Annual
Report
31 March 2021
ACN 072 507 147
CONTENTS
Directors’ Report
Lead Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
2
20
21
Consolidated Statement of Financial Position
22
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
23
24
26
56
57
Annual Report 2021 I 1
DIRECTORS’ REPORT
For the year ended 31 March 2021
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 2021
and the auditor’s report thereon.
PREFACE
During the year Thorn has taken significant decisions to place the Group in the best position for the future. These include the
permanent closure of all Radio Rentals stores, the launch of the new digital Radio Rentals operating model and ceasing
equipment finance originations, all of which has resulted in a significant number of the Group’s staff becoming redundant and a
significant reshaping of the organisation’s cost base.
In addition to the actions taken, in May 2020, it was determined that there was a breach of one of the compliance parameters
in the securitised warehouse (“the warehouse”) which requires no more than 6% of the balances to be in arrears by more than
30 days. This was attributable to the increasing presence of COVID-19 affected customers, many of whom had requested a
payment holiday and had stopped repayments. This breach put the warehouse into run-off.
During the year Thorn reached an agreement with its funders to provide variations to certain COVID-19 affected customers. As
a result of the amendments made to the funding arrangements which allowed us to undertake variations Thorn cannot
originate new deals through the warehouse until further agreement is reached.
Each of these matters has had a significant impact on the financial statements and are explained further in this report.
OPERATING AND FINANCIAL REVIEW
Principal activities
Thorn is a diversified financial services group providing the leasing of household products to consumers and commercial
finance to small and medium-sized enterprises. There were no other significant changes in the nature of the activities of the
consolidated entity during the year.
Financial performance
A$m
Consumer Leasing
Business Finance
Corporate
Significant items
Sub-total
Net interest expense
Loss before tax
Tax expense
Net profit / (loss) after tax
Segment revenue
Segment EBIT to NPAT
2021
70.7
33.4
-
-
104.1
2020
162.4
41.9
-
-
204.3
2021
15.6
12.7
(8.9)
0.3
19.7
(11.3)
8.4
-
8.4
2020
(8.0)
(19.1)
(8.3)
(26.7)
(62.1)
(16.3)
(78.4)
(2.7)
(81.1)
Revenue fell 49% to $104.1m (2020: $204.3m), and the net profit after tax (‘NPAT’) increased from a $(81.1)m loss to a $8.4m
profit.
Consumer Leasing
The Group’s consumer leasing division, Radio Rentals, recorded lower sales units and revenues this year with 5,346 units being
installed in the year which was 93% lower than last year’s 74,503. Revenue reduced by $91.7m to $70.7m (2020: $162.4m) as a
result. Revenue is a combination of sales revenue from installations under new contracts (down $68.8m to $6.0m) and the
interest and fee income from past written contracts. Interest income reduced by $21.2m to $58.4m as the receivables book
(before provisioning), which generates the interest income, fell 47% to $77.3m (2020: $146.0m).
In the face of reduced revenue, the costs of the division were cut. Costs other than impairment reduced by $90.2m driven by a
combination of reductions in the cost of goods sold, staff costs and other expenses.
2 I Annual Report 2021
DIRECTORS’ REPORT
For the year ended 31 March 2021
The credit loss impairment expense on the lease receivables book reduced $25.1m to $13.6m (2020: $38.8m) driven by the
reduction in the book. Arrears over 30 days outstanding at the year-end finished at 15.0% compared to 15.7% at 31 March
2020.
EBIT was a $15.6m profit (2020: $8.0m loss).
Business Finance
Equipment finance originations were $5.2m for the year (2020: $152.0m), the majority of which took place in April prior to the
warehouse going into run-off. Given the lack of external funding and the impact of COVID-19, originations were kept to a
minimum for the remainder of the year with a decision announced to the market in February 2021 that equipment finance
originations would cease until further notice.
Arrears over 30 days started the year at 5.1% at the end of March 2020, reached 11.8% by the end of April and peaked at 36.6%
in July, the majority of which was driven by COVID-19. At the end of March 2021 this figure was 8.6%. Following renegotiations
with our funders’ variations were offered and accepted by many of our customers. Arrears have been reset at the date of
variation. None of the customers, where contracts have been varied, has had 6 months of post variation payments yet. As such
the final 31 March 2021 arrears number should be treated with caution. At 31 March 2021 $73.0m of Business Finance
receivables were identified as COVID-19 impacted. Out of these, 14.5% by value were greater than 30 days in arrears at the
balance date and $44.9m had received a variation in the second half of the financial year.
The receivables book and the profit or loss statement have been heavily influenced by both the reduction in originations and
the impact of COVID-19; receivables (pre provision) reduced from $323.4m to $192.5m; revenue decreased 20% to $33.4m
(2020: $41.9m) and impairment expenses fell by $37.5m to $12.4m (2020: $49.9m).
EBIT was a $12.7m profit (2020: $19.1m loss).
Corporate
Corporate expenses were up slightly at $8.9m (2020: $8.3m).
A one-off recovery of $1.3m from a previously impaired loan in our trade debtor finance, which was sold in a prior period, has
been included here.
Significant items
In the current financial year the Group incurred the following related to the closure of the store network: redundancy costs of
$3.5m and IT-related costs of $0.6m offset by a $1.4m net gain on exiting the majority of the Group’s lease obligations. In
addition, $2.9m in JobKeeper grants received have been presented as a significant item.
In the prior year $26.0m of costs were incurred in settling the Radio Rentals class action and $0.7m of costs for the strategic
review.
Net interest expense
Net interest expense decreased by 31% from $16.3m to $11.3m. These costs include $0.2m of financing charges on lease
liabilities. Borrowings in the warehouse declined to $166.3m (2020: $293.5m) as the warehouse was in amortisation with the
majority of cash collected used to pay down the outstanding notes.
Tax expense
While there is a taxable profit, there is no current tax payable as a result of the tax losses carried forward. Additionally, the
Group has not recognised any deferred tax benefits attributable as directors were not certain that there would be sufficient
taxable profits in future years to justify their recognition as an asset on the balance sheet.
Annual Report 2021 I 3
DIRECTORS’ REPORT
For the year ended 31 March 2021
Financial position
The balance sheet is presented below in two versions; first excluding the warehouse borrowings for the business finance
receivables together with the associated receivables and cash in the warehouse (non-recourse funding for the warehouse)
(“excl. Trust”), and second including the warehouse which is as per the statutory accounts format (“incl. Trust”).
Summarised financial position
31 March 2021
31 March 2020
$m
Cash at bank
Receivables
excl. Trust
68.3
incl. Trust
88.0
55.0
196.6
Investment in unrated notes
-
-
Inventories and other assets
3.1
3.1
Investments
Total Assets
Borrowings
Other liabilities
Total Liabilities
Total Equity
1.0
1.0
127.4
288.7
-
166.3
23.6
23.6
27.3
193.6
103.8
95.1
Gearing (net debt/equity) (i)
n/a
ROE
EPS
103.0%
8.4%
2.6
(i) Gearing is calculated as closing net debt (i.e. debt less free cash) divided by closing equity
(ii) Nm = not meaningful so not included
excl. Trust
incl. Trust
28.7
128.1
-
13.9
-
170.7
12
35.8
47.8
122.9
nm
49.6
389.8
-
13.9
-
453.4
305.5
42.1
347.6
105.8
261.6%
(59.2)%
(33.7)
Cash at bank
The cash at bank amount includes the free cash available to the Group plus the cash in the warehouse (a mixture of customer
receipts collected in the last month of the year and cash reserves). At the year-end, free cash was $68.3m and cash in the
warehouse was $19.7m (2020: $28.7m and $20.9m). The increase in free cash was due to the inflow of receipts from previously
written contracts exceeding both operating expenses and the origination of new contracts in both divisions.
Receivables
The balance consists of consumer leasing receivables and business finance receivables. All are stated at their gross amount less
unearned interest, less a provision for expected credit losses.
The Consumer Leasing receivables gross balance reduced by $68.7m to $77.3m (2020: $146.0m) due to lower originations and
the total book reducing accordingly. The provision decreased by $7.0m to $(29.3m) (2020: $(36.3m)). The net receivables
balance reduced by $61.7m to $48.0m (2020: $109.7m).
The Business Finance receivables gross balance reduced by $130.9m to $192.5m (2020: $323.4m) due to lower originations.
The provision was flat at $(45.0m) (2020: $(45.0m)). The net receivables balance reduced by $130.9m to $147.5m (2020:
$278.4m).
In the table above, the columns which exclude the warehouse remove the Business Finance receivables and related provisions
held in the warehouse.
Investment in unrated notes
This balance represents the carrying value of notes held by the Group in the warehouse.
Investments
The Group made a $1m strategic investment in Quicka Holdings Pty Ltd trading as “QuickaPay” during the year, which has been
classified as an equity investment held at fair value through other comprehensive income.
4 I Annual Report 2021
DIRECTORS’ REPORT
For the year ended 31 March 2021
Other liabilities
The other liabilities reduction of $14.8m was driven by the settlement of store lease obligations which reduced lease liabilities
by $10.8m, with the balance attributable to reduced payables and employee-related liabilities as the size of the business has
reduced.
Funding
The Group has the following debt facility limits:
$m
Secured Corporate Loan Facilities A and B
Securitised Warehouse Facility
Corporate facilities
2021
N/A
166.3
2020
17.0
368.0
The Corporate Loan Facility A was paid down in full during the year and the warehouse borrowings were paid down by $127.2m
to $166.3m (March 2020: $293.5m). Both Corporate Loan Facilities A and B were cancelled following the repayment.
Securitised warehouse facility
Thorn Business Finance is financed by a securitised warehouse facility (“the warehouse”) with senior notes held by a major
Australian bank, mezzanine notes held by a major Australian financial services company, and equity class F notes held by Thorn.
The warehouse facility is secured by rentals and payments receivable from the underlying receivable contracts and is non-
recourse to the Group by which it is meant that Thorn’s liability is limited to its class F notes unless it is liable in damages for
breach of the documents or it is required to buy back an ineligible receivable (defined as one that breached Thorn’s initial sale
representations and not merely that it goes into arrears or defaults).
The amounts expected to be due and payable on the warehouse facility in the next 12 months are disclosed as current. At
maturity no further originations can be sold down into the facility and the portfolio will amortise off for as long as the
underlying receivables are payable.
In addition to the actions taken, in May 2020, it was determined that there was a breach of one of the compliance parameters
in the warehouse which requires no more than 6% of the balances to be in arrears by more than 30 days. This was attributable
to the increasing presence of COVID-19 affected customers, many of whom had requested a payment holiday and had stopped
repayments under their contracts.
This breach put the warehouse into run-off under its amortisation rules. As a result Thorn was unable to sell originations into
the warehouse and the distributions it normally receives via the waterfall distribution mechanism were redirected to pay down
the noteholders in order of seniority while the breach persisted. In the second half of the year Thorn reached an agreement
with its funders to allow Thorn to vary contracts with certain COVID-19 affected customers. These variations were
implemented and completed by year end.
At 31 March 2021 the relevant arrears number was 3.9% (this number does not take into account receivables which have been
written off) and was no longer in breach of this parameter. As a result of the amendments made to the funding arrangements,
which allowed us to undertake variations, Thorn cannot fund new originations through the warehouse until further agreement
is reached. The warehouse facility was reviewed by the noteholders in the normal course of business during the year and the
availability period was not extended.
DIVIDENDS PAID OR RECOMMENDED
On 12 October 2020, the Thorn Board declared a fully franked special dividend of $0.075 cash per share ("Special Dividend").
The Special Dividend was paid to shareholders on Tuesday, 3 November 2020. The special dividend totalled $24.2m. A number
of Thorn’s shareholders participated in the dividend reinvestment plan resulting in $2.6m of the total being reinvested in Thorn
shares, resulting in a net cash outflow of $21.6m.
The Directors have proposed a final dividend of 1.0 cent per share for an expected payment of $3.4m to be paid on the 21 July
2021. The dividends are fully franked.
Annual Report 2021 I 5
DIRECTORS’ REPORT
For the year ended 31 March 2021
REGULATORY MATTERS
The Group is not subject to any significant environmental regulation. Thorn’s asset valuations, useful lives, fair values, costs of
or demand for its products, and credit losses from its receivable books are unlikely to be materially affected by climate change.
Thorn does seek to source products for its consumer division customers which are environmentally friendly and efficient.
The Group is subject to extensive regulation in each of the jurisdictions in which it conducts its consumer finance leasing
business. The Group is regulated by the Australian Securities & Investments Commission and is a member of the Australian
Financial Complaints Authority. Changes in laws or regulations in a market in which the Group operates could impact the
business. The Group continually monitors the regulatory and compliance space to ensure that the business is abreast of all
potential changes.
SUBSEQUENT EVENTS
Refer to note 17 for the final dividend recommended by the directors, to be paid on 21 July 2021.
FINANCING AND GOING CONCERN
The directors have prepared the Financial Report on the going concern basis, which assumes continuity of normal business
activities and the realization of assets and the settlement of liabilities in the ordinary course of business.
The Group achieved a net profit after tax of $8.4m (2020: $81.1m loss) for the year ended 31 March 2021 and net cash
generated in operating activities during the same period amounted to a $209.9m inflow (2020: $9.2m outflow). A significant
proportion of the cash inflow was a result of abnormal business conditions during the period, including Covid-19 and
Government incentives such as JobKeeper, JobSeeker and other Covid-19 stimulus payments. These abnormal business
conditions and the reversal of non-cash ECL provisions contributed to the net profit.
The Group provides financing to both consumers and small and medium size enterprises across a range of industries, many
of which have been impacted by COVID-19.
Thorn’s Consumer leasing division was significantly affected by COVID-19. The Group announced the permanent closure of
the Radio Rentals stores and warehouses and the core of the consumer leasing business was moved completely online with
the launch of a new digital business model. The digital business model is not fully operational and is still in Beta testing
mode. The consumer leasing division recorded lower sales units and revenues this year with 5,346 units being installed in
the year, which was 93% lower than the last financial year’s 74,503. The consumer finance originations have been behind
expectations due to limited marketing activity during the launch of the new business model, the slower than expected on-
boarding of new dropship suppliers and the macro economic factors that have made assessing credit more difficult.
The Business Finance division also faced challenges. On 5 May 2020, the equipment finance warehouse was determined to
have breached one of its warehouse parameters as a result of customers affected by COVID-19 progressively going into
arrears. In September 2020 Thorn reached agreement with its funders to provide relief to some of its COVID-19 affected
customers in the form of contract variations which were finalised in early 2021. As at 31 March 2021, $73.0m of receivables
were identified as COVID-19 impacted. Of these, 14.5% by value were greater than 30 days in arrears. Thorn also ceased
equipment finance originations in the Business Finance division but continues to discuss future options with funders in the
securitised warehouse facility. Thorn is revitalising the Business Finance division, including launching the new debtor
finance product.
These events resulted in redundancies for approximately 300 casual and full time staff across the Group and a significant
reshaping of the organisation’s cost base.
