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Willis Lease Finance CorpAnnual
Report
31 March 2023
ACN 072 507 147
CONTENTS
Directors’ Report
Lead Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
2
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18
19
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Annual Report 2023 I 1
DIRECTORS’ REPORT
For the year ended 31 March 2023
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 2023
and the auditor’s report thereon.
OPERATING AND FINANCIAL REVIEW
Principal activities
Thorn is a financial services group providing commercial finance to small and medium-sized enterprises. During the period, the
Group restructured and recommenced the utilisation of its securitised warehouse facility to fund the growth of asset finance.
Revenue from continuing operations fell 11.6% from $17.3m to $15.3m, and the net profit after tax (“NPAT”) declined from
$32.3m (including proceeds from Radio Rentals sale) to $2.5m profit. Refer to Business Finance review below.
Financial performance
A$m
Business Finance
Corporate
Sub-total
Fair value gains/(losses) on derivative
Net interest expense
Profit/ (loss) before tax
Tax expense
Profit / (loss) after tax from continuing operations
Profit from discontinued operation after tax
Net profit after tax
Business Finance
Segment revenue
Segment EBIT to NPAT
2023
14.5
0.8
15.3
2022
17.3
-
17.3
2023
7.6
(0.8)
6.8
(1.1)
(7.0)
(1.3)
-
(1.3)
3.8
2.5
2022
25.7
(7.6)
18.1
1.5
(6.8)
12.8
-
12.8
19.5
32.3
Thornmoney relaunched its asset finance business in December 2021. Asset finance originations were $118.2m for the year
(2022: $21.7m).
Invoice finance, providing a line of credit backed by the SME’s invoices, amounted to $37.2m in drawdowns for this period
(2022: $2.3m).
The combined receivables balance of $135.3m increased from $88.6m at 31 March 2022; revenue for the 2023 financial year
decreased by 11.6% to $15.3m (2022: $17.3m).
The asset finance receivables 30 days plus arrears were 2.9% at 31 March 2023 (2022: 7.4%).
Operating expenses, excluding impairment expenses, were slightly up at $9.8m (2022: $7.6m) due to the relaunch of the asset
finance business.
Earnings before interest and taxes (EBIT) amounted to $7.6m profit (2022: $25.7m).
Corporate
Corporate EBIT increased from ($7.5m) to ($0.8m) due to continued cost reductions in line with the business restructure and
the implementation of the Group’s new business strategy.
Significant items
No significant items in the current financial year.
Net interest expense
Net interest expense from continuing operations increased by 2.9% from $6.8m to $7.0m. Borrowings in the warehouse
increased to $114.9m (2022: $60.6m) with new originations being directly funded by the warehouse facility.
2 I Annual Report 2023
DIRECTORS’ REPORT
For the year ended 31 March 2023
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 in prior years, 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 Operations
In December 2021, the Group’s assets in the Consumer Finance division, Radio Rentals, were sold to Credit Corp Group Limited.
During the 2023 financial year, Thorn received an additional deferred cash consideration of $2.3m for the sale, taking the total
consideration received to $46.2m. Thorn negotiated an extension of the transitional services agreement with Credit Corp
Group Limited for an additional $1.8m. The arrangement ended on 20 December 2022.
The discontinued operations segment recorded a profit after tax of $3.8m (2022: $19.5m).
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 2023
31 March 2022
$m
Cash at bank
Receivables
Prepayments and other assets
Derivative financial instruments
Investments
Total Assets
Borrowings
Other liabilities
Total Liabilities
Total Equity
Gearing (net debt/equity) (i)
Return on Equity
Earnings Per Share
excl. Trust
incl. Trust
excl. Trust
incl. Trust
17.4
45.3
2.3
-
2.7
67.7
-
8.9
8.9
58.8
Nm
28.8
141.5
2.3
-
2.7
175.3
114.9
9.4
124.3
51.0
191.7%
1.7%
7.3
68.1
50.0
6.4
-
-
124.5
-
17.8
17.8
106.7
86.8
88.6
6.4
-
-
181.8
60.6
18.4
79.0
102.8
(7.3%)
32.6%
95.3
(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). The cash balance was reduced by a capital return of $41.7
million paid to eligible shareholders in October 2022. At 31 March 2023, free cash was $17.4m and cash in the warehouse was
$11.4m (2022: $68.1m and $18.7m).
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 asset finance receivables gross balance increased by $39.3m to $149.7m (2022: $110.4m) due to strong originations during
the year. The provision reduced to $16.6m (2022: $22.1m). The net receivables balance increased by $43.6m to $133.1m (2022:
$88.3m).
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.
Annual Report 2023 I 3
DIRECTORS’ REPORT
For the year ended 31 March 2023
Invoice finance receivables, which are backed by SME invoices, have a $3.4m balance as at 31 March 2023 (2022: $0.3m)
Investments
During the 2023 financial year, Thorn acquired shares in ASX listed companies for a total cost of $4.4m.
Other liabilities
The other liabilities for the Group reduced to $9.4m driven by the prior sale of its Consumer Finance division, with the balance
attributable to reduced payables and employee-related liabilities as the size of the business reduced.
Funding
The Group has the following debt facility limits:
$m
Securitised Warehouse Facility
Securitised warehouse facility
2023
200.0
2022
60.6
Thorn is financed by a rated securitised warehouse facility (“the warehouse”). From May 2020 to July 2022, the warehouse was
in amortisation due to a breach of one of its warehouse parameters, 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. While this
event subsisted, Thorn was unable to sell its originations into the warehouse, and the distributions it was expecting from the
warehouse via the waterfall distribution mechanism were retained in an excess spread reserve.
The warehouse was restructured with a funding limit of $200 million and re-commenced utilisation in August 2022. The existing
notes were repaid in full and the balance of the excess spread reserve was repaid to unitholders. There have been no
subsequent deposits to the excess spread reserve and further transfers are not expected except in the case of an amortisation
event. Thorn Business Finance is financed by the warehouse with senior notes held by a major Australian bank, mezzanine
notes held by a major Australian financial services company, and equity class G notes held by Thorn.
The warehouse facility is secured by loans and payments receivable from the underlying receivable contracts and is non-
recourse to the Group, meaning Thorn’s liability is limited to its class G notes unless it is liable in damages for breach of the
warehouse documents or it is required to buy back an ineligible receivable (defined as one that breached Thorn’s initial sale
representations and not merely that it goes into arrears or defaults).
Interest on the warehouse is charged at a fixed interest premium plus a floating 1-month BBSY (LY: fixed interest premium plus
3-months BBSY).
The facility is currently available until August 2023, however Thorn is negotiating a renewal with its funders. If agreement is not
reached with the funders, further receivables are not able to be sold into the facility, and the portfolio will amortise down for
as long as the underlying receivables are payable. While the warehouse is in operation there will be no repayment of
borrowings and principal collected will be utilised to purchase eligible receivables, hence the full balance of the warehouse
facility is disclosed as non-current. In the comparative March 2022, the warehouse was in amortisation, and the principal was
applied to repay noteholders with the amounts expected to be due and payable on the warehouse facility in the next 12
months being disclosed as current. This payment structure would recommence if the current warehouse facility went into
amortisation.
There were reported technical breaches of compliance parameters in the warehouse during the financial year and for the
period to May 2023. All breaches were remedied within 30 days and no further action taken. To rectify this, the warehouse
parameters were amended with funder consent in May 2023 to align more closely the industry parameters with newly created
asset finance business.
4 I Annual Report 2023
DIRECTORS’ REPORT
For the year ended 31 March 2023
DIVIDENDS PAID OR RECOMMENDED
2023
Final 2022
Interim 2023
Special dividend
Total amount
2022
Final 2021
Interim 2022
Special dividend
Total amount
Cents per
Amount
Franking
share
$’000 AUDs
%
Date of
Payment
1.0
-
3.0
4.0
1.0
-
7.0
8.0
3,392
-
10,429
13,821
3,375
-
23,792
27,167
30%
n/a
30%
30%
n/a
30%
25 July 2022
n/a
2 September 2022
21 July 2021
n/a
9 February 2022
During the year, Thorn paid total dividends of 4 cents per share(*), totalling $13.8m. A number of Thorn’s shareholders
participated in the Company’s dividend reinvestment plan (‘DRP’) offered for the final 2022 dividend, resulting in $2.0m of the
total being reinvested in Thorn shares. Net cash outflow was $11.8m.
*Based on shares prior to the 10:1 share consolidation approved by shareholders on 30 September 2022 and completed on 14 October
2022.
RISKS AND CHALLENGES
Risk management is an integral part of Thorn’s business model. The Board operates with risk management as a key focus and
has implemented a ‘tone from the top’ approach. The material business risks for the Group are summarised below.
Financial Risks
Key Risks
Macroeconomic risk arises from factors such as
inflationary pressures, unemployment, interest rates,
lack of income growth, business investment,
government policy & spending, the volatility and
strength of global and Australian capital markets,
currency value and exchange rates.
Credit risk is the risk of loss that arises when a
customer or third party fail to pay an amount owing to
the Company or a change in customer circumstances
or a failure by Thorn to adequately assess and manage
credit risk. This may result in credit losses, decreased
operating cash flows, increased funding costs and/or
reduced access to funding. Thorn is exposed to the risk
that its customers do not meet their financial
obligations (e.g. their obligation to repay loans) or
become insolvent.
How Thorn responds
•
•
•
•
Thorn continuously monitors the risk of changes in
Australia and global environment that may impact the
economic environment or its business.
Thorn manages the business responsibly, protecting the
Group’s strong capital position and maintaining
conservative buffers to address uncertainties, in line with
the Group’s liquidity policy and funding strategy.
Thorn provides business finance to SMEs pursuant to
policies and procedures that are intended to ensure that
there is no concentration of credit risk. The Group is
subject to a higher level of credit risk due to the credit-
constrained nature of many of its customers.
Thorn has a strong credit risk framework that allows a
consistent credit assessment process for each customer.
