Annual
Report
31 March 2022
ACN 072 507 147
CONTENTS
Directors’ Report
Lead Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
2
17
18
Consolidated Statement of Financial Position
19
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
20
21
23
53
54
Annual Report 2022 I 1
DIRECTORS’ REPORT
For the year ended 31 March 2022
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 2022
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. This includes the
asset sale of the Consumer Finance division to Credit Corp Group Limited (‘Credit Corp’) in December 2021 and launching the
asset finance product with key focus on scalability through technology.
The securitised warehouse facility remains in amortisation, however Thorn is in negotiations with its funders to re-open the
warehouse.
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 financial services group providing commercial finance to small and medium-sized enterprises and the leasing of
household products to consumers. During the year, the Group made a strategic decision to sell the assets of its former
Consumer Finance division to Credit Corp and focus on growing its suite of lending products for SMEs through the Thornmoney
brand.
Financial performance
A$m
Business Finance
Corporate
Significant items
Sub-total
Fair value gains on derivative
Net interest expense
Profit/ (loss) before tax
Tax expense
Segment revenue
Segment EBIT to NPAT
2022
17.3
-
17.3
2021*
33.4
-
33.4
2022
25.7
(7.6)
-
19.1
1.5
(6.8)
12.8
-
Profit / (loss) after tax from continuing operations
Profit from discontinued operation after tax
Net profit after tax
12.8
19.5
32.3
* Restated to redirect the results of discontinued business, into one line above Net profit after tax for the year
2021*
12.7
(8.9)
2.4
6.2
(10.6)
(4.4)
-
(4.4)
12.8
8.4
Revenue fell 48% to $17.3m (2021: $33.4m), and the net profit after tax (‘NPAT’) increased from $8.4m to $32.3m. $11.7m of
NPAT is attributable to gain on sale of assets from the Consumer Finance division.
Business Finance
Equipment finance originations were $21.7m for the year (2021: $5.2m), the majority of which took place in the last quarter of
the year, reflecting growth.
An Invoice Finance value proposition was launched in July 2021, providing a line of credit, backed by the SME’s invoices.
The equipment finance book’s 30 day arrears, were at 7.4% at the end of March 2022 (2021: 8.6%).
The receivables book and the profit or loss statement have been heavily influenced by the absence of originations in the first
half of the year and the impact of COVID-19; receivables (pre provision) reduced from $192.5m to $110.0m; revenue decreased
48% to $17.3m (2021: $33.4m) and impairment expenses netted a positive impact of $19.9m due to the release of COVID-19
provision (2021: $12.4m).
EBIT was a $25.7m profit (2021: $12.7m).
2 I Annual Report 2022
DIRECTORS’ REPORT
For the year ended 31 March 2022
Corporate
Corporate expenses were down 15% to $7.6m (2021: $8.9m). This is largely due to the sale of the Consumer Finance business in
December 2021, reducing communications and IT costs, and personnel expenses.
Significant items
No significant items in the current financial year.
In the prior year, the Group incurred the following costs related to the closure of the Consumer Finance 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.
Fair value gains on derivative
The fair value gains on derivative consists of the ineffective portion of the interest rate swap on the warehouse funding
balance. In December 2021, the Group made an assessment that the interest rate swap has fallen outside the prescribed range
of effectiveness as per AASB 139. This is attributable to the warehouse being in amortisation leading to the funding balance
decreasing at a faster rate than the expected repayment of the warehouse receivables. The swap remained ineffective for the
period from December 2021 through to March 2022. At 31 March 2022, Thorn was hedged at 139% of its warehouse borrowing
balance of $60.6m. In absence of any variations on the swap, the Group expect the hedge to remain ineffective in the future.
Net interest expense
Net interest expense decreased by 36% from $10.6m to $6.8m (excluding discontinued operation). This includes a $0.4m
adjustment of the derivative interest in accordance to AASB 139. Borrowings in the warehouse declined to $60.6m (2021:
$166.3m) 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 the directors consider that, as disclosed last year, there
remains a continuing risk that Thorn may not make sufficient taxable profits in future years to justify their recognition as an
asset on the balance sheet.
Discontinued Operation
The Group’s assets in the Consumer Finance division, Radio Rentals, were sold to Credit Corp in December 2021. Thorn has
received a cash consideration for the sale of $43.9m, with an additional amount of approximately $2.3m payable on a deferred
and conditional basis. An assessment of the deferred amount deemed it highly improbable that the conditions to receive the
amount will be met by the agreed timeline and hence the $2.3m was not taken to revenue.
The sale consideration was offset by $1.4m payable to Credit Corp for employees’ leave liability transfer. Thorn and Credit Corp
commenced a transitional services period of six months in December 2021, including the secondment and subsequent transfer
of relevant employees. The profit on sale was reduced by the costs of sale and provisioning to record a net gain on sale of
$11.7m.
Before the sale completion on 20 December 2021, the Consumer Finance division recorded a profit after tax of $7.7m (2021:
$12.8m including significant items).
Annual Report 2022 I 3
DIRECTORS’ REPORT
For the year ended 31 March 2022
Financial position
The balance sheet is presented below in two versions; the 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 the second including the warehouse which is as per the statutory accounts format (“incl. Trust”).
Summarised financial position
31 March 2022
31 March 2021
$m
Cash at bank
Receivables
excl. Trust
incl. Trust
excl. Trust
68.1
86.8
68.3
incl. Trust
88.0
24.5
88.6
55.0
196.6
Inventories and other assets
6.4
6.4
3.1
3.1
Investments
Total Assets
Borrowings
Other liabilities
Total Liabilities
Total Equity
Gearing (net debt/equity) (i)
Return on Equity
Earnings Per Share
-
-
1.0
1.0
99.0
181.8
127.4
288.7
-
60.6
-
166.3
18.0
18.0
81.0
18.4
79.0
102.8
(25.5)%
32.6%
23.6
23.6
103.8
n/a
9.5
27.3
193.6
95.1
103.0%
8.4%
2.6
(i) Gearing is calculated as closing net debt (i.e. debt less free cash) divided by closing equity
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 $68.1m and cash in the
warehouse was $18.7m (2021: $68.3m and $19.7m). The free cash reflects cash consideration received for the sale of assets in
the Consumer Finance division, the payment of a special dividend in February 2022 totalling $23.8m, 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 Business Finance receivables. All are stated at their gross amount less unearned interest, less a
provision for expected credit losses.
The Business Finance receivables gross balance reduced by $82.5m to $110.0m (2021: $192.5m) due to lower originations. The
provision reduced by 51% to $(22.0m) (2021: $(45.0m)). The net receivables balance reduced by $59.5m to $88.0m (2021:
$147.5m).
In the table above, the columns which exclude the warehouse (headed excl. Trust) do not include the Business Finance
receivables and related provisions held in the warehouse.
Investments
The Group made a $1m strategic investment in Quicka Holdings Pty Ltd trading as “QuickaPay” in financial year 2021. The
business was sold in December 2021, Thorn received $1.15m for its initial investment.
Other liabilities
The other liabilities reduction of $5.2m was driven by the sale of its Consumer Finance division, with the balance attributable to
reduced payables and employee-related liabilities as the size of the business has reduced.
4 I Annual Report 2022
DIRECTORS’ REPORT
For the year ended 31 March 2022
Funding
The Group has the following debt facility limits:
$m
Securitised Warehouse Facility
Securitised warehouse facility
2022
60.6
2021
166.3
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 is secured over rentals and payments receivable from the underlying receivable contracts and is non-recourse
to the Group, meaning that Thorn’s liability is limited to its class F notes unless it is liable in damages for breach of its
delegations under the warehouse documentation 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 in the next 12 months are disclosed as current. At maturity, no
further originations can be sold down into the warehouse and the portfolio will amortise off for as long as the underlying
receivables are payable.
In April 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 previously received via the waterfall distribution mechanism were redirected to pay
down the noteholders in order of seniority while the breach persisted. During the same period, 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 the end of the financial year ending 31 March 2021. At 31 March 2022, the relevant arrears
number was 4.02% (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 Thorn to
undertake those variations, Thorn cannot fund new originations through the warehouse until further agreement is reached.
Thorn is in negotiations with its funders to re-open the warehouse. The warehouse borrowings were paid down by $105.7m to
$60.6m (March 2021: $166.3m).
DIVIDENDS PAID OR RECOMMENDED
2022
Final 2021
Interim 2022
Special dividend
Total amount
2021
Final 2020
Interim 2021
Special dividend
Total amount
Cents per
Amount
Franking
share
$’000 AUDs
1.0
3,375
-
-
7.0
23,792
8.0
27,167
-
-
-
-
%
30%
n/a
30%
n/a
n/a
Date of
Payment
21 July 2021
n/a
9 February 2022
n/a
n/a
7.5
24,176
30%
3 November 2020
7.5
24,176
Annual Report 2022 I 5
DIRECTORS’ REPORT
For the year ended 31 March 2022
On 30 May 2022, the directors have declared a final dividend of 1 cent per share for an expected payment of $3.4m to be paid
on 25 July 2022. The dividend is fully franked. The Company’s DRP will apply to the final dividend, with a discount of 2.5% to the
market price. It is expected that shares allocated under the DRP will be issued and allocated on the dividend payment date.
