Thorn Group profits from banks' reluctance to lend

The household goods rental company, Thorn Group, yesterday announced a 58 per cent increase in net profit for the year to March 2010, based on a 14 per cent growth in revenue. The company said the result was driven by its core business, Radio Rentals.

After adjusting for a $3.1 million one-off tax benefit, the company said normalised earnings of $16.4 million were up 33 per cent on the previous year.

Thorn Group managing director John Hughes said Radio Rentals and Thorn Business Services, a business equipment rental business, grew as a result of the banks' reluctance to provide unsecured personal finance and small business loans.

The group increased customer numbers by 10.5 per cent.

In addition to Radio Rentals and Thorn Business Services, Thorn operates an online retail business, BigBrownBox.com.au, and a personal finance business, cashfirst.

Hughes said BigBrownBox.com.au, which was launched in November 2008, had been caught up in the retail downturn and had produced a disappointing result.

cashfirst, which is 18 months old, offers loans up to $5000 and distributes its product online, has a $5.5 million loan book and has made a negligible contribution to group earnings.

Hughes said cashfirst started to "hit its straps" in the September quarter last year and is showing good growth. It has 4000 accounts.

Hughes said the plan for the current financial year was to expand the group's retail network. Thorn has 70 Radio Rentals outlets and is planning to add another five to 10 this year.

The company adopted a more hands-on approach to managing arrears. Delinquency levels were above 20 per cent of accounts in a number of months during 2008 but were below 20 per cent throughout 2009. They are, however, drifting back toward 20 per cent from a mid 2009 low near 15 per cent, and which may reflect the end of the stimulus payments to most households from the Australian government.

Impairment charges fell from 2.7 per cent of the rental book in the 2008/09 financial year to 2.5 per cent in the latest year.