The key components of the credit risk framework include
governance (Thorn has established a Credit Committee to
manage its credit risk framework and defined risk
appetite), credit risk policies, credit procedures, arrears
Annual Report 2023 I 5
DIRECTORS’ REPORT
For the year ended 31 March 2023
Funding risk is the risk of an adverse impact to the
earnings or operations of Thorn that may result from
having insufficient funds to meet obligations when
they become due, customer demands for funds or any
other financial obligations.
•
•
•
•
management (including collections and recoveries) and
portfolio monitoring and reporting. Credit risk typically
grows in line with the growth of the loan and lease
receivables in all segments.
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.
See note 13 for Thorn’s approach to measuring expected
credit losses (ECL).
Thorn continuously monitors the risk of changes in
Australia and global environment that restricts access to
capital.
Thorn maintains close relationships with its core funders
and manages debt levels within acceptable limits.
Thorn maintains a liquidity policy and funding strategy
which are designed to ensure sufficient funds to support
new loan originations and pay maturing liabilities through a
pre-defined time horizon as well as meeting specific
liquidity position requirements.
Non-financial Risks
Key Risks
How Thorn responds
Strategic risk: risk that Thorn's strategy does not
address market changes or unforeseen events or
initiatives from Thorn's competitors, or that the
strategy is not effectively implemented.
Operational risks are the risk of loss resulting from
inadequate or failed internal processes, people and
systems, or from external events. This includes risks
such as data, cyber, IT, security, outsourcing and legal.
Cyber, technology & Data risk: there is a risk of
disruption to Thorn’s business activities, due to an
externally driven crisis, cyber attack, the failure of
information technology platforms or system failures
and where Thorn’s operations are dependent on
access to third party technology and data providers to
accurately assess customers and provide reliable
services (including reporting). If disruption was to
occur, Thorn could face significant cost, material data
protection issues and/or disruption to its business,
operations or financial performance.
•
•
•
•
•
•
•
•
•
Regularly discuss strategy and strategic initiatives with the
Board
Remain flexible and agile in Thorn’s core business strategy
Monitor industry developments affecting business finance
for SMEs
Thorn has specific capabilities, policies and procedures to
manage and monitor operational risks. These include (but
are not limited to) processes for customer identification,
credit assessment and internal and external fraud
monitoring.
Cyber, technology & Data Risk is a subset of Operational Risk.
Thorn maintains appropriate data governance, controls and
monitoring, including data loss prevention and cyber
protection mechanisms that supports the business to protect
its systems, minimise disruption, ensure privacy compliance
and data protection for all stakeholders and the Group’s
ability to respond to the changing cyber threat environment.
Thorn has implemented resilience programs and processes
to enhance the reliability of its platform. This includes
enhancing flexibility to work across multiple locations in any
event of disruption in one workplace.
Thorn uses specialist third party security operations to
identify potential breaches and responds to minimise impact
on the business, customer and partners.
Where Thorn relies on third parties to provide technology
solutions and (cloud) platforms, ongoing vendor
management assures that these partners are delivering
services in a manner compliant with standards.
6 I Annual Report 2023
DIRECTORS’ REPORT
For the year ended 31 March 2023
Regulatory and Compliance risk: is the risk of legal or
regulatory sanctions, financial loss, or loss to reputation
that Thorn may suffer as a result of its failure to comply
with laws, regulations, and standards of good practice
expected of a financial services company.
•
•
•
•
Thorn maintains and regularly tests, cyber security
procedures across critical systems, including Group-wide
security and cyber security awareness and education for all
employees.
Regulatory and Compliance Risk is a subset of Operational Risk
and managed with policies and practices aligned to the Risk
Management Framework.
Thorn’s objective is to manage regulatory and compliance risk
such that Thorn is compliant with all applicable laws,
regulations, codes of conduct and standards of good practice,
and manage operational risk so as to balance the avoidance of
financial loss and damage to the Group’s reputation, against
excessive cost and control procedures that restrict initiative and
creativity.
Continued engagement with local regulatory, industry and other
relevant stakeholder groups and monitoring the regulatory and
legislative landscape for material or emerging changes.
Emerging Risks
The Group continually monitors the regulatory and compliance environment to ensure that the business is abreast of all
potential changes. Thorn identifies and assesses emerging risks to ensure they are integrated into the Risk Management
Framework along with appropriate risk mitigant strategies.
REGULATORY MATTERS
The Group is regulated by the Australian Securities & Investments Commission and is a member of an external dispute
resolution scheme, the Australian Financial Complaints Authority (AFCA). 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.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Thorn acknowledges its role as a responsible corporate citizen to the environment, the community in which it operates and to
its people. Thorn aims to protect the environment in a sustainable manner preventing or reducing any negative impact of our
operations and activities. As a financial services company, the Group has a relatively small environmental impact. COVID-19 and
the related lockdowns led to a reduction in Thorn’s office environmental footprint. 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. Thorn will continue to look to implement strategies working towards minimising our carbon footprint.
Thorn’s sustainability approach is being progressed to ensure Thorn meets emerging ESG compliance requirements, including
reporting.
CONTINGENT LIABILITIES
In March 2023, Thorn and Thorn Australia Pty Ltd (“TAPL”) were served with a cross claim in Federal Court of Australia
proceedings in which the Commonwealth Attorney-General’s Department (under the Fair Entitlements Guarantee scheme) is
claiming damages, together with interest and legal costs, from Receivers who, on behalf of a secured creditor who appointed
the Receivers to do so, recovered assets from a third party. The proceedings are being defended by Thorn and TAPL. Refer to
note 14.
Annual Report 2023 I 7
DIRECTORS’ REPORT
For the year ended 31 March 2023
SUBSEQUENT EVENTS
Related party loan
On 6 April 2023, the principal repayment date of Somers Limited’s loan was amended and extended to 30 June 2023 at the new
interest rate of 12% per annum, accrued and compounded daily. Refer to note 23.
Securitised warehouse facility
The warehouse parameters were amended in May 2023 with funders consent to align more closely the Industry parameters
with the asset finance business. The current facility is available until August 2023, however Thorn is negotiating a renewal with
its funders.
Investments
On 22 May 2023, Thorn acquired an additional 62,500,000 shares in ASX listed company, Moneyme Limited, for a cost of
$5.0m. Following the investment, Thorn holds 64,408,413 ordinary shares in Moneyme Limited. On 24 May 2023, Thorn lodged
a notice of initial substantial shareholder with ASX, reflecting that Thorn’s voting power was 8.64%.
Asset finance portfolio update
Thorn is in negotiations with a party which has expressed interest in acquiring Thorn Australia Pty Ltd's and Thornmoney Pty
Ltd’s asset finance portfolio. At this stage, negotiations are incomplete and ongoing and no decision has been made in relation
to any potential sale or divestment of Thorn's asset finance portfolio. Thorn is also unable at this stage, to provide
shareholders with any estimates or guidance as to the financial impact of such a transaction on Thorn. Should any such
decision be made, Thorn will update the market in relation to any specific course of action if and when required.
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 $2.5m (2022: $32.3m) for the year ended 31 March 2023 and net cash
generated in operating activities during the same period amounted $52.4m outflow due to the relaunch of Business Finance
(2022: $54.0m inflow).
The directors have reviewed the Group’s cash flow forecast through to 30 June 2024.
The directors are of the opinion that there are reasonable grounds to believe the improved Balance Sheet efficiency & resulting
cash generation achieved by 31 May 2024 (moving receivables collateral from being funded On-Balance to being funded by the
securitised warehouse facility), alongside a smaller cost base will provide sufficient incoming net cashflows to sustain the
business well into the future.
OUTLOOK
Thorn’s policy is not to provide profit guidance and nothing in this report should be construed as profit guidance.
8 I Annual Report 2023
DIRECTORS’ REPORT
For the year ended 31 March 2023
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 was the non-executive Chairman of Invigor Group
Limited, 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
None
Former ASX directorships in the last three years
A2B Australia Limited
Invigor Group Limited
Interests in shares and options
23,500 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 former non-executive director of Invigor Group
Limited.
Other current ASX directorships
None
Former ASX directorships in the last three years
Invigor Group Limited
Interests in shares and options
24,755 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.
Annual Report 2023 I 9
DIRECTORS’ REPORT
For the year ended 31 March 2023
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
27
26
B
27
27
A
9
10
B
10
10
A
2
2
Allan Sullivan
A – Number of meetings attended
B – Number of meetings held during the time the director held office during the year
10
10
25
27
2
B
2
2
2
A
2
2
2
B
2
2
2
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Insurance
During the financial year, the Company paid insurance premiums of $655,000 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. These insurance policies 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.
10 I Annual Report 2023
DIRECTORS’ REPORT
For the year ended 31 March 2023
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
For the year ended 31 March 2023, the Non-Executive Directors (‘NEDs’) and KMP were:
Non-Executive Directors
Position
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
Director/Committee Chair
Term or Date
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Term or Date
Full Year
Terminated 30 September 2022
3. NON-EXECUTIVE DIRECTOR REMUNERATION
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 beyond the existing fee pool, 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 upcoming AGM.
From 1 April 2022, 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.
Name
Warren McLeland
Paul Oneile
Allan Sullivan
Total Non-Executive Director Remuneration
Year
2023
2022
2023
2022
2023
2022
2023
2022
Salary and fees
Superannuation
130,000
130,000
125,000
125,000
115,000
115,000
370,000
370,000
13,488
12,838
12,969
12,344
11,931
11,356
38,388
36,538
Total
143,488
142,838
137,969
137,344
126,931
126,356
408,388
406,538
Annual Report 2023 I 11
DIRECTORS’ REPORT
For the year ended 31 March 2023
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.
