Thorn warns on profits as chief makes shock exit

Click to follow
The Independent Online
Thorn, the troubled Radio Rentals group, announced the shock departure of its chief executive yesterday and warned that current-year profits would be at the lower end of market expectations. Investors took fright, sending the shares down 6 per cent to 146.5p.

Steve Marshall, who has been Thorn's finance director since 1995 is replacing Mike Metcalf as chief executive. Mr Metcalf will receive a pay-off of around pounds 350,000, equivalent to one year's salary.

Mr Metcalf was expected to remain to oversee a vital strategic review at Thorn designed to reverse a dramatic slump in its share price since it demerged from EMI, the music group. But he surprised the market by deciding to leave before this review had been completed.

"A lot of work has been done and we will make a decision on the future of the company within the next few months. Mike had to decide whether to see through the implementation of the plans or hand over to somebody else," Mr Marshall said.

He insisted that Mr Metcalf left the group by his own accord and was not under any pressure from institutions despite the slump in the group's value.

Analysts believe Thorn is now likely to break itself, with some of the proceeds from its disposal programme likely to be handed back to shareholders. Mr Marshall confirmed that one option under consideration was the sale of Rent-A-Center, which is a market leader in the US with more than 1,400 stores.

Thorn admitted yesterday that it was facing further litigation worries in America over the terms of rental contracts. The group faces new law suits in New York, Alabama and Massachusetts having already been ordered to pay $127m (pounds 75m) in damages in two US states. The group will have to wait at least six months to hear the result of an appeal against one of those decisions.

Industry sources suggested Thorn was also considering approaching Granada, the leisure and media group, to discuss a marriage between its rental business and Radio Rentals. Such a merger would create severe competition concerns.

Christmas trading at Radio Rentals was disappointing due to a fall in customers renting personal computers, despite a reduction in prices.

This poor performance saw profits at Thorn fall by almost a third to pounds 88.6m in the nine months to December, causing analysts to downgrade profit forecasts by at least pounds 5m to around pounds 120m for the year to March.

Thorn admitted that trading in the UK was likely to remain tough but said that it had no current plans to close any more Radio Rentals branches after shutting down 90 sites last year.

Investment Column, Page 20