RAISING
THE BAR
ANNUAL REPORT
2017
THORN ANNUAL REPORT 2017
CONTENTS
2
4
6
10
11
12
12
16
18
20
22
25
84
2017 Financial Overview
Chair’s Report
CEO’s Report
Board of Directors
Raising the Bar
Leadership Team
Our Strategy
Our Businesses
Consumer Leasing
Thorn Business Finance
Thorn Equipment Finance
Thorn Trade & Debtor Finance
Community
Financial Report
Corporate Directory
NOTICE OF MEETING
11.00 am on Wednesday, 30 August 2017
in the KPMG Auditorium, Tower Three,
International Towers Sydney,
300 Barangaroo Avenue, Sydney
NSW 2000
RAISING
THE BAR
FROM ITS ORIGINS IN 1937, THORN HAS BECOME ONE OF
AUSTRALIA’S LEADING FINANCIAL SERVICE PROVIDERS,
OFFERING A BROAD RANGE OF FINANCIAL SOLUTIONS TO
CONSUMER AND COMMERCIAL MARKETS.
Thorn’s foundation business, Radio
Rentals remains a leader in consumer
leasing with over 80 outlets nationally
and Rent-Try-$1 Buy® offering. Thorn’s
other major pillar, Thorn Business Finance
is growing fast and is now a major
contributor to earnings, focusing on small
and medium sized businesses with a
broadening product suite.
Thorn’s strategic direction over the next
few years is to grow consumer leasing
and business finance, the two areas of
highest return, whilst pursuing product
development, organic growth and potential
acquisitions. We continue to raise the bar,
delivering the best service, products and
value to customers.
Annual Report 2017 | 1
2017 FINANCIAL
OVERVIEW
REVENUE
PROFIT AFTER TAX
GROUP RECEIVABLES
$299m
$25.3m
$493.0m
UP
3.2%
UP
26.2%
UP
29.4%
RETURN ON EQUITY
EPS
FULL YEAR, FULLY
FRANKED DIVIDEND
12.4%
16.2¢
PER SHARE
8.0¢
PER SHARE
GEARING
56.1%
OPERATIONAL
HIGHLIGHTS
SIMPLIFIED
BUSINESS MODEL
STRONG INVESTMENT IN
TECHNOLOGY
CONTINUED GROWTH IN
BUSINESS FINANCE
With focus on two core businesses -
consumer leasing and business
finance - both generating an attractive
return on capital.
Refining application-to-approval
process and improving the
customer experience.
Strong relationships with brokers
and strategic partners resulting in
receivables growth of 80 per cent in
equipment finance, with the division
now a significant contributor to
group earnings diversity.
2 | Thorn Group
RESULTS AND
HIGHLIGHTS
RESULTS AND
HIGHLIGHTS
REVENUE*
REVENUE
REVENUE
REVENUE
REVENUE
($m)
($m)
($m)
($m)
($m)
PROFIT AFTER TAX
UNDERLYING CASH NPAT
UNDERLYING CASH NPAT
($m)
($m)
($m)
UNDERLYING CASH NPAT
($m)
UNDERLYING CASH NPAT
($m)
350
350
350
350
300
300
300
300
250
250
250
250
200
200
200
200
150
150
150
150
100
100
100
100
50
50
0
0
50
50
0
0
’13
’13
299
299
299
299
’15
’14
’14
’15
’16
’15
’15
’16
’17
’16
’16
’17
’17
’17
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
35
30
25
20
15
10
35
30
25
20
15
10
5
5
0
’13
0
’13
25.3
25.3
25.3
25.3
’15
’14
’14
’15
’16
’15
’15
’16
’17
’16
’16
’17
’17
’17
’14
’13
’14
’13
’14
’13
’14
’13
* Continuing business, does not include Receivables
Management business
GROUP RECEIVABLES
($m)
GROUP RECEIVABLES (NET)
GROUP RECEIVABLES (NET)
GROUP RECEIVABLES (NET)
GROUP RECEIVABLES (NET)
493.0
493.0
493.0
493.0
500
500
450
450
400
400
350
350
300
300
250
250
200
200
150
150
100
100
50
50
0
0
500
450
400
350
300
250
200
150
100
50
0
500
450
400
350
300
250
200
150
100
50
0
’13
’13
EPS & DIVIDENDS
(cents)
EPS & DIVIDENDS
EPS & DIVIDENDS
EPS & DIVIDENDS
(cents)
(cents)
(cents)
EPS & DIVIDENDS
(cents)
25
25
25
25
20
20
20
20
15
15
15
15
10
10
10
10
16.2
16.2
16.2
16.2
8.0
8.0
8.0
8.0
5
5
0
0
’17
’17
’15
’14
’14
’15
’16
’15
’15
’16
’17
’16
’16
’17
’14
’13
’13
’14
5
5
0
0
’13
’13
’13
’14
’14
’15
’15
’16
’16
’17
’14
’13
’16
’15
Basic Earnings Per Share
Basic Earnings Per Share
’15
’14
’16
’17
’17
’17
Basic Earnings Per Share
Dividends Per Share
Basic Earnings Per Share
Dividends Per Share
Dividends Per Share
Dividends Per Share
Annual Report 2017 | 3
CHAIR’S REPORT
The past two years have been challenging for the
Thorn Group, particularly in dealing with issues from
the past. As I mentioned in last year’s Annual Report,
our strategic review identified that the two principal
businesses, consumer leasing and business finance,
generated good returns and offered growth potential
over the longer term. Accordingly, the NCML receivables
management business was sold and the TFS consumer
loan division closed during the year.
FINANCIAL RESULTS
The financial outcomes from our business challenges are
summarised in the CEO’s report. Most importantly, net profit
after tax for the year to 31 March 2017 was up 26 per cent
on the previous year to $25.3 million and after significant
items in both years, adjusted net profit after tax was up
3.6 per cent to $31.4 million.
STRATEGY
We are very confident about our two businesses, consumer
leasing and business finance, supported by skills and
systems in credit assessment. We believe Thorn now
has an industry leading credit assessment system which
ensures high standards in responsible lending. Both
businesses are profitable and have distinctive industry
positioning. For the past two years, business finance has
been growing at a faster rate than consumer leasing.
Thorn’s strategy is to foster the growth of both these
businesses by ensuring the best structural support as well
as considering expansion opportunities which may arise
from industry adjustment in consumer leasing and network
expansion in business finance. The Board considers both
businesses have positive prospects, while Radio Rentals
faces some short term challenges due, in part, to changes
in the regulatory environment.
BOARD
The Board restructure over the last couple of years has
resulted in a strong, diversified and highly qualified Board,
with skills across management, finance, strategy, law, retail
and marketing. All directors have been actively involved in
the difficult issues addressed during the year.
RESIGNATION OF MANAGING DIRECTOR
In April 2017 the Board accepted the resignation of
Managing Director, James Marshall. James served
the company for 24 years, ultimately attaining the
top managerial position. He brought his accumulated
experiences to his role and was in charge during a difficult
time for the business. A search for a new managing director
is in progress. Meanwhile, our CFO, Peter Forsberg, is acting
CEO. We thank him for stepping up to this role.
DIVIDEND
Thorn’s approach to provisioning for the issues it has
faced has been an important factor in keeping the group
in sound shape with two profitable business streams.
Consumer leasing will face ongoing issues in FY18 but
beyond that will continue to be a strong contributor
demonstrating market leadership.
WITH AN ONGOING AND
POSITIVE GROWTH TRAJECTORY
FOR BUSINESS FINANCE, THE
BOARD IS CONFIDENT THAT
THORN WILL DEMONSTRATE ITS
POTENTIAL IN YEARS TO COME.
4 | Thorn Group
THORN IS IMPLEMENTING AN
INDUSTRY LEADING CREDIT
ASSESSMENT SYSTEM WHICH
ENSURES HIGH STANDARDS IN
RESPONSIBLE LENDING
The Board took into account many considerations in
deciding on a reduced final dividend - higher expenses from
regulatory and legal issues, tougher business conditions
for Radio Rentals as well as the need to conserve capital
to fund the ongoing growth of business finance. The 50 per
cent payout of full year profit after tax represents 8 cents
a share compared with 11.5 cents in the previous year,
all fully franked. In May 2017, at the time of the full year
results announcement, the share price of $1.25 equated
to a yield of 6.4% (a gross 9.1% if the franking credit
is taken into account).
PEOPLE
The Board thanks the leadership team for accepting
additional responsibility in recent times. We also believe
Thorn’s entire staff deserve acknowledgement and
thanks for their hard work in addressing the challenges
we have faced. They have treated our customers with
respect and adhered to Thorn’s values and vision. I also
thank our shareholders for their support through our
experiences and trust this will continue as we strive to
meet their expectations.
JOYCELYN MORTON
Chair
Annual Report 2017 | 5
CEO’S
REPORT
PETER FORSBERG
RAISING
THE BAR
We have now simplified Thorn’s business model down to the core businesses of consumer
leasing and business finance. These two business lines earn a good return on capital and so it
makes sense to redirect the capital released from the sale of the NCML receivables management
business and the closure of the TFS consumer loan division back into their growth.
Having two businesses each focused on different market segments (consumer and SME) gives
Thorn a distinctive market position and a balanced platform with some diversification benefit as
these two segments should perform differently through the economic cycle.
Thorn’s results this year reflect the combined outcome of these businesses with each having quite
differing experiences in FY17.
INDUSTRY CONTEXT AND
COMPANY SITUATION
Thorn’s consumer leasing business, Radio
Rentals, is a strong market leader in an
industry where there are two other large
constituents and then a number of smaller
players. Radio Rentals is a well established
brand which has been trading for 80 years this
year. To be successfully serving customers for
that length of time together with the leading
market position brings with it brand recognition
and economic scale with around 100,000 loyal
customers and a widespread national footprint
of over 80 outlets.
However the consumer leasing industry and
Radio Rentals specifically have attracted
scrutiny from the regulator (ASIC) and the
federal government over the recent past on
how responsible lending is conducted and the
amount that is charged for the service.
The regulator ASIC has examined the quality
of responsible lending of many consumer
leasing companies over the past few years
and has obtained enforcement outcomes
against at least eight of them. Its investigation
into Radio Rentals culminated this year in
our taking up a provision for the expected
costs of customer compensation and an
anticipated penalty.
At an industry level, the federal government
inquiry has reported and put forward
recommendations. These are in the process of
being translated into legislation in the coming
year with caps on the cost to consumers, a
protected earnings requirement, restrictions
on some fees, changes to responsible lending
assessment and suitability, and disclosure.
6 | Thorn Group
Radio Rentals supports the recommendations and
has moved to early adopt the proposed price caps
and most of the other recommendations. While these
proposed legislative changes will hopefully settle the
regulatory position of the industry and therefore any
uncertainty that overhangs it, they will have an effect
on the market and its profitability and Radio Rentals
will not be immune from that.
Thorn Business Finance is a relatively small player
in a large addressable market of 2 million small and
medium enterprises representing 61% of Australian
pre tax profits and employing 68% of Australian
workers. The market for financing is growing as SMEs
seek new financing increasingly from the non bank
financial sector and particularly so if their financing
requirements preclude offering property security,
require flexibility or a quick decision. Thorn has
positioned itself to provide what the market requires
and is helped by its network of brokers and partners
who contribute to a growing deal flow. Thorn has also
expanded its offer with franchise financing, giving
it broader product categories to meet the needs
of small business.
Thorn’s two core lines of business are therefore well
positioned in sectors which have ongoing demand
and sound fundamentals.
THORN HAS POSITIONED ITSELF
TO PROVIDE WHAT THE MARKET
REQUIRES AND IS HELPED BY
ITS NETWORK OF BROKERS AND
PARTNERS WHO CONTRIBUTE TO
A GROWING DEAL FLOW.
FINANCIAL PERFORMANCE
The headline numbers for Thorn in FY17 are all
positive – revenue is up 3 per cent to $299 million,
EBIT is up 25 per cent to $47.1 million, NPAT is up
26 per cent to $25.3 million and return on equity is
two percentage points higher at 12.4 per cent.
Within that performance though is the larger story of
simplifying the business, dealing with consequences
from historic Radio Rentals issues, positioning for the
future and redirecting resources towards the faster
growth in business finance than consumer leasing.
Simplifying the business has involved not only
reducing it down to the present two business
segments but also cutting costs in Radio Rentals and
the corporate office.
The financial results are fully explained in the
Operating and Financial Review in the Directors’
Report. In summary though, FY16’s profit after tax
was impacted by a $6.7 million charge for NCML, a
$1.6 million charge for closing the consumer loans
business, and a $2.0 million charge for the first of the
regulatory matters while FY17 had charges for further
provisions for regulatory matters with a profit impact
of $6.1 million after tax. If all these were adjusted
then the reported profit between years would have
been up 3.6 per cent.
We recognise that these adjustments have come at
a significant cost to shareholders but we trust our
actions in facing up to them and working through
them provides shareholders with more confidence
in the future.
Annual Report 2017 | 7
CEO’S
REPORT
BUSINESS OPERATIONS
PEOPLE
A rigorous and disciplined approach to credit risk is key to
success in both of Thorn’s business units as there must be
confidence that customers will meet their commitments. To
this end we continue to invest in technology and refine the
application-to-approval process to ensure that it is easy to
use but rigorous enough to provide the necessary data to
make an effective credit assessment in a timely manner.
In consumer leasing, we have also set out to ensure Radio
Rentals provides a good value proposition to customers
through lower pricing, a more modern and wider range
of household equipment delivered through an improved
online presence and through refurbished stores with
some relocated into high traffic shopping centres to reach
more customers and a wider demographic. This year while
revenue rose 2 per cent to $251 million, higher costs
including the provision for regulatory matters mentioned
above resulted in EBIT falling 17 per cent to $36.3 million.
Thorn Business Finance saw its revenue lift 23 per cent to
$37 million and its EBIT rise 40 per cent to $18.4 million.
Underlying this was a particularly strong performance by
Equipment Finance but a disappointingly lower revenue
and EBIT from Trade & Debtor Finance as it reshaped its
receivables book to move away from riskier credits towards
more traditional debtor finance customers and incurred
credit losses in the process.
Employing and retaining the best people is critical to
business performance. This year while Thorn lost some
expertise through the business simplification process,
the closure of six Radio Rentals stores and some senior
resignations, there is a core of expertise which should
serve the business well for the future. We know personal
service and the customer relationship are crucial to keeping
customers happy and loyal, so we tried to isolate these
elements of our operation from any cost cutting. In what
has been a difficult year for some parts of the business,
we are grateful for all who have helped ensure we continue
to provide the high levels of service our customers have
come to expect.
OUTLOOK
In this report, we have been at pains to show we are facing
up to and addressing some difficult business circumstances
and being frank about the financial consequences. At the
same time, it is important not to cloud the potential we see
in the business model.
In consumer leasing, at a time when some 3 million
Australians are excluded from the financial mainstream,
there is an ongoing need for people to be able to lease
consumer goods as an alternative to waiting some years to
accumulate funds to buy these goods outright.
However there are some immediate challenges being faced
by Radio Rentals in terms of adverse publicity, weaker retail
market conditions, regulatory changes, temporary deferral of
returning customers due to the launch of the 4 year contract
3 years ago, and significant business change including a
transition to a new online origination platform and process.
All of these are expected to put pressure on earnings in
the short term.
8 | Thorn Group
WE ARE GRATEFUL FOR
ALL WHO HAVE HELPED
ENSURE WE CONTINUE TO
PROVIDE THE HIGH LEVELS
OF SERVICE OUR CUSTOMERS
HAVE COME TO EXPECT
Over the medium term however the large pool of loyal
customers and the more efficient cost base should position
it for continued industry leadership and growth.
Business Finance on the other hand has strong momentum
currently behind it and the combination of increasing small
business demand, the industry structure and the referral
network we have established, indicate that performance
should continue to improve and see it form an increasing
percentage of Thorn’s earnings in future.
THANK YOU
Any success the company achieves is due to the efforts
of the staff and management right across Thorn combined
with the support and loyalty of our wonderful customers,
clients and banking and finance partners. I am lucky to work
with such a talented and committed team and I thank them
on your behalf.
PETER FORSBERG
Acting CEO
Annual Report 2017 | 9
BOARD OF DIRECTORS
RAISING THE BAR
Over the past two years, Thorn has instituted a review of the
way it does business. In particular this has focused on how
we can help our people give customers the best service.
This has ranged across many aspects of how we relate to
customers, in consumer leasing and business finance, and
we have called the program “raising the bar” which is the
theme for this year’s Annual Report.
apply and in ensuring we are providing goods in line with
people’s capacity to pay. Our pricing is highly competitive
and we are now providing a wider range of goods for a
broader demographic group. The look of our stores is also
changing, with newer outlets in shopping centres making
people realise that consumer leasing might be a new way of
accessing household goods.
Raising the bar relates to how we apply our values and
how we utilise technology to ensure we are meeting our
commitments to customers. By raising the bar we want to
ensure all our practices are of the highest standard. In this
way, we ensure we are giving customers the best deal in
meeting their needs and increasing the opportunity for our
people to feel good about the services we provide.
In consumer leasing, as well as being the market leader
in size, we are striving for leadership in the pricing we
In business finance, we are also raising the bar in terms of
credit quality, speed of decision making and applying a broader
business understanding to the needs of small business
customers. We provide finance that is not easy to obtain in
today’s market, such as equipment leasing and cash flow and
franchise financing. By appreciating how small businesses
operate and how we can help them, we are creating a superior
operating practice that underlies our growth.
DAVID
FOSTER
ANDREW
STEVENS
JOYCELYN
MORTON
BELINDA
GIBSON
STEPHEN
KULMAR
Independent,
Non-Executive Director
Independent,
Non-Executive Director
Chair, Independent,
Non-Executive Director
Independent,
Non-Executive Director
Independent,
Non-Executive Director
25 years in financial
services, including CEO
of Suncorp Bank 2008-13.