For the year, Thorn paid a total dividend of 8 cents per share, totalling $27.2m. A number of Thorn’s shareholders participated
in the Company’s dividend reinvestment plan (‘DRP’) offered for the 2021 final dividend, resulting in $0.5m of the total being
reinvested in Thorn shares. Net outflow was $26.7m.
REGULATORY MATTERS
We acknowledge Thorn’s role as a responsible corporate citizen to the environment, the community in which we operate and
to our people. We aim to protect the environment in a sustainable manner preventing or reducing any negative impact of
Thorn’s operations and activities. As a financial services company, the Group has a relatively small environmental impact across
its business locations. COVID-19 and the related lockdowns led to a reduction in Thorn’s office environmental footprint. The
Audit Committee, the Risk & Compliance Committee and the Board regularly review the risks associated with the business and
believe that the Group does not have any material exposure to environmental or social sustainability risks. 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. In FY23, we will
continue to look to implement strategies working towards minimising our carbon footprint.
The Group is subject to extensive regulation in each of the jurisdictions in which it conducts its consumer finance leasing
business. The Group will remain subject to this regulatory environment through the transition period following the sale of the
Consumer Finance division.
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 environment to ensure that the business is abreast of all potential
changes.
SUBSEQUENT EVENTS
Dividend declaration
Refer to note 17 for the final dividend declared by the directors on 30 May 2022, to be paid on 25 July 2022. The Company’s
Dividend Reinvestment Plan will apply to the final dividend with a discount of 2.5% to the market price.
Share buy back programs
On 30 May 2022, Thorn completed a minimum holding share buy back, under which it bought back and cancelled 81,977 fully
paid ordinary shares for $21,150.
Thorn is conducting an on-market share buy back program of up to 5% of Thorn’s ordinary shares, or up to 16,994,615 ordinary
shares, commencing 1 March 2022 and for up to 12 months. From 1 April 2022 to 24 June 2022, the Group has bought back
861,851 fully paid ordinary shares for a total cost of $224,965.
Legal proceedings
On 27 September 2021, the Supreme Court of New South Wales delivered judgement in Thorn’s favour in relation to a disputed
property lease.
On 23 June 2022, the appeal by Centuria against the judgement in favour of Thorn at first instance was dismissed by the NSW
Court of Appeal (Centuria Property Funds Ltd v Thorn Australia Pty Ltd [2022] NSWCA 104).
Other
During the period of May 2022 to 24 June 2022, Thorn acquired shares in another ASX listed company, Humm Group Limited,
for a cost of approximately $3.55 million.
6 I Annual Report 2022
DIRECTORS’ REPORT
For the year ended 31 March 2022
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 realisation of assets and the settlement of liabilities in the ordinary course of business.
The Group achieved a net profit after tax of $32.3m (2021: $8.4m) for the year ended 31 March 2022 and net cash
generated in operating activities during the same period amounted to a $87.7m inflow (2021: $209.9m inflow), $54.0m
inflow (2021: $119.0m) excluding the Consumer Finance division. A significant proportion of the cash outflow occurred in
the second half of the year as a result of the Group’s asset finance product re-launch and required funding of the
originations, and the payment of special dividend in February 2022.
Following a strategic review, the assets of the Consumer Finance division were sold to Credit Corp in December 2021. This
netted a cash consideration of $42.5m, $43.9m satisfied in cash in December 2021 and $1.4m payable to Credit Corp in
financial year 2023.
The directors have reviewed the Group’s cash flow forecast through to 30 June 2023.
The directors are of the opinion that there are reasonable grounds to believe that the collection from the receivables books
alongside a smaller cost base, 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 invoice finance
product and the revitalisation of the asset finance division are not guaranteed.
OUTLOOK
Thorn’s policy is to not provide profit guidance and nothing in this report should be construed as profit guidance.
Annual Report 2022 I 7
DIRECTORS’ REPORT
For the year ended 31 March 2022
DIRECTORS' INFORMATION
Warren McLeland
Non-Executive Director
Appointed 30 August 2019
Appointed Board Chairman 23 October 2019
Appointed Chair of Risk & 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 Ltd 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
None
Interests in shares and options
Nil
Paul Oneile
Independent, Non-Executive Director
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
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.
Paul is the Non-Executive Chairman of Invigor Group Limited.
Previously Paul was the Non-Executive Chairman of ASX listed
company, A2B Australia Limited (formerly Cabcharge
Australia Limited) and was the Non-Executive Chairman of
Intecq Limited (formerly eBet Limited), from 2012 until its
acquisition by Tabcorp Holdings Limited in December 2016.
Other current ASX directorships
Invigor Group Limited
Former ASX directorships in the last three years
A2B Australia Limited
Interests in shares and options
235,000 ordinary shares
Allan Sullivan
Non-Executive Director
Appointed 30 August 2019
Qualifications
Bachelor of Science, Bachelor of Engineering, Doctor of
Engineering
Experience
Allan has had a professional career spanning over 40 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 Plc.
Allan is a Non-Executive director of Invigor Group Limited.
Other current ASX directorships
Invigor Group Limited
Former ASX directorships in the last three years
None
Interests in shares and options
247,540 ordinary shares
Company Secretary
Alexandra Rose (BLaws, MBA, FAID, FGIA, FCIS) is the Group’s
General Counsel, Company Secretary and General Manager of
Risk & Compliance. Alexandra is an experienced corporate
lawyer with over 25 years of legal, risk and regulatory
expertise. She has held senior executive roles at a number of
leading Australian financial services companies and is a
former non-executive director of The Law Society of New
South Wales, Lawcover Insurance, Intech Credit Union
Limited (now merged with Bank Australia), Justice Connect
and Hockey NSW.
8 I Annual Report 2022
DIRECTORS’ REPORT
For the year ended 31 March 2022
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
Paul Oneile
A
25
25
B
25
25
A
6
6
B
6
6
A
3
3
Allan Sullivan
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year
25
25
6
6
3
B
3
3
3
A
2
2
2
B
2
2
2
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Insurance
During the financial year, the Company has paid insurance premiums of $1,908,779 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, except for 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.
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 has ultimate responsibility for the fixed and variable remuneration opportunity and outcomes and determines what
is value for money for shareholders.
Annual Report 2022 I 9
DIRECTORS’ REPORT
For the year ended 31 March 2022
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 non-executive 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 non-executive directors and its charter is available on the Company’s website. The Committee
makes recommendations to the Board for its consideration and approval. The Chairman of the Committee will be available at
the Annual General Meeting to answer any questions from shareholders on this report.
The Committee draws 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 2022, the Non-Executive Directors (‘NEDs’) and KMP were:
Non-Executive Directors
Position
Director/Committee Chair
Term or Date
Warren McLeland
Paul Oneile
Director
Board Chairman
Chairman of Risk & Compliance Committee
Director
Chairman of Audit Committee
Chairman of Remuneration & Nomination Committee
Allan Sullivan
Director
Executive KMP
Peter Lirantzis
Luis Orp
Position
Chief Executive Officer
Chief Financial Officer
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Term or Date
Full Year
Full Year
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 Annual General Meeting (‘AGM’).
The Board does not intend to seek an increase to the fee pool at the 2022 AGM.
From 1 April 2021, the base annual fee for the Chairman is $110,000 per annum plus superannuation. Base fees for other non-
executive directors are $100,000 per annum plus superannuation. The Chair of each of the committees receives an additional
annual fee of $10,000 plus superannuation. Members of each of the committees receive an additional annual fee of $5,000
plus 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.
10 I Annual Report 2022
DIRECTORS’ REPORT
For the year ended 31 March 2022
Name
Warren McLeland
Paul Oneile
Allan Sullivan
Former Non-Executive Director
Kent Bird*
Total Non-Executive Director Remuneration
*Kent Bird resigned as a non-executive director on 2 October 2020.
Year
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Salary and fees
Superannuation
130,000
90,769
125,000
89,500
115,000
75,000
-
45,769
370,000
301,038
12,838
8,623
12,344
8,503
11,356
7,125
-
4,348
36,538
28,599
Total
142,838
99,392
137,344
98,003
126,356
82,125
-
50,117
406,538
329,637
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 to enable small to medium businesses to thrive and for everyday Australians to
access all-encompassing household essentials.
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
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
Annual Report 2022 I 11
DIRECTORS’ REPORT
For the year ended 31 March 2022
CEO sign on allocation of share rights
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 two year service period to be completed, starting from 10 February 2020. These
rights vested on 30 March 2022 and are currently held in escrow with a two year hold period. If Mr Lirantzis’s employment is
terminated by the Company for cause, all shares subject to a holding lock, at the time of termination will be forfeited.
Peter 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)
Nil
Max (b)
-
*The grant of the rights was finalised during the 2021 financial year with the service period being backdated to 10 February 2020, Peter’s start date.
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 (a)
Other
remuneration
(b)
Superannuation
Long Service
Leave
LTI (c)
Total
Executive KMP
Peter Lirantzis
2022
499,308
-
522,876
234,451
Luis Orp
Former KMP’s
Peter Forsberg
Total
Remuneration
2021
2022
2021
2022
2021
2022
2021
499,481
360,000
151,526
-
234,451
-
-
153,427
98,623
-
98,623
-
-
-
247,102
293,325
-
-
-
-
859,308
898,109
-
676,303
333,074
293,325
333,074
-
23,100
21,521
23,100
11,202
-
21,521
46,200
54,244
-
-
-
-
-
32,328
1,312,063
36,756
792,209
-
635,150
-
261,351
-
-
-
(127,378)
434,570
-
-
32,328
1,947,213
(90,622)
1,488,130
a)
b)
c)
The amounts are earned by the KMP but, due to the introduction of the deferral mechanism, 50% of total STI is to be paid in July 2022 with
subsequent payments as per STI deferral scheme.
