Performance rights granted to directors and officers of the Company
During the financial year, no performance rights over unissued ordinary shares in the Company were granted. Pages 16 to 17
provides the details of those performance rights which have not vested at the date of the report.
Unissued shares under options
At the date of this report there are no unissued ordinary shares of the Company under option.
10. Indemnification and Insurance of Officers and Auditors
Indemnification
The Company has agreed to indemnify the current, former and subsequent directors and officers of the Company, against all
liabilities to another person (other than the Company or a related body corporate) that may arise from their position as directors
or officers of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good
faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.
Insurance Premiums
During the financial year the Company has paid insurance premiums of $43,884 in respect of directors’ and officers’ liability and
legal expenses’ insurance contracts, for current and former directors and officers, including senior executives of the Company
and directors, senior executives and secretaries of its controlled entities. The insurance premiums relate to:
– costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their
outcome; and
– other liabilities that may arise from their position, with the exception of conduct involving misconduct.
The insurance policies outlined above do not contain details of the premiums paid in respect of individual officers of the Company.
11. Non-Audit Services
During the year KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties.
The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of
those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
– all non-audit services were subject to the corporate governance procedures adopted by the Company and have been
reviewed by the Audit Risk and Compliance Committee to ensure they do not impact the integrity and objectivity of
the auditor;
– the non-audit services provided do not undermine the general principles relating to auditor independence; and
26
Thorn Group 2014 Financial ReportDirectors’ report for the year ended 31 March 2014 (continued) – as set out in APES110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s
own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or
jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the consolidated entity, KPMG, and its related practices for audit and non-audit
services provided during the year are set out in note 5.
12. Lead Auditor’s Independence Declaration
The Lead Auditor’s independence declaration is set out on page 28 and forms part of the directors’ report for financial year
ended 31 March 2014.
13. Rounding Off
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class
Order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless
otherwise stated.
This report is made in accordance with a resolution of the directors:
David Carter
Chairperson
Dated at Sydney
20 May 2014
27
To: the directors of Thorn Group Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 31 March 2014 there
have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the
audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Anthony Travers
Partner
Dated at Sydney
21 May 2014
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
28
Thorn Group 2014 Financial ReportFor the year ended 31 March 2014LEAD AUDITOR’S INDEPENDENCE DECLARATION In thousands of AUD
Revenue
Employment benefits expense
Finance lease cost of sales
Depreciation and amortisation expense
Impairment losses on loans and receivables
Marketing expenses
Property expenses
Transport expenses
Communication and IT expenses
Finance expenses
Travel expenses
Other expenses
Profit before income tax
Income tax expense
Profit for the period
Other comprehensive income
Total comprehensive income for the year
Basic earnings per share (cents)
Diluted earnings per share (cents)
Note
2014
2013
3
4
6
20
20
234,855
203,203
(48,859)
(38,583)
(36,213)
(17,029)
(11,358)
(9,345)
(6,737)
(4,684)
(2,073)
(1,323)
(17,619)
41,032
(12,881)
28,151
–
28,151
18.94
18.91
(42,837)
(26,118)
(32,259)
(10,395)
(11,023)
(8,957)
(6,202)
(3,844)
(1,807)
(1,325)
(17,648)
40,788
(12,767)
28,021
–
28,021
1 9.1 1
19.09
The statement of comprehensive income is to be read in conjunction with the notes of the financial statements set out on pages
33 to 60.
29
STATEMENT OF COMPREHENSIVE INCOME In thousands of AUD
Assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Trade and other receivables
Deferred tax assets
Property, plant and equipment
Rental assets
Intangible assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Loans and borrowings
Employee benefits
Income tax payable
Provisions
Total current liabilities
Loans and borrowings
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Note
2014
2013
7
8
8
10
11
12
13
14
15
16
17
15
16
17
2,393
68,981
71,374
89,015
3,260
4,423
52,644
31,734
181,076
252,450
25,903
9,099
5,621
7,039
498
48,160
31,397
248
1,025
32,670
80,830
171,620
99,060
2,851
69,709
171,620
4,871
58,463
63,334
67,139
2,898
3,655
52,929
31,401
158,022
221,356
26,117
–
4,719
4,520
502
35,858
28,900
338
887
30,125
65,983
155,373
95,483
2,769
57,121
155,373
The statement of comprehensive income is to be read in conjunction with the notes of the financial statements set out on pages
33 to 60.
30
Thorn Group 2014 Financial ReportFor the year ended 31 March 2014STATEMENT OF FINANCIAL POSITION In thousands of AUD
Balance at 1 April 2012
Total comprehensive income
Net profit for the period
Other comprehensive income
Transactions with owners of the company
Issue of shares under dividend reinvestment plan
Share based payments transactions
Dividends to shareholders
Balance at 31 March 2013
Balance at 1 April 2013
Total comprehensive income
Net profit for the period
Other comprehensive income
Transactions with owners of the company
Issue of shares under dividend reinvestment plan
Share based payments transactions
Dividends to shareholders
Balance at 31 March 2014
Share capital
Equity
remuneration
reserve
Retained
earnings
Total equity
93,898
2,557
43,756
140,211
–
–
1,585
–
–
95,483
–
–
–
212
–
2,769
28,021
28,021
–
–
–
(14,656)
57,121
–
1,585
212
(14,656)
155,373
95,483
2,769
57,121
155,373
–
–
3,577
–
–
–
–
–
82
–
28,151
28,151
–
–
–
–
3,577
82
(15,563)
(15,563)
99,060
2,851
69,709
171,620
The statement of comprehensive income is to be read in conjunction with the notes of the financial statements set out on pages
33 to 60.
31
STATEMENT OF CHANGES IN EQUITY
In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest paid
Interest received
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of assets
Acquisition of rental assets
Thorn Equipment Finance settlements
Acquisition of property, plant and equipment
Acquisition of software
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at April 1
Cash and cash equivalents at 31 March
Note
2014
2013
255,109
(138,438)
116,671
(2,073)
151
(10,724)
222,660
(120,612)
102,048
(1,807)
260
(7,173)
26
104,025
93,328
1,655
(70,178)
(32,325)
(2,538)
(2,724)
(106,113)
24,996
(13,400)
(11,986)
(390)
(2,478)
4,871
2,393
1,126
(60,463)
(33,161)
(1,874)
(1,784)
(96,156)
18,900
(4,000)
(13,071)
1,829
(999)
5,870
4,871
7
The statement of comprehensive income is to be read in conjunction with the notes of the financial statements set out on pages
33 to 60.
32
Thorn Group 2014 Financial ReportFor the year ended 31 March 2014STATEMENT OF CASH FLOW 1. Significant Accounting Policies
Thorn Group Limited (the ‘Company’) is a company domiciled in Australia. The address of the Company’s registered office is
Level 1, 62 Hume Highway, Chullora NSW 2190. The consolidated financial statements of the Company as at and for the financial
year ended 31 March 2014 comprises the Company and its subsidiaries (together referred to as the ‘consolidated entity’). The
principal activities of the consolidated entity were the leasing of household products, leasing of motor vehicles, the provision of
loans, equipment finance and the provision of receivables management services.
(a) Statement of Compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (‘AASBs’) adopted by the Australian Accounting Standards Board (”AASB”) and the Corporations
Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) adopted by the
International Accounting Standards Board (IASB).
The consolidated financial statements were approved by the Board of Directors on 20 May 2014.
(b) Basis of Preparation
The consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency.
The consolidated financial statements have been prepared on the historical cost basis except where assets are carried at
fair value.
