Thorn Group has given up on its attempt to revive its consumer finance business Radio Rentals and has sold it to Credit Corp.
The A$60 million deal is expected to be completed this month. Thorn said it would use the proceeds to develop its business finance operation.
In April last year Thorn responded to COVID by closing all 62 Radio Rentals stores. A few weeks later it made the closures permanent and retrenched 300 staff.
Thorn’s consumer leasing (Radio Rentals) revenue fell from $162 million in 2019/20 to $70.7 million in the year to March. Revenue was $19.6 million in the six months to September.
The company had committed to revitalising Radio Rentals as a “digital pure play” but that proved too hard.
Credit Corp chief executive Thomas Beregi said the Radio Rentals business is effectively in runoff, issuing new contracts but not at a sustainable rate.
Credit Corp’s plan is to carry on with the business, which will require changes.
Thorn has also had problems in its business finance division. It suffered a blowout in arrears last year that put it in breach of its warehouse finance parameters. Early this year it stopped originating business finance.
The business finance receivables book fell from $264.6 million at the end of September 2020 to $135 million at the end of September this year.
Ten per cent of the book was in arrears at the end of September, down from 34.2 per cent a year earlier.
Business finance revenue was $10.4 million in the six months to September, compared with $17.9 million in the previous corresponding period. The division made a profit thanks to an impairment credit.
Thorn said it still cannot originate new leases through the business finance warehouse until further agreement is reached.
Despite this, Thorn said it is piloting a new debtor finance product under the Thornmoney brand and has plans for an equipment finance offering next year.
The company is promising that these products will be offered through a new platform “unburdened by legacy IT infrastructure”, allowing it to “source and exploit new solutions”.
Thorn chief executive Peter Lirantzis said the company was in a strong cash position with $74 million in the bank, and would use those funds to assist in funding a new warehouse.