Outlook: Thorn's beggars can't be choosers

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The Independent Online
THE HORIZONTAL hold at Thorn went on the blink a long time ago, so yesterday's news that the rentals business has sold its troublesome American operations for a better than expected price must have had battle- weary shareholders pinching themselves. Could this really be true, that the ugly sister of EMI was finally issuing a positive bulletin?

True it is. And not only that but the main thorn in the company's side - a lorry load of US litigation - has been offloaded too, with no ongoing liability.

That pounds 545m was a good price was clear enough from the reaction of the shares, which managed to shoot up 10 per cent before the deal had even been announced (a nice profit but a Stock Exchange inquiry for someone). But does this deal really get this under-performing company off the hook?

It certainly prods Thorn in the right direction. With America gone, management can now concentrate on selling the Scandinavian and Asia-Pacific operations before knuckling down to its only remaining region, the UK. This is what Thorn should have done years ago. The model is Thorn's main rival, Granada, which is run for cash and produces a spectacular return. While Granada can use the money to invest in its other growth businesses in leisure and media, Thorn can return it to shareholders.

With its core business declining at the rate of 5 per cent a year and the shares already well above their low, there may not be much left for bidders to go for. But with a dividend yield of 8 per cent and the prospect of more capital returns, Thorn may have a viable independent future as a kind of junk bond whose higher risk is compensated for by higher dividend returns. Not exactly what management had in mind when the business was demerged from EMI two years ago but beggars can't be choosers.