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class
Order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless
otherwise stated.
The preparation of the consolidated financial statements in conformity with Australian Accounting Standards requires
management to make judgements, estimates and assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in the
consolidated entity.
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.
In particular, information about significant areas of estimation, uncertainties and critical judgements in applying accounting
policies that have the most significant effect on the amounts recognised in the financial statements include the following:
(i) Valuation of goodwill and other intangibles
Judgements are made with respect to identifying and valuing intangible assets on acquisition of new businesses.
(ii) Impairment of goodwill
Note 13 contains information about the assumptions and their risk factors relating to goodwill impairment. The consolidated
entity assesses whether goodwill is impaired at least annually. The calculations include an estimation of the recoverable amount
of the cash generating unit to which the goodwill is allocated.
(iii) Rent Try $1 Buy® asset depreciation
Where assets are installed on Rent Try $1 Buy® contracts and their standard estimated useful life is greater than the period at
which a similar item can be purchased for $1, an estimate of the number of assets expected to be purchased for $1 is made and
additional depreciation is expensed based on the average cost of assets installed.
33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Significant Accounting Policies (continued)
(iv) Impairment of receivables
Note 19 contains information about the credit risk associated with receivables. The consolidated entity assesses the impairment
of receivables monthly. The calculations include an assessment of the expected rates of loss and for consumer lease receivables,
an estimate of collateral.
(v) Purchased debt ledgers
Fair values of PDLs are determined using a discounted cash flow valuation technique. Cash flow forecasts are based on the
estimated future cash flows of the portfolio based on experience on similar portfolios, observed collections to date, payment
arrangements and other known factors.
Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.
(c) Basis of Consolidation
Subsidiaries
Subsidiaries are entities (including special purpose entities) controlled by the consolidated entity. The consolidated entity controls
an entity when is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases. Intra-group balances, and any unrealised
income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.
The consolidated entity has established a special purpose entity (SPE), Thorn ABS Warehouse Trust No.1, for the purpose of
securitising finance lease receivables acquired and other receivables it intends to originate. The SPE entity is wholly owned by
the consolidated entity and included in the consolidated financial statements, based on the evaluation of the substance of its
relationship with the consolidated entity and the SPE’s risks and rewards.
The following circumstances indicate a relationship in which the consolidated entity controls and subsequently consolidates
the SPE:
– The activities of the SPE are being conducted on behalf of the consolidated entity according to its specific business needs so
that the consolidated entity obtains benefits from the SPE’s operation.
– The consolidated entity has the decision making powers to obtain the majority of the benefits of the activities of the SPE.
– The consolidated entity retains the majority of the residual of ownership risks of the SPE or its asset in order to obtain
benefits from its activities.
(d) Revenue
Revenues are measured at the fair value of the consideration received or receivable net of the amount of goods and services tax
(GST) payable to the taxation authority. The major components of revenue are recognised as follows:
Lease Rental Revenue
The consolidated entity derives revenue from finance and operating leases.
Finance leases arise where substantially all of the risks and benefits incidental to ownership of the leased asset pass to the
lessee. Finance lease sales revenue is recognised at the time the rental contract is entered into based on the fair value of the
leased item, with interest income recognised over the life of the lease.
Operating leases arise where substantially all of the risks and benefits incidental to ownership of the leased asset remain with
the lessor. Payments under operating leases are due and payable on a monthly basis in advance.
Operating lease rental revenue is recognised on a straight line basis over the lease term, net of discounts. Revenue also arises
from charges such as late fees, termination fees and damage liability reduction fees. These revenues are recognised when due
and payable.
Collection Revenue
Revenue from collection services rendered is recognised upon delivery of the services to the customers.
34
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) Purchased Debt Ledgers Revenue
Revenue from purchased debt ledgers represents income derived from the application of the effective interest method net of
any changes in fair value. The effective interest rate is the implicit interest rate based on forecast collections derived at the time
of acquisition of an individual PDL. Change in fair value is determined based on the present value of expected future cashflows.
Interest
Interest revenue is calculated and charged on the average outstanding loan and lease balance and recognised on an accrual basis
using the effective interest method.
(e) Cost of Sales
Finance lease costs of sales comprise the cost of the item sold less any accumulated depreciation.
(f) Income Tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the profit or loss except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following
temporary differences: initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not
a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in
subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the
tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the
temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that
it is no longer probable that the related tax benefit will be realised.
Tax consolidation
Thorn Group Limited and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from
1 April 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Thorn
Group Limited.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members
of the tax consolidated group are recognised in the separate financial statements of the members of the tax consolidated group
using the group allocation approach by reference to the carrying amounts of assets and liabilities in the separate financial
statements of each entity and the tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by
the head entity in the tax-consolidated group and are recognised as amounts payable / (receivable) to / (from) other entities in
the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below). Any difference between
these amounts is recognised by the Company as an equity contribution or distribution.
Thorn Group Limited recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the
extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can
be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of
the probability of recoverability is recognised by the head entity only.
Nature of Tax Funding Arrangements and Tax Sharing Arrangements
The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement
which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding
arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed by the head entity and
35
1. Significant Accounting Policies (continued)
any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity receivable
(payable) equal in amount to the tax liability (asset) assumed. The inter-entity receivable (payable) are at call. Contributions
to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s
obligation to make payments for tax liabilities to the relevant tax authorities. The head entity in conjunction with other
members of the tax-consolidated group has also entered into a tax sharing agreement. The tax sharing agreement provides
for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax
payment obligations.
(g) Finance expenses
Finance expenses comprise interest expense on borrowings, and the unwinding of the discount on provisions. All borrowing costs
are recognised in the profit or loss using the effective interest rate method.
(h) Intangible Assets
Goodwill
All business combinations are accounted for by applying the purchase method. Goodwill represents the difference between the
cost of the acquisition and the fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.
Subsequent measurement
Goodwill is measured at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested
annually for impairment.
Other Intangibles
Other intangibles acquired as part of a business combination are recognised separately from goodwill. The assets are measured
at fair value at the date of acquisition.
Amortisation
Amortisation is provided on all intangible assets excluding goodwill. Amortisation is calculated on a straight line basis so as to
write-off the cost of each intangible asset over its estimated useful life. The estimated useful lives in the current and comparative
periods are as follows:
–
–
Customer relationships 5 years
Software
3 – 10 years
The residual value, the useful life and the amortisation method applied to an intangible asset are reassessed at least annually.
(i) Financial Instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and
trade and other payables.
Non-derivative financial instruments excluding financial assets at fair value through profit and loss are recognised initially at fair
value plus transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured at amortised
cost less impairment losses.
A financial instrument is recognised if the consolidated entity becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if the consolidated entity’s contractual rights to the cash flows from the financial assets expire
or if the consolidated entity transfers the financial asset to another party without retaining control or substantially all risks and
rewards of the asset. Financial liabilities are derecognised if the consolidated entity’s obligation specified in the contract expire or
are discharged or cancelled.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only
when, the consolidated entity has a legal right to offset the amounts and intends either to settle on a net basis or realise the
asset and settle the liability simultaneously.
36
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) The consolidated entity recognises its financial assets at either amortised cost or fair value, depending on its business model
for managing the financial assets and the contractual cash flow characteristics of the financial assets. The classification of
financial assets that the consolidated entity held at the date of initial application was based on the facts and circumstances of the
business model in which the financial assets were held at that date.
Financial assets recognised at amortised cost are measured using the effective interest method, net of any impairment loss.