In December 2021, the Board determined to change the short term incentive framework post annual report sign off for the 2021 financial year.
The potential target amount had changed from 50% to 100% of fixed remuneration salary package. An additional amount of $234,451 and
$98,623 was payable to Peter Lirantzis and Luis Orp respectively for the 2021 year.
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.
12 I Annual Report 2022
DIRECTORS’ REPORT
For the year ended 31 March 2022
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
50%
50%
0%
Peter 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.
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
100%
100%
Target (as % of Fixed)
Maximum (as % of Fixed)
In December 2021, the Board determined to change the short term incentive framework post annual report sign off for
the 2021 financial year. The potential target amount had changed from 50% to 100% of fixed remuneration salary
package.
Performance Period
12 months
Gateway and
performance metrics (2022)
The FY22 STI’s were set based upon recovery of COVID-19 and executing a number of strategic initiatives.
The KPIs that were assessed for financial year 2022 include:
Financial metrics including cash NPAT and preserving the cash balance;
•
• Market Benchmarking;
•
•
•
People and culture;
Capital, Risk and Funding; and
Innovation and technology initiatives (delivery of technology strategies to allow for scale and digitalisation)
Gateway and
performance metrics (2021)
The FY21 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 Consumer Finance.
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
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.
Annual Report 2022 I 13
DIRECTORS’ REPORT
For the year ended 31 March 2022
Features
Description
Once approved, the STI rewards are expected to be paid in the month following the release of the Company’s results
to ASX.
Deferral
CEO STI payment to Peter Lirantzis is to be paid in 3 instalments (50% in July 2022, 25% in July 2023 and 25% in July
2024). The CFO STI payment to Luis Orp and other executive team members are to paid in 2 instalments (50% in July
2022 and 50% in July 2023).
Payment of STI deferred amount is subject to continued employment.
STI OUTCOMES FOR 2022 - AUDITED
Given the strong performance against NPAT and other KPI measures, short term incentive payments will be made to the
executive KMPs for financial year 2022. The Board approved an STI outcome of 75% of total KMP target pool.
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 LTI remuneration framework is presently under review.
For financial year 2022, no executive KMPs were involved in LTI plans. Refer to note 25 for details of LTI plans that were in place
for the year.
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.
As noted above, the LTI remuneration framework is presently under review.
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 ($)
2022
32.3
9.5
8.0
0.28
Return on equity %
Return on equity is calculated as NPAT divided by the average book equity.
32.5
2021
8.4
2.6
8.5
0.18
8.4
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
6. SERVICE CONTRACTS FOR EXECUTIVE KMP - AUDITED
The present contractual arrangements with executive KMPs are:
Component
Contract duration
Notice by individual or company
Termination without cause
Termination with cause
CEO
Ongoing
6 months
Senior executives
Ongoing
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.
14 I Annual Report 2022
DIRECTORS’ REPORT
For the year ended 31 March 2022
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 2021
Granted as
Compensation
Vested during
the year
Lapsed
Forfeited Held at 31 March
2022
Peter Lirantzis*
* Currently held in escrow with a two year hold period until 10 February 2024.
464,253
-
(464,253)
-
-
-
Shareholdings of the directors and executive KMP
2022
Name
Warren McLeland
Paul Oneile
Allan Sullivan
Peter 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
-
235,000
247,540
-
250,000
-
-
-
464,253
-
-
-
-
-
12,206
-
235,000
247,540
464,253
262,206
* Currently held in escrow with a two year hold period until 10 February 2024.
Other transactions with Directors or Executive KMP
There were no loans made or outstanding to Directors or executive KMPs 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 27.
The Company has agreed to indemnify the auditor, UHY Haines Norton, to the extent permitted by law.
Annual Report 2022 I 15
DIRECTORS’ REPORT
For the year ended 31 March 2022
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 is available on
Thorn’s website https://www.thorn.com.au/site/showcontentpopup.aspx?CompanyPageUid=541be516-3826-4052-b9bd-
f34b11c7cc73&PageName=Corporate%20Governance%20Statement%202022&ReturnTo=showcategory.aspx?CategoryID=190
AUDITOR’S INDEPENDENCE DECLARATION
The Auditor’s independence declaration is set out on page 17 and forms part of the directors’ report for the financial year
ended 31 March 2022.
This report is made in accordance with a resolution of the directors:
Warren McLeland
Chairman
Dated at Sydney
24 June 2022
16 I Annual Report 2022
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 2022,
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
24 June 2022
UHY Haines Norton
Chartered Accountants
17
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 PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2022
Notes
2022
2021
$’000 AUD
Continuing operations
Interest revenue
Other revenue
Revenue
Employee benefit expense
Impairment losses on loans and receivables
26
14
Marketing expenses
Property expenses
Communication & IT expenses
Insurance expenses
Legal expenses
Other expenses
15,490
32,626
1,806
816
17,296
33,442
(14,137)
(13,171)
19,898
(12,492)
(359)
76
220
(422)
(3,942)
(4,566)
(2,601)
(1,628)
(1,592)
(3,007)
(4,362)
(922)
Impairment of intangibles & property, plant and equipment
9,10
(389)
(216)
Recovery of impaired loan
Net gain on sale of financial asset
Corporate expense allocated to discontinued operation
Total operating expenses
Earnings before interest and tax ("EBIT")
Fair value gains on derivative
Finance expenses
Profit/(Loss) before income tax
Income tax
Profit/(Loss) after tax for the year from continuing operations*
Discontinued operation
Profit from discontinued operation, net of tax
Profit after tax for the year
Other comprehensive income - items that may be reclassified
subsequently to profit or loss
Other comprehensive income
Income tax
Other comprehensive income for the year
Total comprehensive profit
Earnings per share- Continuing Operations
Basic earnings per share (cents)
Diluted earnings per share (cents)
Earnings per share- Discontinued Operation
Basic earnings per share (cents)
Diluted earnings per share (cents)
Earnings per share- Consolidated
Basic earnings per share (cents)
Diluted earnings per share (cents)
8
2
11
23
18
18
18
18
18
18
-
119
1,330
-
8,025
7,745
880
(27,273)
18,176
6,169
1,453
-
(6,764)
(10,617)
12,865
(4,448)
-
-
12,865
(4,448)
19,481
32,346
12,844
8,396
2,352
2,601
-
-
2,352
2,601
34,698
10,997
3.8
3.8
5.7
5.7
9.5
9.5
(1.4)
(1.4)
3.9
3.9
2.6
2.5
* Restated to redirect the results of discontinued business, into one line above Profit after tax for the year. For details see note 23.
The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the accompanying notes.
18 I Annual Report 2022
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2022
$’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
4
5
3
5
12
10
8
9
6
7
16
26
15
16
7
26
13
15
17
17
The Consolidated Statement of Financial Position is to be read in conjunction with the accompanying notes.
Note
2022
2021
86,760
34,984
6,480
-
-
88,045
67,093
2,935
128
-
128,224
158,201
53,600
129,549
-
-
-
-
53,600
181,824
8,810
11
43,412
5,090
4,090
61,413
17,179
-
77
359
-
17,615
79,028
102,796
158,049
5,605
(60,858)
102,796
-
-
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
Annual Report 2022 I 19
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2022
$’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 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
$’000 AUD
Share capital
Reserves
Retained
earnings
Total Equity
Balance at 1 April 2021
Total comprehensive income
Net profit for the period
Other comprehensive income
Total comprehensive income
Transactions with owners of the Company
Issue of shares under dividend reinvestment plan
Shares buy-back program
Share-based payments transactions
Dividends to shareholders
Total transactions with owners of the Company
Balance at 31 March 2022
157,843
(3,492)
(59,217)
95,134
-
-
-
491
(354)
69
-
206
158,049
6,974
2,352
9,326
-
-
(229)
-
(229)
5,605
25,372
-
25,372
-
-
154
(27,167)
(27,013)
(60,858)
32,346
2,352
34,698
491
(354)
(6)
(27,167)
(27,036)
102,796
The Consolidated Statement of Changes in Equity is to be read in conjunction with the accompanying notes.
20 I Annual Report 2022
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2022
$’000 AUD
2022
2021
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
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
Sale/(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
Payment for share buy back
Dividends paid
Net cash from financing activities
Net increase in cash and cash equivalents- continuing operations
Net increase in cash and cash equivalents from discontinued operation
23
Cash and cash equivalents at 1 April
Cash and cash equivalents at 31 March
The Consolidated Statement of Cash Flows is to be read in conjunction with the accompanying notes.
