The Thorn Group has named Radio Rentals a ‘standout performer’ in its full financial year results posted today, with the consumer leasing branch of the business posting a 16 per cent increase in revenue to $197 million.
The parent company for Radio Rentals, known as Rentlo in South Australia, has lifted revenue 16 per cent to $235 million for the 12 months to 31 March 2014, with a net profit after tax of $28.15 million, slightly higher than the $20.02 million of the previous year.
The increase in revenue did not translate to a significant increase in earnings as the expansion was matched with higher costs in the short term ahead of growth benefits, the company said. However the group considered the results “solid” since profits were stable after absorbing costs of expanding to become a broader based financial services business.
Click here to sign up for our free daily newsletter
Returning to Radio Rentals’ results, furniture and smartphones increased significantly compared to the year before and strong demand continued for flat panels and larger whitegoods. The introduction of the new 48 month ‘Rent,Try,$1Buy’ contract made larger products and whole room packages more affordable, the company said.
The company said that demand for Samsung and Apple products, where sales realise a lower margin, has reduced gross margin.
“Underlying EBITDA was up 6 per cent to $50 million ($47.3M), after accounting for ‘Rent, Drive, Buy’ trial costs and a new software system. Costs increased as new stores were opened and additional resources were required in the store network due to growth in the number of units on rent.”
A new website was launched in October 2013 to improve Radio Rentals’ online capability and customer loyalty remained strong, with 48 per cent of customers who completed a ‘Rent, Try, $1Buy’ contract renewing for a new item.
Regarding outlook, Thorn said investments in new business opportunities are expected to deliver solid NPAT growth to above $30 million as it continues its transformation to a broader based financial services group.
Managing director of Thorn, Mr John Hughes, said that with all branches of the group growing revenue, there is clear evidence Thorn’s diversification strategy is starting to pay off.
“We have achieved significant revenue and receivables growth this year. Earnings have had to absorb major investment in new systems and people plus one-off costs relating to our CEO transition. Nevertheless, Thorn has been able to keep profit stable and grow dividends while building a business that will deliver stronger benefits in coming year,” Hughes said.
James Marshall will take over as managing director of the Thorn Group from Hughes when he retires at the end of June.