Financial assets other than those classified as financial assets recognised at amortised cost are measured at fair value with any
changes in fair value recognised in profit or loss. Financial assets designated at fair value comprise purchased debt ledgers.
(j) Trade and Other Receivables
Finance lease receivables are recognised at the present value of the minimum lease payments less impairment losses. The
present value is calculated by discounting the minimum lease payments due, at the interest rate implicit in the lease.
Trade and other receivables are stated at their amortised cost less impairment losses, with the exception of purchased debt
ledgers which are designated at fair value.
(k) Loans and Borrowings
Loans and borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
loans and borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in
the profit or loss over the period of the borrowings on an effective interest basis.
(l) Rental Assets
Recognition and Measurement
Rental assets are stated at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset.
Gains and losses on disposal of an item of rental assets are determined by comparing the proceeds from disposal with the
carrying amount of the asset and are recognised net within “Other Income” or “Other Expenses” in profit or loss.
Depreciation
Depreciation is provided on rental assets and is calculated on a straight line basis so as to write-off the net cost of each asset
over its estimated useful life. Where assets are installed on Rent Try $1 Buy® contracts and their estimated useful life is greater
than the period at which a similar item can be purchased for $1, an estimate of the number of assets expected to be purchased
for $1 is made and additional depreciation expensed based on the average cost of assets installed.
The estimated useful lives in the current and comparative periods are 2 to 6 years.
The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.
(m) Property, Plant and Equipment
Recognition and Measurement
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from
disposal with the carrying amount of the asset and are recognised net within “Other Income” or “Other Expenses” in profit or loss.
Depreciation
Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is
calculated on a straight line basis so as to write-off the net cost of each asset over its estimated useful life.
Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the
straight line method.
The estimated useful lives in the current and comparative periods are as follows:
37
1. Significant Accounting Policies (continued)
–
Freehold Buildings
20 years
–
–
Leasehold Property
The lease term, to a maximum of 5 years
Plant and Equipment
3 – 10 years
The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.
(n) Impairment
Non-Financial Assets
The carrying amounts of the consolidated entity’s assets, other than deferred tax assets are reviewed at each balance date
to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is
estimated. For goodwill the recoverable amount is estimated at each balance date.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing
use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating units”). The
goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are
expected to benefit from the synergies of the combination.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. Impairment losses are recognised in the profit or loss, unless an asset has previously been re-valued, in which case the
impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit
or loss.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the
unit (group of units) on a pro rata basis.
Financial Assets
The recoverable amount of the consolidated entity’s receivables carried at amortised cost is calculated as the present value of
estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial
recognition of these financial assets).
Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significant
receivables are individually assessed for impairment. Impairment testing of receivables that are not assessed as impaired
individually is performed by placing them into portfolios with similar risk profiles and undertaking a collective assessment
of impairment, based on objective evidence from historical experience adjusted for any effects of conditions existing at each
balance date.
Reversals of Impairment
Impairment losses, other than in respect of goodwill, are reversed when there is an indication that the impairment loss may no
longer exist and there has been a change in the estimate used to determine the recoverable amount.
An impairment loss in respect of goodwill is not reversed.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(o) Employee Benefits
(i) Defined Contribution Superannuation Funds
Obligations for contributions to defined contribution superannuation funds are recognised as an expense in the profit or loss in
the periods during which services are rendered by employees.
38
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) (ii) Long Service Leave
The consolidated entity’s net obligation in respect of long-term service benefits is the amount of future benefit that employees
have earned in return for their service in the current and prior periods. The obligation is calculated using expected future
increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using the rates
attached to the Commonwealth Government bonds at the balance date which have maturity dates approximating to the terms of
the consolidated entity’s obligations.
(iii) Wages, Salaries, Annual Leave and Non-Monetary Benefits
Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the
reporting date represent present obligations resulting from employees’ services provided up to reporting date, and are calculated
at undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay as at the
reporting date including on-costs, such as workers compensation insurance and payroll tax.
(iv) Share-based Payment Transactions
The Performance Rights Plan allows certain consolidated entity employees to receive shares of the Company. The fair value
of performance rights granted is recognised as an employee expense with a corresponding increase in equity. The fair value
is measured at grant date and spread over the period during which the employees become unconditionally entitled to the
performance rights.
The fair value of the performance rights granted is measured using a Monte Carlo simulation model, taking into account the
terms and conditions upon which the performance rights were granted. The amount recognised as an expense is adjusted to
reflect the actual number of performance rights that vest except where the rights have not vested due to share prices not
achieving the threshold for vesting.
(v) Termination Benefits
Termination benefits are recognised as an expense when the consolidated entity is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to terminate employment before the retirement date.
(p) Provisions
A provision is recognised in the statement of financial position when the consolidated entity has a present legal or constructive
obligation that can be measured reliably as a result of a past event, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The
unwinding of the discount is recognised as a finance cost.
Make good costs for leased property
A provision for make good costs for leased property is recognised when a make good obligation exists in the lease contracts.
The provision is the best estimate of the present value of the expenditure required to settle the make good obligation at the
reporting date. Future make good costs are reviewed annually and any changes are reflected in the present value of the make
good provision at the end of the reporting period. The unwinding of the discounting is recognised as a finance cost.
(q) Trade and Other Payables
Trade and other payables are stated at their amortised cost. Trade payables are non-interest bearing.
(r) Lease Payments
Payments made under operating leases are recognised in the profit or loss on a straight-line basis over the term of the lease.
Lease incentives received are recognised in the profit or loss as an integral part of the total lease expense and spread over the
lease term.
(s) Goods and Services Tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of
GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense.
39
1. Significant Accounting Policies (continued)
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to,
the ATO is included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing
and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.
(t) Earnings Per Share
The consolidated entity presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated
by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary
shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number
of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise performance rights
granted to employees.
(u) Share Capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and performance
rights are recognised as a deduction from equity net of any tax effects.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
Dividend Reinvestment Plan
The consolidated entity has operated a DRP during the financial year. An issue of shares under the dividend investment plan
results in an increase in issued capital. The DRP allows eligible shareholders to elect to invest dividends in ordinary shares
which rank equally with the Company’s ordinary shares. All holders of the Company ordinary shares are eligible to participate in
the plan.
The issue price for the shares acquired under the DRP will be a price derived from the arithmetic average of the daily volume
weighted average market price per Company shares during the five trading days commencing on the second trading day
following the Record Date for the relevant dividend, less any discount the directors may determine from time to time and
announce to the Australian Stock Exchange.
(v) Segment Reporting
The consolidated entity determines and presents operating segments based on the information that internally is provided to the
CEO, who is the consolidated entity’s chief operating decision maker.
(w) Changes in Accounting Policy
All new Accounting Standards and Interpretations applicable to annual reporting periods commencing on or before 1 April 2014
have been applied to the consolidated entity effective from their required date of application. The initial application of
these Standards and Interpretations has not had a material impact on the financial position or the financial results of the
consolidated entity.
There has been no other change in accounting policy during the year.
(x) New Standards and Interpretations Not Yet Adopted
The following standards, amendments to standards and interpretations have been identified as those which may impact the
consolidated entity in the period of initial application. The consolidated entity will apply the standards and amendments for the
reporting periods beginning on the operative dates set out below. An initial assessment of the financial impact of the standards
and amendments has been undertaken and they are not expected to have a material impact on the consolidated entity’s financial
statements or accounting policies. The consolidated entity does not plan to adopt these standards early.
