Unfortunately for its long-suffering shareholders, a bad year just got even worse for the Thorn Group Ltd (ASX: TGA) share price.
In early afternoon trade the financial services company's shares have recovered slightly and are down 15% to 56.5 cents. At one stage they were 17% lower at a multi-year low of 55 cents.
This brings its year-to-date decline to an disastrous 70%.
What happened?
This morning Thorn's shares emerged from a trading halt with the release of its half-year results.
According to the release, for the six months ending September 30, Thorn delivered revenue of $132.4 million from continuing operations. This was a 12.5% decline on the prior corresponding period.
On the bottom line the company posted an after tax loss of $9.7 million, compared to a profit of $15.2 million during the first-half of FY 2017.
This loss was attributable to a $20.7 million non-cash impairment of goodwill made during the half related to Radio Rentals and Trade & Debtor Finance of $15.6 million and $5.1 million respectively.
However, it is worth noting that even after excluding this impairment, net profit after tax would have still been down considerably on the prior corresponding period.
The main reason for this is the performance of its Consumer Leasing division. It reported a 19.1% decline in segment revenue during the half to $108 million. Being the main breadwinner by some distance, its poor performance has an overwhelming impact on the business as a whole.
According to the release, management has blamed the poor performance on general weak retail market conditions, a delay in returning customers due to the launch of the four-year contract three years ago, adverse publicity from the class action launched by Maurice Blackburn, and significant operational changes arising from the roll out of the new online origination and credit assessment platform.
Looking ahead, management doesn't appear to expect much better in the second half, believing that its outlook continues to be "subdued".
It did however advise that it still expects a full-year cash profit of between $17 million and $20 million. This cash profit forecast excludes the impact of the non-cash goodwill impairment charge of $20.7 million.
Should you buy the dip?
Although Thorn looks dirt cheap, there is a reason for this and a real danger that it could prove to be a value trap.
I would suggest investors stay clear of the company and consider Thorn's modern equivalents Afterpay Touch Group Ltd (ASX: APT) and zipMoney Ltd (ASX: ZML) instead.
