Financial services provider, Thorn Group Ltd (ASX: TGA) has today announced another strong first half profit result. For the six months to September 30 2014, reported NPAT was up 14% to $15.2 million on the back of a 33% rise in revenue. Each of the company's divisions – including Radio Rentals and Rentlo, Thorn Financial Services, NCML and Thorn Equipment Finance – showed signs of top line expansion.
An interim dividend of 5 cents per share fully franked was declared.
Thorn, a $414 million company, has experienced revenue growth in every first-half-year report since 2010. Today's result was bolstered by another record performance from Radio Rentals, which introduced a 48-month, "Rent, Try, $1 Buy contract", coupled with expansion in other operating segments.
The continued strong operating performance proves Thorn is up to the challenge of adapting to the new environment and growing in a sustainable manner. This has included both organic expansion and bolt on acquisitions, such as the recent strategic investment in invoice financing business Cash Resources Australia (CRA).
Managing Director, James Marshall, said the group is in good shape and placed for further growth in the future: "Thorn continues to perform strongly and we are seeing results from our strategic initiatives and investments, including additional loan products and extended lease contracts, flowing through to the bottom line."
Although Thorn has $29 million worth of current banking facilities to finance further acquisitions, it is currently in the process of expanding its debt facilities.
Buy, Hold, or Sell?
Although a number of other small financial companies – such as Money3 Corporation Limited (ASX: MNY) and Cash Converters International Ltd (ASX: CCV) – are competing in a similar industry to Thorn, there's reason to be bullish on the company's long-term prospects.
Indeed, so far this year Thorn is off to a great start and expects, despite soft economic conditions, to deliver solid NPAT growth. It is forecasting around $30 million in underlying NPAT for the full year, deviating from reported profit due to transaction costs associated with the CRA acquisition.
I'm expecting high-single digit NPAT growth in the coming year.
Despite its share price rising 26% in the past six months, I believe its valuation is not demanding and it could prove to be a great long-term investment today. Especially when its growth potential is coupled with its 4.2% fully franked dividend yield.