The collections on the two receivables books and the continued cost reductions have been cash positive for the Group. The
Radio Rentals receivables balance (net of unearned interest and credit provisioning) reduced by $61.7m to $48.0m (2020:
$109.7m). The Business Finance net receivables balance reduced by $130.9m to $147.5m (2020: $278.4m). The current
performance of the consumer leasing collections is not meeting forecasted targets and the impact of the withdrawal of the
Government Covid-19 stimulus payments is uncertain.
The Group is now effectively in a “start-up” phase. This involves a significant investment in technology and navigating
through an increasingly competitive market with slow, continuing re-engineering of outdated business practices and
processes. Further, the Group is operating in a challenging compliance and regulatory environment. These factors could
6 I Annual Report 2021
DIRECTORS’ REPORT
For the year ended 31 March 2021
significantly impact the Group’s ability to generate profits and net cash inflows and therefore, there is a significant risk of
the Group making an operating loss in the 12 month period from the date of this report.
Considering all the above, and acknowledging that corporate actions always contain some risk and uncertainty, the
directors have reviewed the Group’s cash flow forecast through to 30 June 2022.
The directors are of the opinion that there are reasonable grounds to believe that the collection from the two receivables
books will provide sufficient incoming cash flows and remain confident that the business will, longer term, be successful in
achieving its strategic objectives. However, the success of the recently launched Radio Rentals online business and
revitalisation of the Business Finance division are not guaranteed and along with the continuing Covid-19 uncertainty, and
the challenging compliance and regulatory environment, multiple material uncertainties exist that cast significant doubt as
to the Group’s ability to continue as a going concern and therefore whether Thorn will be able to realise its assets and
discharge its liabilities in the normal course of business and for the amounts recorded in this report.
OUTLOOK
Given the significant effect that the ongoing COVID-19 pandemic is having and both the actual and planned changes to the
business there are insufficient grounds to be able to provide a detailed and reliable outlook statement and profit guidance at
the present time.
Thorn will progress its announced actions on Debtor Finance and will continue to invest in the new digital Radio Rentals
business.
Thorn’s policy is to not provide profit guidance and nothing in this annual report should be construed as profit guidance.
Annual Report 2021 I 7
DIRECTORS’ REPORT
For the year ended 31 March 2021
DIRECTORS' INFORMATION
Warren McLeland
Non-Executive
Appointed 30 August 2019
Appointed Board Chairman 23 October 2019
Appointed Chair of Risk and Compliance Committee 4
December 2019
Qualifications
Bachelor of Science
MBA
Experience
Warren has over 40 years of experience in financial services
in wholesale and retail sectors at top business management
and CEO levels. Warren’s experience has been gained in
organisations such as Bain and Co and Chase Manhattan (now
JP Morgan Chase). Warren is the Non-Executive Chairman of
ASX listed Resimac Group Limited and was formerly the CEO.
Warren is a former non-executive director of UIL Limited.
Other current ASX directorships
Resimac Group Ltd
Former ASX directorships in the last three years
UIL Limited
Interests in shares and options
Nil
Paul Oneile
Independent, Non-Executive
Appointed 14 October 2019
Appointed Chair of Audit Committee 4 December 2019
Appointed Deputy Chair of the Board 20 October 2020
Appointed Chair of Remuneration and Nomination
Committee 20 October 2020
Qualifications
Bachelor of Economics
Experience
Paul is the current Chair of ASX listed company, A2B Australia
Limited (formerly Cabcharge Australia Limited).
Previously Paul was the non-executive Chairman of Intecq
Limited (formerly eBet Limited), from 2012 until its
acquisition by Tabcorp Holdings Limited in December 2016.
From 2003 to 2008, Paul was CEO of Aristocrat Leisure
Limited where he oversaw significant business and cultural
change, refocused R&D spending, streamlined the supply
chain operation, and successfully oversaw the growth of the
company’s international operations.
Other current ASX directorships
A2B Australia Ltd A2B Limited (formerly Cabcharge Australia
Limited)
8 I Annual Report 2021
Former ASX directorships in the last three years
None
Interests in shares and options
235,000 ordinary shares
Allan Sullivan
Non-Executive
Appointed 30 August 2019
Qualifications
Bachelor of Science, Bachelor of Engineering, Doctor of
Engineering
Experience
Allan has had a professional career spanning over 30 years
involving senior management roles in Switzerland, Holland,
Korea, Hong Kong and Australia. Allan has a Bachelor of
Science, a Bachelor of Engineering and a Doctor of
Engineering from the University of Sydney.
Allan was the Chief Executive Officer and Director of the
listed ASX-ERG Group of Companies based in Perth (now Vix
Technology) from 2004 to 2007. Since 2007, Allan has acted
as a consultant to the VIX Verify Group and the Allectus
Capital Group in relation to their technology businesses.
More recently, Allan has served as Executive Chairman of the
VIX Verify Group, managing the successful sale of VIX Verify
Global Identification business to the UK listed GB Group.
Other current ASX directorships
None
Former ASX directorships in the last three years
None
Interests in shares and options
247,540 ordinary shares
Kent Bird
Independent, Non-Executive
Appointed 30 August 2019, resigned 2 October 2020
Appointed Deputy Chair of the Board 11 October 2019, until
his resignation on 2 October 2020
Appointed Chair of Thorn’s Remuneration and Nomination
Committee 30 August 2019, until his resignation on 2 October
2020
Qualifications
Bachelor of Business
Graduate Diploma in Applied Finance
Experience
Kent is a banking and finance professional with 25 years’
experience in commercial and investment banking.
Kent was with Credit Agricole CIB Australia Limited for 12
years and was the Managing Director – Head of Loan
Syndications Australia and Head of DCM Origination Australia
for the last three years, ending in December 2018. Prior to
DIRECTORS’ REPORT
For the year ended 31 March 2021
this, Kent worked at various financial institutions such as
Suncorp Limited, Heritage Bank Limited and the Queensland
Office of Financial Supervision (now the Australian Prudential
Regulation Authority).
Other current ASX directorships
None
Former ASX directorships in the last three years
None
Interests in shares and options
None
Company Secretary
Alexandra Rose (BLaws, MBA, FAID, FGIA, FCIS) is the Group’s
General Counsel and General Manager of Risk & Compliance.
Alexandra is an experienced corporate lawyer with over 20
years of legal, risk and regulatory expertise. She has held
senior executive roles at a number of leading Australian
financial services companies.
Directors’ Meetings
The number of directors’ meetings (including meetings of committees of directors) and the number of meetings attended by
each of the directors of the Company during the financial year are detailed below.
Director
Board Meetings
Audit Committee Meetings
Risk & Compliance Committee
Meetings
Remuneration & Nomination
Committee Meetings
Warren McLeland
Kent Bird*
Paul Oneile
A
33
24
32
B
34
24
34
A
8
4
8
B
8
5
8
A
1
1
1
34
Allan Sullivan
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year
*Kent Bird resigned as a director of the Company effective 2 October 2020
34
1
8
8
B
1
1
1
1
A
1
1
1
1
B
1
1
1
1
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Insurance
During the financial year, the Company has paid insurance premiums of $991,944 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.
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 agreements stipulate that the Company will meet the full amount of any such liabilities, including costs and
expenses.
Annual Report 2021 I 9
DIRECTORS’ REPORT
For the year ended 31 March 2021
REMUNERATION REPORT
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 our auditors.
The report is structured as follows:
1. Remuneration governance
2. Non-Executive Directors and Key Management Personnel
3. Non-Executive Director remuneration
4. Key Management Personnel (“KMP”) remuneration
5. Alignment between remuneration and performance
6. Service contracts for KMP
7. Other statutory disclosures
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 & 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 2019 AGM, the
Remuneration Report received a vote of approval of 12% of the votes received and hence was rejected by shareholders.
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.
2. NON-EXECUTIVE DIRECTORS AND KEY MANAGEMENT PERSONNEL - AUDITED
For the year ended 31 March 2021, the NEDs and KMP were:
Non-Executive Directors
Position
Director/Committee Chair
Term or Date
Full Year
Full Year
Full Year
Full Year
Director
Board Chairman
Chairman of Risk & Compliance Committee
Director
Director
Chairman of the Remuneration & Nomination Committee
Until 2 October 2020
Until 2 October 2020
Director
Chairman of Audit Committee
Full Year
Full Year
Chairman of Remuneration & Nomination Committee
Appointed 20 October 2020
Director and Board Chairman
Director and Chairman of the Remuneration & Nomination
Committee
Until 23 October 2019
Until 30 August 2019
Director and Chairman of Audit Committee
Until 4 December 2019
Director and Chairman of Risk & Compliance Committee
Until 4 December 2019
Warren McLeland
Allan Sullivan
Kent Bird
Paul Oneile
David Foster
Stephen Kulmar
Andrew Stevens
Belinda Gibson
10 I Annual Report 2021
DIRECTORS’ REPORT
For the year ended 31 March 2021
Executive KMP
Pete Lirantzis
Luis Orp
Alexandra Rose*
Peter Forsberg
Tim Luce
Wendy Yip
Position
CEO
Term or Date
Full Year
Chief Financial Officer
Appointed 14 October 2020
General Counsel, General Manager Risk & Compliance and
Company Secretary
Full Year
Chief Financial Officer
CEO and Managing Director
Chief Risk Officer
Until 14 October 2020
Until 12 February 2020
Until 22 November 2019
David Lines
*Alexandra Rose, who was considered to be a KMP in the previous financial year is now no longer considered to be a KMP at the start
of the 2021 financial year, she remains employed at Thorn for the full year .
General Counsel and Company Secretary
Until 16 August 2019
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
inclusive of superannuation per annum and was last voted upon by shareholders at the 2013 AGM. The Board does not intend
to seek an increase to the fee pool at the 2021 AGM.
The base annual fee for the Chairman is $82,125 per annum including superannuation. Base fees for other non-executive
directors are $82,125 per annum including superannuation. The Chairs of each of the committees receive an additional annual
fee of $10,950 inclusive of superannuation.
Non-executive directors do not receive performance-related remuneration. Non-executive directors are not entitled to any
additional remuneration upon retirement. Out-of-pocket expenses are reimbursed to directors upon the production of proper
documentation.
Name
Warren McLeland
Kent Bird
Paul Oneile
Allan Sullivan
David Foster
Stephen Kulmar
Andrew Stevens
Belinda Gibson
Total Non-Executive Director Remuneration
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Salary and fees
Superannuation
90,769
45,115
45,769
47,731
89,500
36,173
75,000
42,115
-
100,615
-
42,236
-
67,210
-
67,210
301,038
448,405
8,623
4,286
4,348
4,534
8,503
3,436
7,125
4,001
-
9,558
-
4,187
-
6,385
-
6,385
28,599
42,772
Total
99,392
49,401
50,117
52,265
98,003
39,609
82,125
46,116
-
110,173
-
46,423
-
73,595
-
73,595
329,637
491,177
Annual Report 2021 I 11
DIRECTORS’ REPORT
For the year ended 31 March 2021
4. KEY MANAGEMENT PERSONNEL REMUNERATION - AUDITED
The Company’s approach to remuneration is framed by the strategy and operational demands of the business, the desire 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 real funding alternatives for everyday Australians to access all-encompassing household essentials and
enabling small to medium businesses to thrive.
Business objective
↓
Remuneration strategy objectives
1.
Align executive remuneration to Company performance and
results delivered to shareholders through the short and long term
incentive plans being ‘at-risk’ based on various cash based targets
and delivering on strategic objectives.
2.
Attract, motivate and retain executive talent in a competitive
market through a competitive rewards program that 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
Rewards experience, skills and capabilities
Rewards performance over a 12 month period
Fixed payment reviewed annually
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
CEO sign on allocation of share rights
At-risk wholly dependent upon achieving agreed
performance
(only paid if targets achieved)
Payment is determined by performance against
certain financial targets
Performance rights granted annually at the
Board’s discretion
Rewards achievement of the Company’s
shareholder return targets over a three year
period
At-risk wholly dependent upon achieving agreed
performance
Vesting is determined by performance against
targets that align to the Company’s long term
shareholder return objectives
As part of his remuneration package on appointment as CEO, Peter Lirantzis was provided with an upfront allocation of 464,253
units of share rights. These rights require a 2 year service period to be completed, starting from 10 February 2020. Once the
service period is completed they will automatically vest and convert to shares with a two year hold period on the resulting
shares. If Mr Lirantzis’s employment is terminated by the Company for cause, all outstanding share rights, and shares subject to
a holding lock, at the time of termination will be forfeited.
Pete Lirantzis
Share Rights Granted
Number
464,253
Date
22 May 2020*
Financial Year in which Grants Vest
(ended 31 March)
2022
Values Yet to Vest $
Min (a)
Max (b)
Nil
-
*The grant of the rights was finalised during the current financial year with the service period being backdated to 10 Feb 2020, Pete’s start date.
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. The
share price as at 31 March 2021 was 18 cents per share.
12 I Annual Report 2021
DIRECTORS’ REPORT
For the year ended 31 March 2021
These share rights are not part of any of the LTI plans disclosed below.
Future remuneration intentions
The above-described remuneration framework for both short and long term incentives is presently under review.
Remuneration expenses for Executive KMP
The following table shows details of the remuneration expense recognised for the Group’s executive key management
personnel for the current and previous financial year measured in accordance with the requirements of the accounting
standards.
Name
Year
Salary Termination
STI
Other
remuneration
(a)
Superannuation
Long Service
Leave
LTI (b)
Total
Executive KMP
Pete Lirantzis
Luis Orp
Former KMP’s
Peter Forsberg
Tim Luce
Wendy Yip
David Lines
Alexandra Rose*
Total
Remuneration
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
499,481
111,588
151,526
-
-
-
-
-
247,102
293,325
424,958
-
680,973
-
249,727
-
149,239
-
130,731
-
-
-
-
-
-
-
-
-
234,451
-
98,623
-
-
-
-
-
-
-
-
-
-
-
898,109
293,325
333,074
-
-
-
-
-
215,000
-
-
-
21,521
6,717
11,202
-
21,521
20,885
-
-
-
-
-
36,756
792,209
-
-
-
118,305
261,351
-
-
(127,378)
434,570
-
-
136,657
797,500
-
-
20,885
-
(332,184)
369,674
-
46,376
15,634
-
-
2,612
10,384
-
-
-
-
10,435
54,244
84,940
-
-
-
-
-
-
-
-
-
-
(53,157)
258,580
-
-
(58,737)
103,498
-
-
-
141,166
(90,622)
1,488,130
(307,421)
1,788,723
1,747,216
-
-
263,988
*Alexandra Rose, who was considered to be a KMP in the previous financial year is now no longer considered to be a KMP at the start of the 2021
financial year, she remains employed at Thorn for the full year .
a) Other remuneration represents retention and capital raising incentive payments
b)
The LTI column represents the accounting charge recognised in the Company’s profit or loss statement in respect of the long term incentive plan,
and also include retention payments settled in equity. 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 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
or anticipated failure to achieve non-market condition hurdles then the expense previously recognised can be reversed and result in a negative
entry in this column.