40
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) – AASB 2010-7 and AASB 2009-11 Amendments to AASB 9 introduce new requirements for the classification and
measurement of financial assets. The basis of classification depends on the entity’s business model and the contractual cash
flow characteristics of the financial asset. AASB 9 introduces additions relating to financial liabilities. The IASB currently has
an active project that may result in limited amendments to the classification and measurement requirements of AASB 9 and
add new requirements to address the impairment of financial assets and hedge accounting. The amendments, which become
mandatory for the consolidated entity’s 31 March 2016 financial statements, are not expected to have a significant impact on
the financial statements.
– AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure
Requirements remove the individual KMP disclosure requirements from AASB124 Related Party Disclosures, to achieve
consistency with the international equivalent standard and remove a duplication of the requirements with the Corporations
Act 2001. While this will reduce the disclosures that are currently required in the notes to the financial statements, it will
not affect any of the amounts recognised in the financial statements. The amendments apply for the consolidated entity’s
31 March 2015 financial statements and cannot be adopted early. The Corporations Act 2001 requirements in relation to the
remuneration reports will remain unchanged for now, but these requirements are currently subject to review and may also
be revised in the near future.
– AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge
Accounting (effective financial years beginning on or after 1 January 2014) made amendments to AASB 139 Financial
Instruments: Recognition and Measurement, which permits the continuation of hedge accounting in circumstances where
a derivative, which has been designated as a hedging instrument and is novated from one counterparty to a central
counterparty as a consequence of laws or regulations. Since the Group transacts derivatives directly with banks, the
amendments are not expected to have a significant impact on the Group’s financial statements. The Group does not intend to
adopt the new standard before its operative date, which means that it would be first applied in the annual reporting period
ending 31 March 2015.
– AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets The disclosure
requirements of AASB 136 ‘Impairment of Assets’ have been enhanced to require additional information about the fair value
measurement when the recoverable amount of impaired assets is based on fair value less costs of disposals. Additionally,
if measured using a present value technique, the discount rate is required to be disclosed. The amendments are applicable
to annual reporting periods beginning on or after 1 January 2014. The adoption of the amendments may increase the
disclosures by the consolidated entity.
2. Segment Reporting
The Board and CEO (the chief operating decision maker) monitor the operating results of four reportable segments, which are
the Consumer Leasing division, the Credit Management division, the Thorn Equipment Finance division and the Thorn Financial
Services division for the purpose of making decisions about resource allocation and performance assessment.
The Consumer Leasing division conducts the business of leasing of household products and leasing of motor vehicles.
The Credit Management division is comprised of the NCML business. NCML provides receivables management, debt recovery,
credit information services, debt purchasing and other financial services.
Thorn Equipment Finance division conducts the business in equipment financing for small and medium enterprises.
The Thorn Financial Services division conducts the business of the provision of personal loans.
Segment performance is evaluated based on operating profit or loss. Interest and income tax expense are not allocated to
operating segments, as this type of activity is managed on a group basis.
41
2. Segment Reporting (continued)
For the twelve months ended 31 March 2014
2014
In thousands of AUD
External revenues
Inter-segment revenue
Segment revenue
Operating expenses
Profit before interest, tax, depreciation
and amortisation
Depreciation
Profit before interest, tax and amortisation
Capital Expenditure
Segment Assets
Segment Liabilities
2013
In thousands of AUD
External revenues
Segment revenue
Operating expenses
Consumer
Leasing
Credit
Management
196,800
–
196,800
20,241
370
20,611
(147,350)
(16,560)
49,450
(1,363)
48,087
75,105
151,041
(78,692)
4,051
(247)
3,804
308
26,427
(2,138)
Thorn
Equipment
Finance
Thorn
Financial
Services
Consolidated
8,317
–
8,317
(5,353)
2,964
(50)
2,914
32,325
49,977
–
9,346
234,704
–
9,346
(8,161)
1,185
(71)
1,114
30
370
235,074
(177,424)
57,650
(1,731)
55,919
107,768
25,005
252,450
–
(80,830)
Consumer
Leasing
Credit
Management
170,020
170,020
18,874
18,874
Thorn
Equipment
Finance
6,129
6,129
Thorn
Financial
Services
7,920
7,920
Consolidated
202,943
202,943
(122,022)
(15,204)
(5,078)
(6,283)
(148,587)
Profit before interest, tax, depreciation
and amortisation
Depreciation
Profit before interest, tax and amortisation
Capital Expenditure
Segment Assets
Segment Liabilities
47,998
(1,212)
46,786
63,822
142,676
(63,789)
3,670
(262)
3,408
299
24,519
(2,194)
1,051
(48)
1,003
33,161
34,996
–
Reconciliation of reportable segment profit or loss
In thousands of AUD
Profit before interest and tax for reportable segments
Unallocated amounts:
Other corporate expenses
Depreciation & Amortisation
Net financing costs
Profit before tax
Income tax expense
Profit after tax
42
1,637
(13)
1,624
–
19,165
–
2014
55,919
(10,532)
(2,433)
(1,922)
41,032
(12,881)
28,151
54,356
(1,535)
52,821
97,282
221,356
(65,983)
2013
52,821
(8,302)
(2,184)
(1,547)
40,788
(12,767)
28,021
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) Reconciliation of reportable revenue
In thousands of AUD
Revenue for reportable segments
Other revenue
Elimination of inter-segment revenue
Revenue
3. Revenue
In thousands of AUD
Operating leases
Finance lease sales
Interest
Collection revenue
PDL revenue
Other income
2014
2013
235,074
202,943
151
(370)
260
–
234,855
203,203
2014
2013
108,041
51,507
54,343
17,474
3,136
354
102,191
37,876
44,023
15,801
3,073
239
234,855
203,203
Adjustments to the carrying amount of purchased debt ledgers as a result of changes in estimated cash flows were immaterial
during the year. These have been included in PDL revenue above.
4. Employment Benefits
In thousands of AUD
Wages and salaries
Contributions to defined contribution superannuation funds
Increase in liability for annual leave
Increase in liability for long service leave
Termination benefits
Equity settled share-based payment transactions
2014
44,387
3,173
323
256
638
82
2013
39,163
2,930
69
54
409
212
48,859
42,837
43
5. Auditors’ Remuneration
In whole AUD
Audit services
KPMG Australia:
Audit and review of financial reports
Other services
KPMG Australia
Taxation services – compliance
Taxation services – advice
Other services
6. Income Tax Expense
Recognised in the Income Statement
In thousands of AUD
Current tax expense
Current year
Adjustment for prior years
Deferred tax expense
Origination and reversal of temporary differences
Total income tax expense in the income statement
Numerical reconciliation between tax expense and pre-tax accounting profit
In thousands of AUD
Profit before tax
Prima facie income tax using the domestic corporation tax rate of 30% (2013: 30%)
Change in income tax expense due to:
Non-deductible expenses
(Over)/Under provided in prior years
2014
2013
345,000
345,000
327,000
327,000
60,000
30,000
45,000
115,000
175,000
5,000
135,000
295,000
2014
2013
13,227
16
(362)
12,881
2014
41,032
12,310
555
16
10,245
(105)
2,627
12,767
2013
40,788
12,236
636
(105)
Income tax expense on pre-tax accounting profit
12,881
12,767
7. Cash and Cash Equivalents
In thousands of AUD
Bank balances
Call deposits
Cash and cash equivalents
2014
2,283
110
2,393
2013
4,761
110
4,871
Included in cash are amounts of $1,340,000 (2013: Nil) which are held as part of the consolidated entity’s funding arrangements
that are not available to the consolidated entity.
