Thorn Group is pinning its hopes on new business finance products to help revive its fortunes, after a year when it sold its consumer finance business and was unable to originate equipment finance.
Thorn reported a net profit of $32.3 million for the year to March, a big increase from profit of $8.4 million in 2020/21.
The turnaround was largely due to a $19.9 million release of COVID provisions.
Revenue fell from $33.4 million in 2020/21 to $17.3 million in the year to March. Receivables (pre-provision) fell from $192.5 million to $110 million.
In December Thorn sold its consumer finance business Radio Rentals to Credit Corp for a cash consideration of $43.9 million plus deferred payments of $2.3 million. The profit on the sale was $11.7 million.
In April 2020 Thorn responded to COVID by closing all 62 Radio Rentals stores. A few weeks later it made the closures permanent and retrenched 300 staff.
The company said it would revitalise Radio Rentals as a “digital pure play” but struggled to make headway.
When Credit Corp took control, its chief executive Thomas Beregi said the business was effectively in runoff, issuing new contracts but not at a sustainable rate.
Thorn has also had problems in its business finance division. It suffered a blowout in arrears in 2020 that put it in breach of its warehouse finance parameters and which meant that it was unable to sell originations into the warehouse.
According to its latest financial report, “Thorn cannot originate new leases through the warehouse until further agreement is reached”.
The size of the facility has fallen from $166.3 million at the end of March 2021 to $60.6 million at the end of March 2022.
In July last year the company launched a new a debtor finance product under the Thornmoney brand, providing invoice finance to SMEs.
Thorn said it has plans to launch a suite of business finance products under the new brand, which will have a “digital first” business model.
Funding for the new product does not come from the warehouse facility. Instead, Thorn is using what it calls a “capital light” model, although it did not make clear what that involves.