108,763
16,623
-
(40,494)
(24,454)
60,438
(6,422)
-
54,016
(257)
1,154
897
-
(105,711)
(247)
491
(354)
(27,167)
(132,988)
(78,075)
76,790
88,045
86,760
131,780
32,001
-
(31,282)
(5,452)
127,047
(11,076)
3,051
119,022
(107)
(1,000)
(1,107)
11,339
(138,582)
(382)
2,588
-
(24,176)
(149,213)
(31,298)
69,724
49,619
88,045
Annual Report 2022 I 21
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
Proceeds on sale of investment and discontinued operation
Fair value gains on derivative
Interest expense adjustment on derivative
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) in prepayments and other assets
Decrease in inventories
(Decrease)Increase in deferred tax liability
Decrease in income tax receivables
(Decrease)/Increase in trade and other payables
Increase/(Decrease) in provisions and employee benefits
Net cash from operating activities
Net cash from operating activities- discontinued operation
Net cash from operation activities – continuing operations
23
The Consolidated Statement of Cash Flows is to be read in conjunction with the accompanying notes.
2022
32,346
389
(39)
(43,876)
(1,453)
443
(131)
(12,321)
108,058
(3,545)
128
-
-
(6,913)
2,322
87,729
33,713
54,016
2021
8,396
(1,217)
(49)
-
-
-
78
7,208
193,201
(40)
7,847
-
3,051
1,147
(2,510)
209,904
90,882
119,022
22 I Annual Report 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
1. SIGNIFICANT ACCOUNTING POLICIES
Thorn Group Limited (the ‘Company’ or ‘Thorn’) is a for-profit
company domiciled in Australia. The Company’s registered
office and principal place of business is Ground Floor, 320 Pitt
Street, Sydney, NSW, 2000. As at 31 March 2022, the
registered address is Suite 402, 2 Elizabeth Street, North
Sydney, NSW, 2060. The consolidated financial statements of
the Company as at and for the financial year ended 31 March
2022 comprise the Company and its subsidiaries (together
referred to as the ‘Group’ or ‘consolidated entity’). Thorn is a
financial services group providing commercial finance to small
and medium-sized enterprises and consumer finance.
(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 24 June 2022.
(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
a 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.
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) Determination of expected credit losses of receivables
and provisions. See note 14.
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:
(iv) 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
(v) 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 2022 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.
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 consolidated financial statements.
Readers should carefully consider these disclosures in light of
the inherent uncertainty described above.
The directors have prepared the consolidated financial
statements on a going concern basis, which assumes
continuity of normal business activities and the realisation
Annual Report 2022 I 23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
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
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.
(g) 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.
(h) 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.
(i) New Standards and Interpretations Adopted
The AASB has issued AASB 2020-8 Amendments to Australian
Accounting Standards – Interest Rate Benchmark Reform –
Phase 2, which is an amendment in response to the IBOR
reforms. The reform provides an amendment to AASB 9, 139,
7 and 16. The standard is effective for the current reporting
period and are not expected to significantly affect the current
or future periods.
of assets and the settlement of liabilities in the ordinary
course of business.
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:
(c) 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.
(d) Revenue
The major components of revenue are recognised as follows:
(i) Due to the changes in how we acquired and delivered the
leased items to our customers in the Consumer Finance
division, we no longer recognised sales revenue and cost
of sales on a gross basis. As we were acting as an agent,
we recognised a net agent fee which comprises the gross
margin on the leased item as well as any direct costs
associated with the delivery of the item. As a result, for
the 9 months prior to the sale of the division, the sales
revenue $6.4m and finance lease cost of sales ($6.1m)
have been shown in note 23 as revenue of $0.3m.
(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.
(e) 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.
Impairment
(f)
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.
24 I Annual Report 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
(j) New Standards and Interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2022
reporting periods and have not been early adopted by the group. These standards and interpretations are not expected to have
a material impact on the entity in the current or future reporting periods.
(k) Reclassification of comparative financial information
(i) During the period, the Group has completed the sale of assets from the Consumer Finance division. The comparative
information in the statement of profit or loss and other comprehensive income and statement of cash flow have been
reclassified to present the items belonging to Consumer Finance as a single line item (discontinued operation). Refer to
note 23 for details on adjustments to these statements.
(ii) Thorn has corrected the cost base of its intangibles and property, plant and equipment (‘PPE’) in prior financial year to
reflect the closure of Radio Rentals stores. In note 9, the cost and amortisation and impairment amount of right of use
assets has decreased from $17,559,000 to $6,120,000. In note 10, the cost and depreciation and impairment amount has
decreased from $34,910,000 to $4,366,000.
2. SEGMENT REPORTING
The Board and CEO (together the chief operating decision makers) monitor the operating results of the two reportable
segments which are the Consumer Finance division and the Business Finance division.
On 20 December 2021, the Group completed the sale of assets from the Consumer Finance division to Credit Corp. This division
was disclosed as discontinued operation, with comparatives in 2021 restated in the Consolidated Statement of Profit or Loss &
Other Comprehensive Income to show the impact of the sold assets.
Segment performance is evaluated based on operating profit or loss. Income tax expense are not allocated to operating
segments, as this type of activity is managed on a group basis.
2022
$’000 AUD
Sales Revenue
Interest Revenue
Other
Total Segment revenue
Net gain on sale of financial asset
Operating expenses
Corporate re-allocation of expenses
EBITDA
Depreciation and amortisation
Impairment on PPE and intangibles
Gain on sale of discontinued operation
EBIT
Fair value gains on derivative
Finance expense
Profit before tax
Segment assets
Segment liabilities
Consumer Finance
(Discontinued
operation)
Business Finance
Corporate
Consolidated
6,411
22,943
4,567
33,921
-
(18,104)
(8,025)
7,792
-
(13)
11,736
19,515
-
(34)
19,481
-
15,490
1,806
17,296
-
12,413
(3,883)
25,826
-
(153)
-
25,673
1,453
(6,764)
20,362
-
-
109,323
(69,987)
-
-
-
-
119
(19,288)
11,908
(7,261)
-
(236)
-
(7,497)
-
-
(7,497)
72,501
(9,041)
6,411
38,433
6,373
51,217
119
(23,969)
-
27,367
-
(402)
11,736
38,701
-
(6,355)
32,346
181,824
(78,018)
Annual Report 2022 I 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
2021
$’000 AUD
Sales Revenue
Interest Revenue
Other
Total Segment revenue
Recovery of impaired loan
Operating expenses
Corporate re-allocation of expenses
EBITDA
Net gain on modification of lease liability
Depreciation and amortisation
Impairment on PPE and intangibles
EBIT
Finance expense
Profit before tax
Segment assets
Segment liabilities
Consumer Finance
(Discontinued
operation)
Business Finance
Corporate
Consolidated
6,037
58,375
6,280
70,692
-
(50,809)
(7,745)
12,138
1,433
-
-
13,571
(727)
12,844
52,146
(20,946)
-
32,626
816
33,442
-
(20,197)
(700)
12,545
-
-
-
12,545
(10,617)
1,928
167,304
(172,670)
-
-
-
-
1,330
(15,935)
8,445
(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)
Reconciliations of reportable segment to IFRS measures
$’000 AUD
Revenue
Total revenue for reportable segments
Elimination of discontinued operations
Consolidated Revenue
Profit before tax
Total profit before tax for reportable segments
Elimination of discontinued operations
Consolidated profit/(loss) before tax from continuing operations
Reconciliations of corporate re-allocation expenses
2022
2021
51,217
(33,921)
17,296
32,346
(19,481)
12,865
104,134
(70,692)
33,442
8,396
(12,844)
(4,448)
During the year, the Group re-allocated a portion of the gross corporate expenses to each business division. In 2022, $8.0m was
allocated to the Consumer Finance division (2021: $7.7m). Some of these costs will still be incurred in future years as corporate
expenses even though Consumer Finance has been discontinued. The Group estimated this amount to be approximately $1.1m.
The breakdown of the allocated costs is as below.
2022
$’000 AUD
Employee benefit expense
Property expenses
Communication & IT expenses
Legal fees
Other expenses
Total corporate expenses re-allocated
26 I Annual Report 2022
Consumer Finance
Business Finance
(4,393)
(305)
(2,489)
(266)
(572)
(8,025)
(2,481)
(77)
(631)
(213)
(481)
(3,883)
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
2021
$’000 AUD
Employee benefit expense
Property expenses
Communication & IT expenses
Legal fees
Other expenses
Total corporate expenses re-allocated
3.
INVENTORIES
$’000 AUD
Inventories
Consumer Leasing
Business Finance
(3,738)
(3)
(3,208)
(378)
(418)
(7,745)
2022
-
(696)
-
(4)
-
-
(700)
2021
128
2021
88,045
-
88,045
On the completion of the Consumer Finance sale, the Group has transferred $0.2m in net inventory value to Credit Corp.
4. CASH AND CASH EQUIVALENTS
$’000 AUD
Bank balances
Call deposits
Cash and cash equivalents
2022
86,760
-
86,760
Included in cash is an amount of $18,705,000 (2021: $19,745,000) held as part of the consolidated entity’s funding
arrangements that is not available to the consolidated entity. This cash is held within the warehouse and as such is under the
control of the external Trustee. Within this balance, $6,973,605 is held in an excess spread reserve account as collateral. Free
cash is $68,055,000 (2021: $68,300,000) as at 31 March 2022.
5. TRADE AND OTHER RECEIVABLES
$’000 AUD
Current
Trade receivables
Finance lease receivables
Loan receivables
Non-current
Finance lease receivables
Loan receivables
2022
2,431
8,805
23,748
34,984
9,533
44,067
53,600
2021
6,932
30,719
29,442
67,093
57,860
71,689
129,549
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 $40,460 (2021: $41,000) 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.