44
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) 8. Trade and Other Receivables
In thousands of AUD
Current
Trade receivables
Finance lease receivables
Loan receivables
Purchased debt ledgers
Lease deposits
Other receivables and prepayments
Non-current
Finance lease receivables
Loan receivables
Purchased debt ledgers
2014
2013
4,062
37,316
15,583
3,581
564
7,875
4,504
28,815
12,744
3,697
584
8,119
68,981
58,463
74,033
9,689
5,293
89,015
56,119
6,422
4,598
67,139
Trade receivables are shown net of provision for impairment losses amounting to $972,000 (2013: $894,000).
Provision for impairment losses relating to finance lease receivables amounting to $10,526,000 (2013: $8,053,000) reflects the
risk to the consolidated entity of the expected early return or loss of products throughout the life of the contract.
Loan receivables are shown net of provision for impairment losses amounting to $3,159,000 (2013: $2,588,000).
The consolidated entity’s exposure to credit risk and impairment losses related to trade and other receivables are disclosed
in Note 19.
9. Purchased Debt Ledgers
Purchased Debt Ledgers (PDL) are measured at fair value and are classified as level 3 under the hierarchy set out in AASB 7
Financial Instruments: Disclosure. The following table shows a reconciliation of the PDL balances:
In thousands of AUD
At the beginning of the year
Net additions
Collections
Revenue
Total
PDLs are classified as follows:
In thousands of AUD
Current
Non-current
Total
2014
8,295
5,897
(8,436)
3,136
8,874
2014
3,581
5,293
8,874
2013
6,703
5,609
(7,090)
3,073
8,295
2013
3,697
4,598
8,295
45
9. Purchased Debt Ledgers (continued)
The following summarises the assumptions used in these calculations:
Input
Assumption and/or basis for assumption
Term which collections will be yielded
Maximum 72 months from start date of PDL acquisition
Effective interest rate
Forecast collections
Based on the effective interest rate for each PDL recognised at the time of acquisition
Forecasts are based on each PDL collections to date, the performance of equivalent
PDL and allowances for other known factors
A change of five percent in forecast collections at the reporting date would have increased or decreased the consolidated entity’s
equity and profit or loss by $271,000 (2013: $210,000).
10. Deferred Tax Assets and Liabilities
Recognised Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities are attributable to the following:
In thousands of AUD
Rental assets
Property, plant and equipment
Trade, loan and other receivables
Finance lease receivables
Accruals
Provisions
PDL liability
Assets
Liabilities
Net
2014
2013
2014
2013
2014
26,824
21,094
338
1,240
–
1,965
1,241
300
94
1,019
–
1,746
1,130
–
–
–
–
–
–
–
26,824
338
1,240
2013
21,094
94
1,019
(28,648)
(22,086)
(28,648)
(22,086)
–
–
–
–
–
(99)
1,965
1,241
300
3,260
1,746
1,130
(99)
2,898
Tax assets/(liabilities)
31,908
25,083
(28,648)
(22,185)
46
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) 11. Property, Plant and Equipment
In thousands of AUD
Year ended 31 March 2013
Opening net book amount
Additions
Depreciation charge for the year
Closing net book amount
At 31 March 2013
Cost
Accumulated depreciation
Net book amount
Year ended 31 March 2014
Opening net book amount
Additions
Depreciation charge for the year
Closing net book amount
At 31 March 2014
Cost
Accumulated depreciation
Closing net book amount
Land and
Buildings
Leasehold
Improvements
Plant and
Equipment1
20
–
(2)
18
70
(52)
18
18
–
(2)
16
70
(54)
16
2,154
1,203
(883)
2,474
9,002
(6,528)
2,474
2,474
1,245
(966)
2,753
10,247
(7,494)
2,753
1,266
671
(774)
1,163
6,770
(5,607)
1,163
1,163
1,293
(802)
1,654
7,833
(6,179)
1,654
Total
3,440
1,874
(1,659)
3,655
15,842
(12,187)
3,655
3,655
2,538
(1,770)
4,423
18,150
(13,727)
4,423
1.
Intangibles to the carrying amount of $3,508,000 were reclassed from property plant and equipment to Intangible assets in
2013 comparatives.
12. Rental Assets
In thousands of AUD
Opening balance
Acquisitions
Disposals
Depreciation
Transfers to finance leases
Transfers from finance leases
Balance at 31 March
2014
52,929
70,178
(3,184)
(32,049)
(36,759)
1,529
52,644
2013
48,478
60,463
(2,908)
(28,540)
(26,328)
1,764
52,929
47
13. Intangible Assets
In thousands of AUD
Year ended 31 March 2013
Opening net book amount
Additions
Amortisation charge for the year
Closing net book amount
At 31 March 2013
Cost
Amortisation and Impairment Losses
Net book amount
Year ended 31 March 2014
Opening net book amount
Additions
Amortisation charge for the year
Closing net book amount
At 31 March 2014
Cost
Amortisation and Impairment Losses
Net book amount
Goodwill
Customer
Relationships
Software1
Total
22,276
–
–
22,276
29,350
(7,074)
22,276
22,276
–
–
22,276
29,350
(7,074)
22,276
7,037
–
(1,760)
5,277
8,797
(3,520)
5,277
5,277
–
(1,760)
3,517
8,797
(5,280)
3,517
2,364
1,784
(300)
3,848
6,575
(2,727)
3,848
3,848
2,727
(634)
5,941
9,302
(3,361)
5,941
31,677
1,784
(2,060)
31,401
44,722
(13,321)
31,401
31,401
2,727
(2,394)
31,734
47,449
(15,715)
31,734
1.
Intangibles to the carrying amount of $3,508,000 have been reclassed from property plant and equipment to intangible assets in 2013.
Impairment tests for Cash Generating Units (CGU) containing goodwill
The following units have significant carrying amounts of goodwill:
In thousands of AUD
Consumer Leasing
Credit Management
2014
15,604
6,672
22,276
2013
15,604
6,672
22,276
The recoverable amount of the above CGU’s are determined based on a value-in-use calculation. Value-in-use is calculated based on
the present value of cash flow projections over a 5 year period and terminal value. The cash flow projections have been approved
by the Board.
Key assumptions used for value-in-use calculations
Consumer Leasing
During the forecast period, revenue is assumed to grow at an average of 3% p.a. and the pre-tax discount rate is assumed at 10.54%
(2013: 9.42%). A terminal value is calculated using the cash flows for year 5 of the forecast period and a long-term growth rate of
2%. The value in use calculation in 2014 was determined on a similar basis to the 2013 calculation.
Credit Management
During the forecast period, revenue is assumed to grow at an average of 8% p.a. and the pre-tax discount rate is assumed at 11.66%
(2013: 9.42%). A terminal value is calculated using the cash flows for year 5 of the forecast period and a long-term growth rate of
2%. The value in use calculation in 2014 was determined on a similar basis to the 2013 calculation.
The Credit Management discount rate increased to 11.66% due to:
48
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) – an increase in the risk free rate in-line with the 10 year government bond rate;
– an increase in the beta; and
– the inclusion of a size premium.
The recoverable amount of the CGU’s exceeds their carrying value at 31 March 2014.
Management believes that any reasonable change in the key assumptions on which the estimates and/or the discount rate are
based would not cause the carrying amount of the CGU to exceed its recoverable amount.