30 years in business and
technology, including over
four years MD of IBM
Australia and New Zealand.
Over 35 years of experience
in finance, taxation and
management, in Australia
and internationally.
Over 30 years legal
experience across securities
and financial markets and
regulatory strategy.
Over 35 years of
experience in marketing and
strategic development.
Full biographies in Director’s Report, p.30 and 31
10 | Thorn Group
LEADERSHIP TEAM
OUR STRATEGY
Thorn’s strategy is to grow the market position and
performance of its two core businesses, consumer leasing
and business finance. These businesses have sound
attributes and provide a suitable return on capital for the
risk involved.
Our strategy involves ensuring our people and businesses
have the resources to prosper. Fostering skills in credit
assessment is common to how we execute our strategy,
along with the people side of our business, as we deal
directly with customers in our consumer leasing stores and
come to know the individual needs of small businesses.
The rapid growth of business finance has meant that
providing capital to this operation is a critical component of
its expansion. Our bankers and shareholders are providers
of this capital which has enabled business finance to
take on more commitments, meeting the needs of more
small businesses.
Both our core businesses have potential for organic growth
and as business and industry conditions allow, there may
be scope for acquisitions. Industry developments in
consumer leasing may result in consolidation opportunities
and in a more fragmented business finance industry,
there is scope to foster a growing network of referrers and
alliances as well as source bolt on acquisitions or develop
new lines of business.
SIMON
REVELMAN
PHIL
CHAPLIN
WENDY
YIP
Chief Information
Officer
Joined Thorn Group
in 2013 as General
Manager Information
Services. Has a
diverse background
in the IT marketplace
across a range of
industry sectors.
General Manager
Thorn Business
Finance
Over 20 years
experience in the
finance industry,
with a broad skill-
set across general
management,
sales leadership,
operational
excellence and
strategic planning.
Chief Risk Officer
Over 18 years of
experience as a
risk and capital
management
professional,
across advisory
firms and
major financial
institutions.
ANDREW
CROWTHER
Chief Financial
Officer (acting)
Over 20 years
experience in
financial services
involving the
wealth and
property sectors.
MATT
INGRAM
PETER
FORSBERG
DARREN-JOHN
AQUILINA
Chief Operating
Officer
Chief Executive
Officer (acting)
Chief Marketing
Officer
Over 20 years
extensive
experience in the
financial services
sector, strong
background
in strategic
planning, people
development and
team leadership.
Experienced CFO
across healthcare,
manufacturing and
distribution, FMCG
and professional
services in listed,
not-for-profit and
private equity
owned businesses.
Over 20 years
experience in
Marketing &
eCommerce across
FMCG, Finance
and Retail.
Annual Report 2017 | 11
OUR BUSINESSES
CONSUMER
LEASING
12 | Thorn Group
STRATEGIC INTENT
THORN’S STRATEGIC INTENT IS TO RAISE THE BAR BY IMPROVING RADIO RENTALS’
CUSTOMER OFFER THROUGH LOWER PRICES, A WIDER, MORE MODERN PRODUCT
RANGE IN NEW IMPROVED STORES, THE IMPLEMENTATION OF A NEW ONLINE
CUSTOMER APPLICATION AND CREDIT ASSESSMENT SYSTEM WHILE DRIVING
OPERATIONAL EFFICIENCIES.
Over the past few years, there has been increased scrutiny
of the consumer leasing industry, with the Radio Rentals’
name regularly mentioned as an example for the wider
industry because of its recognition and market leading
position. Over the past year, Thorn has undertaken a review
of the brand’s value proposition, to ensure it continues to
provide a competitive offer and superior customer service.
Radio Rentals has developed an online customer application
and credit assessment system which is now being rolled out
nationally. This streamlined system is the first of its kind in
the consumer leasing industry, and will improve customer
experience as well as provide a scalable and more efficient
approval process.
THORN’S CONSUMER LEASING
BUSINESS, RADIO RENTALS, IS A
MARKET LEADER AND HAS BEEN
OPERATING IN AUSTRALIA FOR 80
YEARS, WITH A BASE OF 100,000
LOYAL CUSTOMERS AND A NATIONAL
FOOTPRINT OF OVER 80 OUTLETS.
Radio Rentals provides an extensive range of essential
household goods and home office needs through consumer
leasing products, principally under the Rent-Try-$1 Buy®
banner. Rent-Try-$1 Buy® enables customers to enjoy the
benefits and flexibility of rental along with the potential
to obtain ownership. In line with the group’s responsible
lending policy, Radio Rentals ensures all customers are
provided with products that suit their needs and budget and
are not over committed, enabling more Australians to gain
access to every day essentials.
97.3%
OF CUSTOMERS
SAY THE RADIO
RENTALS TEAM
TREAT THEM
WITH DIGNITY
AND RESPECT
Annual Report 2016 | 13
OUR BUSINESSES
OPERATIONS
Radio Rentals’ strategy of reinventing itself to customers by creating
new products, locations and ways of helping people access the goods
they want and need has resulted in exposure to larger customer
bases and higher demographics, with revenue increasing 2 per cent
in FY17, to $251.2 million. However, the measures put in place to
deliver an improved customer experience and investment in a more
stable business have resulted in higher costs. These costs plus the
provisioning for regulatory matters have resulted in EBIT being down
17 per cent to $36.3 million.
Longer term contracts continue to be very successful, with customers
moving away from shorter term leases to four year leases, which allow
for more affordable weekly payments. With this having begun three
years ago, there will be a flow through impact of temporary deferral
of returning customers due to launch of the four year contract. This
disparity will decrease over the next couple of years as there will be a
larger proportion of four year contract renewals.
A REINVENTED BRAND
Last year, Thorn announced its plan to transition six existing full
service branches to the new and modernised “Hub and Spoke” model
under the new brand, RR, strategically located in high traffic shopping
centres. This strategy has proven successful with a number of stores
relocating into high footfall shopping centre locations this year in
addition to the first RR pilot store in Erina, NSW.
Following this pilot, Thorn expects to continue the rollout of the new,
refreshed, RR brand and continue its investment into additional
concept stores.
14 | Thorn Group
DEVELOP
Thorn branded
product range further
and new propositions
to reach a wider
demographic
MAINTAIN
high levels
of customer
satisfaction across
the store network
ENHANCE
regulatory focus and
streamline “enquiry
to contract” process
for improved customer
experience
As it looks to better service customers, Thorn is also progressively
establishing a number of warehousing and distribution hubs in metro
locations, including in Sydney and Brisbane, to help capture new
customer segments.
Thorn branded products remain popular, with volume and range expanding
over the past few years and now including televisions, a variety of
fridge types, smart phones and tablets. This year has also seen the
launch of new product categories, including small appliances and music
instruments, as well as a summer catalogue which included a range
of barbeques, lawn mowers and outdoor items such as trampolines.
These are expected to be a recurring offering.
BRAND STRENGTH AND SUPPORT
Radio Rentals is a resilient business with a network of 80 stores nationally
and 100,000 loyal customers. Customer satisfaction and loyalty remain a
key focus of the Radio Rentals business. An independent survey conducted
last year by Roy Morgan revealed strong support for the brand. The research
shows 97 per cent of customers say Radio Rentals treats them with dignity
and respect, 92 per cent consider Radio Rentals affordable and 70 per cent
say Radio Rentals was the only way for them to access affordable everyday
essential goods. More than half of the respondents said that if they had not
gone to Radio Rentals, they would have had to go without the goods and
95 per cent said “Rent-Try-$1 Buy” was important to them.
92%
OF CUSTOMERS RATED
RADIO RENTALS
AFFORDABLE
Annual Report 2017 | 15
OUR BUSINESSES
THORN
BUSINESS
FINANCE
16 | Thorn Group
THORN
BUSINESS
FINANCE
THORN BUSINESS FINANCE (TBF) CONSISTS
OF THORN EQUIPMENT FINANCE (TEF), THORN
TRADE & DEBTOR FINANCE (TDF), AND
STRATEGIC PARTNER, CASHFLOW IT (SPECIALIST
FUNDER TO THE FRANCHISE SECTOR).
Across its various businesses, Thorn Business Finance provides
equipment loans, leases, debtor finance, trade finance and capital funding
solutions, through direct customer relationships and Thorn’s multi-channel
distribution network.
An investment in technology has streamlined processes across the
different businesses, with all brands now under the Thorn Business
Finance banner. This has enhanced the business finance offering, enabling
cross selling of products and solutions to new and existing customers.
STRATEGIC INTENT
THORN BUSINESS FINANCE OPERATES
IN NICHE MARKETS UNDERSERVICED
BY THE BANKS, OFFERING PRODUCTS
AND SOLUTIONS TO SMALL AND MEDIUM
ENTERPRISES AND THE FRANCHISE SECTOR.
Growth is driven by a very clear strategy around the market the
business serves, the financial products it provides, and the
relationships with brokers and white label partners. This combination
is intended to support SMEs in their day-to-day operations and
growth ambitions.
As Thorn strengthens its relationships with brokers and strategic
partners, there is also an opportunity to bring additional financial
products to SMEs, such as small business loans, to help them
manage cash flow better.
DEVELOP
product offering
to create cross-sell
opportunities and
drive organic
growth
EXPAND
complementary
acquisitions, partnership
opportunities, and
strategic alliances
ENHANCE
profitability and scale
through synergies
and leveraging
broader business
capabilities
Annual Report 2017 | 17
OUR BUSINESSES
THORN EQUIPMENT FINANCE
THORN’S EQUIPMENT FINANCE DIVISION HAS GROWN
SIGNIFICANTLY IN FY17 MAINLY DRIVEN BY A STRONG
RELATIONSHIP WITH BROKERS AND STRATEGIC PARTNERS,
RESULTING IN RECEIVABLES GROWTH OF 80 PER CENT.
This division is now a significant contributor to earnings
diversity within the group, gaining strong momentum and
providing a growing proportion of group earnings. Equipment
Finance grew revenue and EBIT strongly (up 58 per cent to
$26.4 million and 83 per cent to $16.1 million respectively)
with the support of brokers and partners and the success of
franchise financing.
Equipment Finance provides a unique offering as a
specialist source of funds for SMEs, a segment representing
99 per cent of Australian businesses which employ around
70 per cent of the entire Australian workforce. Equipment
Finance provides SMEs with access to equipment they
need to operate their businesses, from specialised medical
equipment to information technology, commercial kitchen
equipment, solar products, machinery and vehicles.
In FY17, Thorn has further tailored its offering to introducers
and select brokers, driving organic growth and higher
deal volume. Thorn has built a strong reputation in the
equipment finance market, with brokers increasingly
choosing TEF over competitors to assist their SME clients.
Thorn Equipment Finance’s diversity of assets and
customers mean arrears and losses are well controlled.
There is a moderate concentration of catering equipment
and motor vehicles, and the average transaction is
around $30,000.
CASHFLOW IT
Cashflow IT is an exclusive strategic partnership providing
specialised lending solutions to the franchise sector.
Working as an integral part of Thorn Business Finance,
Cashflow It provides equipment finance to some of
Australia’s largest and best known franchise groups. Setting
itself apart through a deep understanding of the challenges
faced by both franchisees and franchisors, Cashflow It
shows how expertise and a tailored approach can deliver
a service experience beyond that of the banks, a feature
highly valued by Australian businesses.
In FY17, the Cashflow It partnership continued to make a
positive contribution, as the focus on the franchise segment
increased. This translated into significant growth in the
franchising model, with Thorn working directly with franchise
groups as well as franchisees themselves.
In addition to the usual franchise groups operating in fitness
and food, Thorn has seen growth in other industry sectors
including health + wellbeing, real estate and newsagencies.
The average loan in the franchise sector has increased as
operators understand a stronger level of support is needed
to succeed in a competitive market.
WHERE TRADITIONAL LENDERS
HAVE NARROW REQUIREMENTS, THE
TEAM AT THORN UNDERSTAND THE
CHALLENGES OF A GROWING BUSINESS
AND THE NEED TO FINANCE GROWTH
18 | Thorn Group
CUSTOMER STORY
ESTABLISHED IN 1986, OPORTO WAS FOUNDED
ON CREATING AN AUTHENTIC PORTUGUESE
TASTE. TODAY, OPORTO HAS OVER 140
RESTAURANTS ACROSS AUSTRALIA. OPORTO
IS ONE OF THREE FRANCHISE SYSTEMS FROM
CRAVEABLE BRANDS (FORMERLY QUICK SERVICE
RESTAURANT HOLDINGS).
Cashflow It’s accreditation program offers Oporto
franchise partners pre-approved funding for all of their
asset finance requirements.
Through the use of new dynamic restaurant designs, new
uniforms, a loyalty program, marketing engagement and
ongoing social media campaigns, Oporto is ensuring it
maintains its image as a young, engaged and dynamic brand.
Cashflow It has been able to assist Oporto with the roll out
of the new restaurant design by providing finance to franchise
partners for the costs associated with the refurbishment.
“Cashflow It has supported our franchise partners by providing
an alternative to traditional bank lending. They provide a variety
of finance options to our franchise partners from equipment
finance, refurbishment and full store fit out. Their application
process is simple, efficient and they also provide a great
customer service.”
– Carl Tjandra, Franchise Analytical Manager
Annual Report 2017 | 19
OUR BUSINESSES
TRADE & DEBTOR FINANCE
ACCESS TO ADEQUATE CAPITAL IS ONE OF THE GREATEST
CHALLENGES FACED BY AUSTRALIAN SMALL AND MEDIUM
ENTERPRISES. THORN TRADE & DEBTOR FINANCE
ADDRESSES THIS ISSUE BY UNLOCKING THE CASH TIED UP IN
BUSINESS-TO-BUSINESS SALES, ALLOWING SME’S TO RAISE
FUNDS AGAINST INVOICES, SPECIFIC DEBTORS, OR THEIR
ENTIRE DEBTORS LEDGER. THIS FLEXIBLE AND SCALABLE
FINANCE PRODUCT PROVIDES OUR CUSTOMERS WITH THE
CAPITAL AND CASH-FLOW THEY NEED TO INVEST IN THEIR
BUSINESSES AND TO DRIVE GROWTH.
In FY17 TDF completed the transformation of its acquired
Debtor Finance business, adding resources in key markets
and aligning operations to better leverage the Thorn Group
infrastructure. At the end of the FY17 year the business was
more closely aligned with the fast growing Thorn Equipment
Finance business, all under the Thorn Business Finance
banner. This alignment of business streams supports
Thorn’s strategy of being a niche lender to Australian SME’s,
providing a broad range of financial products and services
that allow those business customers to thrive.
Looking to the future Thorn is setting new benchmarks for
flexibility and ease of implementation when it comes to
financing invoices and debtors. The future of Debtor Finance
for Thorn in Australia is bright, delivering simple and cost
effective solutions to Australian SME’s, both directly and
through our network of partners.
20 | Thorn Group
TDF CUSTOMER STORY
RUNNING A SMALL BUSINESS IN THE
BUILDING INDUSTRY TODAY
Debtor funding has come a long way in the last 15 to
20 years, from what was historically quite a limited
product with a number of negative connotations, to a
modern incarnation as a flexible and scalable source of
business funding.
This has been a necessary evolution with market factors
driving down prices and forcing businesses to operate
on ever narrowing margins. Combine this with ever
extending trading terms and the resulting slow cash
cycle puts considerable restraints on business growth.
Poly-Tech Industrial Services was established in 1984 to
provide practical solutions for the repair and protection
of assets against the corrosive effects associated
with all forms of industry, from mining and automotive
engineering to food processing.
Thorn Trade & Debtor Finance (TDF) provides a modern
and holistic approach to providing small businesses
with a funding solution that is tailored to the individual
needs of the business. Unlike banks or other debtor
funding facilities, Thorn understands the processes of
our business and has created a lending package which
provides us with the flexibility to meet our needs. The
company has a deep understanding of our business and
our client base and so we have a business partner rather
than a funding facility.
Client trust is very important in our industry and Thorn
provides a very low-key interface with our clients.
Poly-Tech clients are comfortable in knowing we have
access to such a facility because it demonstrates we
have sufficient cash flow to run our business.
– Steve Church, Founding Director, Poly-Tech
Annual Report 2017 | 21
COMMUNITY
THORN BELIEVES BUSINESSES SHOULD GIVE BACK TO
THE COMMUNITIES IN WHICH THEY OPERATE AND BE
A GOOD CORPORATE CITIZEN IN ORDER TO HAVE A
SOCIAL LICENSE TO OPERATE. THORN’S ENTIRE TEAM
IS COMMITTED TO DEVELOPING AND MAINTAINING LONG
TERM PARTNERSHIPS WITH COMMUNITY ORGANISATIONS,
NETWORKS, AND LOCAL COMMUNITIES.
As part of Thorn’s 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. Among the initiatives supported by Thorn are White Ribbon, Digger’s Rest,
Project New Dawn, Mission Australia, and the Children’s Tumour Foundation of Australia.
WHITE RIBBON
Thorn Group supports White Ribbon, Australia’s only
national, male led Campaign to end men’s violence
against women and promote gender equality and
healthy relationships.
Thorn’s support of White Ribbon is organisation-wide,
involving all employees, brands and businesses under
the Thorn Group banner, with all members of the
leadership team being White Ribbon ambassadors.
White Ribbon is an organisation that works to prevent
violence by changing attitudes and behaviours.
The prevention work is driven through social
marketing, the Ambassador Program and initiatives
with communities, schools, universities, sporting
codes and workplaces.
Statistics show that domestic violence and family
violence are the principal causes of homelessness
for women and their children.
One woman is killed every week in Australia as a result
of domestic violence and one in four children is exposed
to domestic violence.