Remuneration mix
The table below represents the target remuneration mix for group executives in the current year:
KMP
At risk
Fixed remuneration
Short term incentive
Long term incentive
67%
33%
0%
Pete Lirantzis received performance rights, which can be considered to be long term incentives, as part of his sign on. There are
no performance hurdles and therefore they have not been included in the above table.
Annual Report 2021 I 13
DIRECTORS’ REPORT
For the year ended 31 March 2021
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. 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.
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. The Board has discretion in all matters. The below described remuneration
framework is presently under review.
Features
Purpose
Opportunity
Description
To motivate executives to achieve short term performance targets.
KMP
50%
100%
Target (as % of Fixed)
Maximum (as % of Fixed)
Performance Period
12 months
Gateway and
performance metrics (2021)
The current year’s STI’s were set against the backdrop of COVID-19 and its impact on the business. The primary
objective was to preserve and increase the Group’s cash balance while also executing a number of strategic initiatives.
Goals were specific to the Group achieving a target closing cash balance, collection targets in both the Consumer
Leasing and Business Finance divisions, cost targets relating to the Group’s store network as well as the development
and launch of the new digital platform in Radio Rentals.
100% of the STI that can be earned (detailed in the table above) is eligible for payment as it is based upon achieving
the strategic goals outlined above
Gateway and
performance metrics (2020)
The STI is subject to a Net Profit After Tax ‘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%
60% 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 PAT with the remaining 40% 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.
Assessment, approval and
payment
At the end of the financial year, the Remuneration & Nomination Committee assesses actual financial performance
based on the Company’s audited financial statements and each executive’s performance against the Group 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 expected to be paid in the month following the release of the Company’s results
to the ASX.
14 I Annual Report 2021
DIRECTORS’ REPORT
For the year ended 31 March 2021
Features
Description
Deferral (2020, no deferral
mechanism was in place for
2021)
A deferral mechanism is in place whereby 30% of the awarded STI is deferred for one year and subject to forfeiture
under two conditions only, first should a material misstatement or omission in the financial statements become
apparent, or second the executive acts in a manner unbecoming of the office held.
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.
STI OUTCOMES FOR 2021 - AUDITED
STI for 2020-21
Pete Lirantzis
Luis Orp
Peter Forsberg
Total
Target $
260,501
116,027
222,694
599,222
Earned %
Earned $
Forfeited %
Forfeited $
90%
85%
0%
234,451
98,623
-
333,074
10%
15%
100%
26,050
17,404
222,694
266,148
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 below described remuneration framework is presently under review.
The Company currently has two active 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 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 2018 and 2019 plans where
they differ.
Features
Instrument
Purpose
Opportunity
Description
Performance rights being a right to receive a share subject to performance and vesting conditions.
To motivate executives to achieve long term performance targets.
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.
Annual Report 2021 I 15
DIRECTORS’ REPORT
For the year ended 31 March 2021
Features
Description
Performance criteria
Performance period
and vesting dates
Assessment, approval
and payment
Change of control
Termination
Claw back provisions
The plans use a Relative Total Shareholder Return (“RTSR”) performance hurdle and an Earnings Per Share
(“EPS”) hurdle in equal measure. 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 July 2018 and
July 2019 Grants
Percentage of Performance Rights subject to TSR
condition that qualify for vesting
< 50th percentile
50th percentile
50th to 75th percentile
75th percentile or greater
0%
50%
Assessed on a straight-line basis
100%
Thorn Group Limited’s EPS Hurdle July 2018 and July
2019 Grants
Percentage of Performance Rights subject to EPS
condition that qualify for vesting
< 5% compound annual growth rate
5%
>5% to <10%
= or > 10% CAGR
0%
50%
Assessed on straight line basis
100%
July 2018: 3 years (1 July 2018 to 30 June 2021). Vesting date is 1 September 2021.
July 2019: 3 years (1 July 2019 to 30 June 2022). Vesting date is 1 September 2022.
At the end of each performance period, the Remuneration & 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.
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.
There are no specific provisions providing the capacity to claw back a component of remuneration in the event
of a matter of significant concern.
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 inputted 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 the 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 the 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
Expiry
Date
Fair Value Per
Performance
Right
Exercise
Price
Price of Shares
on Grant Date
Expected
Volatility
Risk Free
Interest Rate
Dividend
Yield
1 July 2017
1 July 2018
1 July 2019
1 September 2020
31 October 2020
1 September 2021
31 October 2021
1 September 2022
31 October 2022
$1.00
$0.46
$0.26
Nil
Nil
Nil
$1.42
$0.60
$0.31
37.0%
44.0%
46.0%
1.9%
2.1%
1.0%
5.3%
2.8%
0.0%
16 I Annual Report 2021
DIRECTORS’ REPORT
For the year ended 31 March 2021
Long term incentive outcomes for FY21
The 2017 plan was tested at 1 September 2020, failed the performance criteria, and all performance rights attaching to it
lapsed.
Performance rights granted as compensation in the year
No performance rights have been granted as compensation during the period under any of these existing long term incentive
plans.
5. ALIGNMENT BETWEEN REMUNERATION AND PERFORMANCE – AUDITED
In considering the consolidated entity’s performance and benefits for shareholders’ wealth, the board of directors has regard to
the following indices in respect of the current financial year and the four previous financial years.
Year ending 31 March
Profit After Tax (AUD millions)
Earnings per share (cents)
Dividends per share (cents)
Share price at year end ($)
2021
8.4
2.6
8.5
0.18
Return on equity %
Return on equity is calculated as NPAT divided by the average book equity.
8.4
6. SERVICE CONTRACTS FOR EXECUTIVE KMP - AUDITED
The present contractual arrangements with executive KMPs are:
2020
(81.1)
(33.7)
0.0
0.05
n/a
2019
(14.9)
(9.3)
0.0
0.46
n/a
2018
(2.2)
(1.4)
1.0
0.62
n/a
2017
25.3
16.2
8.0
1.31
12.4
Component
Contract duration
Notice by individual or company
Termination without cause
Termination with cause
CEO
Ongoing
6 months
Senior executives
Ongoing
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 unexercised LTI can be exercised within a period of 30 days from termination
7. OTHER STATUTORY DISCLOSURES - AUDITED
LTI and Other performance rights available for vesting
There are no other performance rights available for vesting.
Performance and share 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:
Held at
1 April 2020
Granted as
Compensation
Vested during
the year
Lapsed
Forfeited Held at 31 March
2021
Pete Lirantzis
Peter Forsberg
-
464,253
1,360,939
-
-
-
-
-
464,253
(233,476)
(1,127,463)
-
Annual Report 2021 I 17
DIRECTORS’ REPORT
For the year ended 31 March 2021
Shareholdings of the directors and executive KMP
2021
Name
Warren McLeland
Kent Bird
Paul Oneile
Allan Sullivan
Pete Lirantzis
Luis Orp
Balance at the
start of the year
Received on vesting
of incentives
Other changes
(bought and sold)
Balance at the
end of the year
-
133,186
-
205,999
-
-
-
-
-
-
-
-
-
(133,186)
235,000
41,541
-
250,000
-
-
235,000
247,540
-
250,000
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.
UNISSUED SHARES UNDER OPTIONS
At the date of this report there are no unissued ordinary shares of the Company under option.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act for leave to bring proceedings on behalf of the
Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf
of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the
Corporations Act 2001.
AUDIT AND NON-AUDIT SERVICES
UHY Haines Norton performed certain other services in addition to their statutory duties. The Board, based on advice from the
Audit Committee, 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, UHY Haines Norton, and its related practices for audit and
non-audit services provided during the year are set out in note 26.
The Company has agreed to indemnify their auditors, UHY Haines Norton, to the extent permitted by law.
ROUNDING OF FINANCIAL AMOUNTS
The Company is of a kind referred to in ASIC Instrument 2016/191 issued by the Australian Securities & 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 https://www.thorn.com.au/site/PDF/7498ee48-a6d5-4171-9b52-
ce92b4e1f881/CorporateGovernanceStatement2021.
18 I Annual Report 2021
DIRECTORS’ REPORT
For the year ended 31 March 2021
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s independence declaration is set out on page 20 and forms part of the directors’ report for the financial year
ended 31 March 2021.
This report is made in accordance with a resolution of the directors:
Warren McLeland
Chairman
Dated at Sydney
30 June 2021
Annual Report 2021 I 19
Auditor's Independence Declaration under section 307C of the Corporations Act 2001
To the Directors of Thorn Group Limited
As lead auditor for the audit of Thorn Group Limited for the financial year ended 31 March 2021, I
declare that, to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Thorn Group Limited and the entities it controlled during the
financial year.
Mark Nicholaeff
Partner
Sydney
30 June 2021
UHY Haines Norton
Chartered Accountants
20
Level 11 | 1 York Street | Sydney | NSW | 2000 GPO Box 4137 | Sydney | NSW | 2001t: +61 2 9256 6600 | f: +61 2 9256 6611sydney@uhyhnsyd.com.auwww.uhyhnsydney.com.auAn association of independent (cid:386) rms in Australia and New Zealand and a member of UHY International, a network of independent accounting and consulting (cid:386) rms.UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826Liability limited by a scheme approved under Professional Standards Legislation.Passion beyond numbers
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2021
(59,993)
(48,194)
(88,893)
(8,499)
(5,266)
(3,252)
(6,240)
(1,429)
(1,897)
(2,297)
(1,242)
(11,300)
(1,925)
-
-
(25,944)
(266,371)
(62,072)
(16,253)
(78,324)
(2,744)
(81,068)
$’000 AUD
Continuing operations
Sales revenue
Interest revenue
Other revenue
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
Insurance expenses
Impairment of inventory
Legal expenses
Other expenses
Notes
2021
2020
6,037
74,873
91,001
121,061
7,096
8,365
104,134
204,299
25
14
(8,414)
(29,295)
(26,136)
(1,223)
(1,408)
(1,239)
(6,753)
(1,229)
(1,628)
(2,527)
(3,120)
(3,969)
Impairment of intangibles & property, plant and equipment
9,10
(216)
Net gain on modification of lease liability
Recovery of impaired loan
Class action settlement and related expenses
Total operating expenses
Earnings before interest and tax ("EBIT")
Finance expenses
Profit/(Loss) before income tax
Income tax
Profit/(Loss) after tax for the year
1,433
1,330
-
(84,394)
19,740
(11,344)
8,396
11
-
8,396
Other comprehensive income - items that may be reclassified
subsequently to profit or loss
Other comprehensive income
Income tax
Other comprehensive income for the year
2,601
(2,996)
-
2,601
(998)
(3,994)
Total comprehensive profit/(loss)
10,997
(85,062)
Earnings per share
Basic earnings per share (cents)
Diluted earnings per share (cents)
18
18
2.6
2.5
(33.7)
(33.7)
The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the accompanying notes.
Annual Report 2021 I 21
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2021
$’000 AUD
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments and other assets
Inventories
Income tax receivable
Total current assets
Non-current assets
Trade and other receivables
Deferred tax assets
Property, plant and equipment
Financial assets at fair value through other comprehensive income
Right of use asset
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liability
Loans and borrowings
Employee benefits
Provisions
Total current liabilities
Non-current liabilities
Loans and borrowings
Lease liability
Employee benefits
Derivative financial instruments
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Note
2021
2020
4
5
3
5
12
10
8
9
6
7
16
15
16
7
13
15
17
17
88,045
67,093
2,935
128
-
158,201
49,619
129,297
2,895
7,975
3,051
192,838
129,549
260,546
-
-
1,000
-
130,549
288,750
15,723
507
78,203
3,951
1,944
100,328
88,100
427
170
3,721
870
93,288
193,616
95,134
157,843
(3,492)
(59,217)
95,134
-
-
-
-
260,546
453,383
14,576
6,142
117,918
5,053
3,929
147,619
187,627
5,578
462
6,322
-
199,989
347,609
105,775
155,255
(5,912)
(43,569)
105,775
The Consolidated Statement of Financial Position is to be read in conjunction with the accompanying notes.
22 I Annual Report 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2021
$’000 AUD
Share capital
Reserves
Balance at 1 April 2019
Changes on initial application of AASB 16 (see note 1(h))
Restated total equity at 1 April 2019
120,932
-
120,932
(1,424)
-
(1,424)
Retained
earnings
48,811
(11,460)
37,351
Total comprehensive income
Net loss for the period
Other comprehensive income
Total comprehensive income
Transactions with owners of the company
Issue of shares under capital raising
Issue of shares under dividend reinvestment plan
Share-based payments transactions
Dividends to shareholders
Total transactions with owners of the company
Balance at 31 March 2020
-
-
-
34,323
-
-
-
34,323
155,255
-
(81,068)
(3,994)
(3,994)
-
-
(494)
-
(494)
(5,912)
-
(81,068)
-
-
148
-
148
(43,569)
Total Equity
168,319
(11,460)
156,859
(81,068)
(3,994)
(85,062)
34,323
-
(347)
-
33,977
105,775
$’000 AUD
Share capital
Reserves
Retained
earnings
Total Equity
Balance at 1 April 2020
Total comprehensive income
Net profit for the period
Other comprehensive income
Total comprehensive income
Transactions with owners of the company
Issue of shares under capital raising
Issue of shares under dividend reinvestment plan
Share-based payments transactions
Dividends to shareholders
Total transactions with owners of the company
Balance at 31 March 2021
155,255
(5,912)
(43,569)
105,775
-
-
-
-
2,588
-
-
2,588
157,843
-
2,601
2,601
-
-
(181)
-
(181)
(3,492)
8,396
-
8,396
-
-
132
(24,176)
(24,044)
(59,217)
8,396
2,601
10,997
-
2,588
(49)
(24,176)
(21,637)
95,134
The Consolidated Statement of Changes in Equity is to be read in conjunction with the accompanying notes.
Annual Report 2021 I 23
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2021
$’000 AUD
2021
2020
Cash flows from operating activities
Cash receipts from customers (excluding interest)
Interest revenue received
Cash received from liquidation of inventory
Cash paid to suppliers and employees*
Acquisition of inventories
Equipment finance originations
Cash generated from operations
Net borrowing costs
Income tax refund
Net cash from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment and software
Acquisition of financial asset
Net cash from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Proceeds from issues of shares
Dividends paid
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at April 1
Cash and cash equivalents at 31 March
The Consolidated Statement of Cash Flows is to be read in conjunction with the accompanying notes.
*Includes $25m class action settlement and associated legal costs settled during the 2020 financial year.