14. Trade and Other Payables
In thousands of AUD
Current
Trade payables
Other creditors and accruals
Deferred rental revenue
Property lease accrual
15. Loans and Borrowings
In thousands of AUD
Current liabilities
Secured loans
Non-current liabilities
Secured loans
Financing Loan Facilities
In thousands of AUD
Secured loan facilities available
Secured loan facilities utilised at balance date
Secured loan facilities not utilised at reporting date
Financing arrangements
Loan facilities
2014
2013
16,031
7,359
2,152
361
25,903
16,517
6,810
2,359
431
26,117
2014
2013
9,099
–
31,397
40,496
28,900
28,900
2014
2013
100,000
100,000
40,496
40,496
59,504
59,504
50,000
50,000
28,900
28,900
21,100
21,100
Thorn Australia Pty Limited has loan facility of $50,000,000 secured by a fixed and floating charge over the assets of the
consolidated entity.
The consolidated entity entered into a warehouse loan facility of $50,000,000 secured by rentals and payments receivable in
respect of the underlying lease receivable contracts during the financial year. The amounts due and payable on the warehouse
loan facility in the next 12 months are disclosed as current.
For more information about the consolidated entity’s exposure to interest rate risk and liquidity risk see note 19.
49
16. Employee Benefits
In thousands of AUD
Current
Salaries and wages accrued
Liability for long service leave
Liability for annual leave
Non-Current
Liability for long service leave
2014
2013
1,312
1,783
2,526
5,621
248
248
1,079
1,437
2,203
4,719
338
338
Defined contribution superannuation funds
The consolidated entity makes contributions to a defined contribution superannuation fund. The amount recognised as expense
was $3,173,000 for the financial year ended 31 March 2014 (2013: $2,930,000).
17. Provisions
In thousands of AUD
Balance at 1 April 2013
Provisions made during the year
Provisions used during the year
Unwind of discount
Balance at 31 March 2014
Current
Non-current
Make Good
Make Good
1,389
345
(237)
26
1,523
2014
498
1,025
1,523
Total
1,389
345
(237)
26
1,523
2013
502
887
1,389
A provision for make good costs in respect of leased property is recognised when a make good obligation exists in the lease
contracts. The provision is initially recognised at the inception of the lease.
50
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) 18. Capital and Reserves
On issue at the beginning of year
Issue of new shares on vesting of performance rights
Issue of shares under dividend investment plan
On issue at the end of year
2014
2013
147,584,880
146,374,703
127,919
1,782,014
409,339
800,838
149,494,813
147,584,880
–
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at shareholder’s meetings.
–
In the event of the winding up of the Company ordinary shareholders rank after all other shareholders and creditors and are
fully entitled to any proceeds of liquidation.
–
The Company does not have authorised capital or par value in respect of its issued shares.
Reserves
Equity Remuneration Reserve
The equity remuneration reserve represents the value of performance rights issued under the Company’s long-term
incentive plan.
Dividends
Dividends recognised in the current year by the Company are:
2014
Final 2013
Interim 2014
Total amount
2013
Final 2012
Interim 2013
Total amount
Cents per
share
Total amount
$’000s
Franked/
unfranked
Date of payment
6.0
4.5
5.5
4.5
8,863
6,700
15,563
8,051
6,605
14,656
Franked
18 July 2013
Franked
17 January 2014
Franked
18 July 2012
Franked
17 January 2013
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
Dividend Reinvestment Plan (DRP)
The Company operated a DRP during the period. In accordance with the Company’s DRP, 1,782,014 new ordinary shares totalling
$3,577,000 were issued.
Details of the DRP are disclosed in Note 1(u).
After the balance sheet date, the following dividend was proposed by the directors.
Final ordinary
6.5
9,717,163
Franked
17 July 2014
Cents per
share
Total amount
Franked/
unfranked
Expected date of
payment
51
18. Capital and Reserves (continued)
The financial effect of this dividend has not yet been brought to account in the financial statements for the year ended
31 March 2014 and will be recognised in subsequent financial reports. The impact on the dividend franking account of dividends
proposed after the balance date but not recognised as a liability is to reduce franking credits by $4,164,498 (2013: $3,795,040).
In thousands of AUD
Dividend franking account
2014
2013
30% franking credits available to shareholders of Thorn Group Limited for subsequent
financial years
30,813
24,241
The above available amounts are based on the balance of the dividend franking account at year end adjusted for:
– franking credits that will arise from the payment of the current tax liabilities
– franking debits that will arise from the payment of dividends recognised as a liability at the year end; and
– franking credits that the entity may be prevented from distributing in subsequent years.
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.
19. Financial Risk Management
(a) Financial Risk Management Objectives and Policies
The consolidated entity is exposed to financial risks through the normal course of its business operations. The key risks arising
are credit risk, liquidity risk and market risk.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The
Board has established the Audit, Risk and Compliance Committee, which is responsible for developing and monitoring risk
management policies. The Committee reports regularly to the Board of Directors on its activities.
Risk management policies are established to identify and analyse the risks faced by the consolidated entity, to set appropriate
risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the consolidated entity’s activities. The consolidated entity, through training
and management standards and procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
The Audit, Risk and Compliance Committee oversees how management monitors compliance with the consolidated entity’s risk
management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced
by the consolidated entity.
Credit risk
Credit risk is the risk of financial loss to the consolidated entity if a customer fails to meet its contractual obligation, and arises
principally from the consolidated entity’s trade, loan and finance lease receivables from customers and purchased debt ledgers.
To manage credit risk, the consolidated entity has formulated comprehensive credit policies covering credit assessments and
compliance with regulatory and statutory requirements. Credit underwriting includes the use of a scorecard system or credit
bureau report or a detailed internal risk profile for each application. The scorecard system is revised periodically and adjusted for
a number of factors including geographic location and market changes.
Credit risk for purchased debt ledgers is managed through a stringent process involving analysis of the target entity and its
customer history and with reference to the industry.
Liquidity risk
Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The
consolidated entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to
meet is liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage
to the consolidated entity’s reputation.
The consolidated entity’s access to financing arrangements is disclosed in Note 15.
52
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign currency that will affect the consolidated
entity’s income. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising returns. The consolidated entity has foreign currency risk on the purchase of rental assets directly
imported that are denominated in USD. The consolidated entity manages its exposure to foreign currency risk by utilising
forward exchange contracts where appropriate.
Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business. The Board of Directors monitors the return on capital, which the consolidated entity defines
as profit before financing costs divided by total assets. The Board of Directors also monitors the level of dividends to ordinary
shareholders. Refer to Note 18 for quantitative data.
(b) Credit Risk
The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure. The consolidated
entity’s net exposure to credit risk at the reporting date was:
In thousands of AUD
Trade receivables
Consumer Finance lease receivables
Commercial Finance lease receivables
Loan receivables
Purchased debt ledgers
Impairment losses
Trade receivables
2014
4,062
61,372
49,977
25,272
8,874
2013
4,504
49,817
84,934
19,166
8,295
149,557
116,899
The aging of the consolidated entity’s trade receivables at the reporting date was:
In thousands of AUD
Not past due
Past due 0 – 30 Days
Past due 31 – 180 Days
Gross
2014
Impairment
2014
Gross
2013
Impairment
2013
1,488
1,925
1,621
5,034
–
133
839
972
1,056
2,329
2,013
5,398
–
151
743
894
The net value of trade receivables as at 31 March 2014 was $4,062,000 (2013: $4,504,000)
The consolidated entity invoices its consumer rental customers in advance of the rental period. The revenue is not recognised in
the financial statements until the due date of the invoice.
Consumer finance lease receivables
Finance lease receivables that are past due are disclosed in the trade receivables above.
The provision for impairment losses as at 31 March 2014 is $8,961,000 (2013: $6,590,000). The provision reflects the risk to the
consolidated entity of the expected early return or loss of products throughout the life of the contract.
