The financial services company Thorn Group Limited (ASX: TGA) is doubtful about hitting its full-year profit guidance due to its challenging outlook. The company made a net profit after tax worth $3.8 million within 6 months of duration as compared to the loss of $9.7 million in the prior comparable period.
As a result of poor performance of the Radio Rentals, the company downgraded its full-year guidance report from the range $7 million-$10 million to a range of $6 million - $8 million.
The company informed their investors that the financial performance of the company is due to the reduction in the volume of installation for the past 2 years in Radio Rental’s consumer leasing division.
Price sensitivity and a rising arrear trend have created pressure on the disposable income of the consumers.
In the month of March, a downward trend was seen in the profit of the company as the business also continued to decline. However, as per today’s announcement, the company told its investors that a positive improvement is seen in operations as a result of improved marketing campaigns, flexible pricing, faster transaction, and new store concepts.
As compared to the prior corresponding period, the half-year revenue of the company was $112 million which went down by 11%.
The company also highlights that corporate costs and legal fees have also played a significant role which will stop radio rentals from identifying whether someone who is taking out a lease has a capacity to payback or not.
In the month of May, the Federal Court declared that TGA needs to pay $22.1 million in the form of fine, fees and refund in case if it fails to identify the financial position of its customers. It was admitted by the company that Radio Rentals had breached the National Credit Act 4 times with respect to each of entry made for its 275,060 consumer leases in the duration from January 2012 to May 2015.
The enforceable undertakings consist of $6.1 million in refunds and write-offs as a part of default fees for an estimated 60,000 leases, and another $13.8 million need to be paid for excess lease payments.
Tim Luce who the CEO of TGA is still hopeful that the challenges which the company is facing as of now will take some time and get resolved.
By the end of the day, the share price of the company tumbled by 5.405% after the half-yearly results declared this morning. The last traded price of the share was A$0.525 which is near to its 52 weeks low price. The market capitalization was A$88.76 million.
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