Thorn’s brands, in particular Radio Rentals, strongly
align with White Ribbon’s core promise “We’ve got your
back”. Radio Rentals and Rentlo employees interact
with some customers who are directly affected by
domestic violence.
By showing support for White Ribbon, Thorn aims to play
an important role in the community; raising awareness
and helping victims of domestic violence with basic
needs and support.
THORN’S RENTAL BRANDS, IN
PARTICULAR RADIO RENTALS, STRONGLY
ALIGN WITH WHITE RIBBON’S CORE
PROMISE “WE’VE GOT YOUR BACK”
22 | Thorn Group
THORN ACTIVELY SUPPORTS
THE WHITE RIBBON CAUSE,
THROUGH INTERNAL AND
EXTERNAL ACTIVATIONS
Thorn actively supports the White Ribbon cause, through
internal and external activations, including:
• employee engagement activities including
fundraising lunches
• implementation of the White Ribbon Workplace
Accreditation program across the organisation, including
workshops and policy development
• a marketing activation plan to raise awareness and
additional funds for White Ribbon across stores and
websites including the sale of White Ribbon merchandise
• major sponsorship of White Ribbon events:
- White Ribbon Night (held annually in July), host of
“Have a Night In” event in selected stores
- White Ribbon Day (25 November) - This year, Radio
Rentals stores nationally hosted a Wear-A-Pair
fundraiser, with Radio Rentals’ male employees (store
network and head office) wearing a pair of heels
for the day to inspire conversation and promote the
important social cause.
DIGGER’S REST
Digger’s Rest “A Soldiers Retreat” was set up as an
eco-friendly bush lodge based on the Sunshine Coast in
Queensland. The aim is to bring serving soldiers, younger
Veterans and their families to a friendly environment to help
them reconnect with family, society and themselves at no
financial outlay to them.
Most of the retreat’s soldiers and veterans served in
Afghanistan, Iraq, East Timor and Somalia. Many of these
members now suffer chronic PTSD. Digger’s Rest opened its
doors with one mission: to stop potential suicides.
Digger’s Rest called on Corporate Australia to help out here
and Radio Rentals answered. For the period 1 Jan 2016
to 23 December 2016 a total of 363 Soldiers, Veterans
and Family members visited with 646 nights slept at the
Digger’s Rest and a total of 163 Day visitors. Five homeless
Veterans were also taken in for various periods of time –
offering them a safe place off the streets. This was a direct
result from Radio Rentals helping Digger’s Rest.
The aim is to grow from one site in Queensland to a second
on the Victorian/New South Wales border as well as one in
Western Australia.
Annual Report 2017 | 23
COMMUNITY
CHILDREN’S TUMOUR FOUNDATION
OF AUSTRALIA (CTF)
The Children’s Tumour Foundation is a not-for-profit
organisation dedicated to providing information,
support services and finding effective treatments for
people living with neurofibromatosis (NF), a debilitating
condition that doesn’t follow any one path. NF affects
over 10,000 people in Australia and the varied condition
has a wide range of severity that can lead to an array of
complications including learning difficulties, blindness,
deafness, bone deformities, cancer, and chronic pain.
Under recognised and underdiagnosed, there is currently
no cure and few treatment options.
CTF is dedicated to:
• Supporting children and adults diagnosed with
neurofibromatosis, their families and carers with
information, resources and practical support across
their NF journey; and
• Funding world-leading research into effective
treatments for NF and ultimately finding a cure
Through the close association with Thorn, CTF has been
able to:
• Invest in support officers in three states (only
one previously)
• Fund a three year fellowship based out of Melbourne
with the ultimate aim that this will result in an
individual with a career specialising in clinical aspects
and research in type I neurofibromatosis
• Contribute to world class research projects
CTF is committed to ensuring those suffering with NF
receive adequate, multidisciplinary care throughout
their lives. CTF has strong links internationally to NF
organisations and researchers in the USA, Great Britain,
Ireland, Canada and Europe. CTF also works closely with
and provides funding to world-class local researchers
and clinicians at The Children’s Hospital at Westmead,
the Murdoch Children’s Research Institute and Royal
North Shore Hospital.
“THE CHILDREN, ADULTS AND
FAMILIES LIVING WITH NF
INSPIRE OUR WORLD”
– CTF
24 | Thorn Group
NATURAL DISASTER
When disaster strikes across Australia, such as bushfires or
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 free supply of bedding, washing
machines and refrigerators to relief centres, substantial
goodwill credits on customer accounts and the donation of
products for fundraising.
In April 2017, Cyclone Debbie hit the Queensland coast and
north coast of New South Wales, triggering heavy rainfall
which led to significant flooding in the town of Lismore.
Radio Rentals Lismore assisted a number of customers
during that time. The focus was on helping Radio Rentals
customers to get back on their feet as quickly as possible,
which was done by processing claims for damaged items
as quickly as possible with a focus on replacing fridges and
washing machines as a priority, installing any replacement
item at no additional cost to the customer. Other stores also
provided assistance by sending stock from Queensland. The
main goal was to make sure customers had their essential
items during a very difficult time.
LOCAL COMMUNITY SUPPORT
In June 2017, Radio Rentals assisted Morayfield East State
School after a fire tore through its classroom, affecting
the local community. Radio Rentals donated 110 brand
new musical instruments, boosting the school spirit and
supporting the school’s plan to build up a music program.
THORN FINANCIAL REPORT 2017
CONTENTS
Directors’ Report
Lead Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
26
46
47
48
49
50
52
75
76
82
84
Annual Report 2017 | 25
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 ‘Thorn’, the ‘Group’ or the
’consolidated entity’) for the financial year ended 31 March
2017 and the auditor’s report thereon.
OPERATING AND FINANCIAL REVIEW
Thorn is a diversified financial services group providing financial
solutions to consumers and businesses. Business activities
are the leasing of household products to consumers and the
provision of leasing, invoice discounting, and other financial
services to small and medium enterprises. The Group also
provided receivables management services and consumer
loans during the year.
The Group sold its NCML receivables management business
during the year and accordingly that division has been treated
as a discontinued business in the financial statements where it
is presented as a one line entry above profit after tax. Thorn’s
consumer loans business was closed in March 2016 and the
book is being run off.
There were no other significant changes in the nature of the
activities of the consolidated entity during the year.
Financial performance
Revenue from continuing operations increased 3% on the
previous year, growing from $289.3m to $298.7m.
Profit after tax increased 26% from $20.1m to $25.3m. This
result includes charges to provide for the potential customer
remediation and penalties arising from ASIC’s investigation into
the responsible lending obligations of the Group’s consumer
leasing division, Radio Rentals. This provision is further
discussed in the regulatory section of this review.
Significant Items
The analysis of Thorn’s results is complicated by the presence
of several significant items across both the 2016 and 2017
years as management deal with historical issues.
In 2016, the goodwill attributable to NCML was written off at
an after tax cost of $6.7m, the TFS consumer loan division was
shut down at an after tax cost of $1.6m, and Radio Rentals
took up a charge for refunding customer credits at an after tax
cost of $2.0m, leading to an adjusted NPAT of $30.3m.
In 2017, Radio Rentals provided for the anticipated remediation
costs and penalties from the ASIC regulatory review of a $6.1m
after tax (being the after tax cost of the $3.1m set aside in
the first half and the $4.0m after tax provision made in March
2017) leading to an adjusted NPAT of $31.4m.
Segment performance
There has been a change in presentation of the financial
information this year and a corresponding change put through
for last year’s comparatives. Corporate expenses in prior
years were presented as the cost of all activities not directly
under the control of divisional management. This meant that
central activities such as IT, collections, finance, risk, were all
accounted for as corporate costs when their primary customer
was the divisions.
This presented the corporate costs as larger than might be
expected and correspondingly the profitability of the divisions
as higher than it would be if the amounts were more fully
allocated. This year the allocations have been adjusted such
that corporate costs now consist solely of pure corporate
related activities such as Group IT, Business Development,
Group Finance, Group HR, Risk and Internal Audit, Group Legal,
Board and leadership team, listing and debt financing costs.
Segment revenue
Segment EBIT to PAT
2017
251.2
26.4
11.2
9.9
–
2016
245.7
16.7
13.8
13.1
–
298.7
289.3
2017
36 .3
16.1
2.3
4.0
(11.6)
–
47.1
(9.5)
37.6
(12.2)
25.4
(0.1)
25.3
2016
43.9
8.8
4.3
(1.9)
(10.8)
(6.7)
37.6
(6.5)
31.1
(12.0)
19.1
0.9
20.1
A$m
Consumer Leasing
Equipment Finance
Trade & Debtor Finance
Consumer Finance
Corporate
Goodwill impairment (NCML)
Sub-total
Net interest expense
Profit before tax
Tax expense
Profit after tax for continuing operations
(Loss)/Profit from discontinued operation, net of tax
Profit after tax
26 | Thorn Group
Consumer Leasing
The Consumer Leasing division, operating under the Radio
Rentals and RR brand names, had a challenging year.
The division has been responding to both the proposed
regulatory changes for the consumer leasing industry as a
whole and the specific regulatory matters raised during the
ASIC investigation into Radio Rentals. This has entailed the
development of a new online customer application and credit
assessment system. The system is to be refined to improve the
customer experience and will be rolled out nationally.
The division improved its customer offer during the year through
lower prices, included benefits, and a wider, more modern, and
more affordable product range. The store network is being
progressively refreshed and several stores relocated into high
traffic shopping centre locations to access a larger customer
base and higher demographic.
The division has suffered from adverse publicity during the
period and a deferral of returning customers due to the launch
of the four year contract three years ago.
In spite of these difficulties, revenue rose by 2% to $251.2m
(2016: $245.7m). This is a combination of interest income
from past contracts and revenue from installations under
new contracts. Installations were flat at 122,189 units
(2016: 121,700) with a slight improvement in mix. Finance
leases have now come to represent 99% of all installations
such that shorter duration operating leases are now rolling off
and not being replaced in any quantity.
This pleasing revenue result was $5.5m up on last year but it
came with the cost of significantly higher marketing and selling
costs. The division reduced its cost base by 53 employees in
March 2017, shut 6 stores, and is presently seeking further
savings in non-employee related areas. Costs were up $13.0m
after taking provisions for regulatory matters, additional
marketing costs of $2.0m and personnel costs including the
redundancy costs. Impairment losses increased in line with
book growth however remained consistent as a percentage of
average net receivables.
Reported EBIT was down 17% to $36.3m (2016: $43.9m).
Thorn Equipment Finance
The TEF business continued to enjoy strong growth in lease
originations with $178.5m of lease originations in the year
and the net receivables book growing 81% to $239.3m (2016:
$131.9m). As pricing was kept fairly constant the book growth
translated into interest and fee revenue growth of 57% to
$26.4m (2016: $16.7m). Impairment losses as a percentage
of average net receivables were 1.8% compared to the prior
year’s 1.2%. Impairment losses were expected to increase as
the book increased and matured however average delinquency
at 2.1% is consistent with the prior year and maintained under
the 2.5% benchmark.
Reported EBIT rose 83% to $16.1m (2016: $8.8m).
Trade & Debtor Finance
The TDF business had a difficult year with a deliberate focus
on transitioning the receivables book away from the originally
acquired higher risk, higher margin customers towards the
more traditional debtor finance customers. This meant the book
reduced as several legacy customers paid down, refinanced
out or couldn’t pay and were provided against or written off,
and were replaced by newer customers but later in the year.
Consequently revenue was down $2.6m to $11.2m (2016:
$13.8m) which flowed through to EBIT which was also down
$2.0m to $2.3m (2016: $4.3m).
Consumer Finance
This division was closed last year end and the book is in
run-off. The book has reduced from $33.6m last March to
$21.4m this March. EBIT has increased from last year’s loss
of $1.9m (including $2.3m of closure costs so $0.4m run rate)
to $4.0m this year as costs have been scaled right back to
just a collections team with no need for ongoing marketing or
origination costs. This book and its EBIT profile can both be
expected to run down towards zero in the next several years as
customers repay or refinance out of their loans.
Receivables Management
The NCML Receivables Management business was sold on
13 September 2016 for $22.6m plus or minus a working
capital adjustment. The business has been accounted for as
a discontinued business and as such is presented as one line
after tax profit result below the ‘Profit after tax for continuing
operations’ line on the profit and loss account.
The price resulted in a small loss on sale of $(0.7)m after tax
and costs of sale. Resolution of the working capital adjustment
is still being negotiated but is not expected to amount to a
material adjustment in either direction. NCML made $0.9m
EBIT in the six months before it was sold (2016: $1.4m). The
Company took corporate and legal advice on the sale and
has provided appropriate and necessary warranties to the
purchaser.
Corporate
Corporate HO expenses increased by $0.9m to $11.7m (2016:
$10.8m). The increase was a full year of additional executive
personnel in Operations, Risk and Legal roles, an enhanced
credit and risk team, and additional legal and advisory costs.
Net interest expense
Net borrowing costs increased by 46% from $6.5m to $9.5m.
Borrowings increased 40% from $197.9m to $276.5m
predominantly to fund the growth of the Thorn Equipment
Finance whose debt warehouse rose $70.2m and the corporate
facility $8.4m. The finance expense rose slightly as credit
spreads ticked up during the period and there were fees for the
facility increases and extension.
Annual Report 2017 | 27
DIRECTORS’ REPORT
Financial position
The balance sheet is presented below as two versions; first, excluding the securitised warehouse for the Equipment Finance
receivables along with those associated receivables (which are non-recourse funding for the warehouse), and second as per the
statutory accounts format. The Company’s lender views their corporate facility covenants through the first view, i.e. excluding Trust.
Summarised financial position
($m)
Cash at Bank
Receivables
Investment in unrated notes
Rental and other assets
Intangible assets
Total Assets
Borrowings
Other liabilities
Total Liabilities
Total Equity
Gearing (net debt/equity)
Operating cash flow
EPS (cents)
Return on Equity
31 March 2017
31 March 2016
excl. Trust
incl. Trust
excl. Trust
incl. Trust
14.7
305.8
35.2
17.6
24.3
397.6
124.5
62.9
187.4
210.2
14.7
493.0
–
17.6
24.3
549.6
276.5
62.9
339.4
210.2
56.1%
128.4%
177.4
16.2
12.4%
14.0
278.7
20.5
22.4
25.5
361.1
116.0
47.6
163.6
197.5
53.2%
14.0
381.1
–
22.4
25.5
443.0
197.9
47.6
245.5
197.5
95.1%
127.2
13.1
10.4%
(i) Gearing is calculated as net debt less free cash divided by closing equity
(ii) ROE is calculated as PAT divided by the average of opening and closing equity.
Receivables
Receivables increased by 29% or $111.9m to $493.0m during
the year. Consumer lease receivables grew by 27% or $36.8m
to $172.8m driven by both the customer driven preference for
longer term finance leases from shorter term operating leases
and the increasing average term since the introduction of the
48 month contract in December 2013.
Equipment Finance lease receivables increased by 81% or
107.4m to $239.3m due to continued strong originations. The
trade and debtor book fell during the year by $7.9m as the
book was repositioned although the end point was also affected
by unusually high repayments on the last day of the year. The
TFS consumer finance book was run down by $12.2m during
the year and the NCML PDL book was sold.
Rental and other assets
Rental assets fell from $13.8m to $6.7m driven mostly by
the continuing migration from operating lease to finance lease
contracts in consumer leasing.
Borrowings and gearing
Borrowings rose by $78.6m from $197.9m last year to
$276.5m this year. Ninety per cent of that increase was to
fund the continued growth in Thorn Equipment Finance lease
receivables. Gearing rose 2.9 percentage points from 53.2%
last year to 56.1% this year (excluding the impact of the non
recourse securitised debt) as the consumer lease receivable
book increase was mostly funded through the sale of NCML
and the run down of the TFS book. The consolidated entity
continues to meet all debt covenants and can pay its debts as
and when they become due.
Return on Equity
ROE increased from 10.4% to 12.4%.
Cash flows
Net cash from operating activities increased from $127.2m
to $177.4m. This was primarily attributable to the expansion
of Thorn Business Finance and the increased net customer
receipts resulting from it.
28 | Thorn Group
Funding
The group has the following debt facilities:
$’000
Secured Loan Facility A and B
Secured Loan Facility C
Securitised Warehouse Facility
Total loan facilities
2017
2016
110,000
65,000
180,000
355,000
110,000
30,000
100,000
240,000
The Group continues to be funded by one Australian major bank. That bank extended further facilities to the company primarily to
help finance the strong growth in Thorn Equipment Finance. It also extended the term of the corporate facilities A, B and C to 30
April 2018. Discussions are ongoing with regard to further structured finance facilities and lengthening of debt maturities. Ongoing
funding support is important to allow the Group to continue to grow and diversify earnings.
The $175m senior facilities A, B and C are secured by a fixed and floating charge over the assets of the consolidated entity. The
warehouse facility is secured by rentals and payments receivable from the underlying lease receivable contracts within Thorn
Equipment Finance.
Dividends paid or recommended
Dividends paid by the Company to members during the financial year were:
Final 2016 paid
Interim 2017 paid
Total amount
Final 2017 proposed
Directors have proposed a final dividend of 2.5 cents per share.
This takes the full year dividend to 8 cents per share which is a
50% payout ratio. The dividends are fully franked.
Regulatory provision
Thorn’s consumer leasing division has been engaging with
ASIC on matters pertaining to customer credit refunds and the
appropriate and necessary extent of verification of items of
customer income and expenditure.
During 2016 Thorn advised the discovery of credit balances
on closed customer accounts in its consumer leasing division
and created a $2.8m liability for their refund. Thorn has sought
to contact former customers and repay these credit balances
with interest. The balance has been significantly refunded but,
in spite of extensive efforts also involving external skip-trace
contact experts, a number of customers have not been able to
be contacted. At the year end $1.1m was outstanding and, if
the former customers cannot be found, will be paid to charity in
due course as agreed with ASIC.