204,312
90,342
5,691
(71,120)
(5,117)
(5,452)
218,656
(11,803)
3,051
209,904
(107)
(1,000)
(1,107)
11,339
(150,582)
(9,540)
2,588
(24,176)
(170,371)
38,426
49,619
88,045
243,947
117,525
-
(138,598)
(61,273)
(155,784)
5,816
(16,117)
1,145
(9,156)
(809)
-
(809)
154,458
(152,557)
(7,267)
34,323
-
28,958
18,992
30,627
49,619
24 I Annual Report 2021
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2021
Reconciliation of cash flows from operating activities
$’000 AUD
Profit/(Loss) after tax
Adjustments for:
Impairment and net gain on modification of lease liability
Equity settled transactions
Other adjustments
Operating loss before changes in working capital and provisions
Changes in working capital and provisions, net of the effects of the sale of subsidiaries
Decrease in trade and other receivables
(Increase)/decrease in prepayments and other assets
Decrease in inventories
(Decrease)/increase in deferred tax liability
Decrease in income tax receivables
Increase/(Decrease) in trade and other payables
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.
2021
8,396
(1,217)
(49)
78
7,208
193,201
(40)
7,847
-
3,051
1,147
(2,510)
209,904
2020
(81,068)
1,905
(346)
5,435
(74,074)
67,551
1,457
5,663
(1,100)
1,163
(9,750)
(64)
(9,156)
Annual Report 2021 I 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
1. SIGNIFICANT ACCOUNTING POLICIES
Thorn Group Limited (the ‘Company’) is a for-profit 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 2021
comprise the Company and its subsidiaries (together referred
to as the ‘Group’ or ‘consolidated entity’). Thorn is a
diversified financial services group providing the leasing of
household products to consumers, and commercial finance to
small and medium-size enterprises.
(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 31 May 2021.
(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 for derivative financial
instruments which are measured at fair value.
The Company is of a kind referred to in ASIC Instrument
2016/191 issued by the Australian Securities & 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.
26 I Annual Report 2021
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 and impairment of goodwill and other
intangibles. See note 9; and
(ii) Determination of expected credit losses of receivables.
See note 14.
(iii) Net realisable value of inventory. See note 3.
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.
The ongoing COVID-19 pandemic has increased the
estimation uncertainty in the preparation of these
Consolidated Financial Statements.
The estimation uncertainty is associated with:
(i)
the extent and duration of the disruption to businesses
arising from the actions by governments, businesses and
consumers to contain the spread of the virus;
(ii) the extent and duration of the expected economic
downturn. This includes the disruption to capital
markets, deteriorating availability of credit, liquidity
concerns, increasing unemployment, declines in
consumer discretionary spending, reductions in
production because of decreased demand, and other
restructuring activities; and
(iii) the effectiveness of government and central bank
measures that have and may continue to be put in place
to support businesses and consumers through this
disruption and economic downturn.
The Group has developed expected credit loss estimates in
these Consolidated Financial Statements based on forecasts
of economic conditions which reflect expectations and
assumptions as at 31 March 2021 about future events that
the Directors believe are reasonable in the circumstances.
There is a considerable degree of judgement involved in
preparing forecasts. The underlying assumptions are subject
to uncertainties which are often outside the control of the
Group. Accordingly, actual economic conditions are likely to
be different from those forecast since anticipated events
frequently do not occur as expected, and the effect of those
differences may significantly impact accounting estimates
included in these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
The impact of the COVID-19 pandemic on the Group’s
expected credit loss estimates is disclosed and further
explained in note 14 to the financial statements. Readers
should carefully consider these disclosures in light of the
inherent uncertainty described above.
Financing and going concern basis for the financial report
The directors have prepared the Financial Report on the
going concern basis, which assumes continuity of normal
business activities and the realization of assets and the
settlement of liabilities in the ordinary course of business.
The Group achieved a net profit after tax of $8.4m (2020:
$81.1m loss) for the year ended 31 March 2021 and net
cash generated in operating activities during the same
period amounted to a $209.9m inflow (2020: $9.2m
outflow). A significant proportion of the cash inflow was a
result of abnormal business conditions during the period,
including Covid-19 and Government incentives such as
JobKeeper, JobSeeker and other Covid-19 stimulus
payments. These abnormal business conditions and the
reversal of non-cash ECL provisions contributed to the net
profit.
The Group provides financing to both consumers and
small and medium size enterprises across a range of
industries, many of which have been impacted by COVID-
19.
Thorn’s Consumer leasing division was significantly
affected by COVID-19. The Group announced the
permanent closure of the Radio Rentals stores and
warehouses and the core of the consumer leasing
business was moved completely online with the launch of
a new digital business model. The digital business model
is not fully operational and is still in Beta testing mode.
The consumer leasing division recorded lower sales units
and revenues this year with 5,346 units being installed in
the year, which was 93% lower than the last financial
year’s 74,503. The consumer finance originations have
been behind expectations due to limited marketing
activity during the launch of the new business model, the
slower than expected on-boarding of new dropship
suppliers and the macro economic factors that have made
assessing credit more difficult.
The Business Finance division also faced challenges. On 5
May 2020, the equipment finance warehouse was
determined to have breached one of its warehouse
parameters as a result of customers affected by COVID-19
progressively going into arrears. In September 2020
Thorn reached agreement with its funders to provide
relief to some of its COVID-19 affected customers in the
form of contract variations which were finalised in early
2021. As at 31 March 2021, $73.0m of receivables were
identified as COVID-19 impacted. Of these, 14.5% by value
were greater than 30 days in arrears. Thorn also ceased
equipment finance originations in the Business Finance
division but continues to discuss future options with
funders in the securitised warehouse facility. Thorn is
revitalising the Business Finance division, including
launching the new debtor finance product.
These events resulted in redundancies for approximately
300 casual and full time staff across the Group and a
significant reshaping of the organisation’s cost base.
The collections on the two receivables books and the
continued cost reductions have been cash positive for the
Group. The Radio Rentals receivables balance (net of
unearned interest and credit provisioning) reduced by
$61.7m to $48.0m (2020: $109.7m). The Business Finance
net receivables balance reduced by $130.9m to $147.5m
(2020: $278.4m). The current performance of the
consumer leasing collections is not meeting forecasted
targets and the impact of the withdrawal of the
Government Covid-19 stimulus payments is uncertain.
The Group is now effectively in a “start-up” phase. This
involves a significant investment in technology and
navigating through an increasingly competitive market
with slow, continuing re-engineering of outdated business
practices and processes. Further, the Group is operating in
a challenging compliance and regulatory environment.
These factors could significantly impact the Group’s ability
to generate profits and net cash inflows and therefore,
there is a significant risk of the Group making an
operating loss in the 12 month period from the date of
this report.
Considering all the above, and acknowledging that
corporate actions always contain some risk and
uncertainty, the directors have reviewed the Group’s cash
flow forecast through to 30 June 2022.
The directors are of the opinion that there are reasonable
grounds to believe that the collection from the two
receivables books will provide sufficient incoming cash
flows and remain confident that the business will, longer
term, be successful in achieving its strategic objectives.
However, the success of the recently launched Radio
Rentals online business and revitalisation of the Business
Finance division are not guaranteed and along with the
continuing Covid-19 uncertainty, and the challenging
compliance and regulatory environment, multiple
material uncertainties exist that cast significant doubt as
to the Group’s ability to continue as a going concern and
therefore whether Thorn will be able to realise its assets
and discharge its liabilities in the normal course of
business and for the amounts recorded in this report.
(c) Accounting Policies
Accounting policies have been included within the underlying
notes with which they relate where possible. The balance of
accounting policies are detailed below:
Annual Report 2021 I 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
(d) Inventories
The costs of individual items of inventory are determined
using weighted average costs less volume rebates received.
Inventory is valued at the lower of cost or net realisable
value. Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs
necessary to make the sale.
(e) Revenue
The major components of revenue are recognised as follows:
(i) Finance lease sales revenue is recognised at the time the
rental contract is entered into based on the fair value of
the leased item, or if lower, the present value of the
lease payments discounted using a market rate of
interest.
(ii) Interest revenue is calculated and charged on the
outstanding loan or lease balance and recognised on an
accrual basis using the effective and implicit interest rate
method respectively.
(iii) Other revenue includes late fees, establishment fees,
termination fees and other non-lease related income.
(f) Cost of Sales
Finance lease costs of sales comprise the cost of the item sold
as well as other costs associated with the transaction such as
incentives offered to customers.
(g) Finance expenses
Finance expenses comprise interest expense on lease
liabilities, 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.
(h) Impairment
Non-Financial Assets
In accordance with AASB 136 the carrying amounts of the
consolidated entity’s assets within the scope of the standard,
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.
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 the recoverable amount 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 assets acquired in a business
Thorn has chosen to present within employee benefit
expense.
28 I Annual Report 2021
combination, for the purpose of impairment testing, are
allocated to cash-generating units that are expected to
benefit from the synergies of the combination.
An impairment loss is recognised whenever the carrying
amount of an asset or its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognised in the
profit or loss statement, 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.
(i) 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.
(j) Changes in Accounting Policy
A number of new or amended standards became applicable
for the current reporting period. The group did not have to
change its accounting policies or make retrospective
adjustments as a result of adopting these standards.
(k) New Standards and Interpretations Adopted
During the year Thorn applied AASB 120 Accounting for
Government Grants and Disclosure of Government Assistance
(AASB 120) for the first time as Thorn qualified for the Federal
Government’s JobKeeper grant scheme, administered by the
Australian Taxation Office (“ATO”). The grant is recognised as
income when Thorn is reasonably assured that it will comply
with the conditions attaching to it, and the grant will be
received. The grant is recognised as a receivable when the
associated wage payments are made. Receipt of
reimbursement from the ATO reduces the receivable. The
standard requires entities to match income and expenses. It
allows a presentation choice for the grant to be presented as
“income” or to be deducted from the related expenses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
(l) Reclassification of comparative financial information
During the period, the classification of transactions were reviewed and certain reclassifications were made to financial
statement line items to enhance presentation. The comparative information in the statement of profit or loss and other
comprehensive income, statement of financial position, segment note and statement of cash flow have been reclassified
consistent with the presentation adopted in the 31 March 2021 financial statements.
- Trade and other payables have been consolidated and presented as a single item on the statement of financial position with
further information provided in note 6.
- Chattel mortgages have historically been presented as finance leases in notes 5, 7 and 14. This has now been adjusted to
loan receivables, which resulted in a net movement between lease receivables and loans receivables of $135,886,000.
- A number of business finance receivables have credit balances. Previously they were presented as part of trade receivables.
They have now been presented as part of lease and loan receivables. This change resulted in trade receivables increasing by
$3,110,000 and lease and loan receivables decreasing by $642,000 and $2,467,000 respectively.
Impairment of inventory and insurance expenses were previously presented as part of other expenses. They have now been
presented separately on the face of the statement of profit or loss and other comprehensive income
-
- Certain segment liabilities have been reclassified between divisions, resulting in the consumer leasing segment liabilities
decreasing by $6,322,000 and business finance segment liabilities increasing by $6,322,000.
-
In note 22 SPE, the net receivables has reduced by $20,225,000 as our allocation methodology for our portfolio level credit
provisions has changed.
2. SEGMENT REPORTING
The Board and CEO (the chief operating decision maker) monitor the operating results of the two reportable segments which
are the Consumer Leasing division and the Business Finance division.
Segment performance is evaluated based on operating profit or loss. Interest on the (now closed) corporate facility and
income tax expense are not allocated to operating segments, as this type of activity is managed on a group basis.
2021
$’000 AUD
Sales Revenue
Interest Revenue
Other
Total Segment revenue
Recovery of impaired loan
Operating expenses
EBITDA
Net gain on modification of lease liability
Depreciation and amortisation
Impairment
EBIT
Finance expense
Profit before tax
Segment assets
Segment liabilities
Consumer Leasing
Business Finance
Corporate
Consolidated
6,037
58,375
6,280
70,692
-
(58,554)
12,138
1,433
-
-
13,571
(727)
12,844
52,146
(20,946)
-
32,626
816
33,442
-
(20,897)
12,545
-
-
-
12,545
(10,617)
1,928
167,304
(172,670)
-
-
-
-
1,330
(7,490)
(6,160)
-
-
(216)
(6,376)
-
(6,376)
69,300
-
6,037
91,001
7,096
104,134
1,330
(86,941)
18,523
1,433
-
(216)
19,740
(11,344)
8,396
288,750
(193,616)
Annual Report 2021 I 29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
2020
$’000 AUD
Sales Revenue
Interest Revenue
Other
Total Segment revenue
Operating expenses
EBITDA
Depreciation and amortisation
Impairment
EBIT
Finance expense
Profit before tax
Segment assets
Segment liabilities
3.
INVENTORIES
$’000 AUD
Inventories
Consumer Leasing
Business Finance
Corporate
Consolidated
74,873
79,626
7,937
162,436
(168,738)
(6,302)
-
(1,665)
(7,967)
(1,744)
(9,710)
-
41,434
429
41,863
(60,900)
(19,037)
-
(62)
(19,099)
(14,509)
(33,608)
-
-
-
-
(34,808)
(34,808)
-
(198)
(35,006)
-
(35,006)
74,873
121,060
8,366
204,299
(264,446)
(60,147)
-
(1,925)
(62,071)
(16,253)
(78,324)
122,231
(47,741)
299,378
(299,867)
31,774
-
453,383
(347,609)
2021
128
2020
7,975
At 31 March 2020 an additional provision of $3.7m was recognised to write-down inventories to net realisable value as a result
of the decision to close the store network. This was recognised as an expense in 2020 and included in cost of sales in the profit
or loss statement. Subsequent to 31 March 2020 much of the remaining inventory was sold during the ordinary course of
business during April and May with the actual cost recognised in cost of sales. The balance remaining was liquidated through a
number of channels with a loss recognised in operating expenses.
The remaining inventory is held to meet servicing obligations in the Consumer Leasing division.
4. CASH AND CASH EQUIVALENTS
$’000 AUD
Bank balances
Call deposits
Cash and cash equivalents
2021
88,045
-
88,045
2020
49,619
-
49,619
Included in cash is an amount of $19,745,000 (2020: $20,896,000) held as part of the consolidated entity’s funding
arrangements that are not available to the consolidated entity. This cash is held within the warehouse and as such is under the
control of the Trustee. Free cash is therefore $68,300,000 (2020: $28,723,000).
30 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
5. TRADE AND OTHER RECEIVABLES
$’000 AUD
Current
Trade receivables
Finance lease receivables
Loan receivables
Non-current
Finance lease receivables
Loan receivables
2021
6,932
30,719
29,442
67,093
57,860
71,689
129,549
2020
10,214
64,696
54,387
129,297
122,292
138,254
260,546
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. At the
balance date there was approximately $41,000 (2020: $246,000) of unguaranteed residual value in the finance lease
receivables balance.
Trade receivables and loan receivables are stated at their amortised cost less impairment losses. The consolidated entity’s
exposure to credit risk and impairment losses related to trade and other receivables is disclosed in note 14.
6. TRADE AND OTHER PAYABLES
$’000 AUD
Trade payables
Other payables
2021
425
15,298
15,723
2020
1,133
13,443
14,576
Trade payables are unsecured and are usually paid within 30 days of recognition. Other payables consists of marketing accruals,
refundable deposits for the business finance division and other general accruals. The carrying amounts of trade and other
payables are considered to be the same as their fair values, due to their short-term nature.
