Wait for Thorn's strategic review

the investment column

SO MUCH FOR the theory that demergers are supposed to create value for shareholders. Ever since Thorn and EMI did the splits 18 months ago all it has done is highlight the deficiencies of the separate groups.

Every time one of them gives a trading update it seems to spark a fresh share price fall and profit downgrades. Yesterday it was Thorn's turn and so it came as little surprise when it unveiled another disappointing performance. A warning that earnings for the year to March would come in at the bottom end of expectations was accompanied by the resignation of its chief executive.

Appropriately enough given that the Winter Olympics are in full flow, Thorn's share price graph resembles a ski slope, with its shares falling from more than 400p on demerger to close down another 9p to 146.5p yesterday.

Thorn's future now hinges on the outcome of its strategic review. The Radio Rentals chain is still losing business at an alarming rate. Thorn is hardly to blame for the slump in sales caused by the rise in a rise in insurance premium tax. Building society windfalls also prompted customers to buy a TV or video rather that rent one.

But the fact is the business faces real long-term problems. The rental market is in decline, with industry sales predicted to fall by at least 5 per cent a year. And the group has been slower than Granada to start using direct sales techniques. It will be a long hard grind for Thorn to get UK sales moving in the right direction again. The best solution is to join forces with Granada, but that could pose insurmountable competition issues.

Thorn would also be well advised to sell its US business, where the group has been guilty of poor management and allowing competitors to steal market share.

Thorn's prospects hardly look promising. But with the share price so low already it is worth waiting to see if it can produce a rabbit out of the hat when it announces the results of its review in May.

SG Securities has downgraded profit forecasts from pounds 125m to around pounds 118m for the year to March, putting the shares on a prospective p/e ratio of just 8. Hold.

Start your day with The Independent, sign up for daily news emails
News
The two faces revealed by the ultraviolet light
newsScholars left shaken after shining ultraviolet light on 500-year-old Welsh manuscript
News
Rosamund Pike played Bond girld Miranda Frost, who died in Die Another Day (PA)
news
Arts and Entertainment
books
News
newsHow do you get your party leader to embrace a message and then stick to it? With people like this
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat