Static for Radio Rentals

Shares in owner Thorn marked down on results

RADIO Rentals owner Thorn Group has reported a modest half-year profit of $3.8 million and has been forced to downgrade its full-year profit after continued subdued activity in its furniture and business finance leasing operations.

The result for the six months to September, however, was an improvement on its $9.7 million loss for the same period last year.

The consumer and small business finance company expects further challenges ahead, after an 11 per cent fall in revenue to $111.6 million and a 43 per cent fall in earnings before interest and tax of $10.9 million.

Thorn also announced a full year profit forecast for March 2019 of between $6 million and $8 million, well down on its previous forecast of between $7 million and $10 million.

Shareholders were unimpressed with the result and downgrade, marking down the shares by about 6 per cent during trade yesterday.

“As expected, the challenges facing Radio Rentals will take time to resolve, although we are encouraged by the early signs of improvement,” Thorn chief executive Tim Luce said. “Thorn business finance increased its receivables book and profit but the pace of originations was constrained by debt funding capacity for part of the first half.”

Its Radio Rentals division provided the bulk of revenue for the company at $90.1 million, however this was down 17 per cent compared with the same period a year earlier.

The lower income was caused by a 14 per cent fall in consumer rental installations of 42,610 units, compared with 49,818 the same time last year. The latest result was, however, an improvement on the previous six months to March 2018, which only had 32,570 rentals.

The company also warned of growing arrears in rental payments.

“Further pressure on consumers’ disposable incomes is driving price sensitivity and a rising arrears trend,” Mr Luce said. “The business has responded with efficiency improvements and a coordinated marketing and promotional campaign, offering customers a wider product range, trials of new store concepts, more flexible pricing and faster transaction processing.”

Thorn’s business finance division reported lease originations of just $84.6 million in the half year, down from $113.7 million a year earlier.

The slowdown was attributed to tight credit conditions while Thorn put in place new funding arrangements.