Thorn is committed to providing financial solutions to Small and Medium-sized Enterprises (SMEs)
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 or performance rights
(may be partially deferred)
Performance rights granted annually at the
Board’s discretion
Rewards experience, skills and capabilities
Rewards performance over a 12 month period
Fixed payment reviewed annually
Set with reference to comparable companies (in
terms of industry and size), the scope and
nature of the role, and the executive’s
qualifications, skills, and experience
CEO sign on allocation of share rights
At-risk wholly dependent upon achieving agreed
performance
(only paid if targets achieved)
Payment is determined by performance against
certain financial targets
Rewards achievement of the Company’s
shareholder return targets over a three year
period
At-risk wholly dependent upon achieving agreed
performance
Vesting is determined by performance against
targets that align to the Company’s long term
shareholder return objectives
As part of his remuneration package on appointment as CEO, Peter Lirantzis was provided with an upfront allocation of 464,253
units of share rights (post the 10:1 share consolidation, 46,425). These rights required 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 until 10 February 2024. 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.
Share Rights Granted
Financial Year in which Grants
Vest
(ended 31 March)
Values Yet to Vest $
Financial Year in which
Escrow released
(ended 31 March)
Peter Lirantzis
Number
464,253
Date
22 May 2020*
2022
Min (a)
Nil
Max (b)
-
2024
*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.
12 I Annual Report 2023
DIRECTORS’ REPORT
For the year ended 31 March 2023
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
Former KMP’s
Luis Orp*
Total
Remuneration
2023
2022
2023
2022
2023
2022
499,308
-
424,412
-
499,308
-
522,876
234,451
180,000
286,974
-
-
360,000
-
153,427
98,623
679,308
286,974
424,412
-
859,308
-
676,303
333,074
24,861
23,100
24,861
23,100
49,722
46,200
-
-
-
-
-
-
-
948,581
32,328
1,312,063
-
-
-
491,835
635,150
1,440,416
32,328
1,947,213
* Luis Orp’s employment terminated on 30 September 2022
a)
b)
c)
The amounts are earned by the KMP but, due to the introduction of the deferral mechanism, 50% of the total FY22 STI was paid in Q3 FY23, 25%
is to be paid in the Q3 FY24 and the remaining 25% is to be paid in the Q3 FY25. The FY23 STI will be paid 50% in Q3 FY24 and 50% in Q2 FY25.
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 paid in FY22 financial year to Peter Lirantzis and Luis Orp respectively for FY21.
The LTI column represents the accounting charge recognised in the Company’s profit or loss statement in respect of the long term incentive plan,
and also include retention payments settled in equity. The charge reflects the fair value of the performance rights calculated at the date of grant
using a Monte Carlo simulation model and allocated to each reporting period over the period from grant date to the expected vesting date. The
value disclosed is the portion of the fair value of the performance rights allocated to this reporting period. Where grants lapse due to the failure
or anticipated failure to achieve non-market condition hurdles then the expense previously recognised can be reversed and result in a negative
entry in this column.
Remuneration mix
The table below represents the target remuneration mix for Group executives in the current year:
KMP
At risk
Fixed remuneration
Short term incentive
Long term incentive
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.
Annual Report 2023 I 13
DIRECTORS’ REPORT
For the year ended 31 March 2023
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 remuneration framework described
below 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 and it continues to be same for FY23.
Performance Period
12 months
Gateway and
performance metrics (2023)
The FY23 STIs were set based upon recovery of COVID-19 and executing a number of strategic initiatives.
The KPIs that were assessed for financial year 2023 include:
Financial metrics including cash NPAT and preserving the cash balance;
•
• Market Benchmarking;
•
•
•
People and culture;
Capital, Risk and Funding; and
•
• 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 (2022)
The FY22 STIs 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;
Innovation and technology initiatives (delivery of technology strategies to allow for scale and digitalisation)
Assessment, approval and
payment
At the end of the financial year, the Remuneration & Nomination Committee assesses actual financial performance
based on the Company’s audited financial statements and each executive’s performance against the Group KPIs to
determine the value of each executive’s STI reward.
The Board has 100% discretion with the STI outcome including the exercising of judgement with regard to any matter,
both positive and negative, that may have occurred during the financial period and to adjust the levels of achievement
accordingly.
Once approved, the STI payments are expected to be paid in Q3 2023 (subject to the deferral mechanism detailed
below).
Deferral
CEO STI payment for FY23 to Peter Lirantzis is to be paid in two instalments (50% in Q3 FY24 and 50% in Q2 FY25). The
STI payment to other executive team members is paid in two instalments (50% in Q3 FY24 and 50% in Q2 FY25).
Payment of STI deferred amount is subject to continued employment and “good leaver” terms.
STI OUTCOMES FOR 2023
Given the performance against NPAT and other KPI measures, short term incentive payments will be made to the executive
KMPs for financial year 2023. The Board approved an STI outcome of 85% 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 2023, no executive KMPs were
involved in LTI plans and at the date of this report, no options had been issued or vested under the LTI plan. Refer to note 24
for details of the LTI plan that was in place for the year.
14 I Annual Report 2023
DIRECTORS’ REPORT
For the year ended 31 March 2023
Performance rights granted as compensation in the year
No performance rights have been granted as compensation during the period under any of these existing long term incentive
plans.
5. ALIGNMENT BETWEEN REMUNERATION AND PERFORMANCE – AUDITED
In considering the consolidated entity’s performance and benefits for shareholders’ wealth, the Board of Directors has regard
to the following indices in respect of the current financial year and the four previous financial years.
Year ending 31 March
Profit After Tax (AUD millions)
Earnings per share (cents)*
Dividends per share (cents)
Share price at year end ($)*
2023
2.5
7.3
4.0
1.14
2022
32.3
95.3
8.0
2.80
2021
8.4
2.6
8.5
0.18
2020
(81.1)
(33.7)
0.0
0.05
2019
(14.9)
(9.3)
0.0
0.46
Return on equity %
Return on equity is calculated as NPAT divided by the average book equity.
*Earnings per share and share price for 2022 has been adjusted as a result of 10:1 share consolidation during the 2023 financial year. 2019 to 2021
figures haven’t been updated for this amendment.
32.5
n/a
8.4
0.8
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.
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
Performance rights over ordinary shares issued last year to Peter Lirantzis are currently held in escrow with a two year hold
period until 10 February 2024.
Shareholdings of the directors and executive KMP
2023
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)
Consolidation of
shares(***)
Balance at the
end of the year
-
235,000
247,540
464,253
262,206
-
-
-
-
-
-
-
-
-
-
-
(211,500)
(222,785)
(417,827)
-
-
23,500
24,755
46,426
-
* Currently held in escrow with a two year hold period until 10 February 2024.
** Luis Orp’s employment terminated on 30 September 2022 and any shares held by him are not disclosed after this date.
*** During the year, shareholders approved a share consolidation of 10:1 basis.
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.
Annual Report 2023 I 15
DIRECTORS’ REPORT
For the year ended 31 March 2023
UNISSUED SHARES UNDER OPTIONS
At the date of this report, there are no unissued ordinary shares of the Company under option.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act for leave to bring proceedings on behalf of the
Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf
of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the
Corporations Act 2001.
AUDIT AND NON-AUDIT SERVICES
UHY Haines Norton performed certain other services in addition to their statutory duties. The Board, based on advice from the
Audit Committee, has considered the non-audit services provided during the year by the auditor and is satisfied that the
provision of those non-audit services is compatible with, and did not compromise, the auditor independence requirements of
the Corporations Act 2001 for the following reasons:
all non-audit services were subject to the corporate governance procedures adopted by the Company to ensure they do
not impact the integrity and objectivity of the auditor;
the non-audit services provided do not undermine the general principles relating to auditor independence; and
as set out in APES110 Code of Ethics for Professional Accountants, they did not involve reviewing or auditing the
auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the
Company or jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the consolidated entity, UHY Haines Norton, and its related practices for audit and
non-audit services provided during the year are set out in note 26.
The Company has agreed to indemnify the auditor, UHY Haines Norton, to the extent permitted by law.
ROUNDING OF FINANCIAL AMOUNTS
The Company is of a kind referred to in ASIC Instrument 2016/191 issued by the Australian Securities & Investments
Commission and in accordance with that Instrument, amounts in the financial report and directors’ report have been rounded
off to the nearest thousand dollars, unless otherwise stated.
CORPORATE GOVERNANCE STATEMENT
This statement outlines the main corporate governance practices in place throughout the financial year and can be referred to
on Thorn’s website at www.thorn.com.au/site/file/39/view/CorporateGovernanceStatement2023Clean.pdf
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 2023.
This report is made in accordance with a resolution of the directors:
Warren McLeland
Chairman
Dated at Sydney
31 May 2023
16 I Annual Report 2023
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 2023,
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
31 May 2023
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 2023
Notes
2023
2022
14,443
15,490
890
1,806
$’000 AUD
Continuing operations
Interest revenue
Other revenue
Revenue
Employee benefit expense
Reversal of impairment losses on loans and receivables
Marketing expenses
Property expenses
Communication & IT expenses
Insurance expenses
Legal expenses
Other expenses
Impairment of intangibles & property, plant and equipment
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/(losses) 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
25
13
27
8,9
2
12
10
22
Other comprehensive income (OCI) - items that may be
reclassified subsequently to profit or loss
Cash flow hedge reserve movements
Other comprehensive income – reclassification adjustments
Cash flow hedge reclassification adjustments 12
Other comprehensive income – items that will not be
reclassified to profit or loss
Changes in the fair value of equity investments at fair value through OCI 16
Other comprehensive income for the year
15,333
(9,290)
5,738
(199)
(374)
(1,771)
(1,901)
(936)
762
(583)
-
-
(8,554)
6,779
(1,106)
(7,020)
(1,347)
17,296
(14,137)
19,898
(359)
220
(3,942)
(2,601)
(1,592)
(4,362)
(389)
119
8,025
880
18,176
1,453
(6,764)
12,865
-
-
(1,347)
3,884
2,537
-
1,369
(1,677)
(308)
12,865
19,481
32,346
2,352
-
-
2,352
Total comprehensive profit
2,229
34,698
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)
17
17
17
17
17
17
(3.9)
(3.9)
11.2
11.2
7.3
7.3
37.9
37.8
57.4
57.3
95.3
95.1
* Earnings per share was adjusted in the prior year due to the consolidation of shares during the 2023 financial year. Refer to Note 17.