Thorn also carries credits on current customer contracts arising
from overpayments made ahead of contractual obligations.
Thorn has been contacting customers to offer repayment of
these credit balances along with compensatory interest. These
overpayments continue to accrue. Arrangements have now
been agreed with Centrelink to allow for the cancellation and
reduction of customer payments to reduce the further accrual
of these credit balances and to allow for periodic repayment
through the temporary suspension of their periodic payments.
Cents per
share
6.0
5.5
2.5
Amount
$’000
9,268
8,612
17,880
3,956
Franking
Date of
payment
100%
18 July 2016
100%
20 Jan 2017
100%
18 July 2017
At year-end $10.5m was in credit and repayable to customers.
As these amounts have always been held on balance sheet as
liabilities, the profit and loss impact is limited to the interest
component and the cost of effecting the repayments.
ASIC’s investigation has progressed and accordingly Thorn
has taken up provisions in these accounts for the expected
compensation of affected customers and an anticipated
penalty.
Contingent Liability
Class Action
The Thorn subsidiary running Radio Rentals was named on
29 March 2017 as the respondent to a class action proceeding
that has been commenced by one of its customers in the
Federal Court of Australia. It is understood that the allegations
presently relate to misleading, deceptive and unconscionable
conduct, false representations and unfair contract terms.
The matter will be vigorously defended and is expected to take
some time, possibly years, to resolve. No provision has been
taken in these accounts. Legal fees will be incurred defending
the matter over the period of that defence should the matter
proceed.
Subsequent Events
Thorn’s Chief Financial Officer and Company Secretary,
Peter Forsberg, was appointed Acting CEO on 24 April 2017
following the resignation of James Marshall.
Thorn’s General Manager of Finance, Andrew Crowther, was
appointed Acting Chief Financial Officer on 24 May 2017.
Annual Report 2017 | 29
DIRECTORS’ REPORT
Outlook
The outlook for the Thorn Group is likely to be subdued in the
coming year.
Stephen Kulmar
Independent, Non-Executive
Appointed 15 April 2014
While Business Finance is expected to enjoy strong growth,
Consumer Leasing is facing a period of transition with some
short term challenges from adverse publicity, weaker general
retail market conditions, the deferral of returning customers
due to the launch of the 4 year contract 3 years ago and
significant business change resulting from the transition to a
new origination platform and associated processes.
Over the medium term Radio Rental’s large and loyal customer
base, prices that are already under the proposed legislative
caps, and the efficient cost base will position it for industry
leadership and growth.
Qualifications
Experience
Stephen is the former Managing Director and Chairman of
IdeaWorks and is currently the Managing Director of Retail
Oasis, retail marketing and business consultancy.
Stephen has over 35 years experience in advertising and
has extensive experience in retail strategy, brand strategy,
channel to market strategy, digital and social strategy, business
re-engineering and new retail business development.
DIRECTORS’ INFORMATION
Joycelyn Morton
Independent, Non-Executive
Appointed 1 October 2011
Appointed Chair 26 August 2014
Qualifications
Bachelor of Economics
FCA, FCPA, FIPA, FGIA, FAICD
Experience
Joycelyn has more than 35 years’ experience in finance and
taxation having begun her career with Coopers & Lybrand
(now PwC), followed by senior management roles with
Woolworths Limited and global leadership roles in Australia and
internationally within the Shell Group of companies.
Joycelyn was National president of both CPA Australia and
Professions Australia, she has served on many committees and
councils in the private, government and not-for-profit sectors.
Other current directorships
Argo Investments Limited
Argo Global Listed Infrastructure Limited
InvoCare Limited
Snowy Hydro Limited
Former directorships
Crane Group Limited
Count Financial Limited
Noni B Limited
Interests in shares and options
91,994 ordinary shares
Other current directorships
CreativeOasis Pty Ltd
Edge Pty Ltd
Retail Oasis Pty Ltd
RCG Corporation Limited
Former directorship
Charles Parsons Pty Ltd
Interests in shares and options
68,000 ordinary shares
David Foster
Independent, Non-Executive
Appointed 1 December 2014
Qualifications
Bachelor of Applied Science
MBA, GAICD, SFFIN
Experience
David is an experienced Independent Non-Executive Director
across a range of industries. He has had an extensive career in
Financial Services spanning over 25 years.
His most recent executive role until December 2013 was
CEO of Suncorp Bank, a role he commenced in September
2008. Prior to his role as CEO of Suncorp Bank, David lead
Suncorp’s strategy function which included numerous merger
and acquisition activities including one of Australia’s largest
Financial Services transactions – Promina Limited.
Other current directorships
G8 Education Limited
Motorcycle Holdings Limited
Kina Securities Limited
Genworth Mortgage Insurance Australia Limited
Former directorships
Interests in shares and options
26,970 ordinary shares
30 | Thorn Group
Andrew Stevens
Independent, Non-Executive
Appointed 1 June 2015
Qualifications
Master of Commerce
FCA, MAICD
Peter Henley
Independent, Non-Executive
Appointed 21 May 2007
Retired 23 August 2016
Qualifications
FAIM, MAICD
Experience
Andrew began his career at Price Waterhouse (now PwC) and
was a Partner of that firm for 12 years. He also performed a
range of senior management and global leadership roles at IBM
Corporation, most recently serving as the Managing Director of
IBM Australia and New Zealand from 2011-2014.
Other current directorships
MYOB Group Limited
The Greater Western Sydney Football Club
Former directorships
Australian Chamber Orchestra
Interests in shares and options
15,720 ordinary shares
Belinda Gibson
Independent, Non-Executive
Appointed 1 July 2016
Qualifications
Bachelor of Economics, LLB (Hons) (Sydney) and LLM (Hons)
(Cambridge), FAICD, FGIA
Experience
Belinda was a Commissioner and then Deputy Chairman of
the Australian Securities and Investments Commission (ASIC)
from 2007 until May 2013. From 1987 until joining ASIC
she was a corporate law partner at the law firm Mallesons
Stephen Jaques, specialising in transactional advice and also
corporate governance issues. She was partner in charge of the
Mallesons’ Sydney office from 2000 to 2003.
Other current directorships
Citigroup Pty Ltd
Brisbane Airport Corporation
Trustee of the Australian Museum
Ausgrid Group
Chief Executive Women Ltd
Former directorships
Airservices Australia
The Sir Robert Menzies Foundation
Interests in shares and options
Nil
Experience
Peter has had a long and distinguished career in financial
services generally and in consumer and commercial finance in
particular, having held Managing Director roles with AGC, Nissan
Finance and more recently GE Money.
Other current directorships
Motorcycle Holdings Limited
Former directorships
GE Motor Solutions Australia GE MoneySingapore and Malaysia.
United Financial Services Limited
MTA Insurances Limited
AP Eagers Limited
Interests in shares and options
N/A
James Marshall
Managing Director
Appointed 5 May 2014
Resigned 21 April 2017
Qualifications
Dip. Financial Services
MAICD, MFTA
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 consumer leasing,
receivables management and broader financial services
industries, and has been instrumental in driving the
development and growth of Thorn’s core business divisions and
diversification strategy since the IPO.
Other current directorships
Former directorships
Interests in shares and options
181,543 ordinary shares
Annual Report 2017 | 31
DIRECTORS’ REPORT
COMPANY SECRETARY
Peter Forsberg was appointed Company Secretary on 3 February 2017 upon the resignation of Peter Ryan.
Peter Forsberg is the Acting CEO having been appointed on 24 April 2017 following Mr Marshall’s resignation. He joined as the
company’s CFO on 28 September 2015. Mr Forsberg (BSC Hons, FCA, F Fin, GAICD, MFTA) is an experienced and qualified CFO and
senior executive having worked in healthcare, manufacturing and distribution, FMCG, professional services, and in publicly listed,
private equity owned and charitable companies operating both in Australia and internationally.
Peter Ryan was appointed on 7 December 2015 and resigned on 3 February 2017.
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
Joycelyn Morton
James Marshall
Stephen Kulmar
Peter Henley
David Foster
Andrew Stevens
Belinda Gibson
Board Meetings
Audit, Risk and Compliance
Committee Meetings
Remuneration and Nomination
Committee Meetings
A
13
13
13
5
13
13
9
B
13
13
13
5
13
13
9
A
7
N/A
7
2
7
7
5
B
7
N/A
7
2
7
7
5
A
5
N/A
5
2
5
4
3
B
5
N/A
5
2
5
5
3
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year (Mr Henley retired as director on 23rd Aug 2016)
N/A – Mr Marshall, as an executive Director, attended all meetings but as an invitee
REMUNERATION REPORT – AUDITED
The Board of Thorn Group Limited presents the remuneration report which outlines key aspects of the remuneration policy and
framework and the remuneration awarded this year.
The information provided in this report has been prepared based on the requirements of the Corporations Act 2001 and the
applicable accounting standards and has been audited by KPMG.
The report is structured as follows:
1. Remuneration governance
2. Non-Executive Directors and Key Management Personnel
3. Non-Executive Director remuneration
4. Executive KMP remuneration
5. Alignment between remuneration and performance
6. Service contracts for executive KMP
7. Other statutory disclosures
32 | Thorn Group
1. REMUNERATION GOVERNANCE
The Company aims to deliver sustainable and superior returns
to shareholders. The remuneration framework is designed to
ensure rewards are appropriate for the results achieved and
are aligned to the Company’s strategic goals and shareholder
wealth creation.
The Board provides guidance and oversight to the remuneration
strategy and has established a Remuneration and Nomination
Committee to ensure the remuneration strategy attracts and
retains quality directors and executives, fairly and responsibly
rewards them, is equitable and aligned to shareholders’
interests, and complies with the law and high standards of
governance.
The Committee is made up of independent non-executive
directors and its charter is available on the Company website.
The Committee makes recommendations to the Board for its
consideration and approval. The Committee Chairman will
be available at the Annual General Meeting to answer any
questions from shareholders on this report. At the 2016 AGM,
the Remuneration Report received a vote of approval of 96% of
the votes received.
The Committee can draw on independent experts where
appropriate to provide advice on remuneration levels,
trends and structures. Where this occurs the consultants
are instructed by and report directly to the Chairman of the
Committee and are thereby free of any undue influence by
any KMP to whom their recommendations may relate. The
Committee did not engage any consultants during the year.
2. NON-EXECUTIVE DIRECTORS AND KEY MANAGEMENT PERSONNEL – AUDITED
For the year ended 31 March 2017, the NEDs and KMP were:
Non-Executive Directors
Position
Joycelyn Morton
Stephen Kulmar
Peter Henley
David Foster
Andrew Stevens
Belinda Gibson
Executive KMP
Chair, Director
Director
Director
Director
Director
Director
Position
James Marshall (Resigned)
CEO and Managing Director
Peter Forsberg
Matt Ingram
Wendy Yip
Peter Ryan
Chief Financial Officer
Chief Operating Officer
Chief Risk Officer
Term or Date
Full year
Full year
Until 23 August 2016
Full year
Full year
From 1 July 2016
Term or Date
Full year
Full year
Full year
Full year
General Counsel and Company Secretary
Until 3 February 2017
Changes to KMP during the year
Mr Ryan resigned his position as General Counsel and Company Secretary on 3 February 2017. A search is underway for a
replacement. Mr Forsberg assumed the Company Secretary role from 3 February 2017.
Thorn’s Chief Financial Officer and Company Secretary, Peter Forsberg, was appointed Acting CEO on 24 April 2017 following the
resignation of James Marshall.
Annual Report 2017 | 33
DIRECTORS’ REPORT
3. NON-EXECUTIVE DIRECTOR REMUNERATION – AUDITED
Non-executive directors’ fees are determined within an aggregate directors’ fee pool as approved by shareholders from time to
time. Independent remuneration consultants are employed periodically to provide advice and, where an increase is recommended,
this is put to shareholders at the subsequent AGM. The current maximum aggregate fee pool is $650,000 per annum and was
last voted upon by shareholders at the 2013 AGM. The Board does not intend to seek a change to the fee pool at the 2017 AGM.
The base annual fee for the Chairperson is $170,980 per annum. Base fees for other non-executive directors are $85,490 per
annum. In addition, the Chair of the Audit, Risk and Compliance Committee receives a fee of $15,000 per annum and the Chair of
Remuneration and Nomination Committee $10,000 per annum.
Non-executive directors do not receive performance-related remuneration. However, they are able to purchase shares in the
Company on market during approved ‘windows’ for share trading.
Non-executive directors are not entitled to any additional remuneration upon retirement. They do receive statutory superannuation
contributions and these are in addition to the base fees shown above. Out-of-pocket expenses are reimbursed to directors upon
the production of proper documentation.
Salary and
fees
Year
Other
incentives
Super-
annuation
STI
Long
service
leave
LTI
Total
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16,243
16,243
9,071
9,071
3,342
8,121
9,546
9,546
8,122
6,716
5,966
–
52,290
49,697
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
187,223
187,223
104,561
104,561
38,524
93,611
110,036
110,036
93,612
77,410
68,768
–
602,724
572,841
Name
Non-Executive Directors
Joycelyn Morton
Stephen Kulmar
2017
2016
2017
2016
170,980
170,980
95,490
95,490
Peter Henley
2017 (i)
35,182
David Foster
Andrew Stevens
Belinda Gibson
Total Non-Executive
Director Remuneration
2016
2017
2016
2017
2016
85,490
100,490
100,490
85,490
70,694
2017 (ii)
62,802
2016
–
2017
2016
550,434
523,144
(i) Mr Henley retired on 23 August 2016.
(ii) Ms Gibson was appointed as a director on 1 July 2016.
34 | Thorn Group
4. EXECUTIVE KMP REMUNERATION – AUDITED
The Company’s approach to remuneration is framed by the strategy and operational demands of the business, the requirement for
superior sustained shareholder returns, the complex and onerous regulatory environment and high standards of governance.
The remuneration structure has been designed to balance both shareholder and executive interests. It consists of a mix of fixed
and ‘at-risk’ pay where the at-risk element seeks to balance both short and long term performance.
The diagram below illustrates the link between the business’ objective and executive KMP remuneration.
The Company is committed to providing a ‘fair go’ for consumers and SMEs in a responsible manner while delivering shareholders
sustainable and increasing long term value through an organic and acquisitive growth strategy.
Business objective
Remuneration strategy objectives
1. Align executive remuneration to Company performance and
2. Attract, motivate and retain executive talent in a competitive
results delivered to shareholders through the short and long
term incentive plans being ‘at-risk’ based on business profit
after tax performance and returns to shareholders.
market through a competitive rewards program which
attracts quality executives and incorporates a significant at-
risk incentive component.
Fixed
At-risk
Fixed remuneration
Short term incentive
Long term incentive
Base salary and benefits plus statutory
superannuation contributions
Annual cash payment with deferral
mechanism
Performance rights granted annually at the
Board’s discretion
Rewards experience skills and capabilities
Rewards performance over a 12 month
period
Rewards achievement of the Company’s
shareholder return targets over a three year
period
Fixed payment reviewed annually and any
increases applied from 1 April
At-risk wholly dependent upon achieving
agreed performance (only paid if targets
achieved)
At-risk wholly dependent upon achieving
agreed performance (only vests if targets
achieved)
Set with reference to comparable companies
(in terms of industry and size), the scope
and nature of the role, and the executive’s
qualifications, skills, and experience
Payment is determined by performance
against net profit after tax target and
individual KPIs
Vesting is determined by performance
against targets which align to the Company’s
long term shareholder return objectives
Annual Report 2017 | 35
DIRECTORS’ REPORT
Summary of executive KMP remuneration outcomes on a non-statutory basis – Not Audited
The table below sets out the 2016-17 remuneration outcomes received by the executive KMP over the year on a non-statutory
basis, i.e. excluding the theoretical LTI performance rights calculation and replacing it with the value of any LTI which vested during
the year and for which the executive received shares calculated using the shares value at the time of receipt.
Name
Cash Salary
STI (a)
incentives (b)
Other
Super-
annuation
Vested LTI (c)
Total Realised
Remuneration
James Marshall
Peter Forsberg
Matt Ingram
Wendy Yip
Peter Ryan
Total
603,583
390,404
353,106
285,997
334,036
–
138,158
110,157
114,445
–
1,967,126
362,760
–
–
–
–
37,500
37,500
20,275
19,533
19,533
19,533
19,533
98,407
–
–
–
623,858
548,095
482,796
–
419,975
–
–
391,069
2,465,793
Please refer to the employment period in the KMP section (page 33) for details of the period during which the executives were
employed and hence remunerated.
(a) The STI is stated as paid although it will actually be paid in June 2017. The table records 85% of the awarded STI with the remaining
15% deferred for one year.
(b) Other incentives are sign on bonuses (Mr Ryan).
(c) The vested LTI column relates to the 2012 plan which was tested during the year and failed to reach the required hurdles.
Summary of executive KMP remuneration outcomes on a statutory basis – Audited
Year
Salary
and fees (a)
Other
STI
incentives (b)
Super-
annuation
Long
service
leave
LTI (c)
Total
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
603,583
530,352
–
–
390,404
162,539
189,471
–
353,106
129,597
264,806
75,000
285,997
134,641
82,507
334,036
99,752
–
–
–
–
–
–
–
–
37,500
15,972
20,275
19,187
19,533
9,654
19,533
19,187
19,533
5,941
19,533
5,941
7,585
58,283
38,242
110,757
772,857
30,609
94,894
675,042
–
–
–
–
–
–
–
–
–
51,239
623,715
18,515
217,640
48,244
550,480
18,473
377,466
40,821
480,992
14,526
102,974
(15,869)
375,200
15,869
137,534
41,373
805,772
16,667
6,562
6,110
(87,182)
55,975
–
–
–
–
–
2017
1,967,126
426,777
37,500
98,407
38,242
235,192
2,803,244
2016
1,979,237
75,000
40,224
124,755
36,719
116,468
2,372,403
Former other KMP’s
2016
698,531
Executive KMP who left in 2015-16
2016
113,818
Name
Executive KMP
James Marshall
Peter Forsberg
Matt Ingram
Wendy Yip
Peter Ryan
Peter Eaton
(resigned 30 July 2015)
Total Executive KMP
Remuneration
36 | Thorn Group
Please refer to the employment period in the KMP section (page 33) for details of the period during which the executives were
employed and hence remunerated.
