Have Radio Rentals broken their lease?

Posted by Alex Brown on Oct 18, 2017 5:46:01 PM
This week has been one hell of a rollercoaster ride for Thorn Group (Radio Rentals parent company) shareholders. On Monday Thorn announced a revised profit guidance of 30% below what they achieved last year, sending the stock price into freefall, losing over 30% in two days of trading.

The company stated a number of reasons, all relating to its consumer leasing division (Radio Rentals), namely:

  • The ongoing ASIC investigation into its lending practices and associated Maurice Blackburn led class action mentioned in our earlier article
  • Weakened retail conditions, which are technically the worst in 4 years in their defence
  • A delay in return customers due to launching their 4-year terms 3 years ago - surely this could have been anticipated??
  • Adverse publicity relating to these issues

Overall the result is the number of products installed during the past 6 months down 27% on last year. This begs the question, is this the beginning of the end for Radio Rentals? With their long-time CEO stepping down earlier this year and the CEO-elect yet to commence, it seems the once mighty company is starting to lose its direction.

Some analysts are speculating that Thorn doesn't have the capital to cover both the ASIC investigation and Maurice Blackburn class action, magnified by the slide in share price limiting their borrowing capacity.

Is this a sign of things to come in the consumer leasing industry as a whole? As ASIC continues to mount pressure on franchisors and their rogue operators by dishing out hefty fines and even closing businesses in some cases, the rental industry is waiting in the dark for what the government has promised will shake-up the industry with the new SACC Laws.

Is this the perfect storm for disruption?