Annual Report 2022 I 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
6. TRADE AND OTHER PAYABLES
$’000 AUD
Trade payables
Other payables
2022
103
8,707
8,810
2021
425
15,298
15,723
Trade payables are unsecured and are usually paid within 30 days of recognition. Other payables consists of employee leave
transfer to Credit Corp, 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
During the period, the Consumer Finance division leased household goods to consumers. Contracts ranged from 1 - 60 months.
The Business Finance division finances business assets to small and medium-sized 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.
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
2022
16,990
11,059
28,049
(2,181)
(1,418)
(3,599)
(6,112)
18,338
2021
100,778
81,861
182,639
(29,773)
(22,649)
(52,422)
(41,638)
88,579
Gross cash flows are expected to be collected as follows: $16,990,000 less than one year, $8,140,000 between one and two
years, $2,753,000 between years two and three, $63,000 between years three and four, and $103,000 between years four and
five.
Finance lease revenue of $4,134,000 (2021: $10,533,000) has been recognised in interest revenue in the Business Finance
division.
Finance leases as lessee
At 31 March 2022, the lease liability was $0.1m, this was related to property leases. On completion of the Consumer Finance
asset sale, $0.3m in lease liability was transferred to Credit Corp.
28 I Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
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
2022
2021
-
-
-
-
14
217
130
361
0
361
109
-
-
109
176
439
526
1,141
(1,433)
(292)
The total cash outflow for leases in the year ending 31 March 2022 was $1,046,000. $799,000 of these related to the
discontinued Consumer Finance division.
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
2022
-
2021
1,000
The Group had initially invested $1.0m in Quicka Holdings Pty Ltd. In December 2021, Quicka Holdings Pty Ltd was acquired by
legal service payments platform, RapidPay resulting in proceeds of $1.15m for the investment and a net gain on sale of
$119,000.
9.
INTANGIBLE ASSETS
$’000 AUD
Year ended 31 March 2022
Opening net carrying amount
Additions
Amortisation charges for the year
Impairment charges for the year
Closing net book amount
At 31 March 2022
Cost
Amortisation and impairment
Net book amount
Right of use assets
Software
-
-
-
-
-
277
(277)
-
-
145
-
(145)
-
Total
-
145
-
(145)
-
17,254
17,531
(17,254)
(17,531)
-
-
Annual Report 2022 I 29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
$’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
Right of use assets
Software
-
109
-
(109)
-
6,120
(6,120)
-
-
-
-
-
-
17,109
(17,109)
-
Total
-
109
-
(109)
-
23,229
(23,229)
-
*Costs corrected to reflect closure of Radio Rentals stores in 2021 financial year.
Amortisation
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.
Impairment tests for Cash Generating Units (CGU)
In 2019 and 2020 testing was 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.
At 31 March 2022, testing was performed by the Group with a similar outcome as previous years. 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 been completed. Therefore,
definite life intangible assets as well as PP&E continue to be immediately impaired on acquisition.
10. PROPERTY, PLANT AND EQUIPMENT
$’000 AUD
Year ended 31 March 2022
Opening net carrying amount
Additions
Depreciation charges for the year
Impairment charges for the year
Closing net book amount
At 31 March 2022
Cost
Accumulated depreciation and impairment
Net book amount
30 I Annual Report 2022
Total
-
257
-
(257)
-
3,757
(3,757)
-
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
$’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 and impairment
Net book amount
*Costs corrected to reflect closure of Radio Rentals stores in 2021 financial year.
Property plant and equipment
Property plant and equipment consist of furniture, fittings, and physical computer equipment.
Impairment
Refer to note 9 for details.
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% (2021: 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
Total
-
107
-
(107)
-
4,366
(4,366)
-
2022
2021
-
-
-
-
2022
32,346
9,704
31
(7,999)
(1,736)
-
-
-
-
-
-
2021
8,396
2,519
(6)
(1,657)
(856)
-
-
Annual Report 2022 I 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
12. DEFERRED TAX ASSETS & LIABILITIES
Recognised deferred tax assets and liabilities
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)
2022
2021
2022
2022
-
165
-
-
795
-
-
-
2021
13,381
408
488
-
1,971
722
-
-
-
-
-
-
-
-
(960)
(16,970)
-
-
-
-
-
-
-
-
960
16,970
(960)
(16,970)
2021
13,381
408
488
(16,970)
1,971
722
-
-
-
-
165
-
(960)
795
-
-
-
-
The Group has unrecognised current tax losses of $20.4m ($6.1m tax effected) and $38.5m ($11.6m 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.
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.
32 I Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
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.
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 ineffective portion of the derivative is recognised in the
statement of profit or loss and other comprehensive income as fair value gains or losses on derivatives.
In December 2021, the Group made an assessment that the interest rate swap has fallen outside the prescribed 80-125% range
of effectiveness as per AASB 139. This is attributable to the warehouse being in amortisation, leading to the funding balance
decreasing at a faster rate than the expected repayment of the warehouse receivables. The swap remained ineffective for the
period from December 2021 through to March 2022. At 31 March 2022, Thorn was hedged at 139% of its warehouse borrowing
balance of $60.6m. In absence of any variation on the swap, the Group expect the hedge to remain ineffective in the future.
The impact of the derivative on the statement of profit or loss and other comprehensive income are as per below table.
$’000 AUD
Fair value gains on derivative
Interest expense
2022
1,453
(443)
1,010
2021
-
-
-
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 2022.
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
2022
359
2021
3,721
Annual Report 2022 I 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
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.
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 provides business finance to SMEs 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.
During the year, the Group has two separate receivables books; Business Finance receivables and the Radio Rentals Consumer
Finance receivables. Consumer Finance receivables are included in one group (forms part of the assets sold to Credit Corp) and
Business Finance receivables in another group for the purpose of calculating the expected credit loss.
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
Finance 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. In prior year, the Group prepared a base, best and worst-
34 I Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
case scenario based on economic variables relevant to the Consumer Finance and Business Finance business units. This is no
longer applicable with the sale of the Consumer Finance division and change in methodology for Business Finance as explained
below.
Impact of COVID-19 pandemic
The COVID-19 pandemic and its effect on the local economy has impacted the Group’s customers and performance, and the
future effects of the pandemic and ultimate impact on the recoverability of the Group’s 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 unwound their lockdown measures and returned to pre-COVID-19 economic
conditions varied and there remains a risk of the pandemic and other global issues creating a possible recession within
Australia.
Management overlay
The Business Finance division finances small to medium-sized businesses across the country and many of the division's
customers are in industries heavily affected by COVID-19. The full impact of both the COVID-19 pandemic is uncertain at the
balance date for the Business Finance division as the Group has yet to see the anticipated drop in arrears for the COVID-19
affected lease receivables portfolio as a result of unwinding of all social and lockdown restrictions.
At 31 March 2022, $34.6m of Business Finance receivables were identified as COVID-19 impacted. Out of these, 16.1% by value
were greater than 30 days in arrears at the balance date. As the COVID-19 lease receivables moves towards its end term (36%
of these receivables are set to come to term within the next 18 months), there is increasing concern that collections will
become more difficult for this cohort.
In the 6 months to September 2021, consistent with the methodology used in 2021 financial year, 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. The Group has then assessed the potential impact of three different scenarios, ranging from
slow to faster recovery, on the expected loss provision and given each a weighting, with the highest weighting being applied to
the baseline case.
In light of evolving circumstances, the Group’s methodology has been assessed and revised since March 2021. The provision
has been reduced in quantum in line with the reduction of the affected portfolio and is consistent with the total percentage
used for the half-year results (circa 43% of the total COVID-19 impacted book).
The judgements and assumptions used in estimating the overlays will be reviewed and refined in future financial periods as the
recovery from the COVID-19 pandemic progresses.
Annual Report 2022 I 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
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:
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 2021
9,051
24,718
11,278
45,047
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 2022
(121)
(218)
71
20
1,518
(3,351)
7,294
(408)
1,400
13,856
358
(474)
(309)
34
(20,228)
3,063
(399)
(15,603)
6,763
764
302
(352)
(62)
(5,925)
3,294
(542)
(7,315)
(8,784)
1,442
237
546
(403)
(7)
(332)
(28)
1,518
(29,504)
13,651
(1,349)
(7,315)
(22,987)
22,061
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
Gross carrying amount as at 1 April 2021
129,992
53,152
10,552
193,696
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
Total net change during the period
Gross closing amount as at 31 March 2022
36 I Annual Report 2022
(1,373)
(4,176)
1,168
556
21,809
(48,122)
(30,138)
99,854
1,373
(1,168)
(609)
98
(43,497)
(43,803)
9,349
4,176
609
(556)
(98)
(5,926)
(7,315)
(9,109)
1,442
-
-
-
-
-
-
21,809
(97,545)
(7,315)
(83,050)
110,645
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure. The consolidated
entity’s net exposure to credit risk at the reporting date was:
$’000 AUD
Trade receivables
Consumer Finance lease receivables
Business Finance lease receivables
Loan receivables
Total gross amount
Allowance for impairment
2022
2021
2,430
6,970
-
24,451
83,764
110,645
(22,061)
88,584
74,154
56,062
133,840
271,026
(74,384)
196,642
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 via normal means
of collections and has concluded there is no reasonable expectation of recovery. The Group’s write-off process provides that if
an account is not paid by a specified “days due” threshold, it is written off, unless there is reasonable degree of certainty on
future collections.
