Thorn Group Ltd is a retailer, of sorts.
Instead of flogging things like Harvey Norman or JB Hi Fi, it leases/rents them to customers.
So at a time of high customer caution (evidenced by the weak sales at the likes of Harvey Norman, Myer, David Jones and even JB Hi-Fi), its an alternative for nervy consumers not wanting to spend a lot up front for a new appliance or gizmo.
And judging by the results it has been a very profitable approach for Thorn, judging by 13% rise in annual earnings and the higher dividend delivered yesterday.
Rather than sell outright, the rental route through Radio Rentals and Rentlo stores seems to have worked a treat with customers worried about the gloomy outlook and talk of rate rises.
And the company seems to be benefitting from the consumer caution in another way: the cutting back of credit card spending and personal loans.
Even though Radio Rentals method of doing business involves debt for its customers, this route seems to be more preferred for some people.
Perhaps they can’t get credit cheaply at a bank and rather than fall for the siren songs of the pay day cheque groups and other fringe dwellers in finance, they have gone for the Radio Rentals offers.
Whatever the reason, it made Thorn Group more money last year, with the expectation of another solid year to come.
The shares rose more than 5% to $2.08.
Thorn Group told the ASX yesterday that 2011 net profit rose to $22.04 million, from $19.5 million in the 2010 year.
Thorn said it expected to record high single digit or low double digit like-for-like growth in fiscal 2011-12, which ends next March.
Thorn declared a full year dividend of 4.95c (up 32%) fully franked, boosting the total payout for the year 34% to 8.49c fully franked.
Revenue rose 8.6% to $158 million for the full year.
Manager Director John Hughes said the company had done well in a tough environment as more people chose to rent goods amid an uncertain economic outlook.
"The performance of the consumer rental business is very pleasing and both internal and external customer research has provided very positive feedback in regard to all areas of our customer service and product offering. Strong levels of repeat business also underline the very positive customer attitudes to our offering," he said.
The "new financial year has commenced in line with expectations and subject to current economic conditions remaining stable the company expects a substantial increase in earnings in the financial year ending 31 March 2012 due to a full year contribution from the acquisition of NCML (a credit receivables processing business) and solid organic earnings growth from the existing business."
The company said in its commentary that "Thorn’s performance has again been driven by a 7.5% customer growth in the core Radio Rentals and Rentlo businesses, which is very pleasing given the generally soft retail conditions.
"The Company’s Rent, Try, $1 Buy! offering continues to be a major factor in attracting and retaining customers by combining the benefits of rental with the potential to gain ownership of a product. This flexibility is an important consideration for customers, particularly if they are concerned as to their financial circumstance.
"The result also underscores Thorn’s ability to perform well under both positive and challenging market conditions and the strength of its long-term recurring revenue streams that provide a solid platform of income generation."