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 2023
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2023
$’000 AUD
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments and other assets
Income tax receivable
Total current assets
Non-current assets
Trade and other receivables
Derivative financial instrument
Deferred tax assets
Property, plant and equipment
Financial assets at fair value through other comprehensive income
Intangible assets
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
3
4
4
12
11
9
7
8
5
6
15
25
14
15
6
25
12
14
16
16
The Consolidated Statement of Financial Position is to be read in conjunction with the accompanying notes
Note
2023
2022
28,800
46,775
2,240
-
77,815
86,760
34,984
6,480
-
128,224
94,708
53,600
12
-
-
2,744
-
97,464
175,279
4,949
-
-
2,936
1,512
9,397
-
-
-
-
-
53,600
181,824
8,810
11
43,412
5,090
4,090
61,413
114,890
17,179
-
19
-
-
114,909
124,306
50,973
117,818
(1,677)
(65,168)
50,973
-
77
359
-
17,615
79,028
102,796
158,049
5,605
(60,858)
102,796
Annual Report 2023 I 19
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2023
$’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
$’000 AUD
Balance at 1 April 2022
Total comprehensive income
Net profit for the period
Release of retained earnings from reserves
Other comprehensive income
Total comprehensive income
Transactions with owners of the Company
Issue of shares under dividend reinvestment plan
Shares buy-back program
Return of capital
Transaction costs
Dividends to shareholders
Total transactions with owners of the Company
Balance at 31 March 2023
16
16
16
16
16
16
16
16
16
16
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
Share capital
Reserves
Retained
earnings
Total Equity
158,049
5,605
(60,858)
102,796
-
-
-
-
-
(6,974)
(308)
(7,282)
1,990
(405)
(41,716)
(100)
-
(40,231)
117,818
-
-
-
-
-
-
(1,677)
2,537
6,974
-
9,511
-
-
-
-
(13,821)
(13,821)
(65,168)
2,537
-
(308)
2,229
1,990
(405)
(41,716)
(100)
(13,821)
(54,052)
50,973
The Consolidated Statement of Changes in Equity is to be read in conjunction with the accompanying notes.
20 I Annual Report 2023
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2023
$’000 AUD
2023
2022
Cash flows from operating activities
Cash receipts from customers (excluding interest)
Interest revenue received
Cash paid to suppliers and employees
Asset finance originations and Invoice finance drawdowns/transfers
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
Loan to related parties
(Acquisition)/sale of equity investments
Net cash from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Redemption of borrowings
Repayment of lease liabilities
Proceeds from issues of shares
Payment for share buy back
Return of Capital
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
22
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.
129,288
13,036
(20,532)
(167,511)
(45,719)
(6,649)
-
(52,368)
(583)
(5,000)
(4,410)
(9,993)
114,890
(24,790)
(35,801)
-
1,990
(404)
(41,716)
(13,821)
348
(62,013)
4,053
86,760
28,800
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
Annual Report 2023 I 21
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2023
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)/losses 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
(Increase)/decrease in trade and other receivables
(Increase)/decrease in prepayments and other assets
Decrease in inventories
(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
22
The Consolidated Statement of Cash Flows is to be read in conjunction with the accompanying notes.
2023
2,537
583
-
(4,053)
1,106
-
(231)
(58)
(47,899)
4,241
-
(3,861)
(4,791)
(52,368)
-
(52,368)
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
22 I Annual Report 2023
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
1. SIGNIFICANT ACCOUNTING POLICIES
Thorn Group Limited (the ‘Company’ or ‘Thorn’) is a for-profit
company domiciled in Australia. The Company’s registered
office is Level 11, 1 York Street, Sydney NSW 2000 and
principal place of business is Level 13, 333 George Street,
Sydney NSW 2000. The consolidated financial statements of
the Company as at and for the financial year ended 31 March
2023 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.
(a) Statement of Compliance
The consolidated financial statements are general purpose
financial statements which have been prepared in accordance
with Australian Accounting Standards (‘AASBs’) adopted by
the Australian Accounting Standards Board (‘AASB’) and the
Corporations Act 2001. The consolidated financial statements
comply with International Financial Reporting Standards
(‘IFRSs’) adopted by the International Accounting Standards
Board (‘IASB’).
The consolidated financial statements were approved by the
Board of Directors on 31 May 2023.
(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 13.
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 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 2023 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 directors have prepared the consolidated financial
statements on a 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.
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) Revenue
The major components of revenue are recognised as follows:
Annual Report 2023 I 23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
(i)
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.
(ii) Other revenue includes late fees, establishment fees,
termination fees and other non-lease related income.
(d) 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.
(e) Impairment
Non-Financial Assets
In accordance with AASB 136 the carrying amounts of the
consolidated entity’s assets within the scope of the standard,
are reviewed at each balance date to determine whether
there is any indication of impairment. If any such indication
exists, the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs to
sell. In assessing the recoverable amount the estimated
future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific
to the asset.
For the purpose of impairment testing, assets are grouped
together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of
the cash inflows of other assets or groups of assets (the ‘cash-
generating units’). The assets acquired in a business
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.
(f) Goods and Services Tax
Revenue, expenses and assets are recognised net of the
amount of goods and services tax (GST), except where the
amount of GST incurred is not recoverable from the taxation
authority. In these circumstances, the GST is recognised as
part of the cost of acquisition of the asset or as part of the
expense.
Receivables and payables are stated with the amount of GST
included. The net amount of GST recoverable from, or
payable to, the ATO is included as a current asset or liability
in the statement of financial position.
Cash flows are included in the statement of cash flows on a
gross basis. The GST components of cash flows arising from
investing and financing activities which are recoverable from,
or payable to, the ATO are classified as operating cash flows.
(g) Changes in Accounting Policy
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.
(h) New Standards and Interpretations not yet adopted
Certain new accounting standards and interpretations have
been published that are not mandatory for 31 March 2023
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, however management and the
directors will continue to assess closer to the mandatory
dates.
24 I Annual Report 2023
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
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 Business Finance division and the discontinued operations (Consumer Finance division).
On 20 December 2021, the Group completed the sale of assets from the Consumer Finance division to Credit Corp Group
Limited. 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 divested 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.
2023
$’000 AUD
Sales Revenue
Interest Revenue
Other
Total Segment revenue
Operating expenses
Corporate re-allocation of expenses
EBITDA
Depreciation and amortisation
Impairment on PPE and intangibles
EBIT
Fair value losses on derivative
Finance expense
Profit from discontinued operations
Profit before tax
Segment assets
Segment liabilities
2022
$’000 AUD
Sales Revenue
Interest Revenue
Other
Total Segment revenue
Depreciation and amortisation
Impairment on PPE and intangibles
Gain on sale of discontinued operations
EBITDA
Depreciation and amortisation
Impairment on PPE and intangibles
Gain on sale of discontinued operations
EBIT
Fair value gains on derivative
Finance expense
Profit before tax
Segment assets
Segment liabilities
Consumer Finance
(Discontinued
operation)
Business Finance
Corporate
Consolidated
-
-
-
-
-
-
-
-
-
-
-
-
3,884
3,884
-
13,624
890
14,514
(3,494)
(2,911)
8,109
-
(559)
7,550
(1,106)
(7,020)
-
(576)
153,894
(119,782)
-
819
-
819
(4,477)
2,911
(747)
-
(24)
(771)
-
-
-
(771)
21,385
(4,524)
-
14,443
890
15,333
(7,971)
-
7,362
-
(583)
6,779
(1,106)
(7,020)
3,884
2,537
175,279
(124,306)
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
(24,979)
-
26,357
-
(402)
11,736
37,691
1453
(6,798)
32,346
181,824
(79,028)
Annual Report 2023 I 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
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
The breakdown of the allocated costs is as below.
2023
$’000 AUD
Employee benefit expense
Property expenses
Communication & IT expenses
Legal fees
Other expenses
Total corporate expenses re-allocated
2022
$’000 AUD
Employee benefit expense
Property expenses
Communication & IT expenses
Legal fees
Other expenses
Total corporate expenses re-allocated
3. CASH AND CASH EQUIVALENTS
$’000 AUD
Bank balances
Call deposits
Cash and cash equivalents
2023
2022
15,333
51,217
-
(33,921)
15,333
17,296
2,537
32,346
(3,884)
(19,481)
(1,347)
12,865
Consumer Finance
Business Finance
-
-
-
-
-
-
(1,218)
(240)
-
(315)
(1,138)
(2,911)
Consumer Leasing
Business Finance
(4,393)
(305)
(2,489)
(266)
(572)
(8,025)
2023
28,800
-
28,800
(2,481)
(77)
(631)
(213)
(481)
(3,883)
2022
86,760
-
86,760
Included in cash is an amount of $11.4m (March 2022: $18.7m) 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
Trustee. Within this balance $nil excess spread is held on 31 March 2023 (2022: $6.7m). Free cash is therefore $17.4m ( 2022:
$68.1m).
26 I Annual Report 2023
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
4. TRADE AND OTHER RECEIVABLES
$’000 AUD
Current
Trade receivables
Finance lease receivables
Loan receivables
Non-current
Finance lease receivables
Loan receivables
2023
891
4,635
41,249
46,775
1,578
93,130
94,708
2022
2,431
8,805
23,748
34,984
9,533
44,067
53,600
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 $18,511 (2022: $40,460) 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 13.
Loan receivables also includes a loan of $5.0m to a related party, Somers Limited. Refer to note 23 for further information.
5. TRADE AND OTHER PAYABLES
$’000 AUD
Trade payables
Other payables
2023
23
4,926
4,949
2022
103
8,707
8,810
Trade payables are unsecured and are usually paid within 30 days of recognition. Other payables consists of audit fee 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.
6. LEASES
Finance leases as lessor
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 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.
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. Further security may be obtained including the taking of personal and director
guarantees.
Annual Report 2023 I 27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
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
2023
6,345
2,090
8,435
(590)
(194)
(784)
(1,438)
6,213
2022
16,990
11,059
28,049
(2,181)
(1,418)
(3,599)
(6,112)
18,338
Gross cash flows are expected to be collected as follows: $6,345,000 less than one year, $2,024,000 between one and two
years, $65,000 between years two and three, $1,000 between years three and four, and nil between years four and five.
Finance lease revenue of $1,562,000 (2022: $4,134,000) has been recognised in interest revenue in the Business Finance
division.
Finance leases as lessee
No right-of-use assets or lease liabilities recognised during the 2023 financial year.
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
2023
2022
-
-
-
-
-
334
59
393
-
393
-
-
-
-
14
217
130
361
-
361
The total cash outflow for leases in the year ending 31 March 2023 was $393,000.
7.
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 investments:
$’000 AUD
Investments in ASX listed companies
2023
2,744
2022
-
During the 2023 financial year the Group acquired shares in ASX listed companies for a total cost of $4.4m.
28 I Annual Report 2023
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
8.
INTANGIBLE ASSETS
$’000 AUD
Year ended 31 March 2023
Opening net carrying amount
Additions
Amortisation charges for the year
Impairment charges for the year
Closing net book amount
At 31 March 2023
Cost
Disposals
Amortisation and impairment
Net book amount
Disposals
Goodwill
Right of use assets
Software
-
-
-
-
5,054
-
(5,054)
-
-
-
-
-
-
277
(277)
-
-
-
583
-
(583)
-
17,836
(17,109)
(727)
-
Total
-
583
-
(583)
-
23,167
(17,386)
(5,781)
-
In FY23, the Group carried out an assessment of the intangible assets remaining after the sale of the consumer finance business
in December 2021. The obsolete intangible assets, which were fully impaired/amortised, are now disposed.
$’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
Disposals
Amortisation and impairment
Net book amount
Amortisation
Goodwill
Right of use assets
Software
Total
-
-
-
-
-
20,658
(15,604)
(5,054)
-
-
-
-
-
-
-
145
-
(145)
-
-
145
-
(145)
-
277
17,254
38,189
-
-
(15,604)
(277)
(17,254)
(22,585)
-
-
-
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 2023, 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 is in a period of transformation and working towards building new revenue streams which would generate sufficient
profits to support the carrying value of any other intangibles. Therefore, definite life intangible assets as well as PP&E continue
to be immediately impaired on acquisition.
Annual Report 2023 I 29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
9. PROPERTY, PLANT AND EQUIPMENT
$’000 AUD
Year ended 31 March 2023
Opening net carrying amount
Additions
Depreciation charges for the year
Impairment charges for the year
Closing net book amount
At 31 March 2023
Cost
Disposals
Accumulated depreciation and impairment
Net book amount
Disposals
In FY23 the Group carried out an assessment of the property, plant and equipment assets remaining after the sale of the
consumer finance business in December 2021. The obsolete property, plant and equipment assets, which were fully
impaired/amortised, are now disposed.
$’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
Property plant and equipment
Total
-
-
-
-
-
3,757
(3,629)
(128)
-
Total
-
257
-
(257)
-
3,757
(3,757)
-
Property plant and equipment consist of furniture, fittings, and physical computer equipment.
Impairment
Refer to note 8 for details.
10. 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
30 I Annual Report 2023
2023
2022
-
-
-
-
-
-
-
-
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
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
Income tax (benefit)/ expense on pre-tax accounting profit
2023
2,537
761
20
-
(781)
-
2022
32,346
9,704
31
(7,999)
(1,736)
-
11. DEFERRED TAX ASSETS & LIABILITIES
Recognised deferred tax assets and liabilities
$’000 AUD
Inventories
Property, plant and equipment
Trade, loan and other receivables
Finance lease receivables
Accruals
Provisions
Tax losses
Financial derivative
Tax assets / (liabilities)
Assets
2023
-
78
-
-
1,557
726
-
-
2022
-
165
-
-
795
-
-
-
Liabilities
Net
2023
2022
2023
2022
-
-
-
-
-
-
-
78
-
(2,361)
(960)
(2,361)
-
-
-
-
-
-
-
-
1,557
726
-
-
-
-
165
-
(960)
795
-
-
-
-
2,361
960
(2,361)
(960)
The Group has unrecognised current tax losses of $24.0m (7.2m tax effected) and $32.5m ($9.7m 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 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.
Annual Report 2023 I 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
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 recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is
probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of
the probability of recoverability is recognised by the head entity only.
Nature of Tax Funding Arrangements and Tax Sharing Arrangements
The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement
which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding
arrangements require payments to/from the head entity equal to the current tax liability/(asset) assumed by the head entity
and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity
receivable/(payable) equal in amount to the tax liability/(asset) assumed. The inter-entity receivable/(payable) are at call.
Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the
head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.
The head entity in conjunction with other members of the tax-consolidated group has also entered into a tax sharing
agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the
entities should the head entity default on its tax payment obligations.
12. 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. Historically these
arrangements were designated as cash flow hedges under AASB 139 (which the Group had opted to retain as is currently
permitted). The 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 designated as cash flow hedges 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 designated
hedge derivatives 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 had fallen outside the prescribed 80-125% range
of effectiveness as per AASB 139. At this point hedge accounting ceased and the full fair value movements were booked to the
profit and loss. This was 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 July 2022. In August 2022 with the restructuring of the warehouse, the swap was reset and
redesignated to hedge the warehouse receivables balance. Due to the redesignation of the swap, the previous hedge was
derecognised, and the cash flow hedge balance was recognised to profit and loss. The reset swap has not been designated as a
cash flow hedge at 31 March 2023 and the fair value movements of the derivative are recognised in the statement of profit or
loss.
32 I Annual Report 2023
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
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
FVPL loss on cash flow hedge derecognised from reserves
FVPL gain on ineffective hedge
FVPL gain on undesignated swap
Interest expense
2023
-
(1,369)
774
(511)
(584)
(1,690)
2022
1,453
-
-
-
(443)
1,010
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 2023.
The fair value of derivatives is 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 asset
Interest rate swap liability
13. FINANCIAL RISK MANAGEMENT
Financial risk management objectives and policies
2023
12
-
2022
-
359
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 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.
The Group holds a related party loan which is secured by the borrower’s current and future shareholding in Thorn Group
Limited and management has assessed that no loss impairment is required.
Annual Report 2023 I 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
Expected credit loss measurement for Business Finance loan and lease receivables
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.
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 six months. Default is defined as 90 days past due for asset
finance receivables.
Impact of Covid-19 pandemic
In prior years, the Covid-19 affected contracts were removed from the AASB9 model and a separate management overlay was
provided. During the 2023 financial year, the collection activity on the Covid affected book has improved and there was no
further economic lockdowns. As a result, the arrears have fallen to 10.1% at 31 March 2023 (31 March 2022: 16.1%). The Covid
affected book has decreased by 67% in the period to March 2023 to $11.3m and 82% of the book will reach maturity in the next
two years.
Given the strong collection activity, the declining book and the likelihood that the economy will not suffer from further
lockdowns, it has been decided by management to remove the Covid-19 management overlay. Covid contracts are now subject
to the same AASB9 provision methodology as applied across the entire asset finance portfolio.
Macroeconomic Scenarios
Management has evaluated the current economic indicators and determined that there is a possibility of a downturn,
accompanied by a continuous increase in the cost of living. The economy has already experienced 11 interest rate hikes since
May 2022, with escalating inflation in Australia and worldwide. Considering this assessment, management introduced a
management overlay in addition to the existing Expected Credit Loss (ECL) provisions. This overlay is calculated at 3.7% of the
asset finance receivables book.
This forward-looking adjustment considers the estimated impact of various scenarios based on economic assumptions and the
concentrations of industries and asset classes. The Group considers these factors across multiple scenarios, including the base
case, upside, and downside scenarios. To inform their analysis, the Group combines publicly available economic forecasts for
the Australian economy with portfolio information, judgments, and analysis.
Model risk reserve
A model risk reserve continues to be in place for Business Finance calculated at 2.4% of the asset finance receivables book.
Loss allowance
The impairment expense on the statement of profit or loss includes both net write-offs and provision movements.
34 I Annual Report 2023
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
The following table explains the changes in the loss allowance between the beginning and the end of the financial year due to
these factors:
Asset finance loan and lease receivables
Asset finance 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 2022
13,856
6,763
1,442
22,061
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
Changes in balance
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 2023
(352)
(141)
8
7
1,180
4,973
(6,554)
(879)
12,977
419
(173)
(18)
1
(1,641)
215
(3,166)
(4,363)
2,400
262
10
(44)
(19)
3,699
(673)
612
(4,105)
(258)
1,184
67
121
(165)
(8)
(37)
(18)
3,238
4,515
(9,108)
(4,105)
(5,500)
16,561
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:
Asset finance 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 2022
99,854
9,349
1,442
110,645
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 2023
(2,688)
(1,454)
417
69
115,881
(66,821)
45,404
145,258
2,688
(417)
(290)
30
1,943
(10,081)
(6,127)
3,222
1,454
290
(69)
(30)
-
-
-
-
-
-
395
118,219
1,807
(4,105)
(258)
1,184
(75,095)
(4,105)
39,019
149,664
Annual Report 2023 I 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
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
Asset finance lease receivables
Asset finance loan receivables
Invoice finance receivables
Related party loan receivables
Total gross amount
Allowance for impairment
23
2023
2022
891
2,430
7,652
24,451
141,121
83,492
3,381
5,000
158,045
(16,561)
141,484
272
-
110,645
(22,061)
88,584
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.