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 was in place for both the Consumer Finance receivables prior to the sale 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.
Impairment losses
Consumer Finance lease receivables
$’000 AUD
Stage 1
Stage 2
Stage 3
Gross 2022
Impairment 2022
Gross 2021
Impairment 2021
-
-
-
-
-
-
-
-
69,504
4,795
3,033
77,332
(21,509)
(4,795)
(3,033)
(29,337)
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.
Annual Report 2022 I 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
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. If 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 2022
Impairment 2022
Gross 2021
Impairment 2021
22,489
2,510
577
25,576
(3,527)
(2,008)
(577)
(6,112)
39,111
15,489
2,680
57,280
(2,515)
(7,142)
(2,680)
(12,337)
Loan receivables (Business Finance and remaining consumer solar loans)
$’000 AUD
Stage 1
Stage 2
Stage 3
Gross 2022
Impairment 2022
Gross 2021
77,364
6,840
865
85,069
(10,329)
(4,755)
(865)
(15,949)
90,881
37,663
7,872
136,416
Impairment
2021
(6,536)
(18,302)
(7,872)
(32,710)
At 31 March 2022, the contractual amount outstanding on receivables that were historically written off and that are still
subject to enforcement activity is $14.7m.
Thorn has provided a guarantee, to the warehouse trust, against a group of affected trust receivables. The value of the
receivables as at 31 March 2022 is $17.2m. Thorn has deemed the risk of an outflow of economic resources to be extremely
remote and, as such, has estimated the guarantee to have a zero fair value.
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 Group 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
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 in the 2021 financial 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 2022.
38 I Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
31 March 2022 ($’000 AUD)
Securitised warehouse facility
Lease liability
Trade and other payables
Total non-derivatives
Interest rate swap
(Inflow)
Outflow
Total derivatives
31 March 2021 ($’000 AUD)
Securitised warehouse facility
Lease liability
Trade and other payables
Total non-derivatives
Interest rate swap
(Inflow)
Outflow
Total derivatives
Carrying
amount
60,591
11
8,700
69,302
359
359
Carrying
amount
166,303
934
15,723
Contractual
Cash flows
62,180
11
8,700
70,891
(1,334)
1,683
349
1 year or less
1-5 years
59,627
2,553
8,700
68,327
(545)
1,171
626
-
2,553
(789)
512
(277)
Contractual
Cash flows
170,726
981
15,723
1 year or less
1-5 years
107,254
751
15,723
63,471
230
-
182,960
187,430
123,728
63,701
3,721
3,721
(429)
4,178
3,749
(103)
2,496
2,393
(326)
1,682
1,356
5 years
or more
-
-
-
-
-
-
5 years
or more
-
-
-
-
-
-
-
The securitised warehouse facility (‘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 warehouse facility. As such the timing
of repayment is dependent upon the timing of the receivables collected. 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 warehouse 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 The Group currently does not actively hedge foreign
currency risk and transacts in foreign currencies on a spot basis.
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 warehouse 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
2022
68,055
(23,692)
2021
68,300
(20,016)
Annual Report 2022 I 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
At 31 March 2022, Thorn was hedged at 139% (2021: 112%) of its warehouse borrowing balance of $60.6m (2021: $166.3m).
The interest rate swap ceased to be effective from December 2021, refer to note 13 for details.
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 $642,000 (2021: $618,000), net of tax.
Financial instruments
Capital management
The Board’s policy is to maintain an appropriate capital base so as to maintain investor, creditor and market confidence and to
permit future development of the business. The Board 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 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.
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.
40 I Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
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. The investment was
considered to be a Level 2 investment and has subsequently been sold.
15. PROVISIONS
2022
$’000 AUD
Opening balance
Provisions made during the year
Provisions used during the year
Provisions transferred as part of asset sale of Radio
Rentals
Provisions reversed during the year
Provisions reclassified to other payables
Current
Non-current
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
Business Finance restitution
Business
Finance
restitution
-
-
-
-
-
-
-
-
-
-
Make good
423
26
(112)
(35)
(257)
-
45
45
-
45
Service
warranties
1,808
1,029
(1,526)
(1,311)
-
-
-
-
-
-
Regulatory
and Other
583
4,879
(1,417)
-
-
-
4,045
4,045
-
4,045
Business
Finance
restitution
1,689
-
-
(1,689)
-
-
-
-
-
Make good
1,635
18
(1,230)
-
-
423
423
-
423
Service
warranties
-
1,808
-
-
-
1,808
938
870
1,808
Regulatory and
Other
605
583
-
-
(605)
583
583
-
583
Total
2,814
5,934
(3,055)
(1,346)
(257)
-
4,090
4,090
-
4,090
Total
3,929
2,409
(1,230)
(1,689)
(605)
2,814
1,944
870
2,814
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’s initial position was in favour of the customers with 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 was no reasonable expectation of recovery and all practical recovery efforts had been
exhausted.
The matter was settled in 2021 and consequently the Group has released the remaining restitution provision related to this
matter.
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.
Regulatory and Other provision
This a general provision which covers a number of potential obligations, including indemnities and warranties in connection
with the sale of the Consumer Finance business, costs associated with the business restructure following the sale transaction,
potential customer remediation, penalties and administration costs and legal matters.
Annual Report 2022 I 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
Warranty provision
Under the terms of the consumer leases originated in the Consumer Finance 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. Upon completion of the sale, the warranty of $1.3m has been transferred to gain on sale
calculation.
16. LOANS AND BORROWINGS
$’000 AUD
Current liabilities
Secured loans
Non-Current liabilities
Secured loans
2022
2021
43,412
78,203
17,179
60,591
88,100
166,303
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
Securitised warehouse facility
Utilised
Available headroom
Total loan facilities
Utilised
Secured loan facilities not utilised at reporting date
Corporate facilities
The Group has no open corporate debt facility.
2022
60,591
(60,591)
-
60,591
(60,591)
-
2021
166,303
(166,303)
-
166,303
(166,303)
-
The Group still retains access to bank guarantees as part of its ongoing transactional banking arrangements and at 31 March
2022 the amount drawn was $2.3m. The Group has cash collateralised the facility.
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 is secured by rentals and lease payments and is non-recourse to the Group, which means 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 one that goes into arrears or
defaults).
Interest on the warehouse is charged at a fixed interest premium plus a floating 3 months BBSY.
The amounts expected to be due and payable on the warehouse in the next 12 months are disclosed as current. The warehouse
maturity date is 30 August 2026.
In April 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 the same period, 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 31 March 2021.
42 I Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
As a result of the amendments made to the funding arrangements in FY2021, which allowed us to undertake variations, Thorn
cannot originate new leases through the warehouse until further agreement is reached.
At 31 March 2022, Thorn was no longer in breach of this parameter and the relevant arrears number was 4.02% (this number
does not take into account receivables that have been written off).
No breach of compliance parameters in the warehouse has occurred for the 2022 financial year and for the period post 31
March 2022 to the date of signing.
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 an employee share based payment plan
Repurchase of shares through buy-back scheme
2022
339,188,085
2,398,077
464,253
(1,857,701)
340,192,714
2021
322,350,132
16,837,953
-
339,188,085
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 shareholders’ meetings.
In the event of the winding up of the Company, ordinary shareholders rank after all other shareholders and creditors and
are fully entitled to any proceeds of liquidation.
The Company does not have authorised capital or par value in respect of its issued shares.
Reserves
The reserves consist of the equity remuneration reserve, the cash flow hedge reserve and trust excess spread 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
Trust excess spread reserve
2022
(1,369)
-
6,974
5,605
2021
(3,721)
229
-
(3,492)
During the prior period, Thorn reached an agreement with its funders to allow Thorn to vary contracts with certain COVID-19
affected customers. As a result of the amendments made to the funding arrangements, an “excess spread ledger” was
established. Any excess spread which would usually be distributed to Thorn on a monthly basis is instead held within a cash
reserve and serves as collateral against the collection of the receivables. Once the external note holders are repaid in full, these
amounts will be available for distribution to Thorn.
Annual Report 2022 I 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
Dividends
Dividends are recognised as a liability in the period in which they are declared. Dividends recognised in the current year by the
Company are:
Cents per
Share
Amount
$’000 AUD
Franking
%
Date of
payment
2022
Final 2021
Interim 2022
Special dividend
Total amount
2021
Final 2020
Interim 2021
Special dividend
Total amount
1.0
3,375
-
-
7.0
23,792
8.0
27,167
-
-
7.5
7.5
-
-
24,176
24,176
30%
n/a
30%
-
-
21 July 2021
n/a
9 February 2022
n/a
n/a
30%
3 November 2020
During the year, Thorn paid total dividends of 8 cents per share, totalling $27.2m. A number of Thorn’s shareholders
participated in the Company’s dividend reinvestment plan (‘DRP’) offered for the final 2021 dividend, resulting in $0.5m of the
total being reinvested in Thorn shares. Net cash outflow was $26.7m.
The Directors have declared on 30 May 2022, a final dividend of 1 cent per share for an expected payment of $3.4m to be paid
on 25 July 2022. This has not been recognised as a liability at year end. The dividend is fully franked. The DRP will apply to the
final dividend, with a discount of 2.5% to the market price. It is expected that shares allocated under the DRP will be issued and
allocated on the dividend payment date.