Collateral is held against the finance lease receivables in the form of the assets attached to the contract. In the event that the
asset is returned due to early termination of the contract, the asset is available for rental on other contracts or disposal via cash
sale. The value of this collateral as at 31 March 2014 is $39,696,000 (2013: $29,377,000).
Commercial finance lease receivables
The ageing of the consolidated entity’s commercial finance lease receivables at the reporting date was:
53
19. Financial Risk Management (continued)
In thousands of AUD
Not past due
Past due 0 – 30 Days
Past due 31 – 180 Days
Gross
2014
Impairment
2014
Gross
2013
Impairment
2013
49,832
1,113
597
–
968
597
51,542
1,565
35,134
1,041
405
36,580
–
1,058
405
1,463
The net value of commercial finance lease receivables as at 31 March 2014 was $49,977,000 (2013: $35,117,000)
Loan receivables
The ageing of the consolidated entity’s loan receivables at the reporting date was:
In thousands of AUD
Not past due
Past due 0 – 30 Days
Past due 31 – 180 Days
Gross
2014
Impairment
2014
Gross
2013
Impairment
2013
24,924
1,571
1,936
28,431
1,066
157
1,936
3,159
19,459
1,129
1,166
21,754
1,309
113
1,166
2,588
The net value of loan receivables as at 31 March 2014 was $25,272,000 (2013: $19,166,000)
(c) Liquidity Risk
The following are the contractual maturities of the consolidated entity’s financial liabilities including, where applicable, future
interest payments as at 31 March 2014.
31 March 2014
In thousands of AUD
Secured loan facilities
Trade and other payables
31 March 2013
In thousands of AUD
Secured loan facilities
Trade and other payables
(d) Interest Rate Risk
Carrying
Amount
Contractual
Cash Flows
1 Year or Less
2-5 Years
5 Years or
More
40,496
23,390
63,886
46,966
23,390
70,356
11,468
23,390
34,858
35,498
–
35,498
–
–
–
Carrying
Amount
Contractual
Cash Flows
1 Year or Less
2-5 Years
5 Years or
More
28,900
23,327
52,227
33,001
23,327
56,328
1,745
23,327
25,072
31,256
–
31,256
–
–
–
At the reporting date the interest rate profile of the consolidated entity’s interest bearing financial instruments was:
Variable Rate Instruments
In thousands of AUD
Financial assets
Financial liabilities
54
Carrying Amount
2014
1,136
2013
4,761
(40,496)
(28,900)
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) A change of one percent in interest rates at the reporting date would have increased or decreased the consolidated entity’s
equity and profit or loss by $276,000 (2013: $169,000).
(e) Fair Values
The fair values of the Company’s and consolidated entity’s financial assets and liabilities as at the reporting date are considered
to approximate their carrying amounts.
(f) The Fair Value Hierarchy
Financial instruments carried at fair value require disclosure of the valuation method according to the following hierarchy:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices)
Level 3 – Inputs for the asset or liability that are not based on observable market data.
The consolidated entity’s financial instruments are measured at fair value. The Group’s only Level 2 instruments are forward
foreign exchange contracts. Other financial instruments including purchase debt ledgers are classified as Level 3.
20. Earnings Per Share
Basic earnings per share
The calculation of basic earnings per share at 31 March 2014 was based on profit attributable to ordinary shareholders of
$28,151,000 (2013: $28,021,000) and a weighted average number of ordinary shares during the year ended 31 March 2014 of
148,640,899 (2013: 146,644,775).
Diluted earnings per share
The calculation of diluted earnings per share at 31 March 2014 was based on profit attributable to ordinary shareholders of
$28,151,000 (2013: $28,021,000) and a weighted average number of ordinary shares during the year ended 31 March 2014 of
148,842,000 (2013: 146,488,310), which includes performance rights granted.
2014
2013
Profit attributable to ordinary shareholders (basic)
In thousands of AUD
Profit attributable to ordinary shareholders (basic and diluted)
28,151
28,021
Weighted average number of ordinary shares (basic)
In thousands of shares
Issued ordinary shares at 1 April
Effect of shares issued
Weighted average number of ordinary shares at 31 March
Weighted average number of ordinary shares (diluted)
In thousands of shares
Issued ordinary shares at 1 April
Effect of shares issued
Weighted average number of ordinary shares (diluted) at 31 March
Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
147,584
1,057
146,375
270
148,641
146,645
148,580
146,488
262
324
148,842
146,812
18.94
18.91
19.11
19.09
55
21. Operating Leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
2014
8,068
10,686
18,754
2013
8,141
13,207
21,348
The consolidated entity leases all store and office premises under operating leases. The leases typically run for a period of
3 years, with an option to renew the lease after that date. The majority of the lease payments are increased every year to reflect
market rentals. The property leases do not include contingent rentals.
The consolidated entity also leases vehicles under operating leases. The lease term for these vehicles normally runs for a period
of 4 years. The lease payments are set at the commencement of the lease for the term of the lease. The lease agreements for
vehicles do not include contingent rentals.
Leases as lessor
The consolidated entity leases out its rental assets under operating leases. The future minimum lease payments under
non-cancellable operating leases are as follows:
In thousands of AUD
Less than one year
Between one and five years
22. Finance Leases
Leases as lessor
2014
29,499
5,773
35,272
2013
37,671
8,549
46,220
The consolidated entity leases out its rental assets under finance lease, hire purchase and chattel mortgage contracts. The
consolidated entity classifies Rent Try $1 Buy® contracts as finance leases where the term of the contract is 24 months,
36 months or 48 months. The asset rented has an estimated useful life equal to the contract length. The future minimum lease
payments under non-cancellable finance leases are as follows:
In thousands of AUD
Less than one year
Between one and five years
2013
87,489
101,551
2012
67,597
74,631
189,040
142,228
Unearned finance income in relation to finance leases as at 31 March 2014 was $67,162,000 (2013: $49,225,000).
56
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) 23. Consolidated Entities
Parent entity
Thorn Group Limited
Subsidiaries
Thorn Australia Pty Ltd
Eclipse Retail Rental Pty Ltd
Rent Try Buy Pty Ltd
CashFirst Pty Ltd
1st Cash Pty Ltd
Thorn Equipment Finance Pty Ltd
Thorn Finance Pty Ltd
Votraint No 1537 Pty Ltd
National Credit Management Limited
A.C.N 119211317 Pty Ltd
Hudson Legal Pty Ltd
Thorn ABS Warehouse Series No. 1
24. Contingencies
Ownership interest
Country of
Incorporation
2014
2013
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
n/a
The industry in which the consolidated entity operates is highly regulated. Documentation, marketing and sales activities (both
written and verbal) must comply with strict rules provided in the National Consumer Credit Protection Act and other legislation
such as the Fair Trading and door to door sales legislation. Breach of these rules can result in fines or civil penalties or damages or
compensation or some combination of these.
The consolidated entity has no reason to believe that a breach of these rules will occur or is likely to result in a material effect on
the profitability of the consolidated entity. No provision exists for any potential exposure in connection with such a breach.
The consolidated entity is aware (via the “mystery shop” process, where a person presents as a customer but is not a real
customer) that some verbal statements may have been made to some customers inaccurately describing the customer’s rights in
relation to the acquisition of similar products to those rented under its Rent Try $1 Buy® contracts. Under the National Consumer
Credit Protection Act, the amount at risk in relation to any affected contract is part of any deemed “interest” payable under that
contract and/or any penalties which could be imposed. No customer complaints have been received in this regard.