7. LEASES
Finance leases as lessor
The Consumer Leasing division leases household goods to consumers. Contracts range from 1 - 60 months. The Business
Finance division finances business assets to small and medium enterprises. Finance is provided in the form of a lease, a hire
purchase agreement or a chattel mortgage contract. The majority of contracts in both divisions are for 24 months or more.
Leases where the lessee has substantially all the risks and rewards incidental to ownership of the leased assets are classified as
finance leases. All other leases are classified as operating leases. The majority of the Group’s leased assets meet the definition
of finance leases.
Where finance leases are granted to third parties, the present value of the minimum lease payments plus an estimate of any
unguaranteed residual value is recognised as a receivable. The difference between the gross receivable and the present value
of the receivable is unearned interest income. Lease receipts are discounted using the interest rate implicit in the lease.
Interest income is recognised over the term of the lease using the effective interest rate method, which reflects a constant rate
of return. Finance lease income is presented within interest revenue.
Contracts are secured against the assets leased. In the Business Finance division further security may be obtained including the
taking of personal and director guarantees.
Annual Report 2021 I 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
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
Net Lease receivables
2021
100,778
81,861
182,639
(29,773)
(22,649)
(52,422)
(41,638)
88,579
2020
162,525
203,647
366,172
(58,697)
(69,983)
(128,680)
(50,504)
186,988
Gross cash flows are expected to be collected as follows: $100,778,000 less than one year, $55,313,000 between one and two
years, $22,721,000 between years two and three, $3,575,000 between years three and four, and $252,000 between years four
and five.
No operating lease revenue (2020: $243,000) has been recognised in other revenue in the Consumer Leasing division. Finance
lease revenue of $32,626,000 (2020: $41,434,000) has been recognised in interest revenue in the Business Finance division.
Finance leases as lessee
Net gain on modification of lease liabilities
The adoption of AASB 16 (on 1 April 2019) resulted in the following accounting entries: right of use assets increased by $16.4m,
trade payables decreased by $1.1m and lease liabilities increased by $17.4m. The right of use asset was deemed to be
immediately impaired and this resulted in the following accounting entries; right of use assets decreased by $16.4m, deferred
tax increased by $5.2m and retained earnings decreased by $11.1m.
At 31 March 2020 the lease liability was $11.7m, of which $8.3m related to property leases, $3.2m were vehicle lease
commitments and $0.2m were printer lease commitments.
During the year, following the decision to permanently close the Radio Rentals store network, negotiations were undertaken
with landlords across our property and vehicle lease portfolio in the hope of minimising the costs of exiting these leases. These
negotiations resulted in net payments for amounts that were $1.4m below the recognised liabilities for these leases. As there
was no remaining right of use asset to offset this gain against the full amount has been recognised as a net gain on modification
of lease liability.
At 31 March 2021 the lease liability was $0.9m, of which $0.6m related to property leases and $0.3m were vehicle lease
commitments.
Amounts recognised in the statement of profit or loss and other comprehensive income
The statement of profit or loss and other comprehensive income shows the following amounts relating to leases.
$’000 AUD
Impairment charge - right-of-use assets
Properties
Vehicles
Printers
Total impairment
Interest expense (included in finance expenses)
Expense relating to short-term and low-value leases
Expense relating to variable lease payments not included in lease liabilities
Total expenses relating to leases
Net gain on modification of lease liability
Total
The total cash outflow for leases in the year ending 31 March 2021 was $9,540,000.
32 I Annual Report 2021
2021
2020
109
-
-
109
176
439
526
1,141
(1,433)
(292)
1,095
-
-
1,095
715
2,586
559
3,860
-
3,860
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
8.
INVESTMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Financial assets at fair value through other comprehensive income (FVOCI) comprise equity securities that are not held for
trading and which the Group has irrevocably elected at initial recognition to recognise in this category. These are strategic
investments and the Group considers this classification to be more relevant.
Equity investments at FVOCI comprise the following individual investments:
$’000 AUD
Quicka Holdings Pty Ltd
2021
1,000
2020
-
During the year Thorn completed a strategic investment in Quicka Holdings Pty Ltd trading as “QuickaPay.” As a result of this
investment, Thorn Group’s CEO Peter Lirantzis was appointed as a director of Quicka Holdings Pty Ltd on 24 March 2021.
Information about the methods and assumptions used in determining fair value is provided in note 14.
9.
INTANGIBLE ASSETS
$’000 AUD
Year ended 31 March 2021
Opening net carrying amount
Additions
Amortisation charges for the year
Impairment charges for the year
Closing net book amount
At 31 March 2021
Cost
Amortisation and impairment
Net book amount
$’000 AUD
Year ended 31 March 2020
Opening net carrying amount
Initial application of AASB 16 – creation of asset
Initial application of AASB 16 – impairment of asset
Additions
Amortisation charges for the year
Impairment charges for the year
Closing net book amount
At 31 March 2020
Cost
Amortisation and impairment
Net book amount
Amortisation
Right of use asset
Software
-
109
-
(109)
-
17,559
(17,559)
-
-
-
-
-
-
17,109
(17,109)
-
Total
-
109
-
(109)
-
34,668
(34,668)
-
Right of use asset
Software
Total
-
16,355
(16,355)
1,095
-
(1,095)
-
17,450
(17,450)
-
-
-
-
195
-
(195)
-
17,109
(17,109)
-
-
16,355
(16,355)
1,290
-
(1,290)
-
34,559
(34,559)
-
When not impaired, amortisation is provided on all intangible assets excluding other intangibles. 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.
Annual Report 2021 I 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Impairment tests for Cash Generating Units (CGU)
Consumer Leasing
In 2019 and 2020 testing has been performed to identify if any of the Group’s intangibles were impaired as required under
AASB 116. All were considered to be impaired and an impairment expense was recognised as a result. Given the early stage the
Group is at regarding its strategy there is no indication that any historical impairment losses should be reversed.
The Group’s existing revenue streams are running off while the transformation required to build a new revenue stream
sufficient to generate excess profits to support the carrying value of any other intangibles has not yet taken place. Therefore
definite life intangible assets as well as PP&E continue to be immediately impaired on acquisition.
10. PROPERTY, PLANT AND EQUIPMENT
Total
-
107
-
(107)
-
34,910
(29,421)
(5,489)
-
Total
-
615
-
(615)
-
34,803
(29,421)
(5,382)
-
$’000 AUD
Year ended 31 March 2021
Opening net carrying amount
Additions
Depreciation charges for the year
Impairment charges for the year
Closing net book amount
At 31 March 2021
Cost
Accumulated depreciation
Impairment
Net book amount
$’000 AUD
Year ended 31 March 2020
Opening net carrying amount
Additions
Depreciation charges for the year
Impairment charges for the year
Closing net book amount
At 31 March 2020
Cost
Accumulated depreciation
Impairment
Net book amount
Property plant and equipment
Property plant and equipment consist of furniture, fittings, and physical computer equipment.
Impairment
Refer to note 9 for details.
34 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
11. INCOME TAX EXPENSE
Recognised in the profit or loss statement
$’000 AUD
Current tax expense
Current year
Adjustment for prior year
Deferred tax expense
Origination and reversal of temporary differences
Total income tax (benefit)/ expense in the profit or loss 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% (2020: 30%)
Change in income tax expense due to:
Non-deductible expense and unrecognised timing differences
Utilisation of tax losses
Recognised and unrecognised timing differences
(Over) / Under provided in prior years
Income tax (benefit)/ expense on pre-tax accounting profit
12. DEFERRED TAX ASSETS & LIABILITIES
Recognised deferred tax assets and liabilities
2021
2020
-
-
-
-
2021
8,396
2,519
(6)
(1,657)
(856)
-
-
-
-
2,744
2,744
2020
(78,324)
(23,497)
(67)
-
26,308
-
2,744
Assets
Liabilities
Net
$’000 AUD
Inventories
Property, plant and equipment
Trade, loan and other receivables
Finance lease receivables
Accruals
Provisions
Tax losses
Financial derivative
Tax assets / (liabilities)
2021
13,381
408
488
-
1,971
722
-
-
2020
42,656
3,779
-
-
1,752
1,274
-
-
2021
2020
2021
2020
-
-
-
-
-
(199)
13,381
42,656
408
488
3,779
(199)
(16,970)
(49,262)
(16,970)
(49,262)
-
-
-
-
-
-
-
-
1,971
722
1,752
1,274
-
-
-
-
-
-
16,970
49,461
(16,970)
(49,461)
The Group has unrecognised current tax losses of $48.4m ($14.5m tax effected) and $42.6m ($12.8m tax effected) of
unrecognised deferred tax future deductions.
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.
Annual Report 2021 I 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following
temporary differences: initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit, and differences relating to investments in
subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the
tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the
temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be realised.
Tax consolidation
Thorn Group Limited and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1
April 2003 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Thorn
Group Limited.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members
of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated
group using the group allocation approach by reference to the carrying amounts of assets and liabilities in the separate
financial statements of each entity and the tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by
the head entity in the tax-consolidated group and are recognised as amounts payable / (receivable) to / (from) other entities in
the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below). Any difference between
these amounts is recognised by the Company as an equity contribution or distribution.
Thorn Group Limited recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent
that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be
utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of
the probability of recoverability is recognised by the head entity only.
Nature of Tax Funding Arrangements and Tax Sharing Arrangements
The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement
which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding
arrangements require payments to/from the head entity equal to the current tax liability/(asset) assumed by the head entity
and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity
receivable/(payable) equal in amount to the tax liability/(asset) assumed. The inter-entity receivable/(payable) are at call.
Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the
head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.
The head entity in conjunction with other members of the tax-consolidated group has also entered into a tax sharing
agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the
entities should the head entity default on its tax payment obligations.
13. DERIVATIVE AND HEDGING ACTIVITIES
The Group enters into interest rate swaps to fix the interest rate on the warehouse funding balance and therefore remove the
fixed/floating interest rate mismatch between the Group’s receivables and the Group’s funding balance. These arrangements
are designated as cash flow hedges under AASB 139 (which the Group has opted to retain as is currently permitted). This
instrument is an amortising swap whose cash flow profile is modelled on the expected repayment profile of the receivables
(which mirrors the funding balance) and is regularly reset. As such the swap is expected to be effective and continues to be
effective under the requirements of AASB 139.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-
measured to their fair value at the end of each reporting period. The full fair value of a hedging derivative is classified as a non-
current liability as the remaining maturity of the hedged item is more than 12 months from 31 March 2021.
36 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
The fair value of derivatives are classified as level 2 instruments as they are not traded in an active market and are determined
using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and
rely as little as possible on entity-specific estimates.
$’000 AUD
Interest rate swap liability
2021
3,721
2020
6,322
14. 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 Risk & Compliance Committee, which is responsible for developing and monitoring risk management
policies. The Committee reports regularly to the Board of Directors on its activities.
Due to the onset of COVID 19 and the restructuring of its consumer and commercial businesses, the Board of Directors adopted
a crisis management approach with an increased number of meetings (usually weekly) to provide strategic direction and overall
governance of business activities. The step was to allow the newly appointed CEO and CFO sufficient time to acclimatise and
establish new strategic priorities for the organisation going forward.
The Risk & 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.
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.
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 of receivables
and loans. The Group leases products to consumers 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.
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.
Credit risk typically grows in line with the growth of the loan and lease receivables in all segments.
Expected credit loss measurement
Under AASB 9, a three-stage approach is applied to measuring expected credit losses (‘ECL’) based on credit migration between
the stages as follows:
Stage 1: At initial recognition, a provision equivalent to 12 months ECL is recognised;
Stage 2: Where there has been a significant increase in credit risk since initial recognition, a provision equivalent to full lifetime
ECL is required; and
Stage 3: Lifetime ECL is recognised for loans where there is objective evidence of impairment.
ECL are probability-weighted and determined by evaluating a range of possible outcomes, taking into account the time value of
money, past events, current conditions and forecasts of future economic conditions.
The Group has two separate receivables books; Business Finance receivables and the Radio Rentals consumer leasing
receivables. Consumer Leasing receivables are included in one group and Business Finance receivables in another group for the
purpose of calculating the expected credit loss.
Annual Report 2021 I 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Significant increase in credit risk (SICR)
The Group considers a financial instrument to have experienced a significant increase in credit risk based on quantitative
information to identify this on an asset level. Each financial asset will be assessed at the reporting date for significant
deterioration where the financial asset is more than 30 days past due. When an account is cured it retains an adjusted and
higher probability of default within the impairment model for 6 months. Default is defined as 60 days past due for Consumer
Leasing and 90 days past due for Business Finance. In light of COVID-19, the Group has made an additional assessment of those
assets which are not 30 days past due but have likely experienced a SICR as part of the management overlay set out in further
detail below.
Macroeconomic Scenarios
Expected credit losses (“ECL”) are a probability-weighted estimate of credit losses over the expected life of the financial
instrument. The Group has a process for incorporating forward-looking economic scenarios and determining the probability
weightings assigned to each scenario in determining the overall ECL. The Group prepares a base, best and worst-case scenario
based on economic variables relevant to the Consumer Leasing and Business Finance business units. The Group has
incorporated this by use of a management overlay as explained below.
Impact of COVID-19 pandemic
The COVID-19 pandemic and its effect on the local economy has impacted our customers and our performance, and the future
effects of the pandemic and ultimate impact on the recoverability of our receivables are uncertain. The outbreak necessitated
governments to respond at unprecedented levels to protect public health, local economies and livelihoods. It has affected
regions at different times and varying degrees. The varying government measures in response have added challenges, given the
rapid pace of change and significant operational demands.
The speed at which territories and states will be able to unwind their lockdown measures and return to pre-COVID-19
economic levels will vary based on the levels of infection and local political decisions and access and ability to roll out vaccines.
There remains a risk of subsequent waves of infection.
Governments and central banks in major economies have deployed extensive measures to support their local populations.
Measures implemented by governments have included income support to households and funding support to businesses.
RBA measures have included cuts to policy rates, support to funding markets and asset purchases. Central banks globally as
well as in Australia are maintaining record low interest rates for a considerable period of time and the debt burden of
governments is expected to rise significantly.
The Australian government’s economic response helped business stability and kept Australians in jobs through the Job Keeper
Payment and Boosting Cash Flow for Employers, and supported Australians in need with the Coronavirus Supplement and Early
Release of Superannuation.
The Government’s response is now transitioning to ensure the Australian economy recovers strongly by targeting additional
temporary support measures to boost household incomes, bring forward business and infrastructure investment activity, and
drive the unemployment rate back down. The Government is continuing to support those sectors, regions and communities
that face significant challenges.
The significant changes in economic and market drivers, customer behaviours and government actions caused by COVID-19
have also impacted the performance of financial models. These include our consumer and business finance AASB 9 credit
models. This has required ongoing monitoring and frequent review and analysis. It also has resulted in the use of compensating
controls, specifically as overlays on top of model outputs to provide a more appropriate assessment.