Notes
(a) The increase year on year is significantly affected by the recording of a full year’s remuneration for three of the five KMP who were first
employed during the prior year.
(b) Other incentives are sign on bonuses
(c) The LTI represents the accounting charge recognised in the Company’s profit and loss account in respect of the long term incentive plan.
The charge reflects the fair value of the performance rights 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. Where grants lapse due to the failure to achieve non-market
condition hurdles then the expense previously recognised can be reversed and result in a negative entry in this column.
Executive remuneration structure – Audited
Remuneration mix
The table below represents the target remuneration mix for group executives in the current year:
Fixed remuneration
Short term incentive
Long term incentive
At-risk
KMP
50%
25%
25%
Fixed remuneration
Fixed remuneration consists of a base salary and benefits plus statutory superannuation contributions. The fixed remuneration
is set with reference to the market, the scope and nature of the role, and the executive’s qualifications, skills, performance and
experience. In certain cases, the Board may determine that it is appropriate to stretch fixed annual compensation in order to
attract critical talent where necessary.
Fixed remuneration is reviewed annually and any increase applied from 1 April. The Board may also approve adjustments during
the year as recommended by the CEO such as those arising from promotion or the undertaking of additional duties.
The benchmark peer group against which the remuneration packages are compared consists of companies within the ASX300
with market characteristics of between 50% and 200% of that of Thorn Group. Independent expert advice may be sought by the
Remuneration and Nomination Committee to assist in that exercise.
Annual Report 2017 | 37
DIRECTORS’ REPORT
Short Term Incentive
The short term incentive (“STI”) is an annual cash payment subject to achieving performance criteria based both on financial and
non-financial key performance indicators. There is a target level of payment with an additional stretch component available for out-
performance. The Board has 100% discretion in all matters.
Features
Description
Purpose
To motivate executives to achieve the short term performance targets.
Opportunity
Performance
Period
Gateway and
performance
metrics
Assessment,
approval and
payment
Deferral
KMP
12 months
Target (as % of Fixed)
Maximum (as % of Fixed)
50%
100%
The STI is subject to an NPAT gateway below which no STI payments are made. The maximum STI that can be earned is
based on NPAT against budget as follows:
Company NPAT against budget
STI that can be earned
<85%
85%
100%
110%
0%
42.5%
50%
100%
Performance between these levels is rewarded on a straight line basis.
70% of the STI that can be earned (detailed in the table above) is eligible for payment as it is based upon the financial
performance against budgeted NPAT with the remaining 30% dependent upon the individual’s performance against their
personal KPIs.
The personal KPIs are individual to the executive’s position and capacity to influence, pre-agreed with the Board, and
relate to strategically important initiatives and measures for customer satisfaction, systems, risk and staff development.
At the end of the financial year, the Remuneration and Nomination Committee assesses actual financial performance
based on the Company’s audited financial statements, and each executive’s performance against their personal KPIs to
determine the value of each executive’s STI reward.
The Board has 100% discretion with the STI outcome including the exercising of judgement with regard to any matter,
both positive and negative, that may have occurred during the financial period and to adjust the levels of achievement
accordingly.
Once approved, the STI rewards are paid in the month following the release of the Company’s results to the ASX.
For the 2017 financial year a deferral mechanism was introduced whereby 15% of the awarded STI is deferred for one
year and subject to forfeiture should a material misstatement or omission in the financial statements become apparent,
or the executive act in a manner unbecoming of the office held. This deferral percentage will rise to 30% in the 2018
year.
The deferred portion is subject to an election by the KMP as to its method of payment. It can be paid in cash one year
later, subject to the restrictions stated, and will earn interest at a suitable deposit rate for that period, or it can be
converted into performance share rights at a VWAP for the 5 days prior to the payment date of the initial tranche and
receive an uplift by a dividend equivalent for any dividends declared during the deferral period. The performance rights will
then be converted to shares on the due date and awarded to the KMP.
38 | Thorn Group
STI outcomes for 2017 – Audited
The Company reported an NPAT of $25.3m which included charges for expenses arising from regulatory matters pertaining to the
period 1 January 2012 to 1 May 2015.
That period was before 4 of the 5 members of the KMP were employed by the company and before the extent of the regulatory
matters was known. Thorn’s KMP have spent much of the past year investigating and resolving the difficult consequences of
those matters in addition to the conduct of their specified role. Accordingly, the board exercised its discretion and determined that
incentives were eligible to be paid.
Mr Marshall and Mr Ryan resigned and have been deemed ineligible for an STI payment.
STI for 2016-17
James Marshall
Peter Forsberg
Matt Ingram
Wendy Yip
Peter Ryan
Total
Target $
Earned %
Earned $
Forfeited %
Forfeited $
312,500
205,099
186,619
164,800
176,902
1,045,920
0%
79.2%
69.4%
81.7%
0%
40.8%
–
162,539
129,597
134,641
–
426,777
100%
20.8%
30.6%
18.3%
100%
59.2%
312,500
42,560
57,022
30,159
176,902
619,143
The amounts above are earned by the KMP but, due to the introduction of the deferral mechanism, 85% is payable in June 2017
and 15% withheld for one year subject to the restrictions described above.
Long Term Incentive (LTI)
The Long Term Incentive is an annual performance rights plan to which executive KMP are invited to participate at the Board’s
discretion.
The Company currently has four LTI plans running which share the same method but differ slightly in their hurdles and vesting
criteria detailed in the table below. All of the 2012, 2014, 2015 and 2016 plans were granted in the form of performance rights
directly linked to the performance of the Company, the returns generated, and relative increases in shareholder wealth. This
structure was used to ensure appropriate alignment to shareholder value over a specified timeframe.
The following table sets out the key features of the plans with specific references to each of the 2012, 2014, 2015 and 2016
plans where they differ.
Features
Description
Instrument
Performance rights being a right to receive a share subject to performance and vesting conditions.
Purpose
To motivate executives to achieve the long term performance targets.
Opportunity
KMP
50% of fixed remuneration
The number of performance rights issued is determined by dividing the dollar opportunity by the prevailing share price of
the Company at the date of issue.
Dividends or
share issues
No dividends are paid or accrued on unvested awards.
Gateway Hurdle Gateway hurdles of the grants across relevant measurement periods are as follows:
Plan
2012
2014
2015
2016
Gateway
20.0% Return on capital employed
18.5% Return on equity
16.0% Return on equity
No gateway hurdle
The hurdle has differed with each LTI grant as the Company has sought to diversify its business segments into new areas
with different capital return expectations. The Board reserve the right to amend the hurdle at its discretion but has not
done so in the 2017 year.
Annual Report 2017 | 39
DIRECTORS’ REPORT
Features
Description
Performance
Hurdles
The 2012, 2014 and 2015 plans use a Relative Total Shareholder Return (“RTSR”) performance hurdle solely while the
2016 plan has two performance hurdles in equal tranches being the RTSR and an Earnings Per Share (“EPS”) hurdle.
The company’s Relative Total Shareholder Return performance is measured against a comparator group of ASX listed
companies (available on the website at www.thorn.com.au).
RTSR was selected as an objective indicator of shareholder wealth criterion as it includes share price growth, dividends
and other capital adjustments.
Thorn Group Limited’s TSR Ranking
2012 to 2015 Grants
2016 Grants
Percentage of Performance Rights
subject to TSR condition that qualify
for vesting
< 50th percentile
< 50th percentile
0%
50th percentile
50th to 90th percentile
50th percentile
50th to 75th percentile
50%
Assessed on straight line basis
90th percentile or greater
75th percentile or greater
100%
The EPS hurdle applies only to the 2016 grant.
Thorn Group Limited’s EPS Hurdle
2016 Grant
< 5% compound annual growth rate
5% to 10%
Percentage of Performance Rights subject to EPS
condition that qualify for vesting
0%
Assessed on straight line basis
= or > 10% CAGR
100%
Performance
period and
vesting Dates
• 2012: 1/3 of the grant is tested at 3 years (31 March 2015), 1/3 at 4 years (31 March 2016), and 1/3 at 5 years
(31 March 2017). Earlier tranches which fail can be re-tested up until December 2017. Vesting dates are 1 June of the
respective years.
• 2014: 3 years (1 April 2014 to 31 March 2017). Vesting date is 1 June 2017.
• 2015: 3 years (1 April 2015 to 31 March 2018). Vesting date is 1 June 2018.
• 2016: 3 years (1 July 2016 to 30 June 2019). Vesting date is 1 September 2019.
Assessment,
approval and
payment
At the end of each performance period, the Remuneration and Nomination Committee assesses the relevant
performance measures and determines the extent to which the awards should vest.
Payment is made by the issuing or transfer of shares.
Change of
control
Termination
If a change of control occurs prior to the vesting of an award, then the Board may determine in its absolute discretion
whether all or some of a participant’s unvested award vest, lapse, is forfeited, or continues.
Unvested performance rights will lapse if performance conditions are not met. Performance rights will be forfeited on
cessation of employment unless the Board determines at its absolute discretion otherwise.
Clawback
provisions
There are no specific provisions providing the capacity to clawback a component of remuneration in the event of a matter
of significant concern.
40 | Thorn Group
Calculation of the value of performance rights in the remuneration tables
The value of performance rights issued to executives and included in the remuneration tables is a mathematical model calculation
designed to show an intrinsic value. This is necessary to show the benefit attributable to the KMP in the year of issue but before
that benefit is actually received by the KMP.
The number of performance rights to be issued is derived from the relevant percentage of the executive’s fixed remuneration at
the time of the grant divided by the share price at that time. This number of performance rights is then input into a Monte Carlo
simulation model by an independent expert and which works out the intrinsic value of the performance rights using the expected
volatility of the shares, the time period to testing date, and a number of other monetary factors as set out in the table below.
The end result is an intrinsic value for each of the performance rights which is recorded in the books of the Company by allocating
the expense to each reporting period evenly over the period from grant date to the vesting date.
The table below outlines the factors and assumptions used in determining the fair value of performance rights at grant date.
Grant date
Initial Test
date
Fair Value Per
Performance
Right
Expiry
Date
Exercise
Price
Price of
Shares on
Grant Date
Expected
Volatility
Risk Free
Interest Rate
Dividend
Yield
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
1 Jul 2014
1 Jun 2017
31 Jul 2017
31 Oct 2015
1 Jun 2018
31 Jul 2018
1 Jul 2016
1 Sep 2019
31 Oct 2019
$1.40
$1.28
$1.15
$1.24
$0.81
$0.97
Nil
Nil
Nil
Nil
Nil
Nil
$1.91
$1.91
$1.91
$2.17
$2.12
$1.45
32.0%
32.0%
32.0%
28.0%
31.0%
33.0%
2.7%
2.7%
2.7%
2.7%
1.8%
1.4%
6.0%
6.0%
6.0%
5.0%
6.4%
5.9%
Long term incentive outcomes for 2017
The tranches of the 2012 LTI award falling due for testing or retesting on 1 June 2016 were assessed. The ROCE hurdle was not
achieved and hence they did not vest. Under the terms of the grant they remain on foot and can be retested on 1 June 2017.
Performance rights granted as compensation in the year
James Marshall
Peter Forsberg
Matt Ingram
Wendy Yip
Peter Ryan
Performance Rights Granted
Financial Year
in Which Grants
Vest
Values Yet to Vest $
Number
Date (ended 31 March)
Min (a)
Max (b)
218,410
1 July 2016
143,346
1 July 2016
130,430
1 July 2016
115,180
1 July 2016
123,639
1 July 2016
2020
2020
2020
2020
2020
Nil
Nil
Nil
Nil
Nil
315,602
207,135
188,471
166,435
Nil
(a) 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.
(b) The maximum value of the performance rights yet to vest is not accurately 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. However, for the purposes of
this disclosure the value of the shares at award grant date has been used along with assumption of full 100% vesting to calculate a
theoretical maximum value.
Annual Report 2017 | 41
DIRECTORS’ REPORT
5. ALIGNMENT BETWEEN REMUNERATION AND PERFORMANCE – AUDITED
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.
Year ending 31 March
2017
2016
Net Profit After Tax (AUD millions)
Earnings per share (cents)
Dividends per share (cents)
Share price at year end ($)
Return on capital employed %
Return on equity %
25.3
16.2
8.0
1.31
11.0
12.4
20.1
13.1
11.5
1.82
11.1
10.4
2015
30.6
20.3
11.75
2.67
18.5
16.9
2014
2013
28.2
18.9
10.5
2.15
21.8
17.2
28.0
19.1
10.0
2.06
24.8
19.0
Return on capital employed is calculated as EBIT divided by average capital employed (net debt plus book equity). Return on equity
is calculated as NPAT divided by the average book equity.
6. SERVICE CONTRACTS FOR EXECUTIVE KMP – AUDITED
The present contractual arrangements with executive KMPs are:
Component
Contract duration
Notice by individual or company
Termination without cause
Termination with cause
CEO
Ongoing
6 months
Senior executives
Ongoing
Range between 3 and 6 months
Entitlement to pro-rata STI for the year.
Unvested LTI is forfeited unless the board decide at its absolute discretion otherwise.
Board has discretion to award a greater or lesser amount.
STI is not awarded and all unvested LTI will lapse
Vested and exercised LTI can be exercised within a period of 30 days from termination
(a) James Marshall resigned with an effective date 21st April 2017. He remains under his employment contract for a six month period
following this date.
(b) Different contractual terms apply to the following individuals:
• Peter Ryan received a sign on bonus of $50,000 payable in 4 instalments of $12,500
• Peter Ryan was entitled to 6 weeks annual leave in his first year of service.
42 | Thorn Group
7. OTHER STATUTORY DISCLOSURES – AUDITED
LTI Performance rights available for vesting
Details of the performance rights available for vesting are detailed below:
Initial Grant
Number
Date
Financial
Years in
Which Grant
Vests (ending
31 March)
Remaining
Unvested
Values Yet to Vest $
2017 Movements on original grant
Number
Min (a)
Max (b)
Vested
Forfeited
Unvested
James Marshall
63,291
7 Dec 2012
2015-2018
63,291
7 Dec 2012
2016-2018
63,291
7 Dec 2012
2017-2018
66,556
1 Jul 2014
103,695
1 Jul 2015
218,410
1 Jul 2016
Peter Forsberg
72,257 31 Oct 2015
143,346
1 Jul 2016
Matt Ingram
34,150
1 Jul 2014
30,271 31 Oct 2015
130,430
1 Jul 2016
Wendy Yip
56,692 31 Oct 2015
115,180
1 Jul 2016
Peter Ryan
61,934 31 Oct 2015
123,639
1 Jul 2016
2018
2019
2020
2019
2020
2018
2019
2020
2019
2020
2019
2020
23,418
63,291
63,291
66,556
103,695
218,410
72,257
143,346
34,150
30,271
130,430
56,692
115,180
61,934
123,639
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
44,728
120,886
120,886
144,427
219,833
315,602
153,185
207,135
74,106
64,175
188,471
120,187
166,435
131,300
178,658
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(61,934)
(123,639)
37%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
(a) 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.
(b) The maximum value of the performance rights yet to vest is not accurately 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. However, for the purposes of
this disclosure the value of the shares at award grant date has been used along with assumption of full 100% vesting to calculate a
theoretical maximum value.
Annual Report 2017 | 43
DIRECTORS’ REPORT
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:
James Marshall
Peter Forsberg
Matt Ingram
Wendy Yip
Peter Ryan
Held at
1 April 2016
Granted as
Compensation
Vested during
the year
Lapsed
Forfeited
Held at
31 March 2017
320,251
72,257
64,421
56,692
61,934
218,410
143,346
130,430
115,180
123,639
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(185,573)
538,661
215,603
194,851
171,872
–
Shareholdings of the Directors and Executive KMP
2017
Name
Joycelyn Morton
Stephen Kulmar
Peter Henley
David Foster
Andrew Stevens
Belinda Gibson
James Marshall
Peter Forsberg
Matt Ingram
Wendy Yip
Peter Ryan
Balance at
the start of
the year
Received on
vesting of
incentives
Other changes
(bought
and sold)
Balance at
the end of
the year
85,786
68,000
71,499
26,970
15,000
–
175,054
10,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,208
–
–
–
720
–
6,489
–
–
–
–
91,994
68,000
71,499
26,970
15,720
–
181,543
10,000
–
–
–
Changes in the year relate to Directors’ participation in the dividend reinvestment plan.
Other transactions with Directors or Executive KMP
There were no loans made or outstanding to Directors or executive KMP during or at the end of the year.
A director, Stephen Kulmar, is the founder of the retail consultancy Retail Oasis, which has the Company as one of its clients.
During the year, the Company engaged Retail Oasis for strategy and marketing consultancy work. The billings received and accrued
on the account for the year ended 31 March 2017 were $33,665. They were on normal commercial terms and conditions.
44 | Thorn Group
NON-AUDIT SERVICES
During the year KPMG, the Company’s auditor, 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 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 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
• as set out in APES110 Code of Ethics for Professional
Accountants, 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 22.
ROUNDING OF FINANCIAL AMOUNTS
The Company is of a kind referred to in ASIC Instrument
2016/191 issued by the Australian Securities and Investments
Commission and in accordance with that Instrument, amounts
in the financial report and directors’ report have been rounded
off to the nearest thousand dollars, unless otherwise stated.
