Decline of Radio Rentals is a Thorn in the side for retailer; shares slide 17pc
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Retailer Thorn Group has issued another profit warning as its appliance rental group Radio Rentals continues to decline.
Thorn told shareholders in November that the Radio Rentals consumer leasing business had posted a half-year loss on a weak retail environment.
That followed bad news in October, when Thorn shares lost a third of their value after initially forecasting a 30 per cent drop in year-on-year performance.
Trading conditions in the Radio Rentals business had continued to deteriotae and this would “materially affect the company’s future financial results”, Thorn said today.
Earlier guidance of a $17 million to $20 million full-year profit was now expected to “be around the lower end”.
The shares fell sharply from Wednesday’s close of 71.5c to a low of 58c on Thursday — before clawing back to 63c, down 12 per cent for the day.
Radio Rentals was now installing appliances for 27 per cent fewer customers.
“The performance of Radio Rentals continues to deteriorate and trading conditions are likely to be difficult in the medium term,” the company said.
“The results have been further impacted by the adverse publicity from Thorn’s settlement with ASIC and the ongoing class action.”
In January the corporate watchdog ASIC hit Radio Rentals with a $20 million penalty “to address past poor conduct and protect future customers”.
That included $6.1 million in refunds to customers and write-offs of default fees plus $13.8 million in customer refunds for excess lease payments.
Thorn said it was “responding to these challenges and is developing a refreshed and extended retail offering in Radio Rentals, further promotional activities and a strategic review to improve business performance”.
But solid performance of its business finance division would not offset the “weak underperformance of the consumer leasing division.
“Accordingly, the company’s profits next year will be significantly less than the year ending March 2018.”
A further update expected with end-of-year results in May.