By their nature, such compensating controls require a significant degree of management judgement and assumptions to be
applied, and there is a risk that future performance may differ from such judgements and assumptions. The performance and
usage of models over the near term will continue to be impacted by the consequences of the COVID-19 outbreak.
As a result of the above, the expected performance of Thorn’s receivables will evolve as the situation unfolds and more data is
available to understand and model the credit risk and loss implications from the COVID-19 pandemic and to understand the
ultimate mitigating impact of government stimulus. Over time as the impacts work their way into the reported variables, the
overlay is expected to reduce as the impact becomes reflected in the routine modelled outcome.
38 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Management overlay
The full impact of both the COVID-19 pandemic and the closure of the store network is uncertain at the balance date for the
Consumer Leasing division as the Group has yet to see the anticipated increase in delinquencies which would flow through to
the modelled expected loss provision. We are of the view that the expected impact has not yet materialised over the past 12
months primarily as a result of the national and local government stimulus and measures taken to support the economy. We
expect the withdrawal of the stimulus to have a significant impact on our receivables book and that the expected deterioration
may occur. This is consistent with what we have seen in April across our Consumer portfolio and we believe this could become
more pronounced in the coming months with the removal of the stimulus and uncertain path to a fully vaccinated population
and further potential lockdowns and restrictions. Therefore the Group continues to specifically consider the likely industry-
specific and retail customer impacts through an overlay. This overlay also incorporates the early data we have gathered in April
2021.
At 31 March 2021 $73.0m of Business Finance receivables were identified as COVID-19 impacted. Out of these, 14.5% by value
were greater than 30 days in arrears at the balance date. $44.9m received a variation in the second half of the year and were
all in either stage 2 or stage 3 when the variation occurred. While the arrears of the $73.0m have improved significantly in the 6
months to 31 March 2021 and varied contracts have had positive payment patterns post variation the varied contracts have not
had a sufficient period of repayments post variation for management to consider them completely rehabilitated. As a result,
their arrears status has not been considered appropriate to use in the current arrears based modelled provision. At 31 March
2021 $9.0m was in stage 1, $32.5m in stage 2 and $3.5m in stage 3. This overlay is therefore a standalone provision estimate
for the impact of COVID-19 on the Business Finance division.
Business Finance
The Business Finance division finances small to medium size business across the country and many of the division's customers
are in industries heavily affected by COVID-19. In light of evolving circumstances, our methodology has been updated from
March 2020 and is consistent with the methodology used for the half-year results. To evaluate the ECL under the updated
methodology, a six-point rating matrix has been developed which ranges from No Impact to Very High Impact and results in
expected loss severities from 5% to 95%. Receivables have in turn been assigned a rating on the scale and have then been
attributed a loss severity which has been to calculate an expected loss for each individual receivable. To allocate a rating on the
scale to each individual receivable the portfolio has first been stratified into industry segments based on how severely
impacted they have been from COVID-19. Within each sub-industry, a further breakdown is made where management believes
there is a cohort of contract holders that exhibit similar risk characteristics. Some examples include cafes in major
suburban/capital cities, certain gym franchises, and various obligors who appear to rely more on government stimulus to
remain viable. Trading volumes, internal conversations with contract holders, and resale value of the assets are some examples
of relevant factors used to categorise each receivable.
Consumer Leasing
Many of the Radio Rentals customers work in currently affected and potentially further affected industries and particularly in
the higher affected employment statuses such as part-time and casual work. As such, the COVID-19 pandemic and the removal
of government stimulus continues to be expected to have a material impact upon those customers financial situation and the
related receivable credit losses. In addition to that factor, the decision to close the entire Radio Rentals store network is
expected to present challenges to collection rates. Our view is that much of this deterioration has not occurred due to the
extraordinary measures taken by both state and local government bodies as well as other regulatory bodies to support the
economy.
To assess the ECL, a rating matrix has been applied by rating customers across three criteria; monthly billing amount,
occupation status and employment type. This resulted in a rating scale from 3 to 9. Ratings 3 to 5 are considered to be low risk,
6 to 7 medium and 8 to 9 high risk. Receivables have then been attributed to groups across that rating scale with the AASB 9
staging buckets and their probability of default (“PD”) adjusted upwards progressively as they move through the scale. The
adjusted PD has been applied at a portfolio level using the current loss given default (“LGD”) to estimate the expected loss. In
addition, the Group has overlaid this with prior experience of collection performance deterioration from situations where
stores have been closed in the past. This has been used to estimate the increased risk to collections in the portfolio.
Annual Report 2021 I 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Overall
The Group has looked at three potential scenarios, outlined below, and how these will impact the two divisions. The Group has
then weighted the three scenarios with the highest weighting being applied to the baseline case. The outcome of this is a
$29.3m million provision for the Business Finance Division and a $14.7m provision for the Consumer Leasing Division.
The following provides an overview of the scenarios chosen as well as the expected change to the total overlay were the
individual scenarios to be given a 100% weighting:
Scenario
Baseline
A 100% weighting to this scenario would
reduce the expected credit loss provision by
circa $10.5m
Expectation
The baseline scenario assumes that no further large outbreaks of COVID-19 and accompanying
hard lockdowns occur within Australia and that restrictions, when imposed, are brief. The domestic
vaccination program is assumed to proceed in line with government guidance, and the
international border is assumed to remain closed until the end of 2021. Unemployment is likely to
have already peaked and is now expected to decline steadily to around 5¼ per cent by mid-2023.
GDP is expected to have contracted by around 2 per cent over the year to December 2020, but
then grow by around 3½ per cent over both 2021 and 2022. Inflation is expected to pick up a little
alongside the gradual decline in the unemployment rate, to be 1¾ per cent by mid-2023.
Faster recovery
A 100% weighting to this scenario would
reduce the expected credit loss provision by
circa $20.7m
A stronger economic recovery than the one outlined in the baseline scenario is possible if ongoing
low case numbers in Australia and a sustained run of positive health outcomes enable a faster
easing of domestic restrictions. These outcomes would boost consumer and business confidence
and reduce uncertainty, leading to a stronger recovery in private consumption and investment. In
this scenario, a stronger rebound in activity would see the unemployment rate decline at a faster
pace, falling to around 4¾ per cent by the end of 2022.
Slower recovery
A 100% weighting to this scenario would
increase the expected credit loss provision by
circa $6.4m
A plausible downside scenario is that Australia experiences further large outbreaks of the virus. It is
assumed that this would require broad activity restrictions to be reimposed. In this scenario,
consumer and business confidence would be weaker and the recovery in household consumption
and business investment would be slower than in the baseline scenario. As a result the
unemployment rate would peak in this scenario at around 6¾ per cent in mid-2021 and decline
only slowly in 2022.
The judgements and assumptions used in estimating the overlays will be reviewed and refined in future financial periods as the
COVID-19 pandemic progresses.
40 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Loss allowance
The impairment expense on the statement of profit or loss includes both net write-offs and provision movements.
The following table explains the changes in the loss allowance between the beginning and the end of the annual period due to
these factors:
Consumer Leasing lease receivables
Impairment provision
Stage 1
Stage 2
Stage 3
Total
12-month ECL
Lifetime ECL
Lifetime ECL
$’000 AUD
$’000 AUD
$’000 AUD
$’000 AUD
Loss allowance as at 1 April 2020
16,095
15,745
4,843
36,683
Movements with P&L impact
Transfers:
Transfer from Stage 1 to Stage 2
Transfer from Stage 1 to Stage 3
Transfer from Stage 2 to Stage 1
Transfer from Stage 2 to Stage 3
Transfer from Stage 3 to Stage 1
Transfer from Stage 3 to Stage 2
New financial assets originated or purchased
Changes in the balances of non-transferred financial
assets
Change in estimates
(404)
985
-
581
(1442)
152
-
2,441
999
(1,336)
-
(1,184)
-
52
-
1,606
(1,728)
-
57
(5,135)
(12,535)
12,071
4,233
1,710
(531)
(204)
4,094
13,213
(18)
(479)
(147)
1,606
(13,576)
29,517
Changes to model assumptions and methodologies
(1,487)
(627)
(707)
(2,821)
Write-offs
Total net P&L charge during the period
5,413
(10,951)
(21,824)
(1,808)
(21,824)
(7,346)
Loss allowance as at 31 March 2021
21,508
4,794
3,035
29,337
The following table further explains changes in the gross carrying amount of the loans and receivables to help explain their
significance to the changes in the loss allowance as discussed above:
Lease receivables
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 April 2020
Movements with P&L impact
Transfers:
Transfer from Stage 1 to Stage 2
Transfer from Stage 1 to Stage 3
Transfer from Stage 2 to Stage 1
Transfer from Stage 2 to Stage 3
Transfer from Stage 3 to Stage 1
Transfer from Stage 3 to Stage 2
New financial assets originated or purchased
Changes in the balances of non-transferred financial assets
Write-offs
12-month ECL
Lifetime ECL
Lifetime ECL
$’000 AUD
$’000 AUD
$’000 AUD
$’000 AUD
107,013
34,362
4,970
146,345
(4,157)
(13,650)
3,011
-
748
-
10,680
(34,140)
4,157
-
(3,011)
(3,646)
-
287
(27,356)
-
13,650
-
3,646
(748)
(287)
4,202
(22,399)
(1,936)
-
-
-
-
-
-
10,680
(57,294)
(22,399)
(69,013)
Total net change during the period
(37,508)
(29,569)
Gross closing amount as at 31 March 2021
69,505
4,793
3,034
77,332
Annual Report 2021 I 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Business finance loan and lease receivables
Impairment provision
Stage 1
Stage 2
Stage 3
Total
12-month ECL
Lifetime ECL
Lifetime ECL
$’000 AUD
$’000 AUD
$’000 AUD
$’000 AUD
Loss allowance as at 1 April 2020
12,827
24,622
7,851
45,300
Movements with P&L impact
Transfers:
Transfer from Stage 1 to Stage 2
Transfer from Stage 1 to Stage 3
Transfer from Stage 2 to Stage 1
Transfer from Stage 2 to Stage 3
Transfer from Stage 3 to Stage 1
Transfer from Stage 3 to Stage 2
New financial assets originated or purchased
Changes in the balances of non-transferred financial
assets
Change in estimates
Changes to model assumptions and methodologies
Write-offs
Total net P&L charge during the period
Loss allowance as at 31 March 2021
(193)
(454)
152
-
57
-
321
(6,191)
2,532
(3,776)
9,051
952
-
(784)
(1,435)
-
118
(2,629)
3,874
96
24,718
-
1,595
-
1,590
(434)
(200)
6,375
8,864
(14,363)
3,427
11,278
759
1,141
(632)
155
(377)
(82)
321
(2,445)
15,270
(14,363)
(253)
45,047
The following table further explains changes in the gross carrying amount of the loans and lease receivables to help explain
their significance to the changes in the loss allowance as discussed above:
Loan and lease receivables
Stage 1
Stage 2
Stage 3
Total
12-month ECL
Lifetime ECL
Lifetime ECL
$’000 AUD
$’000 AUD
$’000 AUD
$’000 AUD
256,021
62,153
7,314
325,488
(3,452)
(8,430)
2,247
-
775
-
6,401
3,452
-
(2,247)
(3,926)
-
357
-
8,430
-
3,926
(775)
(357)
6,377
(14,363)
3,238
-
-
-
-
-
-
6,401
(123,830)
(14,363)
(131,792)
10,552
193,696
Gross carrying amount as at 1 April 2020
Movements with P&L impact
Transfers:
Transfer from Stage 1 to Stage 2
Transfer from Stage 1 to Stage 3
Transfer from Stage 2 to Stage 1
Transfer from Stage 2 to Stage 3
Transfer from Stage 3 to Stage 1
Transfer from Stage 3 to Stage 2
New financial assets originated or purchased
Changes in the balances of non-transferred financial assets
(123,570)
(6,637)
Write-offs
Total net change during the period
Gross closing amount as at 31 March 2021
(126,029)
129,992
(9,001)
53,152
42 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
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 Leasing lease receivables
Business Finance lease receivables
Loan receivables
Total gross amount
Allowance for impairment
2021
6,970
74,154
56,062
133,840
271,026
(74,384)
196,642
2020*
10,568
139,852
97,640
223,766
471,826
(81,983)
389,843
Chattel mortgages are classified as loan receivables in accordance with AASB 9. The Group classifies its chattel mortgages as at
amortised cost only if both of the following criteria are met: the asset is held within a business model whose objective is to
collect the contractual cash flows, and the contractual terms give rise to cash flows that are solely payments of principal and
interest.
Write-off policy
The Group writes off financial assets in whole or in part, when it has exhausted all practical recovery efforts and has concluded
there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include (i)
ceasing enforcement activity and (ii) where the Group’s recovery method is foreclosing on collateral and the value of the
collateral such that there is no reasonable expectation of full recovery.
Modification of financial assets
The Group sometimes modifies the terms of leases provided to customers due to commercial renegotiations, or for distressed
leases, with a view to maximising recovery.
Such restructuring activities include extended payment term arrangements, payment holidays, and payment forgiveness.
Restructuring policies and practices are based on indicators or criteria which, in the judgement of management, indicate that
payment will most likely continue. These policies are kept under continuous review.
Contracts which have been modified are all considered to have a significant increase in credit risk and are measured using a
lifetime expected credit loss model, unless other creditworthiness indicators provide information which would rebut this
presumption.
Model risk reserve
A model risk reserve is in place for both the consumer finance receivables and the equipment finance receivables books. Each
of these reserves was calculated as 30% of the modelled provision on the adoption of AASB 9 and was intended to take into
account any potential issues with data or the model that, if we had known at implementation, would have resulted in an
increased provision. These reserves have been maintained at 30% of the modelled provision and have declined during the year
in line with the decline in both the receivables book and the modelled provision.
LGD overlay (consumer)
A loss given default rate of 89% has been maintained in the consumer finance division through the use of an overlay. This is our
best estimate of loss given default for consumer finance receivables. We have had to maintain the appropriate loss given
default rate in the current year through an overlay due to the effect of both the rundown of the existing receivables book and
the impact of the coronavirus on the modelled loss given default rate.
Annual Report 2021 I 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Impairment losses
Consumer Leasing lease receivables
$’000 AUD
Stage 1
Stage 2
Stage 3
Gross 2021
Impairment 2021
Gross 2020
Impairment 2020
69,504
4,795
3,033
77,332
(21,509)
(4,795)
(3,033)
(29,337)
107,013
34,362
4,970
146,345
(16,095)
(15,745)
(4,843)
(36,683)
The Group applies the AASB 9 three-stage approach to measuring expected credit losses which uses a 12-month loss for lease
receivables in stage one and lifetime expected loss for lease receivables in stages 2 and 3. To measure the expected credit
losses, lease receivables have been grouped based on shared credit risk characteristics and the days past due.
The expected loss rates are based on the payment profiles of lease receivables over a period of 36 months respectively and the
corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and
forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
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. There has been no changes from prior periods and there are no unrecognised losses because of collateral.