CORPORATE GOVERNANCE STATEMENT
This statement outlines the main corporate governance
practices in place throughout the financial year and can be
referred to on Thorn Group website www.thorn.com.au/irm/
content/corporate-governance.aspx?RID=303
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s independence declaration is set out on page 46
and forms part of the directors’ report for financial year ended
31 March 2017.
This report is made in accordance with a resolution of the
directors:
Joycelyn Morton
Chair
Dated at Sydney
25 May 2017
SUBSEQUENT EVENTS
Thorn’s Chief Financial Officer and Company Secretary,
Peter Forsberg, was appointed Acting CEO on 24 April 2017
following the resignation of James Marshall.
Thorn’s General Manager of Finance, Andrew Crowther was
appointed acting Chief Financial Officer on 24 May 2017.
CONTINGENT LIABILITY
The Thorn subsidiary running Radio Rentals was named on
29 March 2017 as the respondent to a class action proceeding
that has been commenced by one of its customers in the
Federal Court of Australia. It is understood that the allegations
presently relate to misleading, deceptive and unconscionable
conduct, false representations and unfair contract terms.
The matter will be vigorously defended and is expected to take
some time, possibly years, to resolve. No provision has been
taken in these accounts. Legal fees will be incurred defending
the matter over the period of that defence should the matter
proceed.
LIKELY DEVELOPMENTS
For further information about likely developments in the
operations of the consolidated entity and the expected results
of those operations in future financial years, please refer to the
Operating and Financial Review.
UNISSUED SHARES UNDER OPTIONS
At the date of this report there are no unissued ordinary shares
of the Company under option.
INDEMNIFICATION AND INSURANCE OF
DIRECTORS AND OFFICERS
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 $124,900 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.
Annual Report 2017 | 45
Lead Auditor’s Independence Declaration under
LEAD AUDITOR’S INDEPENDENCE DECLARATION
Section 307C of the Corporations Act 2001
To the Directors of Thorn Group Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Thorn Group Limited
for the financial year ended 31 March 2017 there have been:
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
To the Directors of Thorn Group Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Thorn Group Limited
for the financial year ended 31 March 2017 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Anthony Travers
Partner
Sydney
25 May 2017
Anthony Travers
Partner
Sydney
25 May 2017
i.
ii.
KPMG
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.
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
Liability limited by a scheme approved under
Professional Standards Legislation.
Professional Standards Legislation.
46 | Thorn Group
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2017
$’000 AUD
Continuing operations
Revenue
Finance lease cost of sales
Employee benefit expense
Impairment losses on loans and receivables
Marketing expenses
Property expenses
Transport expenses
Communication & IT expenses
Printing, stationary and postage
Travel expenses
Other operating expenses
Depreciation and amortisation
Impairment of Intangibles
Total operating expenses
Earnings before Interest and Tax (“EBIT”)
Finance expenses
Profit before income tax
Income tax expense
Profit after tax from continuing operations
Discontinued operation
Notes
2017
2016*
3
298,695
289,346
20
(84,013)
(58,150)
(28,607)
(13,602)
(10,495)
(5,906)
(6,314)
(2,945)
(2,024)
(24,764)
(14,796)
–
(75,115)
(52,104)
(31,435)
(14,642)
(9,951)
(5,886)
(5,754)
(2,812)
(1,707)
(20,646)
(24,995)
(6,672)
(251,616)
(251,719)
47,079
(9,478)
37,601
9
(12,195)
25,406
37,627
(6,512)
31,115
(12,004)
19,111
(Loss)/Profit from discontinued operation, net of tax
19
(98)
948
Profit after tax for the year
Other comprehensive income – items that may be reclassified subsequently to profit or loss
Movement in fair value of cash flow hedge
Total comprehensive income
Earnings per share – continuing operations
Basic earnings per share (cents)
Diluted earnings per share (cents)
Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
25,308
20,059
(546)
24,762
107
20,166
15
15
15
15
16.3
16.3
16.2
16.2
12.5
12.5
13.1
13.1
* Restated to redirect the results of discontinued business, NCML, into one line above Profit after tax. For details see Note 19.
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying
notes.
Annual Report 2017 | 47
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2017
$’000 AUD
Assets
Cash and cash equivalents
Trade and other receivables
Income tax receivable
Total current assets
Trade and other receivables
Property, plant and equipment
Rental assets
Intangible assets
Total non-current assets
Total assets
Liabilities
Trade payables
Other payables
Borrowings
Employee benefits
Provisions
Total current liabilities
Borrowings
Deferred tax liabilities
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Notes
2017
2016*
4
4
6
8
13
12
13
10
12
14,681
185,578
5,916
206,175
307,397
5,058
6,651
24,322
343,428
549,603
12,011
23,121
46,904
5,414
9,037
96,487
229,559
12,163
309
847
242,878
339,365
210,238
14,049
149,497
5,363
168,909
231,562
3,244
13,809
25,524
274,139
443,048
15,698
22,941
39,091
5,584
990
84,304
158,782
1,344
375
710
161,211
245,515
197,533
115,340
109,854
2,979
91,919
3,188
84,491
210,238
197,533
* Certain balances in 2016 have been restated. Refer to Note 6 for further information.
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
48 | Thorn Group
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2017
$’000 AUD
Share capital
Reserves
Balance at 1 April 2015
Net profit for the year
Other comprehensive income
Issue of shares under dividend reinvestment plan
Share-based payments transactions
Dividends to shareholders
Balance at 31 March 2016
Balance at 1 April 2016
Net profit for the year
Other comprehensive income
Issue of shares under dividend reinvestment plan
Share-based payments transactions
Dividends to shareholders
Balance at 31 March 2017
103,446
–
–
6,408
–
–
2,989
–
107
–
92
–
Retained
earnings
83,053
20,059
–
–
–
Total equity
189,488
20,059
107
6,408
92
(18,621)
(18,621)
109,854
3,188
84,491
197,533
109,854
3,188
84,491
197,533
–
–
5,486
–
–
–
(546)
–
337
–
25,308
25,308
–
–
–
(546)
5,486
337
(17,880)
(17,880)
115,340
2,979
91,919
210,238
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
Annual Report 2017 | 49
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2017
$’000 AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers, employees and advanced to customers
Cash generated from operations
Net borrowing costs
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of assets
Acquisition of rental assets
Commercial finance originations
Acquisition of property, plant and equipment and software
Disposal of subsidiary
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 increase (decrease) in cash and cash equivalents
Cash and cash equivalents at April 1
Cash and cash equivalents at 31 March
Note
2017
2016
621,320
694,002
(425,366)
(546,769)
195,954
147,233
(9,478)
(9,118)
(6,512)
(13,548)
177,358
127,173
175
6
(81,889)
(178,462)
(3,933)
21,185
19
603
(75,584)
(91,743)
(1,942)
–
(242,924)
(168,666)
166,333
(87,743)
(12,392)
66,198
632
14,049
14,681
94,327
(40,428)
(12,213)
41,686
193
13,856
14,049
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
50 | Thorn Group
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2017
CASH AND CASH EQUIVALENTS
$’000 AUD
Bank balances
Call deposits
Cash and cash equivalents
2017
2016
14,681
–
14,681
13,936
113
14,049
Included in cash are amounts of $8,043,000 (2016: $3,941,000) which are held as part of the consolidated entity’s funding
arrangements that are not available to the consolidated entity. This cash is held within the funding warehouse trust and as such is
under the control of the Trustee. Free cash is therefore $6,638,000 (2016: $10,108,000).
RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
$’000 AUD
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation and amortisation
Equity settled transactions
Loss on sale of subsidiary and money in escrow
Transfer of rental assets to/from finance leases
Business 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
Increase in deferred tax liability
(Decrease) in income tax liability
(Decrease)/Increase in trade and other payables
Increase/(Decrease) in provisions and employee benefits
Net cash from operating activities
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
2017
2016
25,308
20,059
14,843
337
1,033
77,760
178,462
297,743
31,973
92
–
70,625
91,743
214,492
(136,773)
(91,652)
10,300
(553)
(2,167)
8,808
2,847
(3,984)
6,971
(1,501)
177,358
127,173
Annual Report 2017 | 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2017
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 2017 comprise 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, the provision of
loans, commercial 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 25 May 2017.
(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 Instrument
2016/191 issued by the Australian Securities and Investments
Commission and in accordance with that Instrument, 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. See Note 8.
(ii) Impairment of goodwill. See Note 8.
(iii) Longer term Consumer Rental asset depreciation. See Note
6.
(iv) Impairment of receivables. See Note 11.
(v) Purchased debt ledgers (PDL, up to 13th Sep 2016). See
Note 7.
The notes include information which is required to understand
the financial statements and is material and relevant to the
operations, financial position and performance of the Group.
Information is considered material and relevant if:
(i) The amount is significant because of its size or nature;
(ii) It is important for understanding the results of the Group
or changes in the Group’s business; and
(iii) It relates to an aspect of the Group’s operations that is
important to its future operations.
Accounting policies have been included within the underlying
notes with which they relate where possible. The balance of
accounting policies are detailed below:
(c) Cost of Sales
Finance lease costs of sales comprise the cost of the item sold
less any accumulated depreciation.
(d) Finance expenses
Finance expenses comprise interest expense on borrowings,
interest rate hedge costs and the amortisation of deferred
borrowing costs. All borrowing costs are recognised in the profit
or loss using the effective interest rate method.
(e) 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.
52 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 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.
(f) 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.
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.
(g) Changes in Accounting Policy
All new Accounting Standards and Interpretations applicable
to annual reporting periods commencing on or before 1 April
2016 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.
(h) 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 standard and amendments for
the reporting periods beginning on the operative dates set out
below. The financial impact of applying these new standards is
yet to be determined. The consolidated entity does not plan to
adopt these standards early.
• 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 2019 financial
statements, are not expected to have a significant impact on
the financial statements.
• IFRS 15 Revenue from Contracts with Customers establishes
a comprehensive framework for determining whether, how
much and when revenue is recognised. It replaces existing
revenue recognition guidance, including IAS 18 Revenue, and
IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective
for annual reporting periods beginning on or after 1 January
2018, with early adoption permitted. The Group is assessing
the potential financial impact resulting from the application
of IFRS 15.
• IFRS 16 Leases removes the lease classification test and
requires all leases (including operating leases) to be brought
onto the balance sheet. The definition of a lease is also
amended and is now the new on/off balance sheet test for
lessees. IFRS 16 is effective for annual reporting periods
beginning on or after 1 January 2019. Early adoption will
be permitted for entities that also adopt IFRS 15 Revenue
from contracts with customers. The Group is assessing the
potential impact on its financial statements resulting from
the application of IFRS 16.
Annual Report 2017 | 53
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 which leases household products, the Equipment Finance division which provides financial products to
small and medium enterprises including equipment leasing, the Trade & Debtor Finance which provides invoice discounting and the
Consumer Finance division which provides personal loans and is now closed and in run-off.
Segment performance is evaluated based on EBIT. Interest and income tax expense are not allocated to operating segments, as
this type of activity is managed on a group basis.
2017
$’000 AUD
Segment revenue
Operating expenses
EBITDA
Segment assets
Segment liabilities
2016
$’000 AUD
Segment revenue
Operating expenses
EBITDA
Depreciation, amortisation and impairment
(13,964)
EBIT
Finance expenses
36,342
16,114
–
–
Profit before tax – continuing operations
36,342
16,114
2,327
3,950
(21,132)
37,601
Consumer
Leasing
Equipment
Finance
Trade & Debtor
Finance
Consumer
Finance
Corporate
Consolidated
251,175
(200,869)
50,306
26,422
(9,945)
16,477
(363)
11,227
(8,701)
2,526
(199)
2,327
–
9,871
–
298,695
(5,873)
(11,432)
(236,820)
3,998
(11,432)
61,875
(48)
(222)
(14,796)
3,950
(11,654)
47,079
–
(9,478)
(9,478)
193,396
239,268
(61,694)
–
45,852
(1,209)
21,448
49,639
549,603
–
(276,462)
(339,365)
Consumer
Leasing
Equipment
Finance
Trade & Debtor
Finance
Consumer
Finance
Corporate
Consolidated
245,701
(179,854)
65,847
16,703
(7,484)
9,219
(438)
8,781
–
13,823
13,119
–
289,346
(9,211)
(14,503)
(9,000)
(220,052)
4,612
(263)
4,349
–
(1,384)
(473)
(9,000)
(8,563)
69,294
(31,667)
(1,857)
(17,563)
37,627
–
(6,512)
(6,512)
Depreciation, amortisation and impairment (i)
(21,930)
EBIT
Finance expenses
43,917
–
Profit before tax – continuing operations
43,917
8,781
4,349
(1,857)
(24,075)
31,115
Segment assets
Segment liabilities
160,386
131,863
(39,593)
–
44,194
(5,889)
33,615
49,395
419,453
–
(197,871)
(243,353)
Preparation of the segment note includes allocation of corporate costs. The allocation method adopted in 2017 was changed to
improve disclosure. The comparative 2016 disclosure was restated using the new allocation basis.
(i) Corporate depreciation, amortisation and impairment includes the impairment of NCML goodwill of $6.7m.
54 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 3. REVENUE
$’000 AUD
Operating leases
Finance lease sales
Interest
Other commercial revenue
2017
2016
42,900
116,840
127,728
11,227
68,125
103,434
103,964
13,823
298,695
289,346
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:
• 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.
• 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.
• 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.
• Other commercial revenue represents fees derived from invoice discounting transactions performed by Trade & Debtor Finance
within the Thorn Business Finance division and is recognised on an accrual basis.
4. TRADE AND OTHER RECEIVABLES
$’000 AUD
Current
Trade receivables
Finance lease receivables
Other commercial receivables
Loan receivables
Lease deposits
Other receivables and prepayments
Purchased debt ledgers
Non-current
Finance lease receivables
Loan receivables
Purchased debt ledgers
2017
2016*
6,614
114,034
33,873
16,700
617
13,740
–
3,776
63,256
40,313
23,464
616
10,888
7,184
185,578
149,497
298,027
204,718
9,370
–
14,482
12,362
307,397
231,562
* Certain 2016 balances have been restated. Refer to Note 6 for further details.
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 receivables, other commercial receivables, loan receivables and other receivables and prepayments are stated at their
amortised cost less impairment losses, with the exception of PDL’s which were designated at fair value. Detailed information on
PDL’s is disclosed in Note 7.
The consolidated entity’s exposure to credit risk and impairment losses related to trade and other receivables is disclosed in Note
11.
Annual Report 2017 | 55
5. LEASES
Finance leases as lessor
The consolidated entity has finance lease, hire purchase agreements and chattel mortgage contracts. The consolidated entity
classifies longer term Consumer Rental 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 receipts under
non-cancellable finance leases are as follows:
$’000 AUD
Lease receivables – less than one year
Lease receivables – between one and five years
Total Lease receivables
Unearned interest income on finance leases – less than one year
Unearned interest income on finance leases – between one and five years
Total unearned interest income on finance leases
Impairment provisioning – consumer leases
Net Lease receivables
Operating leases as lessor
The consolidated entity leases out its rental assets under operating leases.
The future minimum lease receipts under non-cancellable operating leases are as follows:
$’000 AUD
Less than one year
Between one and five years
Operating leases as lessee
Non-cancellable operating lease rentals are payable as follows:
$’000 AUD
Less than one year
Between one and five years
2017
2016
249,157
392,341
641,498
(108,193)
(94,314)
175,373
283,653
459,026
(85,855)
(78,949)
(202,507)
(164,804)
(26,930)
412,061
(26,248)
267,974
2017
3,408
886
4,294
2016
4,859
1,093
5,952
2017
2016
7,487
10,831
18,318
5,887
6,933
12,820
The consolidated entity leases all store and office premises under operating leases. The leases typically run for a period of 3-5
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 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.
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.
Operating lease rental expenditure for the year ended 31 March 2017 was $11,229,000 (2016: $11,285,000).
56 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 6. RENTAL ASSETS
$’000 AUD
Opening balance
Acquisitions
Disposals
Depreciation
Transfers to finance leases
Transfers from finance leases
2017
2016*
13,809
81,889
(1,559)
(11,740)
(85,237)
9,489
6,651
29,458
75,584
(1,978)
(19,871)
(76,375)
6,991
13,809
* The procedure for purchasing rental assets involves making deposit payments to overseas suppliers and settling balances when delivery
is complete. An adjustment for the gross up of rental assets and trade payables has occurred and has been reflected as a restatement
of 2016 balances with other restatements to other receivables and trade creditors. This resulted in a reduction of rentals assets of
$4.4m to $13.9m, increase of trade and other receivables (current) of $1.6m to $13.8m and decrease in trade payables of $2.8m to
$15.7m.
Recognition and Measurement
Rental assets represent purchased consumer goods held in store or delivered to end customers and earning revenue via operating
lease arrangements. These 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.
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. 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.
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 recognised net within revenue in the profit or loss.
The procedure for purchasing rental assets involves making deposit payments to overseas suppliers and settling balances when
delivery is complete. A change in procedures recording these cash flows has been reflected in a restatement of 2016 balances
with other restatements to other receivables and trade creditors.
7. PURCHASED DEBT LEDGERS
Purchased Debt Ledgers (PDL) were 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 (up to 13 Sep 2016):
$’000 AUD
At the beginning of the year
Net additions
Collections
Revenue
Sale of asset through disposal of division
At the end of the year
PDLs are classified as follows:
$’000 AUD
Less than one year
Between one and five years
At the end of the year
2017
2016
19,546
4,651
(4,715)
2,587
(22,069)
14,409
11,981
(11,271)
4,427
–
–
19,546
2017
2016
–
–
–
7,184
12,362
19,546
Annual Report 2017 | 57
Fair values of PDLs were determined using a discounted cash flow valuation technique. Cash flow forecasts were 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.
