Thorn blow to shareholders over dividend

Shareholder confidence in Thorn was dealt another blow yesterday after the Radio Rentals group that was recently demerged from the more glamorous EMI music publisher withdrew the option for its shareholders to take next month's interim dividend in the form of shares rather than cash.

Thorn's shares, which crashed 42.5p to 209p after a profits warning last week, have drifted since to yesterday's close of 201p. With the price on the slide, shareholders have little incentive to take their dividend payout in the form of shares, as the number they would receive was determined on the basis of a much higher price.

The Thorn scrip alternative to the interim payout for the six months to September was calculated on the basis of a share price of 276.6p, well above the prevailing price. A scrip is only attractive when a rising share price effectively increases the value of the payout.

The withdrawal of the scrip is the latest blow for shareholders in Thorn, who have watched the value of their investment in the consumer goods rentals group slide ever since the demerger of Thorn EMI last summer. Contrary to expectations that the split would enhance shareholder value, shares in both EMI and Thorn, under the chairman Sir Colin Southgate, have fallen.

Since last August, Thorn's value has slumped from pounds 1.77bn to under pounds 900m. EMI's shares have also tumbled from 1,450p to only 1,261p at last night's close. The fall has caused dismay among investors who had expected the split to unlock hidden value in the way that similar demergers did at companies such as ICI, which spun off Zeneca, and Courtaulds, which separated from its textiles subsidiary.

In the run-up to the demerger the value of Thorn EMI was bid up on the stock market as investors gambled on a bid for EMI from a cash-rich American entertainment group which has failed to materialise.

Thorn said last week that it would not make more in the year to March than the pounds 170.7m it achieved a year earlier. The company blamed weak pre-Christmas trading, the full effect of which would not be felt until the final quarter of the year, and the impact of sterling's recent strength on its overseas earnings.

Thorn generates about 60 per cent of its turnover in the US so it is vulnerable to fluctuations in the dollar/pound exchange rate. It has also been hit in the US by intense competition from electrical retailers who have turned consumer electronics such as televisions and videos into commodity products.

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