Business Finance lease receivables
$’000 AUD
Stage 1
Stage 2
Stage 3
Gross 2021
Impairment 2021
Gross 2020
Impairment 2020
39,111
15,489
2,680
57,280
(2,515)
(7,142)
(2,680)
(12,337)
77,145
19,070
2,711
98,926
(3,828)
(7,636)
(2,711)
(14,175)
Loan receivables (Business Finance and remaining consumer solar loans)
$’000 AUD
Stage 1
Stage 2
Stage 3
Gross 2021
Impairment 2021
Gross 2020
90,881
37,663
7,872
136,416
(6,536)
(18,302)
(7,872)
(32,710)
178,868
43,084
4,603
226,555
Impairment
2020
(8,999)
(17,041)
(5,085)
(31,125)
The contractual amount outstanding on receivables that were written off during the year and that are still subject to
enforcement activity is $9.0m.
Liquidity risk
Liquidity risk is the risk that the Group’s financial condition is adversely affected by an inability to meet its liabilities and support
its business growth. The Company manages its capital to maintain its ability to continue as a going concern and to provide
adequate returns to shareholders.
The capital structure of the Group consists of external debt and shareholders’ equity. The Group manages its capital structure
and makes adjustments to it in light of economic conditions and the Group’s individual situation. The Group’s debt facilities
contain restrictions on the Group’s ability to, among other things, sell or transfer assets, incur additional debt, repay other
debt, make certain investments or acquisitions, repurchase or redeem shares and engage in alternate business activities. The
facilities also contain a number of financial and non-financial covenants. Failure to meet any of these covenants could result in
an event of default under these facilities which could, in turn, allow the lender to declare all amounts outstanding to be
44 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
immediately due and payable or the inability to draw down further. In such a case, the financial condition, liquidity and results
of operations of the Group could materially suffer.
See note 16, loans and borrowings, for more information on a breach of warehouse parameters early in the year and the
impact of this and COVID-19 on the Group’s existing funding arrangements.
Liquidity risk is managed through the adequate provision of funding and effective capital management policies.
The following are the contractual maturities of the consolidated entity’s financial liabilities including, where applicable, future
interest payments as at 31 March 2021.
31 March 2021 ($’000 AUD)
Securitised warehouse facility
Lease liability
Trade and other payables
Total non-derivatives
Interest rate swap
(Inflow)
Outflow
Total derivatives
31 March 2020 ($’000 AUD)
Securitised warehouse facility
Lease liability
Trade and other payables
Total non-derivatives
Interest rate swap
(Inflow)
Outflow
Total derivatives
Carrying
amount
166,303
934
15,723
Contractual
Cash flows
170,726
981
15,723
182,960
187,430
3,721
3,721
Carrying
Amount
305,545
11,721
14,988
332,254
(429)
4,178
3,749
Contractual
Cash flows
332,507
12,346
14,988
359,841
6,322
6,322
(1,902)
8,497
6,595
1 year or less
1-5 years
107,254
751
15,723
123,728
(103)
2,496
2,393
63,471
230
-
63,701
(326)
1,682
1,356
1 year or less
1-5 years
127,066
205,441
6,391
14,988
148,445
(914)
4,199
3,285
5,955
-
211,396
(988)
4,298
3,310
5 years
or more
-
-
-
-
-
-
-
5 years
or more
-
-
-
-
-
-
-
The securitised warehouse facility is secured by rentals and payments receivable from the underlying receivable contracts. The
amounts collected from these receivables are used to repay the securitised warehouse facility. As such the timing of repayment
is dependent upon the timing of the receivable collections. For the purpose of this note, which requires contractual maturities,
we have used the future contractual receivable repayment amounts to estimate the timing of repayment of the funding facility
principal and interest. This is different from the current and non-current split in note 16 which is based on expected cash flows.
The consolidated entity’s access to financing arrangements is disclosed in note 16.
Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign currency, will affect the consolidated
entity’s income and cash flow. The objective of market risk management is to manage and control market risk exposures within
acceptable parameters.
Foreign currency risk
The Group is not currently exposed to any significant foreign currency risks. In prior years the direct acquisition of inventories
from overseas suppliers resulted in significant foreign currency risks. To mitigate this risk the Group operates a foreign
exchange risk policy. The 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 Group may not be
able to pass on such changes in the cost of purchased products to its customers which may negatively impact the Group’s
financial performance. The Group currently does not actively hedge foreign currency risk and transacts in foreign currencies on
a spot basis.
Annual Report 2021 I 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Interest rate risk
Interest rate risk is the risk the consolidated entity incurs a financial loss due to adverse movement in interest rates. The
consolidated entity is subject to interest rate risk on its securitised warehouse funding facility.
The consolidated entity enters into interest rate swaps to fix the interest payments on its warehouse borrowings and therefore
remove the interest rate mismatch between the receivables and the borrowings.
At the reporting date the interest rate profile of the consolidated entity’s floating interest-bearing financial instruments was:
$’000 AUD
Free cash
Borrowings, net of hedging
2021
68,300
20,016
2020
28,723
(27,632)
At 31 March 2021, Thorn was hedged at 112% of its warehouse borrowing balance of $166.3m. A change of one percent in
interest rates at the reporting date would have increased or decreased the consolidated entity’s equity and other
comprehensive income by $618,000 (2020: $8,000), net of tax.
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.
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 or 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. Thorn does not apply netting.
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.
Fair values
Fair value reflects the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing
parties in an arm’s length transaction. Quoted prices or rates are used to determine fair value where an active market exists. If
the market for a financial instrument is not active, fair values are estimated using present value or other valuation techniques,
using inputs based on market conditions prevailing on the measurement date.
46 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
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); and
Level 3 – Inputs for the asset or liability that are not based on observable market data.
Derivatives are measured at fair value. These are level 2 instruments. For all other financial instruments, amortised cost
approximates fair value.
Investments at fair value through other comprehensive income
The cost of the Group’s investment in Quicka Holdings Pty Ltd is considered to represent fair value currently as the investment
was made relatively close to the year end. No information has emerged in the period between acquisition and the balance date
to suggest this is no longer representative of fair value. The investment is considered to be a Level 2 investment.
15. PROVISIONS
2021
$’000 AUD
Opening balance
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Provisions reclassified to other payables
Current
Non-current
2020
$’000 AUD
Opening balance
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Provisions reclassified to other payables
Current
Non-current
Business Finance restitution
Business
Finance
restitution
1,689
-
-
(1,689)
-
-
-
-
-
Business
Finance
restitution
1,420
269
-
-
-
1,689
1,689
-
1,689
Regulatory
Make good
605
-
-
-
(605)
-
-
-
-
1,635
18
(1,230)
-
-
423
423
-
423
Regulatory
Make good
707
-
(102)
-
605
605
-
605
1,675
47
(87)
-
-
1,635
1,635
-
1,635
Service
warranties
-
1,808
-
-
-
1,808
938
870
1,808
Service
warranties
-
-
-
-
-
-
-
-
-
Other
Total
-
583
-
-
-
583
583
-
583
3,929
2,409
(1,230)
(1,689)
(605)
2,814
1,944
870
2,814
Other
Total
-
-
-
-
-
-
-
-
-
3,802
316
(189)
-
-
3,929
3,929
-
3,929
In the 2019 financial year a large specific provision of $10.1m was taken up to provide in full for the receivable for the industry-
wide matter of a group of customers for a specific product who were challenging the enforceability of their leases. The
Australian Financial Complaints Authority had issued an initial advice in favour of the customers and setting out terms of
further restitution beyond the writing off of their payable balance. The receivable was written off in full, in accordance with the
Group’s write off policy, as management concluded there is was no reasonable expectation of recovery and all practical
recovery efforts have been exhausted.
Annual Report 2021 I 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
The matter has now been settled and consequently the Group has released the remaining restitution provision related to this
matter.
Regulatory
Regulatory provision amounts were set aside in the Consumer Leasing division for potential customer remediation, penalties
and administration costs.
Make good on leased premises
Make good provision represent expected costs of returning leased office, showroom or warehouse premises to the condition
specified in the individual lease contracts upon termination of the lease.
Warranty provision
Under the terms of the consumer leases originated in the Group’s Consumer Leasing division the Group is required to maintain
the leased product in good working order. Provision has been made for the expected cost of this obligation over the remaining
life of the existing lease arrangements.
16. LOANS AND BORROWINGS
$’000 AUD
Current liabilities
Secured loans
Non-Current liabilities
Secured loans
2021
2020
78,203
117,918
88,100
166,303
187,627
305,545
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 facilities
$’000 AUD
Secured corporate loan facility A
Utilised
Available headroom
Secured corporate loan facility B
Utilised
Available headroom
Securitised warehouse facility
Utilised
Available headroom
Total loan facilities
Utilised
Secured loan facilities not utilised at reporting date
Corporate facilities
2021
-
-
-
-
-
-
166,303
(166,303)
-
166,303
(166,303)
-
2020
12,000
(12,000)
-
5,000
(2,956)
2,044
368,000
(293,545)
74,455
385,000
(308,501)
76,499
The corporate debt facility was in two parts; the ‘A’ facility, a general corporate facility, was fully repaid during the period (fully
drawn to its $12.0m limit at 31 March 2020). The second part, the ‘B’ facility, was a $5.0m limit of a combined undrawn
overdraft and drawn bank guarantees to landlords and suppliers. Both credit facilities were closed during the year.
The Group still retains access to bank guarantees as part of our ongoing transactional banking arrangements and at 31 March
2021 the amount drawn was $1.6m (facility limit of ($1.8m). The Group has cash collateralized the facility.
48 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Warehouse facility
Thorn Business Finance is financed by a securitised warehouse facility (“the warehouse”) with senior notes held by a major
Australian bank, mezzanine notes held by a major Australian financial services company, and equity class F notes held by Thorn.
The warehouse facility is secured by rentals and payments receivable from the underlying receivable contracts and is non-
recourse to the Group by which it is meant that Thorn’s liability is limited to its class F notes unless it is liable in damages for
breach of the documents or it is required to buy back an ineligible receivable (defined as one that breached Thorn’s initial sale
representations and not merely that it goes into arrears or defaults).
The amounts expected to be due and payable on the warehouse 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 receivables are payable.
In addition to the actions taken, in May 2020, it was determined that there was a breach of one of the compliance parameters
in the warehouse which requires no more than 6% of the balances to be in arrears by more than 30 days. This was attributable
to the increasing presence of COVID-19 affected customers, many of whom had requested a payment holiday and had stopped
repayments under their leases.
This breach put the warehouse into run-off under its amortisation rules. As a result Thorn was unable to sell originations into
the warehouse and the distributions it normally receives via the waterfall distribution mechanism were redirected to pay down
the noteholders in order of seniority while the breach persisted. During this year Thorn reached an agreement with its funders
to allow Thorn to vary contracts with certain COVID-19 affected customers. These variations were implemented and completed
by year end.
At 31 March 2021 the relevant arrears number was 3.9% (this number does not take into account receivables which have been
written off) and was no longer in breach of this parameter. As a result of the amendments made to the funding arrangements
which allowed us to undertake variations Thorn cannot originate new leases through the warehouse until further agreement is
reached. The warehouse facility was reviewed by the noteholders in the normal course of business during the year and the
availability period was not extended.
17. CAPITAL AND RESERVES
Issued capital
Number of shares
On issue at the beginning of year
Issue of new shares under dividend reinvestment plan
Issue of new shares under a rights issue
2021
322,350,132
16,837,953
-
339,188,085
2020
161,175,066
-
161,175,066
322,350,132
Ordinary shares are classified as equity. Incremental costs directly attributable to the 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.
Rights issue
During the prior year a rights issue took place. The rights issue had an institutional component and a retail component. In
September 2019, under the institutional offer, 64,342,142 shares were issued at $0.24 per share for gross proceeds of $15.4m
less associated costs of $1.2m. In October 2019, the retail offer was finalised with a further 96,832,924 shares issued at an offer
price of $0.24 resulting in gross proceeds of $23.3m less associated costs of $3.2m. In total 161,175,066 shares were issued with
the Group receiving gross proceeds of $38.7m less $4.4m in associated costs.
Annual Report 2021 I 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Reserves
The reserves consist of the equity remuneration reserve and the cash flow hedge reserve. The equity remuneration reserve
represents the value of performance rights issued. The cash flow hedge reserve consists of the fair value of cash flow hedges
after tax.
$’000 AUD
Cash flow hedge reserve
Share-based payment reserve
Dividends
2021
(3,721)
229
(3,492)
2020
(6,322)
410
(5,912)
Dividends are recognised as a liability in the period in which they are declared. Dividends recognised in the current year by the
Company are:
Cents per
Share
Amount
$’000 AUD
Franking
%
Date of
payment
2021
Final 2020
Interim 2021
Special dividend
Total amount
2020
Final 2019
Interim 2020
Total amount
-
-
7.5
-
-
-
-
24,176
24,176
-
-
-
-
-
n/a
n/a
30%
3rd November 2020
-
-
n/a
n/a
On 12 October 2020, the Thorn Board declared a fully franked special dividend of $0.075 cash per share ("Special Dividend").
The Special Dividend was paid to shareholders on Tuesday, 3 November 2020. The special dividend totalled $24.2m. A number
of Thorn’s shareholders participated in the dividend reinvestment plan resulting in $2.6m of the total being reinvested in Thorn
shares, resulting in a net cash outflow of $21.6m.
The Directors have proposed a final dividend of 1.0 cent per share for an expected payment of $3.4m to be paid on the 21 July
2021. This has not been recognised as a liability at year end. The dividends are fully franked.
Dividend franking account
$’000 AUD
30% franking credits available to shareholders of Thorn Group Limited
2021
28,346
2020
41,739
The above available amounts are based on the balance of the dividend franking account at year-end. This may be 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.
At 31st March 2020, franking credit amount may be affected by $3,050,000 of income tax receivables recognised.
50 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
18. 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.
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.
$’000 AUD
Earnings per share
Profit attributable to ordinary shareholders (basic) $’000 AUD
Profit attributable to ordinary shareholders (basic)
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
Basic earnings per share (cents)
Diluted earnings per share (cents)
2021
2020
8,396
(81,068)
322,350
6,874
329,224
322,350
9,066
331,417
2.6
2.5
161,175
79,437
240,612
161,175
81,534
242,709
(33.7)
(33.7)
Annual Report 2021 I 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
19. CONSOLIDATED ENTITIES
Parent entity
Thorn Group Limited
Subsidiaries
Thorn Australia Pty Ltd
A.C.N. 647 764 510 Pty Ltd**
A.C.N. 647 765 571 Pty Ltd**
Northmoney Pty Ltd**
Eclipse Retail Rental Pty Ltd*
Rent Try Buy Pty Ltd*
Thorn Equipment Finance Pty Ltd
Thorn Business Finance Pty Limited
Thorn Finance Pty Ltd*
Thorn ABS Warehouse Trust No. 1
Country of
Incorporation
Ownership Interest
2021
2020
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
N/A
N/A
100%
100%
N/A
100%
100%
N/A
N/A
N/A
100%
100%
100%
100%
100%
100%
*These entities were all dormant and were deregistered during the year.
