Financier Thorn Group isn’t expecting to hit its original full year profit guidance due to what it calls a “challenging” outlook.

Thorn Group (ASX:TGA) is a financial service provider perhaps best known for being the owner of Radio Rentals, an appliance renter with a history dating back to 1930 when it was founded to rent out radio sets.

The company made a $3.8m profit for the six months to September 30, compared to the $9.7m loss in same period last year.

But they also downgraded full-year profit guidance by up to 20 per cent, from $7m-$10m to $6m-$8m.

One reason is the poor performance of Radio Rentals.

“Thorn’s financial performance reflects a marked reduction in installation volumes over the past two years in the consumer leasing division, Radio Rentals,” the company told investors.

“Pressure on consumers’ disposable incomes is driving price sensitivity and a rising arrears trend.”

Back in March, Thorn issued a profit downgrade as that business continued to decline.

Today, Thorn told investors it was looking at operational improvements to drive Radio Rental’s revival, including marketing campaigns, flexible pricing, faster transactions and new store concepts.

The company’s half-year revenue was $112m, down 11 per cent on the prior corresponding period.

Legal fees bite

Thorn said corporate costs and legal fees would have a “significant” impact, stemming from Radio Rentals failing to determine whether someone taking out a lease had the capacity to pay.

The Federal Court in May told Thorn that it had to pay $22.1 million in fines, fees and refunds for failing to try to verify the financial situation of its customers. Thorn admitted in court that Radio Rentals had breached the National Credit Act four times in respect of each of the 275,060 consumer leases it entered into in from January 2012 to May 2015.

The full package of enforceable undertakings included $6.1 million in refunds and write-offs from default fees for an estimated 60,000 leases, and $13.8 million in refunds of excess lease payments.

“As expected, the challenges facing Radio Rentals will take time to resolve, although we are encouraged by the early signs of improvement on the back of our renewed customer focus,” said Thorn CEO Tim Luce.

“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. The outlook for Business Finance remains positive in the second half with the increased facility limits now in place.”

The company’s shares fell eight per cent in early Thursday trade.

Thorn Group (ASX:TGA) shares over the past year.