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
Based on the effective interest rate for each PDL recognised at the time of acquisition
Forecast collections
Forecasts are based on each PDL collections to date, the performance of equivalent
PDL and allowances for other known factors
8. INTANGIBLE ASSETS
$’000 AUD
Year ended 31 March 2016
Opening net carrying amount
Additions
Amortisation and Impairment charges for the year
Closing net book amount
At 31 March 2016
Cost
Amortisation and Impairment
Net book amount
Year ended 31 March 2017
Opening net carrying amount
Additions
Amortisation and Impairment charges for the year
Closing net book amount
At 31 March 2017
Cost
Amortisation and Impairment
Net book amount
Goodwill
Customer
Relationships
Software
Total
27,330
–
(6,672)
20,658
34,404
(13,746)
20,658
20,658
–
–
20,658
27,732
(7,074)
20,658
1,758
–
5,645
1,159
34,733
1,159
(1,758)
(1,938)
(10,368)
–
4,866
25,524
8,797
(8,797)
–
–
–
–
–
–
–
–
11,569
(6,703)
4,866
4,866
839
(2,041)
3,664
12,408
(8,744)
3,664
54,770
(29,246)
25,524
25,524
839
(2,041)
24,322
40,140
(15,818)
24,322
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 of the acquired business.
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.
58 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 8. INTANGIBLE ASSETS CONTINUED
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 for software in the current and
comparative periods are 3–8 years.
The residual value, the useful life and the amortisation method applied to an intangible asset are reassessed at least annually.
Impairment tests for Cash Generating Units (CGU) containing goodwill
Valuation of goodwill and other intangibles
Judgements are made with respect to identifying and valuing intangible assets on acquisition of new businesses.
Impairment of goodwill
Information about the assumptions and their risk factors relating to goodwill impairment is contained below. 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.
The following units have significant carrying amounts of goodwill:
$’000 AUD
Consumer leasing
Trade & Debtor Finance
Total
2017
2016
15,604
5,054
20,658
15,604
5,054
20,658
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 plus a terminal value. The cash flow projections have been
approved by the Board.
These cash flow projections are derived from budgets submitted and approved by the board. The budget cash flow projections are
based on empirical experience, industry trends and other specific expectations in the future.
Key assumptions used for value-in-use calculations
Consumer Leasing
During the forecast period, revenue is assumed to be impacted by the application of new consumer lending criteria and certain
strategic initiatives regarding the product offering. The finance lease receivable book position will decline temporarily resulting
in strong initial cash flows. Cash flows will decline in subsequent years as the book grows until a terminal positive cash flow is
achieved.
Cost of product purchased and operational costs are also assumed to reduce with the implementation of strategic initiatives
already underway.
A pre-tax discount rate is assumed at 13.35% (2016: 13.85%).
A terminal value is calculated using the cash inflows for year 5 (when the book is mature and new contracts replaces those rolling
off) with a long-term growth rate of 2.0%. The value in use calculation in 2017 was determined on a similar basis to the 2016
calculation.
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 Consumer Leasing CGU to exceed the recoverable amount.
Trade & Debtor Finance
Goodwill of $3,247,000 was initially and provisionally established at the time of purchase and finalised at $5,054,000 during the
year ended 31 March 2016.
A pre-tax discount rate is assumed 10.40% (2016: 13.85%) and a terminal value is calculated using the cash flows for year 5 of
the forecast period with a long-term growth rate of 2.0%.
Management has identified that a reasonable possible change in the budgeted EBITDA growth rate could cause the carrying
amount to exceed the recoverable amount. Budgeted EBITDA growth rate would need to decrease individually by 26.58% for the
estimated recoverable amount to be equal to the carrying amount.
Annual Report 2017 | 59
9. INCOME TAX EXPENSE
Recognised in the Income Statement
$’000 AUD
Current tax expense
Current year
Adjustment for prior year
Deferred tax expense
Origination and reversal of temporary differences
Tax on discontinued operations
Total income tax expense in income statement
Numerical reconciliation between tax expense and pre-tax accounting profit
$’000 AUD
Profit before tax
Prima facie income tax using the domestic corporation tax rate of 30% (2016: 30%)
Change in income tax expense due to:
Non-deductible expenses
(Over)/Under provided in prior years
2017
2016
2,379
(42)
9,817
41
9,543
20
2,847
(406)
12,195
12,004
2017
2016
37,601
11,280
957
(42)
31,115
9,335
2,649
20
Income tax expense on pre-tax accounting profit
12,195
12,004
10. DEFERRED TAX ASSETS AND LIABILITIES
Recognised Deferred Tax Assets and Liabilities
$’000 AUD
Rental assets
Property, plant and equipment
Trade, loan and other receivables
Finance lease receivables
Accruals
Provisions
PDL liability
Assets
Liabilities
Net
2017
2016
2017
2016
2017
2016
65,883
602
944
–
5,000
1,380
–
55,504
675
2,601
–
–
–
–
–
–
65,883
602
944
55,504
675
2,601
–
(85,972)
(66,892)
(85,972)
(66,892)
4,391
2,131
246
–
–
–
–
–
–
5,000
1,380
–
4,391
2,131
246
Tax assets/(liabilities)
73,809
65,548
(85,972)
(66,892)
(12,163)
(1,344)
60 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 10. DEFERRED TAX ASSETS AND LIABILITIES
CONTINUED
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.
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 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.
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.
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.
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.
11. FINANCIAL RISK MANAGEMENT
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.
Annual Report 2017 | 61
Credit risk
Credit risk is the risk of loss that arises when a customer or third party fails to pay an amount owing to the Company and is the
most significant risk to the group. The maximum exposure to credit risk is represented by the carrying amount receivables and
loans. The Group leases products to consumers (as well as consumer loans that are in run off) and provides business finance
to SME’s pursuant to policies and procedures that are intended to ensure that there is no concentration of credit risk with any
particular individual, company or other entity. The Group is subject to a higher level of credit risk due to the credit constrained
nature of many of the Company’s customers and in circumstances where its policies and procedures are not complied with.
The Group maintains a provision for receivable losses. The process for establishing the provision for losses is critical to the
Group’s results of operations and financial condition. It is determined by the Group using a calculation that considers the relative
maturity of the receivables and loans within the portfolio, the long term expected loss rates based on actual historical performance
and the long-term expected losses for a vintage of loans over their life based on actual historical performance. To the extent that
such historical data used to develop its allowance for loans losses is not representative or predictive of current book performance,
the Group could suffer increased loan losses beyond those provided for on its financial statements.
The Group cannot guarantee that delinquency and loss levels will correspond with the historical levels experienced and there is a
risk that delinquency and loss rates could increase significantly and have a material adverse effect on the financial results of the
Group.
Credit risk grew in-line with the growth of the loan and lease receivables in all segments, except Consumer Finance where bad debt
provisioning increased as a percentage of the loan receivables due to the proposed liquidation of the book.
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:
$’000 AUD
Trade receivables
Consumer finance lease receivables
Thorn Equipment Finance lease receivables
Other commercial receivables
Loan receivables
Purchased debt ledgers
2017
2016
6,614
172,793
239,268
33,873
26,070
–
3,776
136,047
131,927
40,313
37,946
19,546
478,618
369,555
Impairment losses
Trade 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.
The ageing of the consolidated entity’s trade receivables at the reporting date was:
$’000 AUD
Not past due
Past due 0 – 30 Days
Past due 31 – 180 Days
Gross
2017
Impairment
2017
Gross
2016
Impairment
2016
3,949
1,918
2,027
7,894
–
(384)
(896)
(1,280)
1,146
2,070
1,735
4,951
–
(408)
( 767)
(1,175)
The net value of trade receivables as at 31 March 2017 was $6,614,000 (2016: $3,776,000)
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.
62 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 11. FINANCIAL RISK MANAGEMENT CONTINUED
Impairment losses continued
Consumer finance lease receivables
Finance lease receivables net of provision total $172,793,000 (2016: $136,047,000) not past due. Finance lease receivables
that are past due are disclosed in the trade receivables above.
The provision for impairment losses as at 31 March 2017 is $21,893,000 (2016: $22,114,000). 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 book value of this collateral as at 31 March 2017 is $106,581,000 (2016: $91,068,000).
Thorn Equipment Finance lease receivables
The ageing of the consolidated entity’s commercial finance lease receivables at the reporting date was:
$’000 AUD
Not past due
Past due 0 – 30 Days
Past due 31 – 180 Days
Gross
2017
Impairment
2017
Gross
2016
Impairment
2016
234,081
5,261
4,962
–
(74)
(4,962)
132,631
1,535
1,895
(2,086)
(153)
(1,895)
244,304
(5,036)
136,061
(4,134)
The net value of commercial finance lease receivables as at 31 March 2017 was $239,268,000 (2016: $131,927,000)
Other commercial receivables
The ageing of the consolidated entity’s other commercial receivables at the reporting date was:
$’000 AUD
Not past due
Past due 0 – 30 Days
Past due 31 – 180 Days
Gross
2017
Impairment
2017
Gross
2016
Impairment
2016
13,871
13,265
7,745
34,881
–
–
(1,008)
(1,008)
7,857
14,256
20,225
42,338
–
–
(2,025)
(2,025)
The net value of other commercial receivables as at 31 March 2017 was $33,873,000 (2016: $40,313,000)
Loan receivables
The ageing of the consolidated entity’s loan receivables at the reporting date was:
$’000 AUD
Not past due
Past due 0 – 30 Days
Past due 31 – 180 Days
Gross
2017
Impairment
2017
Gross
2016
Impairment
2016
26,250
2,585
3,294
32,129
(2,506)
(259)
(3,294)
(6,059)
38,738
2,968
3,557
(3,463)
(297)
(3,557)
45,263
(7,317)
The net value of loan receivables as at 31 March 2017 was $26,070,000 (2016: $37,946,000)
Annual Report 2017 | 63
Liquidity risk
Liquidity risk is the risk that the Group’s financial condition is adversely affected by an inability to meet funding obligations and
support its business growth. The Company manages its capital to maintain its ability to continue as a going concern and to provide
adequate returns to shareholders by way of share appreciation and dividends.
The capital structure of the Group consists of external debt and shareholders’ equity. The Group manages its capital structure and
makes adjustments to it in light of economic conditions and the Group’s individual situation. The Group’s debt facilities must be
renewed on a periodic basis. These facilities contain restrictions on the Group’s ability to, among other things, pay dividends, sell
or transfer assets, incur additional debt, repay other debt, make certain investments or acquisitions, repurchase or redeem shares
and engage in alternate business activities. The facilities also contain a number of financial and non-financial covenants. Failure
to meet any of these covenants could result in an event of default under these facilities which could, in turn, allow the lender
to declare all amounts outstanding to be immediately due and payable or the inability to draw down further. In such a case, the
financial condition, liquidity and results of operations of the Group could materially suffer.
The Group has been successful in renewing and expanding its debt facilities in the past to meet the needs of its growing business.
If the Group were unable to renew these facilities or unable to renew on acceptable terms when they became due, there could be a
material adverse effect on the Group’s financial condition, liquidity and results of operations.
Liquidity risk is managed through the adequate provision of funding and effective capital management policies. Thorn will look to
diversify its funding sources to further mitigate this risk into the future.
The following are the contractual maturities of the consolidated entity’s financial liabilities including, where applicable, future
interest payments as at 31 March 2017.
31 March 2017
$’000 AUD
Secured loan facilities
Trade and other payables
31 March 2016
$’000 AUD
Secured loan facilities
Trade and other payables
Carrying
Amount
Contractual
Cash Flows
1 year or less
1-5 years
276,463
43,232
319,695
298,300
43,232
341,532
57,162
43,232
241,138
–
100,394
241,138
Carrying
Amount
Contractual
Cash Flows
1 year or less
1-5 years
197,873
213,603
38,640
38,640
46,479
38,640
167,124
–
236,513
252,243
85,119
167,124
5 years
or more
–
–
–
5 years
or more
–
–
–
The consolidated entity’s access to financing arrangements is disclosed in Note 13.
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.
Foreign Currency Risk
The Group is also subject to currency risk related to the direct acquisition of rental assets from overseas suppliers. To mitigate
this risk the group operates a foreign exchange risk policy. Group has historically been able to price its lease transactions to
compensate for the impact of foreign currency fluctuations on its purchases. However, in periods of rapid change in an exchange
rate, the Company may not be able to pass on such changes in the cost of purchased products to its customers which may
negatively impact the Company’s financial performance. The Company currently does not actively hedge foreign currency risk and
transacts in foreign currencies on a spot basis.
64 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 11. FINANCIAL RISK MANAGEMENT
CONTINUED
Interest Rate Risk
Interest rate risk is the risk the consolidated entity incurs
financial loss due to adverse movement in interest rates. The
consolidated entity is subject to interest rate risk on both its
senior debt facility and the securitised warehouse.
The consolidated entity purchases interest rate hedges to
effectively fix the securitised warehouse which has a known
term and predictable cash inflows on the established book.
No interest rate hedges have been purchased on the senior
debt facility.
At the reporting date the interest rate profile of the
consolidated entity’s interest bearing financial instruments was:
$’000 AUD
2017
2016
Financial assets
Financial liabilities
6,638
10,108
(276,463)
(197,873)
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 $1,889,000 (2016: $1,314,000).
Financial Instruments
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 equity, which the consolidated
entity defines as net profit after tax divided by the average
of opening and closing equity. The Board of Directors also
monitors the level of dividends to ordinary shareholders. Refer
to Note 14 for quantitative data.
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.
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.
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.
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 and an interest rate derivative.
Other financial instruments including purchase debt ledgers are
classified as Level 3.
Annual Report 2017 | 65
12. PROVISIONS
2017
$’000 AUD
Opening balance
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Current
Non-current
2016
$’000 AUD
Opening balance
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Current
Non-current
Regulatory
Make good
–
8,100
–
–
8,100
8,100
–
8,100
1,700
299
(144)
(71)
1,784
937
847
1,784
Regulatory
Make good
Total
1,700
8,399
(144)
(71)
9,884
9,037
847
9,884
Total
1,680
181
(161)
–
–
–
–
–
–
–
–
–
1,680
181
(161)
–
1,700
1,700
990
710
990
710
1,700
1,700
Regulatory
Regulatory provision represents amounts set aside for potential customer remediation, penalties and costs of engaging expert
advice.
Make good – lease premises
Make good provision represents expected costs of returning lease premises to an appropriate condition upon termination of rental
contract.
66 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 13. BORROWINGS
$’000 AUD
Current liabilities
Secured loans
Non-current liabilities
Secured loans
2017
2016
46,904
39,091
229,559
158,782
276,463
197,873
Borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, 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.
Financing Loan Facilities
$’000 AUD
Secured Loan Facility (Maturity 30 April 2018)
Utilised
Available headroom
Secured Loan Facility (Maturity 30 April 2018)
Utilised
Available headroom
Securitised warehouse facility (Maturity 16 December 2017)
Utilised
Available headroom
Total loan facilities
Utilised
Available headroom
2017
2016
110,000
110,000
94,400
15,600
65,000
30,000
35,000
180,000
152,063
27,937
355,000
276,463
78,537
104,000
6,000
30,000
12,000
18,000
100,000
81,873
18,127
240,000
197,873
42,127
Secured loan facilities noted above are secured by a fixed and floating charge over the assets of the consolidated entity.
The securitised warehouse loan facility is 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. At maturity no further leases are able to be sold down into the facility and the portfolio will amortise off for
as long as the underlying leases are payable.
For more information about the consolidated entity’s exposure to interest rate risk and liquidity risk see Note 11.
14. CAPITAL AND RESERVES
Number of shares
On issue at the beginning of year
Issue of new shares on vesting of performance rights
Issue of shares under dividend investment plan
2017
2016
154,466,886
151,337,839
–
–
3,779,965
3,129,047
158,246,851
154,466,886
Annual Report 2017 | 67
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.
• 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.
Equity Remuneration Reserve
The equity remuneration reserve represents the value of performance rights issued under the Company’s long-term incentive plan.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
Dividends recognised in the current year by the Company are:
2017
Final 2016
Interim 2017
Total amount
2016
Final 2015
Interim 2016
Total amount
Cents per
share
Amount
$’000 AUD
Franking
%
Date of
payment
6.0
5.5
6.75
5.5
9,268
8,612
17,880
10,215
8,406
18,621
100%
18 July 2016
100% 20 January 2017
100%
16 July 2015
100% 21 January 2016
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
After the balance sheet date, the following dividend was proposed by the directors.
$’000 AUD
Final ordinary
Cents per
share
Total
amount
Franked
%
Expected date
of payment
2.5
3,956
100%
18 July 2017
The financial effect of this dividend has not yet been brought to account in the financial statements for the year ended 31 March
2017 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 $1,695,000 (2016: $3,972,000).
Dividend franking account
$’000 AUD
30% franking credits available to shareholders of Thorn Group Limited
2017
2016
31,559
37,625
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.
68 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 14. CAPITAL AND RESERVES CONTINUED
Dividend Reinvestment Plan (DRP)
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.
In accordance with the Company’s DRP 3,779,965 new ordinary shares were issued during this financial year to the value of $5,486,179.
15. EARNINGS PER SHARE
The consolidated entity presents basic and diluted earnings per share (EPS) data for its ordinary shares.
Basic earnings per share
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.
The calculation of basic earnings per share at 31 March 2017 was based on profit attributable to ordinary shareholders of
$25,308,000 (2016: $20,059,000) and a weighted average number of ordinary shares during the year ended 31 March 2017 of
156,266,756 (2016: 152,707,502).
Diluted earnings per share
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.