Dividend franking account
$’000 AUD
30% franking credits available to shareholders of Thorn Group Limited
2022
16,435
2021
28,346
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.
44 I Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
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
2022
2021
Profit attributable to ordinary shareholders (basic) $’000 AUD
Profit attributable to ordinary shareholders (basic)- Continuing operations
12,865 (4,448)
Profit attributable to ordinary shareholders (basic)- Discontinued operation
19,481
12,844
Profit attributable to ordinary shareholders (basic)
32,346
8,396
Weighted average number of ordinary shares (basic) ‘000’s
Issued ordinary shares at 1 April
Effect of shares issued
339,188
322,350
52
6,874
Weighted average number of ordinary shares for the year
339,240
329,224
Weighted average number of ordinary shares (diluted) ‘000’s
Issued ordinary shares at 1 April
Effect of shares issued
339,188
322,350
1,075
9,066
Weighted average number of ordinary shares for the year
340,263
331,416
Earnings per share – Continuing operations
Basic earnings per share (cents)
Diluted earnings per share (cents)
Earnings per share – Discontinued operation
Basic earnings per share (cents)
Diluted earnings per share (cents)
Earnings per share - Consolidated
Basic earnings per share (cents)
Diluted earnings per share (cents)
3.8 (1.4)
3.8 (1.4)
5.7
3.9
5.7
3.9
9.5
2.6
9.5
2.5
Annual Report 2022 I 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
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***
Thornmoney Pty Ltd**
Thorn Equipment Finance Pty Ltd***
Thorn Business Finance Pty Limited***
Thorn ABS Warehouse Trust No. 1
Thorn Finance Pty Ltd*
Thorn Services Pty Ltd*
Thorn Employee Services Pty Ltd*
Thorn Administration No.1 Pty Ltd*
Country of
Incorporation
Ownership Interest
2022
2021
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
N/A
100%
N/A
N/A
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
N/A
N/A
N/A
N/A
*These entities were incorporated during the year
** The entity had a name change during the year, previously A.C.N. 648 650 711 Pty Ltd
***These entities were de-registered 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, with the exception of Thorn ABS Warehouse Trust No.1, 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
46 I Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound
up.
Pursuant to ASIC Corporations Instrument 2016/785, Thorn Australia Pty Limited, Thornmoney Pty Ltd and Thorn Services Pty
Ltd are 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 2022, 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 2022, and throughout the financial year ending 31 March 2022 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
2022
2021
27,167
27,167
108,158
-
-
158,049
(49,891)
-
108,158
24,176
-
24,176
-
108,181
-
-
157,843
(49,891)
229
108,181
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
Thorn Business Finance receivables are financed by a 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 asset/ (liabilities)
2022
64,045
18,705
82,750
60,591
359
60,950
21,800
2021
141,592
19,745
161,337
166,303
3,721
170,024
(8,687)
Annual Report 2022 I 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
The Group provide additional support to the special purpose entity including a liquidity facility of $3.6m (2021: $3.6m) and a bill
and collect facility of $1.9m (2021: $1.9m).
When the securitised warehouse is re-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. DISCONTINUED OPERATIONS
On 20 December 2021, Thorn completed the sale of assets attached to the Consumer Finance (Radio Rentals) division to Credit
Corp. It therefore deems the net profit after tax in the ordinary course of business related to the division as a discontinued
operation profit.
Thorn has received a cash consideration for the sale of $43.9m, with an additional amount of approximately $2.3m payable on
a deferred and conditional basis. Based on management assessments, it is highly improbable that the conditions to receive the
deferred amount will be met by the agreed timeline and hence the $2.3m was not taken to revenue.
The sale consideration was offset by $1.4m payable to Credit Corp for transferring employees’ leave liabilities. This amount is
currently in the statement of financial position as a payable. Thorn and Credit Corp commenced a transitional services period of
6 months in December 2021, including the secondment and subsequent transfer of relevant employees. The profit on sale was
reduced by the costs of sale and provisioning to record a net gain on sale of $11.7m.
The financial performance and cash flow information presented below are for the eight months ended 20 December 2021
(2022 column) and the year ended 31 March 2021.
2022
33,921
(26,176)
7,745
-
7,745
11,736
-
19,481
2022
33,713
43,876
(799)
76,790
2021
70,692
(57,848)
12,844
-
12,844
-
-
12,844
2021
90,882
-
(21,158)
69,724
(a) Result of discontinued operations
$’000 AUD
Revenue
Expenses
Results from operating activities
Income tax
Results from operating activities, net of tax
Gain/(loss) on sale of discontinued operation
Income tax on sale of discontinued operation
Profit (loss) from discontinued operations, net of tax
(b) Cash flow from /(used in) discontinued operation
$’000 AUD
Net cash used in operating activities
Net cash from investing activities
Net cash from financing activities
Net cash flows for the year
48 I Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
(c) Effect of disposal on the financial position of the Group
$’000 AUD
Cash and cash equivalents
Inventory
Trade and other receivables
Deferred tax asset
Trade and other payables
Lease liability
Employee benefits
Provisions
Net assets and liabilities
Consideration received, satisfied in cash
Cash and cash equivalents disposed of
Net cash inflows
2022
(65)
209
31,815
-
(3,825)
(281)
(1,318)
(2,022)
24,513
43,876
-
43,876
Consideration payable for transferring employees’ leave liabilities, to be satisfied in cash
(1,403)
24. RELATED PARTIES
Key management personnel remuneration
$
Short-term employee benefits*
Post-employment benefits
Long-term employee benefits
Share-based payments
2022
2,238,685
82,738
-
32,328
2,353,751
2021
1,532,221
376,168
-
(90,622)
1,817,767
* 2022 includes $313,051 that was paid in December 2021 for the STI awarded in relation to 2021 financial year. An additional amount of $234,451 and
$98,623 was payable to Peter Lirantzis and Luis Orp respectively.
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 are provided in the remuneration report section of the Directors’ report.
There were no loans made or outstanding to Directors or executive KMPs during or at the end of the year.
In the prior financial year, the Group made an investment into Quicka Holdings Pty Ltd and subsequently the Group’s CEO Peter
Lirantzis was appointed as a non-executive director of Quicka Holdings Pty Ltd. As per note 8 the investment was sold during
FY22, and Peter resigned as a director on 20 December 2021. No related party transactions have taken place prior to the date
of his resignation.
Transactions with related party entities
The following table details the total amount of transactions that have been entered into with related parties during the year.
$’000 AUD
General Provincial Company Ltd
2022
1,868
2021
-
The transactions relate to insurance premiums for Civil Liability and Professional Indemnity insurance and Directors and
Officers Liability insurance.
Annual Report 2022 I 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
25. SHARE BASED PAYMENTS
The Company currently has one active LTI plan running with 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 2019 plan.
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.
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 2019 Grants Percentage of Performance Rights subject to TSR
< 50th percentile
50th percentile
50th to 75th percentile
75th percentile or greater
condition that qualify for vesting
0%
50%
Assessed on a straight-line basis
100%
Thorn Group Limited’s EPS Hurdle 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 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
The value of performance rights issued to executives and management is a mathematical model calculation designed to show
an intrinsic value. This is necessary to show the benefit attributable to the employee in the year of issue but before that benefit
is actually received by the employee.
The number of performance rights to be issued is derived from the relevant percentage of the employee’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.
50 I Annual Report 2022
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2022
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 2018
1 July 2019
1 September 2021
31 October 2021
1 September 2022
31 October 2022
$0.46
$0.26
Nil
Nil
$0.60
$0.31
44.0%
46.0%
2.1%
1.0%
2.8%
0.0%
Long term incentive outcomes for FY22
The 2018 plan was tested at 1 September 2021, failed the performance criteria, and all performance rights attaching to it
lapsed.
Performance rights granted as compensation in the year
No performance rights were granted during the 2022 financial year.
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 2021
Granted as
Compensation
Vested during
the year*
Lapsed/Forfeited
Held at 31 March
2022
Performance rights
1,311,624
-
(464,253)
(847,371)
-
* These rights were allocated as part of Peter Lirantzis’ sign on share plan and does not form part of the LTI plans disclosed above.
The Company has one current active plan for the 2022 financial year, however there are no employees in this plan due to
forfeiture upon cessation of employment.
26. EMPLOYEE BENEFIT EXPENSE AND LIABILITIES
Employee benefit expense
$’000 AUD
Employee benefit expense
* restated to remove discontinued operation.
2022
14,137
2021*
13,171
Employee benefit expense includes redundancy expenses of $145,000 (2021: $1,267,000 restated) and super expenses of
$843,000 (2021: $859,000).
Employee benefit liabilities
$’000 AUD
Current
Annual leave liabilties
Long service leave liabilities
Incentive provision
2022
2021
1,043
1,540
177
587
3,248
1,210
Other employee benefit accruals
622
614
Non-current
Long service leave liabilities
5,090
3,951
77
170
77
170
Annual Report 2022 I 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2022
The entire amount of the provision of $5,090,000 (2021: $3,951,000) is presented as current, since the group does not have an
unconditional right to defer settlement for any of these obligations. However, the group does not expect all employees to take
the full amount of accrued leave or require payment within the next 12 months. Total amount of $1,155,000 is not expected to
be paid in the next 12 months (2021: $1,148,000).
