The Motley Fool

Thorn Group share price plunges 21% on profit warning

It’s been a prickly morning for the Thorn Group Ltd (ASX: TGA), the parent company of consumer leasing business Radio Rentals as well as a Business Finance division.

The Thorn Group share price has plunged 21% this morning in response to a profit warning announced after close of business yesterday. The company estimated that its profit after tax for the year ending 31 March 2019 will be a loss of $6m, a heavy fall from previous guidance of $6m to $8m in profit.

The company attributed the profit downgrade to an issue in its Business Finance division where a majority of lessees have defaulted on lease payments for a certain product and are disputing the enforceability of the leases.

Thorn’s total exposure to the issue is estimated at $10.5m. The company said that it is considering its options, but at this point, it looks as if it will be unable to collect on these receivables and this could flow through to a $7.4m hit to profit after-tax.

But that’s not all. The resulting reduction in Thorn’s cash flows combined with persistently challenging conditions in its consumer leasing business are expected to result in a non-cash write-down of the company’s intangible assets which could result in a reduction in reported profit of up to $4m.

The Thorn Group share price has recovered somewhat as the morning has gone on, having been down 30% in early trade.

Top 3 ASX Blue Chips To Buy For 2019

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2019."

Each one pays a fully franked dividend. The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Cale Kalinowski has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.