The calculation of diluted earnings per share at 31 March 2017 was based on profit attributable to ordinary shareholders of
$25,308,000 (2016: $20,059,000) and a weighted average number of ordinary shares during the year ended 31 March 2017 of
156,266,756 (2016: 152,707,502), which includes performance rights granted.
Profit attributable to ordinary shareholders (basic)
$’000 AUD
Profit attributable to ordinary shareholders (basic and diluted) – continuing operations
Profit attributable to ordinary shareholders (basic and diluted)
Weighted average number of ordinary shares (basic)
‘000’s
Issued ordinary shares at 1 April
Effect of shares issued
Weighted average number of ordinary shares for the year
Weighted average number of ordinary shares (diluted)
‘000’s
Issued ordinary shares at 1 April
Effect of shares issued
Weighted average number of ordinary shares for the year
Earnings per share – continuing operations
Basic earnings per share (cents)
Diluted earnings per share (cents)
Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
2017
2016
25,406
25,308
19,111
20,059
154,467
151,338
1,800
1,370
156,267
152,708
154,467
151,338
1,800
1,370
156,267
152,708
16.3
16.3
16.2
16.2
12.5
12.5
13.1
13.1
Annual Report 2017 | 69
16. CONSOLIDATED ENTITIES
Parent entity
Thorn Group Limited
Subsidiaries
Thorn Australia Pty Ltd
Eclipse Retail Rental Pty Ltd
Rent Try Buy Pty Ltd
Thorn Personal Finance 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 (Greater Western Asset Management)
Hudson Legal Pty Ltd
Thorn ABS Warehouse Trust No. 1
Cash Resources Australia Pty Ltd
Cash Resources Australia Unit Trust
Country of
Incorporation
Ownership interest
2017
2016
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
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.
70 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 17. DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations Instrument 2016/914 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 Corporates Instrument 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 16 (excluding Thorn ABS Warehouse Trust No. 1).
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 2017, 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 Trust No. 1. Excluding the Thorn ABS Warehouse Trust No. 1, cash and cash
equivalents would decrease by $8,043,000 and trade and other payables would decrease by $8,043,000.
18. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 31 March 2017 the parent entity of the consolidated entity was Thorn Group
Limited.
$’000 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
Share capital
Equity remuneration reserve
Total Equity
2017
2016
17,880
(546)
17,334
18,621
107
18,728
5,916
5,363
136,398
119,749
5,916
18,079
5,363
6,707
115,340
109,854
2,979
3,188
118,319
113,042
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 16 and Note 17.
Annual Report 2017 | 71
19. DISPOSAL OF SUBSIDIARY
Effective 13 September 2016, the NCML Receivables Management business was sold to a third party. The group received $21.6m
cash on settlement. A further $1.0m is being held in escrow and has been recognised in other receivables.
There is an on-going independent review of the working capital position of the business at date of settlement and the sale price
subsequently adjusted.
A provisional loss on sale of $710,000 after tax has been recognised in 2017.
Result of discontinued operation
2017
2016
7,084
(6,209)
875
(263)
612
(1,014)
304
(98)
15,174
(13,820)
1,354
(406)
948
–
–
948
2017
2016
(2,383)
(19)
(2,402)
797
(86)
711
2017
(415)
(23,685)
(519)
(216)
1,341
801
60
(22,633)
21,600
(415)
21,185
$’000 AUD
Revenue
Expenses
Results from operating activities
Income tax
Results from operating activities, net of tax
(Loss) on sale of discontinued operation
Income tax benefit on sale of discontinued operation
(Loss)/Profit from discontinued operations, net of tax
Cash flow from (used in) discontinued operation
$’000 AUD
Net cash used in operating activities
Net cash from investing activities
Net cash flows for the year
Effect of disposal on the financial position of the Group
$’000 AUD
Cash and cash equivalents
Trade and other receivables
Deferred tax asset
Property, plant and equipment
Trade and other payables
Employee benefits
Provisions
Net assets and liabilities
Consideration received, satisfied in cash
Cash and cash equivalents disposed of
Net cash inflows
72 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 20. EMPLOYMENT BENEFITS EXPENSE
$’000 AUD
Wages and salaries
Contributions to defined contribution superannuation funds
Termination benefits
Equity settled share-based payment transactions
21. RELATED PARTIES
Key management personnel remuneration
$’000 AUD
Short-term employee benefits
Post-employment benefits
Long-term employee benefits
Share-based payments
2017
2016
53,320
3,775
718
337
48,281
3,415
316
92
58,150
52,104
2017
2016
2,981,837
2,617,605
150,699
38,242
235,192
174,452
36,719
116,468
3,405,970
2,945,244
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.
Stephen Kulmar is a Director of Retail Oasis and Creative Oasis. During the financial year the group retained these entities in
relation to brand and advertising work. The total benefit excluding GST was $33,665. This work was undertaken and invoiced on
an arm’s length basis and there were no balances outstanding as at year end. This was reviewed by the Board and determined to
be in accordance with the Company’s independence policy.
No other 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.
22. AUDITORS’ REMUNERATION
In whole AUD
Audit services
KPMG Australia:
Audit and review of financial reports
Compliance assurance services
Disposal of subsidiary related audit services
Other services
KPMG Australia:
Taxation services – compliance and advice
Transaction services
Regulatory advisory*
Risk Consulting services
Other Services
2017
2016
367,000
36,000
33,500
357,000
31,500
–
436,500
388,500
132,989
–
180,000
112,848
18,525
444,362
82,206
144,000
–
201,099
68,245
495,550
* The regulatory advisory assignment was a one-off non recurring item and KPMG were contracted as they were best placed for that
particular work.
Annual Report 2017 | 73
23. CONTINGENT LIABILITY
Class Action
The Thorn subsidiary running Radio Rentals was named on 29 March 2017 as the respondent to a class action proceeding that
has been commenced by one of its customers in the Federal Court of Australia. The statement of claim relates to misleading,
deceptive and unconscionable conduct, false representations and unfair contract terms.
The matter will be vigorously defended and is expected to take some time, possibly years, to resolve. No provision has been taken
in these accounts. Legal fees will be incurred defending the matter over the period of that defence should the matter proceed.
24. SUBSEQUENT EVENTS
Thorn’s Chief Financial Officer and Company Secretary, Peter Forsberg, was appointed Acting CEO on 24 April 2017 following the
resignation of James Marshall.
Thorn’s General Manager of Finance, Andrew Crowther was appointed Acting Chief Financial Officer on 24 May 2017.
74 | Thorn Group
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2017 DIRECTORS’ DECLARATION
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 47 to 74 and the remuneration disclosures that are
contained in 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 2017 and of its performance for
the financial 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(a); and
(c) 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 16 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 Corporations Instrument 2016/914.
3. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief
Executive Officer and Chief Financial Officer for the financial year ended 31 March 2017.
Signed in accordance with a resolution of the directors.
Joycelyn Morton
Chair
Dated at Sydney
25 May 2017
Annual Report 2017 | 75
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
To the shareholders of Thorn Group Limited,
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of the
Thorn Group Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance with the
Corporations Act 2001, including
• giving a true and fair view of the Group’s
financial position as at 31 March 2017 and of
its financial performance for the year ended
on that date; and
•
complying with Australian Accounting
Standards and the Corporations Regulations
2001.
The Financial Report comprises the:
• Consolidated statement of financial position as at 31
March 2017
• Consolidated statement of profit or loss and other
comprehensive income, consolidated statement of
changes in equity, and consolidated statement of
cash flows for the year then ended
• Notes including a summary of significant accounting
policies
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year end and from time to time during
the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements
of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our
other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
• Finance lease receivables impairment
provision.
• Valuation of goodwill.
• Regulatory provisions
Key Audit Matters are those matters that, in our
professional judgment, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our audit
of the Financial Report as a whole, and in forming our
opinion thereon, and we do not provide a separate
opinion on these matters.
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
Profession Standards Legislation.
76 | Thorn Group
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
Finance lease receivables impairment provision ($26,930,000)
Refer to Note 11 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The Group estimate impaired finance lease
receivables collectively, by categorising lease
receivables into portfolios with similar risk
profiles, and using historical experience of actual-
category impairment losses adjusted for any
effects of conditions existing at the balance
date. Our audit attention focused on the finance
lease receivables impairment provision
specifically for the Rent Try Buy 48 month (“RTB
48”) portfolio of finance lease receivables as a
Key Audit Matter. This portfolio contains lease
contracts which have not yet gone to term,
therefore, there is a limited profile of historical
impairment losses with which to estimate the
impairment provision.
As a result, there are significant asusmptions
associated with the Group’s assessment of the
RTB 48 impairment provision, which are
subjective and created complexity in our audit.
We focused on the following significant
assumptions:
•
‘expected loss’ of products in the remaining
life of the contract. The expected loss
reflects the risk of non-recoverability of the
receivable and the risk that the customer has
also absconded with an asset after the
cancellation of the contract.
• extended length of maturity, compared to
other categories, as this increases the risk of
non-recoverability; and
• nature of the products leased. Portable
products increases the risk of loss of
product.
Our procedures included:
• Evaluation of the Group’s finance leasing accounting
process. We tested a sample of controls in this
process designed to limit the risk of impairment of
finance lease receivables including the approval of
new customer applications and authorisation to write
off impaired lease receivables;
• We compared the RTB 48 month receivable life curve
to prior period life curves, for patterns such as loss of
products, length of maturity for expected loss, and
nature of products lost, to challenge the profile of the
current period RTB 48 month receivables life curve.
We checked these considerations in the Group’s
impairment provision at balance date. The life curve
is a graph showing the average proportion of
receivables for a group of RTB 48 month receivables
recorded in the same month since they were
installed.
• We assessed the total impairment provision by:
(1) assessing the historical impairment losses,
compared to the prior year’s impairment
provision; and
(2) analysing actual impairment losses compared to
gross historical finance lease receivable
balances, economic conditions, and our
experience. Economic conditions include
consideration of household debt to assets ratio,
unemployment rates and household
discretionary income. Deterioration of these
reduces capacity for customers to meet their
repayments and increases the risk of
impairment. We used this to inform our
evaluation of the Group’s impairment provision
specifically for the RTB 48 month receivable
portfolio.
Annual Report 2017 | 77
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
Valuation of goodwill ($20,658,000)
Refer to Note 8 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Our audit attention focused on the valuation of
goodwill as a key audit matter due to the level of
significant judgement required by us in
evaluating the Group’s assessment of
impairment.
The assessment of impairment of goodwill is
based on a value in use model, which includes
assumptions, including forecast cash flows,
discount rate applied, and the forecast growth
and terminal growth rates. Reasonably possible
changes in these assumptions have a significant
impact on the valuation.
Estimating the cash flows requires the exercise
of judgement as to the likely impact of:
• competitive pressures in the invoice
discounting sector
•
the Thorn Debtor Finance cash generating
unit (CGU) being recently acquired and in the
process of being integrated into the business
• potential changes resulting from early
adoption of proposed regulatory changes to
the consumer leasing sector and lending
practices.
The significant judgement involved in the annual
impairment testing necessitated specialist
involvement and experienced senior team
member time.
Our procedures included:
• We performed sensitivity analysis, specifically for the
recently acquired Thorn Debtor Finance CGU, for key
assumptions, including terminal growth rate and
forecast cash flows to further focus our procedures;
• Working with our specialists we used our knowledge
of the client, and their industry to challenge the
Group’s value in use model and significant
assumptions. This included:
(1) corroborating the Group’s growth rate
assumptions and discount rates for both the
Thorn Debtor Finance and consumer leasing
CGUs to known market trends and comparable
entities, and
(2) evaluating forecast cashflows in light of recent
competitive market pressure and changes to
lending practices resulting from proposed
regulatory changes. This included comparing
revenue growth rates for the consumer leasing
and invoice discounting sector to the growth
rates incorporated in the Group’s value in use
model.
• We assessed the historical accuracy of previous
Group forecasts to inform our evaluation of forecasts
incorporated in the value in use model.
78 | Thorn Group
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
Regulatory provision ($8,100,000)
Refer to Note 12 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Our audit attention focused specifically on the
regulatory provision as a key audit matter due to
the level of judgement required by us in
evaluating the Group’s assessment of the
provision. The provision relates to matters arising
from the Group’s serviceability model and
lending practice compliance with the
requirements of the National Consumer Credit
Protection Act.
The components of the provision estimation we
focussed on are the:
(1) anticipated civil penalty; and
(2) compensation of customers, who are
required to be remediated.
ASIC’s investigation into the Group’s compliance
with responsible lending laws is continuing, and
has not yet been finalised. Our judgement
involved assessing the Group’s determination of
the merit of the case, given the investigation is
not finalised, evaluating and measuring any
resulting obligations, and analysing the
disclosure as a contingent liability against
requirements of the accounting standard AASB
137 Provisions, Contingent Liabilities and
Contingent Assets.
We used senior team members to assess these
judgements.
Our audit procedures included:
• Evaluating external information regarding the Group’s
estimates for claims relating to, their serviceability
model and responsible lending practices, including an
anticipated civil penalty and compensation of
customers.
• Obtaining the Group’s calculation of the provision
related to the compensation of customers and
checking on a sample basis the data used in the
calculation for consistency to the billing system, as
tested by us.
• Assessing the parameters of the Group’s calculation
of the provision related to the compensation of
customers to the parameters likely to be applied by
ASIC in considering the completeness of the
provision. The parameters we specifically tested
were the period in which the Group’s serviceability
model was in place, financial obligations, and arrears
events of the customer.
• Assessing the disclosures against those required
under AASB 137 for consistency to reflect underlying
facts and current circumstances and our knowledge
of the matter.
Annual Report 2017 | 79
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
Other Information
Other Information is financial and non-financial information in Thorn Group Limited’s annual reporting which is
provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the
Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’s Report. The
anticipated 2017 Financial Overview, Chair’s Report, Managing Director’s Report, Board of Directors,
Leadership Team, Our Businesses, Addressing Financial Exclusion, Community, and the Corporate Directory
are expected to be made available to us after the date of the Auditor's Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will
not express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and
based on the work we have performed on the Other Information that we obtained prior to the date of this
Auditor’s Report we have nothing to report.
Responsibilities of Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001;
•
implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error; and
• assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This description
forms part of our Auditor’s Report.
80 | Thorn Group
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of Thorn
Group Limited for the year ended 31 March
2017, complies with Section 300A of the
Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included in
pages 32 to 44 of the Directors’ report for the year ended
31 March 2017.
Our responsibility is to express an opinion on the
Remuneration Report, based on our Audit conducted in
accordance with Australian Auditing Standards.
KPMG
Anthony Travers
Partner
Sydney
25 May 2017
Annual Report 2017 | 81
SHAREHOLDER INFORMATION
DISTRIBUTION OF SHAREHOLDERS
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 – 9,999,999,999
Rounding
Total
UNMARKETABLE PARCELS
Fully Paid Ordinary Shares (Total) as at 30 June 2017
Total Holders
Units
% Issued Capital
2,019
4,092
1,964
2,031
1,113,749
11,706,247
15,185,315
48,253,296
79
81,988,244
0.70
7.40
9.60
30.49
51.81
0.00
10,185
158,246,851
100.00
Minimum $ 500.00 parcel at $ 1.42 per unit
353
638
93,702
Minimum Parcel Size
Holders
Units
THE NAMES OF THE SUBSTANTIAL SHAREHOLDERS LISTED IN THE COMPANY’S
REGISTER AS AT 30 JUNE 2017 ARE:
Rank Top Investors
1
2
3
Investors Mutual Limited
Vinva Investment Management Limited
IOOF Holdings Ltd
% Issued Capital
15,023,915
9,480,417
9,471,534
9.49%
5.99%
5.99%
VOTING RIGHTS
The Company only has ordinary shares on issue.
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.
82 | Thorn Group
SHAREHOLDER INFORMATION (CONTINUED)
20 LARGEST SHAREHOLDERS – ORDINARY SHARES
Rank Name
1. HSBC Custody Nominees (Australia) Limited
2.
J P Morgan Nominees Australia Limited
3. Citicorp Nominees Pty Limited
4. National Nominees Limited
5. BNP Paribas Nominees Pty Ltd
6. BNP Paribas Noms Pty Ltd
7
8.
Louis Pierre Ledger
Australian Executor Trustees Limited
9. Citicorp Nominees Pty Limited
10. Bond Street Custodians Limited
11. Bentale Pty Ltd
12. HSBC Custody Nominees (Australia) Limited - A/C 2
13. Brispot Nominees Pty Ltd
14. BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd Drp
15. Mr Michael John Horn
16. Mr Francis Maxwell Hooper
17. Blue Feather (QLD) Investments Pty Ltd
18. Romsup Pty Ltd
19. Mr Trevor William Donaldson + Mrs Marie Elizabeth Donaldson
20. Associated World Investments Pty Limited
Number of ordinary
fully paid shares held
% held of issued
ordinary capital
30,786,016
18,211,189
4,635,509
3,799,295
3,756,108
2,242,190
1,654,202
1,592,972
1,026,178
659,745
653,000
633,591
550,306
519,149
454,500
400,171
387,132
338,696
320,000
300,000
19.45
11.51
2.93
2.40
2.37
1.42
1.05
1.01
0.65
0.42
0.41
0.40
0.35
0.33
0.29
0.25
0.24
0.21
0.20
0.19
Annual Report 2017 | 83
CORPORATE DIRECTORY
DIRECTORS
Joycelyn Morton
Chair, Non-Executive Director
Belinda Gibson
Non-Executive Director
Stephen Kulmar
Non-Executive Director
David Foster
Non-Executive Director
Andrew Stevens
Non-Executive Director
COMPANY SECRETARY
Peter Forsberg
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
Level 38, Tower 3, International Towers Sydney
300 Barangaroo Avenue
Sydney NSW 2000
REGISTRY
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
84 | Thorn Group