Thorn Group Limited (ASX: TGA), established in 1937 and based out of Chullora, Australia, is a diversified financial services company providing financial solutions to consumers as well as small and medium enterprises. It’s two key business segments include Radio Rentals and RR and Thorn Business Finance.
The consumer leasing business, Radio Rentals, is a leader in the household goods consumer leasing market, with a national chain of 64 retail stores. Thorn employs around 550 people, is licensed under the National Consumer Credit Protection Act 2009 and operates a responsible lending policy.
On April 1st, 2019, Thorn released an announcement comprising information around strategic review, profit guidance, banking facility update and class action. Reportedly, the company has begun a review of its business encompassing strategic options, alternative ownership considerations, operational practices, procedures and business profitability, amongst other scenarios, to protect and maximise shareholder value. For this process, it has appointed external advisors while also seeking the viewpoint of various stakeholders.
The time span for the review is not definitely specified, but the company aims to finish the examination and subsequently provide an update to the shareholders within the next few months.
According to the company, a couple of matters are expected to adversely impact its reported results and balance sheet for the year ended March 31st, 2019 and also the company’s previous profit guidance released January 31st, 2019. Therefore, the previous profit guidance stating a loss in the order of $ 6 million is now revised downwards to a loss in the order of $ 8 million as a result of increased arrears and write-offs in the Company’s consumer leasing business.
However, these results are yet to be audited and subject to a review of asset values for impairment. Moreover, to maintain flexibility of the balance sheet, the company would be retaining cash and does not expect to pay a final dividend.
As per the banking facility amendment, the company has announced that its corporate facility limit of $ 30 million with a termination date of November 30th, 2020 is now subject to a drawstop, following which all new utilisations will require prior lender approval. Besides, on April 5th, 2019, the Company will resist an application by the Applicant to amend its pleadings to allow for the joinder of a former director of the Company and its insurer. The hearing for the matter is scheduled for October 15th, 2019.
For the quarter ended December 31st, 2018, Thorn Group reported the net cash and cash equivalents at around AUD 29.14 million. The operating activities generated large net cash outflows of around AUD 1.29 million arising from payments for advertising and marketing (AUD 2.31 million), leased assets (AUD 2.69 million), staff costs (AUD 12.68 million) and other corporate costs (AUD 9.79 million). Besides, the interest and other costs of finance paid amounted to AUD 4.33 million. Furthermore, the investing activities primarily comprising payments for property, plant and equipment added AUD 1.1 million to the net cash outflows. However, the financing activities generated around AUD 3.18 million of net cash inflows.
The Group’s current market valuation stands at AUD 74.14 million. On April 1st, 2019, the TGA stock price closed the market trading at AUD 0.425, declining 7.61% by AUD 0.035 with ~ 2.24 million shares traded.
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