27. AUDITORS’ REMUNERATION
In whole AUD
Audit services
Audit and review of financial reports
Total Audit Services
Other services
Other assurance services
Other assurance services
Non audit services
Tax compliance
Total non-audit services
Total auditor’s remuneration
28. SUBSEQUENT EVENTS
Dividend declaration
2022
UHY
Haines Norton
2021
UHY
Haines Norton
356,283
356,283
100,800
100,800
96,213
96,213
553,296
375,000
375,000
100,000
100,000
50,000
50,000
525,000
Refer to note 17 for the final dividend declared by the directors on 30 May 2022, to be paid on 25 July 2022. The Company’s
Dividend Reinvestment Plan (‘DRP’) will apply to the final dividend with a discount of 2.5% to the market price.
Share buy back programs
On 30 May 2022, Thorn completed a minimum holding share buy back, under which it bought back and cancelled 81,977 fully
paid ordinary shares for $21,150.
Thorn is conducting an on-market share buy back program of up to 5% of Thorn’s ordinary shares, or up to 16,994,615 ordinary
shares, commencing 1 March 2022 and for up to 12 month period. From 1 April 2022 to 24 June 2022, the Group has bought
back 861,851 fully paid ordinary shares for a total cost of $224,965.
Legal proceedings
On 27 September 2021, the Supreme Court of New South Wales delivered judgement in Thorn’s favour in relation to a disputed
property lease.
On 23 June 2022, the appeal by Centuria against the judgement in favour of Thorn at first instance was dismissed by the NSW
Court of Appeal (Centuria Property Funds Ltd v Thorn Australia Pty Ltd [2022] NSWCA 104).
Other
During the period of May 2022 to 24 June 2022, Thorn acquired shares in another ASX listed company, Humm Group Limited,
for a cost of approximately $3.55 million.
52 I Annual Report 2022
DIRECTORS’ DECLARATION
For the year ended 31 March 2022
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 18 to 52 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 2022 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 2022.
Signed in accordance with a resolution of the directors.
Warren McLeland
Chairman
Dated at Sydney
24 June 2022
Annual Report 2022 I 53
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 2022, which comprises the consolidated statement of financial
position as at 31 March 2022, 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 2022 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.
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.
We have determined the matters described below to be the key audit matters to be communicated in
our report.
54
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
GAIN ON THE SALE OF RADIO RENTALS ASSETS
Why a key audit matter
How our audit addressed the risk
the size and complexity of
Given
the
transaction, there is a risk that the calculation
of the overall gain on the sale in the profit and
loss at 31 March 2022, is not materially correct
and that the transaction is not appropriately
disclosed in the financial statements to comply
with requirements of Australian Accounting
Standards.
We performed the following audit procedures,
amongst others:
• We obtained the final sale contract and the final
calculation for the gain on sale.
• We obtained proof of
the
consideration for the sale in the bank, including
balances payable at 31 March 2022.
receipt of
• We held discussions with management to
understand the process for determining what
balances were attributable to the gain on sale.
• We substantively tested a sample of balances
that are included in the gain calculation to
ensure accuracy of balances included, and the
final gain amount.
assessed
We
and
completeness of the Group’s disclosures against the
requirements of Australian Accounting Standards.
reasonability
also
the
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
significant
volumes of transactions.
recording of
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 the design and implementation of key
controls over relevant IT systems, which included
assessing: the governance of the Group’s technology
IT change management
control environment,
controls, security and access controls, system
development controls and IT operations controls.
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.
Controls relating to the management of IT
systems are
important because they are
intended to ensure changes to applications and
implemented and
data are appropriately
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.
55
An 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
PROVISION FOR IMPAIRMENT LOSSES ON LOANS AND RECEIVABLES
Why a key audit matter
How our audit addressed the risk
We performed the following audit procedures,
amongst others:
• We assessed the appropriateness of the
Group’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
the
assumptions with
requirements of AASB 9, and the consistency
of assumptions across different elements of
the expected credit loss calculations;
respect
to
• 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 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 Group’s disclosures against the requirements
of Australian Accounting Standards.
lease
(including
AASB 9 requires entities to estimate
expected future credit losses on its financial
assets
loan
receivables). These estimates incorporate
both historical and
looking
information, including historical loss rates,
forward economic projections and other
creditworthiness indicators as appropriate.
forward
and
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 Group in determining their
provisioning rates, such as:
•
• Assumptions made with respect of
projected forward loss rates for
customers,
varying groups of
including
and
type
industry
location;
assumptions
and
Judgements
involved in utilizing complex credit
loss models;
Judgements
in
determining whether customers
have experienced a significant
increase in credit risk;
involved
•
• Assumptions of how the Group’s
existing receivables will perform in
regards to potential future COVID-
19 related restrictions on activity;
Judgements
calculation
provision balances;
involved
of
in
overlays
the
over
•
Refer to note 14 of the financial statements
for further information on the Group’s
expected credit loss provisioning.
56
An 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
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 2022, 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.
57
An 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
• 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.
58
An 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
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to 15 of the directors’ report for the
year ended 31 March 2022.
In our opinion, the Remuneration Report of Thorn Group Limited for the year ended 31 March 2022,
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
24 June 2022
UHY Haines Norton
Chartered Accountants
59
An 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
SHAREHOLDER INFORMATION AS AT 30 JUNE 2022
Additional information required by ASX and not disclosed elsewhere in this report is set out below. The information is
current as at 30 June 2022.
HOLDINGS
The issued capital of Thorn Group Limited is as below.
Equity Class
Fully Paid Ordinary Shares
DISTRIBUTION OF SHAREHOLDERS
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and Over
Rounding
Total
Number of Holders
Total Ordinary Shares
Issued
3,137
339,248,886
Fully Paid Ordinary Shares (Total)
Number of Holders
Number of Ordinary
Shares Held
% of Ordinary Shares
215
890
757
1,078
197
38,051
3,268,056
5,903,465
33,175,997
296,863,317
3,137
339,248,886
0.01
0.96
1.74
9.78
87.51
0.00
100.00
There were 278 shareholders (representing 151,271 shares) who held less than a marketable parcel.
SUBSTANTIAL SHAREHOLDERS
Rank
Registered Shareholder
1
2
ICM Limited
Moat Investments Pty Ltd
Number of Ordinary
Shares Held*
163,991,998
17,050,000
% of Ordinary Shares
48.33%
5.03%
*Number of shares at date of last substantial shareholder notice lodged with the Company as at 30 June 2022. Please refer to ASX for up-to-date
information about Thorn’s securities.
VOTING RIGHTS
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.
ON-MARKET BUYBACK
Thorn is conducting an on-market share buy-back program of up to 5% of Thorn’s ordinary shares, or up to 16,994,615
ordinary shares, commencing 1 March 2022 and for up to 12 months. As at 30 June 2022, Thorn has bought back 1,061,959
fully paid ordinary shares for a total cost of $273,763.30. The average buy-back price was ~$0.2578.
Page 60
SHAREHOLDER INFORMATION AS AT 30 JUNE 2022
20 LARGEST SHAREHOLDERS
Rank
Registered Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
17
19
20
J P Morgan Nominees Australia Pty Limited
Moat Investments Pty Ltd
Mr Sean Patrick Martin
Ace Property Holdings Pty Ltd
Jet Invest Pty Ltd
Gliocas Investments Pty Ltd
Lazarus Corporate Finance Pty Ltd
Mast Financial Pty Ltd
Mr Sunny Yang + Mrs Connie Yang
HBD Services Pty Ltd
Mr Warwick Sauer
Trober No 57 Pty Ltd
Australian Executor Trustees Limited
Mr Benjamin Youngman Graham + Mrs Cara Janine Graham
Mr Sunny Li Sheng Yang + Mrs Connie Cong Huan Yang
Mr Hongbin Chen
Huntingdale Management Pty Ltd
Mr Kim Bee Tan + Mrs Verna Suat Wah Tan
Mr Jason Bradley Whelan
ADC (Investing) Pty Ltd
Number of Ordinary
Shares Held
176,047,884
17,050,000
8,422,891
8,100,000
3,929,043
3,503,763
3,236,392
3,194,010
3,172,776
2,562,253
2,044,822
1,850,269
1,751,984
1,750,000
1,698,659
1,501,100
1,450,000
1,450,000
1,349,466
1,250,000
Totals: Top 20 holders of Fully Paid Ordinary Shares (Total)
Total Remaining Holders Balance
245,315,312
93,933,574
Please refer to ASX for up-to-date information about Thorn’s securities and change of interests of substantial holders.
% of Ordinary Shares
51.89
5.03
2.48
2.39
1.16
1.03
0.95
0.94
0.94
0.76
0.60
0.55
0.52
0.52
0.50
0.44
0.43
0.43
0.40
0.37
72.31
27.69
Page 61
SHAREHOLDER INFORMATION AS AT 30 JUNE 2022
NON-EXECUTIVE DIRECTORS
Warren McLeland
Chairman, Non-Executive Director
Paul Oneile
Deputy Chair, Non-Executive Director
Allan Sullivan
Non-Executive Director
COMPANY SECRETARY
Alexandra Rose
REGISTERED OFFICE
Thorn Group Limited
Groud Floor, 320 Pitt Street
Sydney NSW 2000
www.thorn.com.au
Telephone: +61 2 9101 5000
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
Page 62