** These entities were incorporated during the year
Basis of consolidation
Subsidiaries
Subsidiaries are entities (including special purpose entities) controlled by the consolidated entity. The consolidated entity
controls an entity when it 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 results 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;
and/or
The consolidated entity retains the majority of the residual ownership risks of the SPE or its assets in order to obtain
benefits from its activities.
20. DEED OF CROSS GUARANTEE
Thorn Group Limited and each of the subsidiaries listed in note 19 have entered 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.
52 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
Pursuant to ASIC Corporations Instrument 2016/785 Thorn Australia Pty Limited is relieved from the Corporations Act 2001
requirements for preparation, audit and lodgement of financial reports and Directors’ reports.
The profit before tax per 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 2021, 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 which have been disclosed in note
22.
21. PARENT ENTITY DISCLOSURES
As at 31 March 2021, and throughout the financial year ending 31 March 2021 the parent entity of the consolidated entity was
Thorn Group Limited.
$’000 AUD
Result of Parent Entity
Profit / (Loss) for the period
Other comprehensive income
Total comprehensive profit / (loss) 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
Accumulated losses
Equity remuneration reserve
Total Equity
2021
2020
24,176
-
24,176
-
108,181
-
-
157,843
(49,891)
229
108,181
(49,891)
-
(49,891)
3,051
105,775
-
-
155,255
(49,891)
410
105,775
The parent entity has entered into a Deed of Cross Guarantee with its trading subsidiaries. Further details of the Deed of Cross
Guarantee and the subsidiaries subject to the deed are disclosed in note 20.
22. SPECIAL PURPOSE ENTITY
The Group sells receivables into the securitised warehouse (a special purpose entity for accounting). The warehouse is
consolidated as set out in note 19 as the Group is exposed or has rights to variable returns and has the ability to affect its
returns through its power over the warehouse. The table below presents assets (net of provision) and the underlying
liabilities attributable to the warehouse.
$’000 AUD
Net Receivables
Cash held by Trust
Total assets
Borrowings related to receivables
Derivative financial instruments
Total liabilities
Net liabilities
2021
141,592
19,745
161,337
166,303
3,721
170,024
(8,687)
2020
261,678
20,896
282,574
293,545
6,322
299,867
(17,293)
Annual Report 2021 I 53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
The Group provide additional support to the special purpose entity including a liquidity facility of $3.6m (2020: $3.6m) and a bill
and collect facility of $1.9m (2020: $2.5m).
When the securitised warehouse is open for originations (currently it is not, see note 16 for further information) a level of
credit enhancement is required to be maintained through the junior note investment made by the Group. There are scenarios
where the Group could be required to inject cash into the securitised warehouse to maintain this credit enhancement. This has
not occurred to date.
23. RELATED PARTIES
Key management personnel remuneration
$
Short-term employee benefits
Post-employment benefits
Long-term employee benefits
Share-based payments
2021
1,532,221
376,168
-
(90,622)
1,817,767
2020
2,459,609
127,713
-
(307,421)
2,279,901
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.
There were no loans made or outstanding to Directors or executive KMP during or at the end of the year.
During the year, the Group had made an investment into Quicka Holdings Pty Ltd and subsequently the Group’s CEO Peter
Lirantzis was appointed as director of Quicka Holdings Pty Ltd. No further transactions have taken place after the initial
investment (refer to note 8) to 31 March 2021.
24. SHARE BASED PAYMENTS
The aggregate transactions and outstanding balances relating to share-based payments were as follows:
Performance rights granted as compensation in the year
Performance rights
Performance Rights Granted
Number
464,253
Grant Date
22 May 2020
Financial Year in which Grants Vest
(ended 31 March)
2022
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 the employees is as follows:
Held at
1 April 2020
Granted as
Compensation
Vested during
the year
Lapsed
Forfeited Held at 31 March
2021
Performance rights
2,790,783
464,253
-
(332,755)
(1,610,658)
1,311,624
25. EMPLOYEE BENEFIT EXPENSE
$’000 AUD
Employee benefit expense
2021
29,295
2020
48,194
Employee benefit expense includes redundancy expenses of $4,154,000 (2020: $170,000).
54 I Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2021
26. AUDITORS’ REMUNERATION
In whole AUD
Audit services
Audit and review of financial reports
Total Audit Services
Other services
Other statutory assurance services
Other assurance services
Controls review
Other assurance services
Non audit services
Tax advisory and compliance
Total non-audit services
Total auditor’s remuneration
2021
UHY
Haines Norton
375,000
375,000
-
-
100,000
100,000
50,000
50,000
525,000
2020
PwC
Australia
1,016,938
1,016,938
171,250
14,280
-
185,530
-
-
1,202,468
During the year PwC were paid $386,250 for audit and review of financial reports (related to the 2020 financial year) and
$91,800 for other assurance services.
27. SUBSEQUENT EVENTS
Refer to note 17 for the final dividend recommended by the directors, to be paid on 21 July 2021.
Annual Report 2021 I 55
DIRECTORS’ DECLARATION
For the year ended 31 March 2021
Directors’ declaration
In the opinion of the directors of Thorn Group Limited (the ‘Company’):
1. (a) the financial statements and notes that are set out on pages 21 to 55 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 2021 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 19 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 2016/785.
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 2021.
Signed in accordance with a resolution of the directors.
Warren McLeland
Chairman
Dated at Sydney
30 June 2021
56 I Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
To the Members of Thorn Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Thorn Group Limited (the Company) and its subsidiaries (the
Group) for the year-ended 31 March 2021, which comprises the consolidated statement of financial
position as at 31 March 2021, the 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 to the financial statements, including a summary of significant accounting
policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
i. giving a true and fair view of the Group’s financial position as at 31 March 2021 and of its
financial performance for the year ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. 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 auditor
independence requirements of 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 also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 (b) of the financial report, which discloses that the Group’s ability to
continue as a going concern is impacted by the closure of the radio rental store network, the funding
warehouse going into amortisation, and the impact of COVID-19 on the recovery of the existing lease
and loan books. These conditions together with other matters described in Note 1 (b) of the Financial
Report, indicate a material uncertainty that may cast doubt on the Group’s ability to continue as a
going concern and, therefore, whether it will realise its assets and discharge its liabilities in the normal
course of business, and at the amounts stated in the financial report. Our opinion is not modified in
respect of this matter.
57
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Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters.
In addition to the matter described in the Material uncertainty related to going concern section, we
have determined the matters described below to be the key audit matters to be communicated in our
report.
PROVISION FOR IMPAIRMENT LOSSES ON LOANS AND RECEIVABLES
Why a key audit matter
How our audit addressed the risk
AASB 9 requires entities to estimate
expected future credit losses on its
financial assets (including lease and loan
receivables). These estimates incorporate
both historical and forward looking
information, including historical loss rates,
forward economic projections and other
creditworthiness indicators as appropriate.
We considered this a key audit matter due
to the high level of estimation uncertainty
inherent in the calculations, and the scope
for subjectivity in significant judgements
made by the company in determining their
provisioning rates, such as:
•
• Assumptions made with respect of
projected forward loss rates for
varying groups of customers,
including industry type and
location;
Judgements and assumptions
involved in utilizing complex credit
loss models;
Judgements involved in
determining whether customers
have experienced a significant
increase in credit risk;
•
• Assumptions of how the group’s
•
existing receivables will perform in
regards to potential future COVID-
19 related restrictions on activity;
Judgements involved in the
weighting and calculation of
macroeconomic scenario’s over
provision balances;
We performed the following audit procedures,
amongst others:
• Where management has relied upon the
work of expert’s, we have performed
relevant procedures to evaluate the
appropriateness of the expert and their
work;
• We assessed the appropriateness of the
company’s estimation methodologies
applied, including changes from prior
periods;
• We assessed the mathematical accuracy of
the calculations on a sample basis;
• We agreed a sample of key input data to
supporting documentation, including signed
contracts and cash payment data;
• We assessed the reasonability of significant
assumptions with respect to the
requirements of AASB 9, other internal and
external data sources and the consistency of
assumptions across different elements of
the expected credit loss calculations;
• We assessed the accuracy of management’s
historical expected credit loss provisioning
by comparing the prior year provision to
actual incurred losses in the current year,
adjusting for the expected timing of these
losses;
• We developed an auditors range estimate
for expected credit losses based on
independent external audit evidence, and
compared this to management’s estimate;
58
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Why a key audit matter
How our audit addressed the risk
Refer to note 14 of the financial
statements for further information on the
company’s expected credit loss
provisioning.
• We reviewed the performance of the
receivables book post balance date and
compared this to management balance date
estimates;
We also assessed the reasonability and
completeness of the company’s disclosures against
the requirements of Australian Accounting
Standards.
OPERATION OF IT SYSTEMS AND CONTROLS
Why a key audit matter
How our audit addressed the risk
The Group is reliant on its IT systems for the
processing and recording of significant
volumes of transactions.
This was a key audit matter because a number
of key financial controls we seek to rely on are
related to IT systems and automated controls.
We evaluated (with the assistance from our IT
specialists) the design and implementation of key
controls over relevant IT systems, which included
assessing: the governance of the Group’s
technology control environment, IT change
management controls, security and access
controls, system development controls and IT
operations controls.
Controls relating to the management of IT
systems are important because they are
intended to ensure changes to applications
and data are appropriately implemented and
authorised.
Ensuring staff have appropriate access to IT
systems and that access is monitored are key
controls in mitigating the potential for fraud
or error as a result of underlying changes to
an application or data.
Based on the results of our IT control design
assessment, we were required to perform
additional direct testing, on a sample basis, over
the accuracy of relevant data inputs, automated
calculations and reports in order to obtain
sufficient audit evidence.
59
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Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 31 March 2021, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express 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
and, in doing so, 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.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are 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 the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or
the override of internal control.
60
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• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial report or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain
solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
61
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Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 18 of the directors’ report for the
year ended 31 March 2021.
In our opinion, the Remuneration Report of Thorn Group Limited for the year ended 31 March 2021,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance
with Australian Auditing Standards.
Mark Nicholaeff
Partner
Sydney
30 June 2021
UHY Haines Norton
Chartered Accountants
62
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SHAREHOLDER INFORMATION
HOLDINGS
The issued capital of Thorn Group Limited as of 30 June 2021 is as below.
Equity Class
Fully Paid Ordinary Shares
Unlisted Performance Rights
Number of Holders
3,810
1
Total Issued
337,494,233
464,253
Each Fully Paid 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.
DISTRIBUTION OF SHAREHOLDERS AS AT 30 JUNE 2021
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and Over
Rounding
Total
Fully Paid Ordinary Shares (Total)
Total Holders
272
1,067
875
1,354
242
Shares
61,696
3,870,238
6,868,048
42,816,546
283,877,705
3,810
337,494,233
% issued capital
0.02
1.15
2.04
12.69
84.11
-0.01
100.00
UNMARKETABLE PARCELS AS AT 30 JUNE 2021
Minimum $500.00 parcel at $ 0.2200 per unit
Minimum Parcel Size
2,273
Holders
390
Units
264,700
THE NAMES OF THE SUBSTANTIAL SHAREHOLDERS LISTED IN THE COMPANY’S REGISTER AS AT 30 JUNE 2021
Rank Top Investors
1
2
ICM Limited
Forager Funds Management Pty Ltd
3 Mr Jason Alan Carroll
Shares*
% Issued Capital
116,411,240
24,680,123
16,875,702
34.49%
7.31%
5.00%
*Number of shares at date of last substantial shareholder notice lodged with the Company as at 30 June 2021. Please refer to ASX for up-to-date
information about Thorn’s securities.
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.
UNLISTED EMPLOYEE PERFORMANCE RIGHTS
On 1 July 2021, there were 464,253 unlisted Performance Rights Shares on issue held by 1 person. There were 847,371
unlisted Performance Rights pursuant to LTI plans (2018 and 2019) held by 3 persons.
These rights have no exercise price and vest between 1 September 2021 and 1 September 2022 subject to the fulfilment of
the relevant vesting conditions.
ON-MARKET BUYBACK
There is currently no On-Market buyback for any Thorn Group Limited securities.
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SHAREHOLDER INFORMATION
20 LARGEST SHAREHOLDERS – ORDINARY SHARES AS AT 30 JUNE 2021
Rank
Top Investors
Shares
% Issued Capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
19
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MR JASON ALAN CARROLL
MOAT INVESTMENTS PTY LTD
MS KATHRIN BIRGIT MUTINELLI
ACE PROPERTY HOLDINGS PTY LTD
CITICORP NOMINEES PTY LIMITED
JET INVEST PTY LTD
MAST FINANCIAL PTY LTD
SANDHURST TRUSTEES LTD
GLIOCAS INVESTMENTS PTY LTD
MR SUNNY YANG + MRS CONNIE YANG
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
MR WARWICK SAUER
TROBER NO 57 PTY LTD
BNP PARIBAS NOMINEES PTY LTD
MR SUNNY LI SHENG YANG + MRS CONNIE CONG HUAN YANG
MR HONGBIN CHEN
MR BENJAMIN YOUNGMAN GRAHAM + MRS CARA JANINE GRAHAM
REDBROOK NOMINEES PTY LTD
116,952,665
24,940,332
16,875,702
9,515,026
6,698,244
5,100,000
4,482,211
3,746,127
3,634,010
3,283,564
3,028,753
2,918,884
2,050,656
1,949,626
1,903,105
1,783,499
1,598,659
1,575,900
1,400,000
1,400,000
Totals: Top 20 holders of Fully Paid Ordinary Shares (Total)
Total Remaining Holders Balance
214,836,963
122,657,270
34.65
7.39
5.00
2.82
1.98
1.51
1.33
1.11
1.08
0.97
0.90
0.86
0.61
0.58
0.56
0.53
0.47
0.47
0.41
0.41
63.66
36.34
TAKEOVER OFFER
An on-market takeover offer was made by Somers Limited on Friday, 18 June 2021. Additional information in relation to
the offer has been announced to the ASX, including notices of change of interests of substantial holder.
Please refer to ASX for up-to-date information about Thorn’s securities and change of interests of substantial holders.
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SHAREHOLDER INFORMATION
NON-EXECUTIVE DIRECTORS
Warren McLeland
Chairman, Non-Executive Director
Paul Oneile
Non-Executive Director
Allan Sullivan
Non-Executive Director
COMPANY SECRETARY
Alexandra Rose
REGISTERED OFFICE
Thorn Group Limited
Level 1
62 Hume Highway
Chullora, NSW 2190
www.thorn.com.au
Telephone: +61 2 9101 5000
Facsimile: +61 2 9101 5033
AUDITOR TO THORN GROUP LIMITED
UHY Haines Norton
Level 11, 1 York Street
Sydney, NSW 2000
REGISTRY
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
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