Invoice finance receivables of $3.4m are secured by the SME’s accounts receivable, allowing them to generate cash quickly. The
facility available is based on a percentage of invoices identified as security. The loan is not dissimilar to a working capital loan
where the facility is drawn and repaid multiple times as the business’ liquidity rises and falls. Thorn utilises an invoice financing
platform which access live SME’s financials keeping ahead of potentials risk of default securing the recoverability of the loan
facility. In addition, Thorn manages the loan in-line with roburst credit collection policy. Thorn has assessed that no impairment
provision is required.
Related party interest-bearing loan of $5.0m, which is secured by the borrower’s current and future shareholding in Thorn and
is repayable on 30 June 2023, has been assessed to require no loss impairment.
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.
Impairment losses
Asset finance lease receivables
$’000 AUD
Stage 1
Stage 2
Stage 3
36 I Annual Report 2023
Gross 2023
Impairment 2023
Gross 2022
Impairment 2022
7,234
301
116
7,651
(1,168)
(154)
(116)
(1,438)
22,489
2,510
577
25,576
(3,527)
(2,008)
(577)
(6,112)
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
Asset finance loan receivables and remaining consumer solar loans
$’000 AUD
Stage 1
Stage 2
Stage 3
Gross 2023
Impairment 2023
Gross 2022
Impairment 2022
138,024
2,921
1,068
142,013
(11,809)
(2,246)
(1,068)
(15,123)
77,364
6,840
865
85,069
(10,329)
(4,755)
(865)
(15,949)
At 31 March 2023, the contractual amount outstanding on receivables that were written off in the financial year and that are
still subject to enforcement activity is $2.9m.
Thorn has provided a guarantee to the trustee of the warehouse trust, against a group of affected trust receivables. The value
of the receivables as at 31 March 2023 is $7.0m. Thorn has deemed the risk of an outflow of economic resources to be
extremely remote and, as such, has estimated the guarantee to have a zero fair value.
Liquidity risk
Liquidity risk is the risk that the Group’s financial condition is adversely affected by an inability to meet its liabilities and support
its business growth. The Group manages its capital to maintain its ability to continue as a going concern and to provide
adequate returns to shareholders.
The capital structure of the Group consists of external debt and shareholders’ equity. The Group manages its capital structure
and makes adjustments to it in light of economic conditions and the Group’s individual situation. The Group’s debt facilities
contain restrictions on the Group’s ability to, among other things, sell or transfer assets, incur additional debt, repay other
debt, make certain investments or acquisitions, repurchase or redeem shares and engage in alternate business activities. The
facilities also contain a number of financial and non-financial covenants. Failure to meet any of these covenants could result in
an event of default under these facilities which could, in turn, allow the lender to declare all amounts outstanding to be
immediately due and payable or the inability to draw down further. In such a case, the financial condition, liquidity and results
of operations of the Group could materially suffer.
Liquidity risk is managed through the adequate provision of funding and effective capital management policies.
The following are the contractual maturities of the consolidated entity’s financial liabilities including, where applicable, future
interest payments as at 31 March 2023.
31 March 2023 ($’000 AUD)
Securitised warehouse facility
Lease liability
Trade and other payables
Total non-derivatives
Interest rate swap
(Inflow)
Outflow
Total derivatives
31 March 2022 ($’000 AUD)
Securitised warehouse facility
Lease liability
Trade and other payables
Total non-derivatives
Interest rate swap
(Inflow)
Outflow
Total derivatives
Carrying
amount
114,890
-
4,949
Contractual
Cash flows
127,449
-
4,949
119,839
132,398
(6,800)
6,796
(4)
1 year or less
1-5 years
51,711
-
4,949
56,660
(3,256)
3,127
(129)
75,738
-
-
75,738
(3,544)
3,669
125
5 years
or more
-
-
-
-
-
-
Contractual
Cash flows
1 year or less
1-5 years
5 years
or more
62,180
11
8,700
70,891
(1,334)
1,683
349
59,627
-
8,700
68,327
(545)
1,171
626
2,553
-
-
2,553
(789)
512
(277)
-
-
-
-
-
-
-
Annual Report 2023 I 37
(12)
-
(12)
Carrying
amount
60,591
11
8,700
69,302
-
359
359
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
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 15
which is based on expected cash flows.
The consolidated entity’s access to financing arrangements is disclosed in note 15.
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.
Price risk
The Group exposure to equity securities price risk arises from investments held by the Group and classified in the balance sheet
at fair value through other comprehensive income (FVOCI). The Group diversifies its portfolio to manage any price risk arising
from investments in equity securities and focusses on long term investment. Diversification of the portfolio is done in
accordance with the limits set by the Group. The Group’s Board of Directors reviews and approves all equity investment
decisions.
A change of 57 percent in the share price of the investment assets (ASX listed companies) at the reporting date would have
increased or decreased the consolidated entity’s other comprehensive income by approximately $1.6m (2022: Nil), net of tax.
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 receivables and therefore
remove the interest rate mismatch between the receivables and the borrowings.
In December 2021, the Group made an assessment that the interest rate swap had fallen outside the prescribed 80-125% range
of effectiveness as per AASB 139. This was 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 July 2022. In August 2022 with the restructuring of the warehouse, the swap was reset
and redesignated to hedge the warehouse receivables balance. Due to the redesignation of the swap, the previous hedge was
derecognised, and the cash flow hedge balance was recognised to profit and loss. The reset swap has not been designated as a
cash flow hedge at 31 March 2023 and the fair value movements of the derivative are recognised in the statement of profit or
loss, refer to note 12 for details.
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 swap
2023
17,363
3,341
2022
68,055
(23,692)
At 31 March 2023, Thorn was hedged at 98% (2022: 139%) of its warehouse receivables balance of $113.9m (2022 borrowing
balance: $60.6m).
A change of one percent in interest rates at the reporting date would have increased or decreased the consolidated entity’s
profit and loss by $1.8m (2022: $0.2m), net of tax. The change from prior period is due to changes in the floating rate of the
swap based on a higher notional value and more volatile interest rate market.
Financial instruments
Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to permit
future development of the business. The Board monitors the return on equity, which the consolidated entity defines as net
38 I Annual Report 2023
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
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.
Investments at fair value through other comprehensive income
The cost of the Group’s investment in ASX listed companies is considered to represent fair value. The investments are
considered to be Level 1 investments.
14. PROVISIONS AND CONTINGENT LIABILITIES
2023
$’000 AUD
Opening balance
Provisions made during the year
Provisions used during the year
Provisions released during the year
Current
Make good
45
-
(45)
-
-
-
Service
warranties
-
-
-
-
-
-
Regulatory and
Other
4,045
150
(283)
(2,400)
1,512
1,512
Total
4,090
150
(328)
(2,400)
1,512
1,512
Annual Report 2023 I 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
Non-current
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 released during the year
Current
Non-current
Make good on leased premises
-
-
-
-
-
1,512
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
-
1,512
Total
2,814
5,934
(3,055)
(1,346)
(257)
4,090
4,090
-
4,090
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.
Warranty provision
Under the terms of the former consumer leases, the Group was required to maintain the leased product in good working order.
Provision was made for the expected cost of this obligation over the remaining life of the existing lease arrangements. Upon
completion of the sale of the Consumer Finance business, the warranty of $1.3m was released to gain on sale calculations.
Contingent liabilities
Overview
Contingent liabilities are disclosed when the possibility of a future settlement of economic benefits is considered to be less than
probable but more likely than remote. If the expected settlement of the liability becomes probable, a provision is recognised.
A contingent liability is disclosed where a legal or constructive obligation is possible, but not probable; or where the obligation
is probable but the financial impact of the event is unable to be reliably estimated. From time to time the Group may incur
obligations or suffer financial loss arising from litigation or contracts entered into in the normal course of business, including
guarantees issued for performance obligations of controlled entities in the Group. Legal proceedings threatened against Thorn
may also, if filed, result in Thorn incurring obligations or suffering financial loss. A contingent liability exists in relation to actual
and likely potential legal proceedings. Where it is determined that the disclosure of information in relation to a contingent
liability can be expected to adversely prejudice the position of the Group (or its insurers) in a dispute, accounting standards
allow Thorn to not disclose such information. It is Thorn’s policy that such information is not disclosed in this note.
Litigation
In March 2023, Thorn and Thorn Australia Pty Ltd (“TAPL”) were served with a cross claim in Federal Court of Australia
proceedings in which the Commonwealth Attorney-General’s Department (under the Fair Entitlements Guarantee scheme) is
claiming damages, together with interest and legal costs, from Receivers who, on behalf of a secured creditor who appointed
the Receivers to do so, recovered assets from a third party. That secured creditor was previously, but in February 2018 ceased
to be, a subsidiary of Thorn. Those Receivers have claimed indemnity from the secured creditor who appointed the Receivers to
that role. By the cross claim against Thorn and TAPL, that secured creditor has claimed contractual indemnities, from Thorn and
TAPL, against any liability that secured creditor is found to have to the Receivers plus interest and legal costs. Thorn and TAPL
are defending that cross claim. The cross claim against Thorn and TAPL is not quantified. The proceedings are being defended.
Critical Accounting Estimates and Judgments
The Group recognises a provision where a legal or constructive obligation exists at the balance sheet date and a reliable
estimate can be made of the likely outcome. Provisions are reviewed on a regular basis and adjusted for management’s best
40 I Annual Report 2023
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
estimates, however significant judgement is required to estimate likely outcomes and future cash flows. The judgemental
nature of these items means that future amounts settled may be different from those provided for
15. LOANS AND BORROWINGS
$’000 AUD
Current liabilities
Secured loans
Non-Current liabilities
Secured loans
2023
2022
-
43,412
114,890
114,890
17,179
60,591
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.
2023
200,000
(114,890)
85,110
200,000
(114,890)
85,110
2022
60,591
(60,591)
-
60,591
(60,591)
-
The Group retains access to bank guarantees and credit card facilities with a total limit of $1.1m as part of its ongoing
transactional banking arrangements. At 31 March 2023, the amount utilised was $0.2m and the Group has cash collateralised
the total facilities.
