Thorn Group snuck out its 2017-18 result just after 7pm on Wednesday, thereby making sure it received scant publicity in yesterday morning’s papers, or online.
A release time of after 7pm is important because it means little coverage the next day, certainly in the Fairfax Media papers which have business page deadlines of around 6 to 6.30pm. News Corp papers are a bit later, but it would have to be a big story to prompt a change in story selection and placement.
Possibly it was the statutory loss of $3.6 million ($25.3 million in 2016-17) that prompted the company’s reticence.
Perhaps it was the weak outlook for 2018-19 and a forecast of a sharply weaker profit – in fact it could more than halve (based on the pre one offs figure of $17 million for 2017-18).
A final dividend was omitted (joining the likes of Origin Energy and Seven West Media) after paying an interim of one cent a share. A final of 2.5 cents a share was paid for 2016-17.
“The outlook for Thorn Group will continue to be challenging as difficult trading conditions and historical regulatory matters have reduced Radio Rentals installation volumes and interest earning receivables book, and continue to impact the business.
"The division is undergoing a transition with a range of operational and productivity improvements expected to address these issues and restore performance over the longer term. Thorn Equipment Finance continues to report strong growth although this is expected to only partly offset the challenges facing Radio Rentals.
“Consequently, operating profit after tax for the Group will, as previously announced, be significantly down on this year’s continuing business $14.2m cash profit after tax and fall within the range of $7m to $10m.,” Thorn Group said.
Despite that gloom (and the use of the word “challenging’ which usually sends investors for the exits, selling furiously as they go), the shares were up 2.5% yesterday at 61 cents.
The 2017-18 report was just full of gloom – revenue fell to $236.2 million from $277.6 million. The after tax loss included the $20.7 million write-off of goodwill announced in November 2017.
It would seem that decision, and the March 22 trading update (when the shares fell 16%) took much of the sting out of the weak outlook for the coming year in yesterday’s market reaction.
Managing Director and CEO, Tim Luce said in the statement, "Thorn’s reduced profit reflects difficult trading conditions experienced by the Consumer Leasing division, Radio Rentals, which was exacerbated by adverse publicity, costs and operational charges arising from the ASIC settlement and class action.
“The deferral of customer renewals after Radio Rentals introduced four-year contracts three years ago, and the transition to a new online customer application and credit assessment system, also contributed to a 33% decline in installation volumes,” he said.
"Thorn’s borrowings increased by 2% to $284.3m (FY17: $276.5m). Growth in the Thorn Equipment Finance book is funded partly by debt with the TEF securitised debt warehouse increasing by $91.3m, while the corporate debt facility decreased by $83.5m after the sale of the trade and debtor finance and consumer loans businesses. Thorn’s corporate debt facility was paid down to $41.0m (FY17: $124.0m), reducing gearing to 13% from 56%, and the Group was in compliance with all covenants at 31 March 2018,” the company said in the report.