The consolidated entity has no reason to believe that this matter is likely to result in a material effect on the profitability of the
consolidated entity and no provision exists for any potential exposure in connection with this matter.
25. Deed of Cross Guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998 certain wholly owned subsidiaries are relieved from the
Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and directors’ reports.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The
effect of this is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the
subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the
Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also
given similar guarantees in the event that the Company is wound up. The subsidiaries subject to the Deed are listed in Note 23
(excluding Thorn ABS Warehouse Series No. 1).
57
25. Deed of Cross Guarantee (continued)
The consolidated Statement of Comprehensive Income comprising of entities which are parties to the Deed, after eliminating all
transactions between parties to the Deed of Cross Guarantee, at 31 March 2014, is the same as the consolidated Statement of
Comprehensive Income in this financial report.
The consolidated Statement of Financial Position in this financial report includes the assets and liabilities of Thorn ABS Warehouse
Series No. 1. Excluding the Thorn ABS Warehouse Series No. 1, cash and cash equivalents would decrease by $1,340,000 and trade
and other payables would decrease by $1,340,000.
26. Reconciliation of Cash Flows from Operating Activities
In thousands of AUD
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation and amortisation
Equity settled transactions
Transfer of rental assets to financial leases
Thorn Equipment Finance settlements
Operating profit before changes in working capital and provisions
Changes in working capital and provisions, net of the effects of the Purchase of subsidiaries
(Increase) in trade and other receivables
Decrease in deferred tax assets
Increase/(Decrease) in income tax liability
Increase/(Decrease) in trade and other payables
Increase in provisions and employee benefits
Net cash from operating activities
27. Parent Entity Disclosures
2014
2013
28,151
28,021
36,213
82
36,759
32,325
133,530
32,259
212
26,328
33,161
119,981
(32,394)
(35,303)
(362)
2,519
(214)
946
2,627
3,260
2,719
44
104,025
93,328
As at, and throughout, the financial year ending 31 March 2014 the parent entity of the consolidated entity was
Thorn Group Limited.
In thousands of AUD
Result of Parent Entity
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent comprising of:
Share capital
Equity remuneration reserve
Total Equity
58
2014
2013
15,563
14,656
–
–
15,563
14,656
7,039
108,950
7,039
7,039
99,060
2,851
101,911
4,520
102,772
4,520
4,520
95,483
2,769
98,252
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) Parent entity guarantees in respect of the debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the subsidiaries. Further details of the Deed of Cross
Guarantee and the subsidiaries subject to the deed are disclosed in Note 25. The deed guarantees the debts of the subsidiaries.
28. Related Parties
Key management personnel remuneration
In AUD
Short-term employee benefits
Post-employment benefits
Long service leave benefits
Share based payments
2014
2013
1,949,009
1,908,221
87,342
380,259
127,400
83,676
17,271
176,411
2,544,010
2,185,579
Individual directors and executives compensation disclosures
Information regarding individual director’s and executive’s compensation and some equity instruments disclosures as required by
Corporations Regulation 2M.3.03 is provided in the remuneration report section of the directors’ report on pages 1 to 27.
No director has entered into a material contract with the company or the consolidated entity since the end of the previous
financial year and there were no material contracts involving directors’ interests existing at year end.
59
28. Related Parties (continued)
Movements in shares
The movement during the reporting period in the number of ordinary shares in Thorn Group Limited held, directly, indirectly, or
beneficially, by each key management person, including their related parties, is as follows:
Held at 1 April
2013
Purchases
Sales
Received upon
exercise of
performance
rights
Held at
31 March 2014
241,300
11,429
60,000
–
192,729
3,347,463
60,278
34,000
107,835
340,218
–
–
5,000
–
–
–
–
–
–
–
81,650
3,429,113
–
–
60,278
39,000
19,052
27,217
126,887
367,435
Held at 1 April
2012
Purchases
Sales
Received upon
exercise of
performance
rights
Held at
31 March 2013
262,600
3,586,183
60,278
32,157
20,000
116,870
403,124
3,700
25,000
–
241,300
–
500,000
261,280
3,347,463
12,500
12,500
–
14,000
–
–
–
–
–
60,278
35,157
34,000
–
–
70,000
150,000
60,965
87,094
107,835
340,218
Directors
David Carter
John Hughes
Peter Henley
Joycelyn Morton
Executives
James Marshall
Peter Eaton
Directors
David Carter
John Hughes
Peter Henley
Paul Lahiff
Joycelyn Morton
Executives
James Marshall
Peter Eaton
60
Thorn Group 2014 Financial ReportNotes to the consolidated financial statements for the year ended 31 March 2014 (continued) 1
In the opinion of the directors of Thorn Group Limited (the ‘Company’):
a.
the financial statements and notes that are set out on pages 29 to 60 and the remuneration disclosures that are
contained in section 4.3 of the Remuneration Report in the Directors’ report are in accordance with the Corporations Act
2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 March 2014 and of their
performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
b.
c.
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a); and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
2
There are reasonable grounds to believe that the Company and the consolidated entities identified in Note 23 will be able
to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee
between the Company and the consolidated entities pursuant to ASIC Class Order 98/1418.
3
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing
Director and Chief Financial Officer for the financial year ended 31 March 2014.
Signed in accordance with a resolution of the directors:
David Carter
Chairperson
Dated at Sydney
20 May 2014
John Hughes
Managing Director
61
DIRECTORS’ DECLARATION Independent auditor’s report to the members of Thorn Group Limited
Report on the financial report
We have audited the accompanying financial report of Thorn Group Limited (the ‘Company’), which comprises the consolidated
statement of financial position as at 31 March 2014, and the consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated cash flow statement for the year ended on that date, Notes 1 to 28 comprising
a summary of significant accounting policies and other explanatory information and the directors’ declaration set out on pages
33 to 60 of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time
during the financial year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the financial report that is free from material misstatement
whether due to fraud or error. In Note 1, the directors also state, in accordance with Australian Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements of the consolidated entity comply with International Financial
Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating
to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with
the Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view
which is consistent with our understanding of the Company’s and the Group’s financial position and of their performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
62
Thorn Group 2014 Financial ReportFor the year ended 31 March 2014INDEPENDENT AUDITOR’S REPORT Auditor’s opinion
In our opinion:
a.
the financial report of the consolidated entity is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 March 2014 and of its performance for
the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
b.
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the remuneration report
We have audited the Remuneration Report included in section 4.3 of the directors’ report for the year ended 31 March 2014. The
directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with
Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our
audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Thorn Group Limited for the year ended 31 March 2014, complies with Section 300A of
the Corporations Act 2001.
KPMG
Anthony Travers
Partner
Dated at Sydney
20 May 2014
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
63
a. Distribution of shareholders
Category (size of holding)
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Total
b. The number of shareholders in less than marketable parcels is 285.
c. The names of the substantial shareholders listed in the Company’s register as at 31 March 2014 are:
Shareholder
Vinva Investment Management Limited
Kinetic Investment Partners Limited
IOOF Holdings Ltd
Investors Mutual Limited
d. Voting Rights
The Company only has ordinary shares on issue.
Number of ordinary
1,524
3,336
1,475
1,555
75
7,965
Number of ordinary
fully paid shares held
9,677,638
9, 51 7,1 0 5
9,167, 286
8,289,380
Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one
vote on a show of hands.
e. 20 largest shareholders – ordinary shares
Name
1.
J P Morgan Nominees Australia Limited
2. National Nominees Limited
3. HSBC Custody Nominees (Australia) Limited
4. RBC Investor Services Australia Nominees Pty Limited
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