Securitised warehouse facility
Thorn is financed by a rated securitised warehouse facility (“the warehouse”). From May 2020 to July 2022, the warehouse was
in amortisation due to a breach of one of its warehouse parameters, 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. While this
event subsisted, Thorn was unable to sell its originations into the warehouse, and the distributions it was expecting from the
warehouse via the waterfall distribution mechanism were retained in an excess spread reserve.
The warehouse was restructured with a funding limit of $200 million and re-commenced utilisation in August 2022. The existing
notes were repaid in full and the balance of the excess spread reserve was repaid to the unitholder. There have been no
subsequent deposits to the excess spread reserve and further transfers are not expected except in the case of an amortisation
event. Thorn Business Finance is financed by the warehouse with senior notes held by a major Australian bank, mezzanine
notes held by a major Australian financial services company, and equity class G notes held by Thorn.
The warehouse facility is secured by loans and payments receivable from the underlying receivable contracts and is non-
recourse to the Group, meaning Thorn’s liability is limited to its class G notes unless it is liable for damages for breach of the
warehouse documents or it is required to buy back an ineligible receivable (defined as one that breached Thorn’s initial sale
representations and not merely that it goes into arrears or defaults).
Interest on the warehouse is charged at a fixed interest premium plus a floating 1-month BBSY (LY: fixed interest premium plus
3-months BBSY).
The current facility is available until August 2023, however Thorn is negotiating a renewal with its funders. If agreement is not
reached, further receivables will not be able to be sold into the facility, and the portfolio will amortise down for as long as the
underlying receivables are payable. While the warehouse is in operation, there will be no repayment of borrowings and
principal collected will be utilised to purchase eligible receivables, hence the full balance of the warehouse facility is disclosed
Annual Report 2023 I 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
as non-current. In the comparative March 2022, the warehouse was in amortisation, and the principal was applied to repay
noteholders with the amounts expected to be due and payable on the warehouse facility in the next 12 months being disclosed
as current. This payment structure would recommence if the current warehouse facility went into amortisation.
There were reported technical breaches of compliance parameters in the warehouse during the financial year and for the
period to May 2023. All breaches were remedied within 30 days and no further action taken. To rectify this, the warehouse
parameters were amended with funder consent in May 2023 to align more closely the industry parameters with newly created
asset finance business.
16. 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
Consolidation of shares
2023
340,192,714
9,044,579
-
(1,603,828)
(312,869,446)
34,764,019
2022
339,188,085
2,398,077
464,253
(1,857,701)
-
340,192,714
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.
Share buy-back programs
Thorn conducted on-market share buy-back program of up to 5% of Thorn’s ordinary shares, or up to 16,994,615 ordinary
shares, commenced from 1 March 2022 up until 28 February 2023. From 1 April 2022 to 28 February 2023, the Group bought
back 1,603,828 fully paid ordinary shares for a total cost of $404,703.
Consolidation of Shares
On 30 September 2022 the Group held an Extraordinary General Meeting, during which shareholders approved the
consolidation of every 10 ordinary shares held by a shareholder into 1 ordinary share. The share consolidation was completed
on 14 October 2022. The post consolidation shares on issue amounted to 34,764,019 ordinary shares.
Return of Capital to Shareholders
On 6 October 2022, the Company’s issued ordinary share capital was reduced by approximately $41.7m, following shareholder
approval at the Extraordinary General Meeting convened on 30 September 2022. The Company paid each eligible shareholder
registered on the record date of 6 October 2022, the amount of $0.12 per share held at that time.
Reserves
The reserves consist of the fair value investment reserve, the cash flow hedge reserve and trust excess spread reserve. The
value investment reserve represents the value of quoted prices in active markets. The cash flow hedge reserve consists of the
fair value of cash flow hedges after tax.
$’000 AUD
Cash flow hedge reserve
Fair value investment reserve
Trust excess spread reserve
42 I Annual Report 2023
2023
-
(1,677)
-
(1,677)
2022
(1,369)
-
6,974
5,605
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
During 2021, 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 was instead held within a cash reserve and
serves as collateral against the collection of the receivables.
The balance of the excess spread as at 31 March 2022 was $6,973,594. Following the re-opening of the warehouse on 2 August
2022, the existing notes were repaid in full and the balance of the excess spread reserve was repaid to unitholders. There have
been no subsequent deposits to the excess spread reserve and further transfers are not expected except in the case of an
amortisation event.
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:
2023
Final 2022
Interim 2023
Special dividend
Total amount
2022
Final 2021
Interim 2022
Special dividend
Total amount
Cents per
Share
Amount
$’000 AUD
Franking
%
Date of
payment
1.0
-
3.0
4.0
3,392
-
10,429
13,821
30%
n/a
30%
25th July 2022
n/a
2nd September 2022
1.0
3,375
-
-
7.0
23,792
8.0
27,167
30%
n/a
30%
21 July 2021
n/a
9 February 2022
During the year, Thorn paid total dividends of 4 cents per share, totalling $13.8m. A number of Thorn’s shareholders
participated in the Company’s dividend reinvestment plan (‘DRP’) offered for the final 2022 dividend, resulting in $2.0m of the
total being reinvested in Thorn shares. Net cash outflow was $11.8m.
Dividend franking account
$’000 AUD
30% franking credits available to shareholders of Thorn Group Limited
2023
10,511
2022
16,435
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.
17. EARNINGS PER SHARE
The consolidated entity presents basic and diluted earnings per share (EPS) data for its ordinary shares. For comparability, EPS
for the prior year was restated to account for the share consolidation during the year.
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.
Annual Report 2023 I 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
$’000 AUD
2023
2022
Profit attributable to ordinary shareholders (basic) $’000 AUD
Profit attributable to ordinary shareholders (basic)- Continuing operations
Profit attributable to ordinary shareholders (basic)- Discontinued operation
Profit attributable to ordinary shareholders (basic)
Weighted average number of ordinary shares (basic) ‘000’s
Issued ordinary shares at 1 April
Effect of shares issued
Weighted average number of ordinary shares for the year
Weighted average number of ordinary shares (diluted) ‘000’s
Issued ordinary shares at 1 April
Effect of shares issued
Weighted average number of ordinary shares for the year
Earnings per share – 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)
18. CONSOLIDATED ENTITIES
Parent entity
Thorn Group Limited
Subsidiaries
Thorn Australia Pty Ltd
A.C.N. 647 764 510 Pty Ltd
Thornmoney Pty Ltd
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*
*These entities were deregistered during the financial year.
44 I Annual Report 2023
(1,347)
12,865
3,884
19,481
2,537
32,346
34,020
33,919
501
5
34,521
33,924
34,020
33,919
501
108
34,521
34,027
(3.9)
37.9
(3.9)
37.8
11.2
57.4
11.2
57.3
7.3
7.3
95.3
95.1
Country of
Incorporation
Ownership Interest
2023
2022
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
N/A
N/A
100%
100%
100%
100%
100%
100%
100%
100%
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
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.
19. DEED OF CROSS GUARANTEE
Thorn and each of the subsidiaries, with the exception of Thorn ABS Warehouse Trust No.1 (the Closed Group) listed in note 18
have entered into a Deed of Cross Guarantee. The effect of this is that the Company guarantees to each creditor payment in full
of any debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a
winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six months any
creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound
up. During the year, two subsidiaries (Thorn Employee Services Pty Ltd and Thorn Administration No.1 Pty Ltd) were
deregistered.
Pursuant to ASIC Corporations Instrument 2016/785, Thorn Australia Pty Limited and Thornmoney Pty Ltd were relieved from
the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and Directors’ reports.
The profit before tax of the Closed Group after eliminating all transactions between parties to the Deed of Cross Guarantee, at
31 March 2023, is $7.0m.
Annual Report 2023 I 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
Consolidated Statement of Profit or Loss and Other Comprehensive Income of the Closed Group
$’000 AUD
Continuing operations
Interest revenue
Other revenue
Revenue
Employee benefit expense
Reversal of impairment losses on loans and receivables
Marketing expenses
Property expenses
Communication & IT expenses
Insurance expenses
Legal expenses
Other expenses
Impairment of intangibles & property, plant and equipment
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/(losses) 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 will not be
reclassified to profit or loss
Changes in the fair value of equity investments at fair value through OCI
Other comprehensive income for the year
2023
2022
4,021
176
15,096
1,816
19,117
(9,290)
(635)
(199)
(374)
(1,771)
(1,901)
(936)
780
(583)
1,992
(14,137)
26,103
(359)
220
(3,942)
(2,601)
(1,592)
(4,177)
(389)
-
-
119
8,025
(14,909)
4,208
-
(1,078)
3,130
7,270
9,262
-
(771)
8,491
-
-
3,130
3,884
7,014
(1,677)
(1,677)
8,491
19,481
27,972
-
-
Total comprehensive profit
5,337
27,972
46 I Annual Report 2023
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
Consolidated statement of financial position of the Closed Group
$’000 AUD
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments and other assets
Income tax receivable
Total current assets
Non-current assets
Trade and other receivables
Other assets
Financial assets at fair value through other comprehensive income
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liability
Employee benefits
Provisions and contingent liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
2023
2022
17,362
15,276
2,240
-
34,878
24,707
6,214
2,744
-
33,665
68,543
5,304
-
2,935
1,512
9,751
19
19
9,770
58,773
117,818
(1,677)
(57,368)
58,773
68,055
5,140
6,480
-
79,675
19,401
25,470
-
-
44,871
124,546
8,557
11
5,090
4,090
17,748
77
77
17,825
106,721
158,049
6,974
(58,302)
106,721
Annual Report 2023 I 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
20. PARENT ENTITY DISCLOSURES
As at 31 March 2023, and throughout the financial year ending 31 March 2023, the parent entity of the consolidated entity was
Thorn Group Limited.
