Thorn results prompt shares to slide by 10%

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The Independent Online
Shares in Thorn fell by 10 per cent yesterday in adverse to reaction to the electrical retailer's first set of results since demerging from its more glamorous former partner, the music publishing giant EMI.

Analysts cut back their forecasts after Thorn made cautious noises about the outlook on both sides of the Atlantic.

"The warning about US trading and the UK cost overruns came out of the blue," said Nick Bubb, retail analyst at Mees Pierson. "It is a dull company that cannot afford to disappoint."

Mike Metcalf, Thorn's chief executive, said the market remained highly competitive in most of its key markets including the US and it faced delays in making cost efficiencies in Britain.

He also revealed a higher than expected pounds 33m provision taken to cover the collapse of Escom, the German computer retailer which had taken on more than 230 leases from Thorn's Rumbelows chain.

Some 180 of these leases, mostly in poorly located high street sites, reverted to Thorn when Escom folded. Thorn is still looking to sell the shops.

Thorn's shares closed just off their day's low, down 34p at 313.5p, their lowest level since the summer demerger from EMI.

Mr Metcalf blamed Thorn's poor stock market performance partly on worries about litigation in the US. He said the company would contest any damages award from lawsuits it faces in several states over its rental-purchase sales system, though he was unable to estimate what level of provisions may be required for these cases.

In the six months to September, Thorn made pre-tax profits of pounds 87m, versus pounds 79m a year earlier, before the exceptional costs of the Escom leases. The maiden interim dividend is 3.5p.

Thorn's main business is hire-purchase deals on electrical goods such as televisions and video recorders mainly sold in the UK under its flagship Radio Rentals chain.

It also opened 16 more of its new downmarket Crazy George stores during the period, bringing their total to 47. Recently Thorn has expanded into selling furniture and personal computers and plans to enter the car rental market in the US.

Investment column, page 25

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