$’000 AUD
Result of Parent Entity
Profit for the period
Other comprehensive income
Total comprehensive 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
Fair value investment reserve
Total Equity
2023
2022
13,183
(1,677)
11,506
111,882
-
(46,271)
117,818
(50,529)
(1,677)
65,611
27,167
-
27,167
108,158
-
-
158,049
(49,891)
-
108,158
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 19.
21. 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 18 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
Derivative financial instruments
Total assets
Borrowings related to receivables
Derivative financial instruments
Total liabilities
Net asset/ (liabilities)
2023
101,500
11,437
12
112,949
114,890
-
114,890
(1,941)
2022
64,045
18,705
-
82,750
60,591
359
60,950
21,800
The Group provides additional support to the special purpose entity including a liquidity facility of $1.4m (2022: $3.6m) and a
bill and collect facility of $0.8m (2022: $1.9m).
The securitised warehouse is required to maintain a level of credit enhancement through the Class G Notes 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. The warehouse amended certain pool parameters in May 2023. As part of the amendments, the Class
G Notes were increased by 2.5%, to provide additional credit enhancement, and the Class A notes were reduced by an
equivalent amount. The overall limit did not change. The additional credit enhancement served to ensure that the credit ratings
on the externally rated Notes maintained their individual ratings.
48 I Annual Report 2023
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
22. DISCONTINUED OPERATIONS
In December 2021, the Group’s assets in the Consumer Finance division, Radio Rentals were sold to Credit Corp Group Limited.
During the 2023 financial year, Thorn received an additional deferred cash consideration of $2.3m for the sale, taking the total
consideration received to $46.2m. Thorn negotiated an extension of the transitional services agreement with Credit Corp for an
additional $1.8m. The arrangements concluded on 20 December 2022.
The discontinued operations segment recorded a profit after tax of $3.9m (2022: $19.5m).
(a) Result of discontinued operations
$’000 AUD
Revenue
Expenses
Results from operating activities
Income tax
Results from operating activities, net of tax
Gain on sale of discontinued operation
Income tax on sale of discontinued operation
Profit 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
23. RELATED PARTIES
Key management personnel remuneration
$
Short-term employee benefits*
Post-employment benefits
Termination payments**
Share-based payments
2023
-
-
-
-
-
3,884
-
3,884
2023
-
4,053
-
4,053
2022
33,921
(26,176)
7,745
-
7,745
11,736
-
19,481
2022
33,713
43,876
(799)
76,790
2023
1,473,720
88,110
286,974
-
2022
2,238,685
82,738
-
32,328
1,848,804
2,353,751
* 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.
**2023 includes Luis Orp’s termination payment.
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.
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
2023
2022
General Provincial Company Ltd
369
1,868
The transactions relate to insurance premiums for Civil Liability and Professional Indemnity insurance and Directors and
Officers Liability insurance.
Annual Report 2023 I 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
Related Party Loan
On 17 October 2022, Thorn Australia Pty Limited entered into a secured loan of $5.0m with a related party, Somers Limited,
repayable on 30 December 2022 at the interest rate of 9% per annum. Interest was accrued, compounded daily and the
amount of $93,314 was paid. The principal repayment date was extended to 31 March 2023 (Contract signed) at an increased
interest rate of 10% per annum. On 31 March 2023, an interest payment of $124,663 was received. On 6 April 2023, the
principal repayment date was further extended to 30 June 2023 at the new interest rate of 12% per annum, accrued and
compounded daily. The loan is secured by the borrower’s present and future interest in shares on issue by Thorn Group Limited
and held by the borrower and any custodian or sub custodian on behalf of borrower.
Somers Limited has a shareholding of 49.34% in the Company (based on its last ASX substantial shareholder notification lodged
with ASX on 25 July 2022).
$’000 AUD
Somers Limited
24. SHARE BASED PAYMENTS
2023
5,000
2022
-
The Company had a legacy Long Term Incentive (LTI) share plan (2019) - there are no remaining employees in this plan due to
forfeiture upon cessation of employment (as all performance rights had lapsed, there was no need to test the plan in
September 2022 in accordance with the plan rules).
The Company has no active share plan for the 2023 financial year - no performance rights or options were granted during the
2023 financial year.
In March 2022, ordinary shares were issued to Peter Lirantzis and are currently held in escrow with a two year hold period until
10 February 2024 (these rights were allocated as part of Peter Lirantzis’ sign-on share plan and do not form part of the LTI plans
disclosed above).
There are no other performance rights over ordinary shares in Thorn Group Limited held directly, indirectly or beneficially, by
any employees.
25. EMPLOYEE BENEFIT EXPENSE AND LIABILITIES
Employee benefit expense
$’000 AUD
Employee benefit expense
2023
9,290
2022
14,137
Employee benefit expense includes redundancy expenses of $459,000 (2022: $145,000) and superannuation expenses of
$653,000 (2022: $843,000).
Employee benefit liabilities
$’000 AUD
Current
Annual leave liabilities
Long service leave liabilities
Incentive provision
Other employee benefit accruals
Non-current
Long service leave liabilities
2023
2022
751
1,043
150
177
1,800
3,248
235
622
2,936
5,090
19
77
19
77
The entire amount of the provision of $2,936,000 (2022: $5,090,000) 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 $892,000 is not expected to
be paid in the next 12 months (2022: $1,155,000).
50 I Annual Report 2023
NOTES TO THE CONSOLIDATED STATEMENTS
For the year ended 31 March 2023
26. 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
27. OTHER EXPENSES
2023
UHY
Haines Norton
2022
UHY
Haines Norton
447,707
447,707
60,560
60,560
89,532
89,532
597,799
356,283
356,283
100,800
100,800
96,213
96,213
553,296
Included in Other expenses is a credit of $3.8m arising from the reduction in provisions and accruals.
28. SUBSEQUENT EVENTS
Related party loan
On 6 April 2023, the principal repayment date of Somers Limited’s loan was amended and extended to 30 June 2023 at the new
interest rate of 12% per annum, accrued and compounded daily. Refer to note 23.
Securitised warehouse facility
The warehouse parameters were amended in May 2023 with funders consent to align more closely the Industry parameters
with the asset finance business. The current facility is available until August 2023, however Thorn is negotiating a renewal with
its funders.
Investments
On 22 May 2023, Thorn acquired an additional 62,500,000 shares in ASX listed company, Moneyme Limited, for a cost of
$5.0m. Following the investment, Thorn holds 64,408,413 ordinary shares in Moneyme Limited. On 24 May 2023, Thorn lodged
a notice of initial substantial shareholder with ASX, reflecting that Thorn’s voting power was 8.64%.
Asset finance portfolio update
Thorn is in negotiations with a party which has expressed interest in acquiring Thorn Australia Pty Ltd's and Thornmoney Pty
Ltd’s asset finance portfolio. At this stage, negotiations are incomplete and ongoing and no decision has been made in relation
to any potential sale or divestment of Thorn's asset finance portfolio. Thorn is also unable at this stage, to provide shareholders
with any estimates or guidance as to the financial impact of such a transaction on Thorn. Should any such decision be made,
Thorn will update the market in relation to any specific course of action if and when required.
Annual Report 2023 I 51
DIRECTORS’ DECLARATION
For the year ended 31 March 2023
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 51 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 2023 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 18 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. This declaration has been made after receiving the declaration required to be made to the directors in accordance with
Section 295A of the Corporations Act 2001 for the financial year ended 31 March 2023.
Signed in accordance with a resolution of the directors.
Warren McLeland
Chairman
Dated at Sydney
31 May 2023
52 I Annual Report 2023
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 2023, which comprises the consolidated statement of financial
position as at 31 March 2023, 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 2023 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.
53
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 PROVISION FOR IMPAIRMENT LOSSES ON LOANS AND RECEIVABLES
Why a key audit matter
How our audit addressed the risk
AASB 9 requires entities to estimate expected
future credit losses on its financial assets
(including lease and loan receivables). These
estimates incorporate both historical and
forward
including
forward economic
historical
projections and other creditworthiness
indicators as appropriate.
looking
loss rates,
information,
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
their
provisioning rates, such as:
in determining
the Group
•
•
•
•
•
groups
Assumptions made with respect of
loss rates for
projected forward
varying
customers
of
including industry type and location;
Judgements
assumptions
and
involved in utilizing complex credit
loss models;
Judgements involved in determining
whether
have
experienced a significant increase in
credit risk;
Assumptions of how the Group’s
existing receivables will perform in
regards to potential future economic
downturns;
Judgements
the
calculation of overlays over provision
balances;
customers
involved
in
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.
Refer to note 13 of the financial statements
information on the Group’s
for further
expected credit loss provisioning.
54
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 OPERATION OF IT SYSTEMS AND CONTROLS
Why a key audit matter
How our audit addressed the risk
We evaluated the design and implementation of key
controls over relevant IT systems, which included
assessing: the governance of the Group’s technology
control environment,
IT change management
controls, security and access controls, system
development controls and IT operations controls.
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.
The Group is reliant on its IT systems for the
processing and recording of significant
volumes of transactions.
This was a key audit matter because a
number of key financial controls we seek to
rely on are related to IT systems and
automated controls.
Controls relating to the management of IT
systems are important because they are
intended to ensure changes to applications
and data are appropriately implemented
and authorised.
Ensuring staff have appropriate access to IT
systems and that access is monitored are
key controls in mitigating the potential for
fraud or error as a result of underlying
changes to an application or data.
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 2023, 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.
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 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.
• 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.
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
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.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 15 of the directors’ report for the
year ended 31 March 2023.
In our opinion, the Remuneration Report of Thorn Group Limited for the year ended 31 March 2023,
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
31 May 2023
UHY Haines Norton
Chartered Accountants
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 SHAREHOLDER INFORMATION AS AT 30 MAY 2023
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.
HOLDINGS
The issued capital of Thorn Group Limited is as below.
Equity Class
Fully Paid Ordinary Shares
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
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