28-Aug-2020:  Forager's Australian Shares Fund (FOR) have released their 2020 Full Year Statutory Accounts (& Appendix 4E) after the market closed today.  Here's what they had to say about TGA this time:

Poor Performers Again This Year

Some of this year’s poor performers were also there last year. Thorn Group (TGA) alone cost investors 5.4% of the portfolio as its share price fell 71% over the year. Its small business equipment financing division has likely been wiped out by COVID-19, making the decision not to sell it last year a sub-optimal decision. Procrastination over the future of Radio Rentals has eroded the value of that division. The entire board and Thorn's CEO has been replaced and the new board has moved quickly to cut costs and finally decided Radio Rentals is worth more by being wound up, than continuing in its previous format. With a growing cash balance much larger than the current market capitalisation, it is time for shareholders to see some return.

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There seems there's always a reason to hold on to TGA, but they still keep heading south.  It's Steve Johnson's decisions to invest in these sub-optimal companies and then to make sub-optimal decisions about not selling them when they should - that has caused FOR to now have underperformed their benchmark (the All Ordinaries Accumulation Index) over every period up to 8 years.  FOR have only outperformed that index by 0.78%pa over 9 years, by 0% over 10 years (same returns over 10 years), and by only 0.02%pa since inception.  That's a mighty fall for a fund that was a great outperformer in their first few years and were trading at a persistent premium of over 20% above their NAV.  How those times have changed!!

FOR still hold TGA shares, and I still hold FOR shares.  I think we both need to wake up and smell the manure!

05-June-2020:  Steve Johnson's Forager Funds sent out their shareholder report for May today for their Forager Australian Shares Fund (FASF, ASX: FOR), and their FASF NAV rose +18% in May, beating the All Ords (+5%) by +13%.  As they said, "Having fallen much more than the index, the net asset value of Forager’s Australian Shares Fund also bounced back faster.  The unit value rose 18% in May thanks to a combination of diminished fear and relatively positive updates from companies with extremely depressed share prices."

However, their TGA holding - if indeed they still hold TGA - remains problematic.  Here's what Steve had to say about Thorn Group today:

Thorn (TGA) released its annual results in May.  It didn’t make for good reading.  COVID-19 has dramatically affected Thorn’s small business equipment finance segment.  More than a quarter of its $323m loan book is not being repaid.  Losses for the division reached $19m.  And as the situation worsened, Thorn’s own funder refused to accept new loans.

The news was better for Thorn’s Radio Rentals consumer leasing division, now in run-down.  Stores have been closed and 300 staff have been made redundant.

The company will now collect as much as it can from the $146m owed by customers.  Costs will need to be trimmed to realise the most cash from the process while a new online offering is being relaunched.  The company’s $30m-odd net cash pile is set to grow.  How much cash is eventually realised will depend on the actions that the Board and management team take over the next few months.

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Luckily FOR have a number of other investments - such as RPM Global Holdings Limited (ASX:RUL) 12.5% of FOR, Enero Group Limited (ASX:EGG) 6.9%, Eclipx Group Limited (ASX:ECX) 6.8%, Mainstream Group Holdings Ltd (ASX:MAI) 6.0%, and Macmahon Holdings Limited (ASX:MAH) 5.9% of the fund - that are of far better quality than TGA are.

TGA were FOR's third largest position - at 6.8% of the fund - at the end of April, but they're not in their top 5 now.  The SP of TGA dropped -10.7% in May from 14 cps to 12.5 cps, and that could have been enough - combined with other FOR positions having share prices that actually rose strongly during the month - for them to drop out of FOR's top 5.  However, I suspect - and hope - that Steve has finally made the call to reduce their TGA position (or to sell out) during May.  I don't know that, but I suspect it. 

Last time I talked to Steve Johnson about TGA vs RFG, which was back in 2018 I think, during the Adelaide leg of the Forager Australian Roadshow, he was adamant that TGA was in much better shape than the market was giving them credit for (he was wrong on that, as it turns out), but that he wouldn't touch RFG because he struggled to see how they could ultimately survive, let alone thrive - I shared those insights in an RFG straw here soon after that.  I agreed with him on RFG then, and still do, but I've never liked TGA so we agreed to disagree on that one.  

You can read FOR's entire May report by clicking here.

Disclosure:  I hold FOR shares, but not TGA directly.  I still don't like TGA, and would be very happy if FOR have indeed exited the stock.

29-May-2020:   Annual Results FY2020 Media Release   and   Investor Presentation Annual Results FY2020

Plus:  4E and Annual Report   and   Appendix 4G

Thorn posted an annual Net Loss of $81.1 million, compared with a loss of $14.9 million in the previous corresponding period. Revenue from continuing operations fell 7.9 per cent from $221.9 million to $204.3 million.

Thorn determined that provisions totalling $35.6 million for the expected impact of COVID-19 and the Radio Rentals’ store closure program - additional to matters included in previous announcements to ASX - should be taken up in its accounts for the year ended 31 March 2020.  Those additional provisions comprise $13.5 million for the Radio Rentals business and $22.1 million for the Business Finance Division.

The result was further affected by a series of significant events, including a charge of $26 million for the class action settlement and an additional $12.8 million of debts being either written off or fully provided for in the Business Finance Division.

The closure of the 62 Radio Rentals’ stores affected the carrying value of certain assets and liabilities in that division, including inventory and further provisions to reduce the valuation of assets.

Thorn’s revised business strategy is predicated upon the intention to continue to operate the consumer leasing business, based exclusively on a digital customer onboarding process, and to continue to operate the business finance activity with a selective customer and broker model and enhanced credit policies and collection processes.  These initiatives, combined with cost cuts across all divisions and head office and a current cash balance in excess of $40 million are aimed at having the Company remain sustainable during the current challenging circumstances and best position the Company to achieve longer term growth.

Thorn continues its previously announced position of not providing profit guidance. 

26-May-2020:  Strategy Update

This "Strategy Update" is pretty short:

Thorn Group Limited (ASX:TGA) (“Thorn”) notes recent media speculation. 
 
Thorn has previously announced the expansion of its online presence and the closure of the Radio Rental stores. 
 
The Board’s intention is to continue to originate in Thorn Business Finance and in Consumer Leasing in accordance with tightened credit policies in the Covid-19 environment.

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However it was enough to cause the TGA SP to rise over 17% today (that's where they are as I type this anyway).  I don't hold TGA, but I do hold FOR shares (the Forager Australian Shares Fund (FASF) LIT - Listed Investment Trust) and TGA was FOR's 3rd largest position (6.8% of FASF) at April 30.  Forager own 16.15% of TGA.  I agree with Steve Johnson on most things but his foray into TGA was not one of those things.  I have long hated TGA as a company.  Hated is a strong word.  Disliked, with a passion?  I much prefer Steve's largest 2 positions in his FASF (ASX:FOR) fund, being RPM Global Holdings Limited (ASX:RUL, 14.9% of FASF) and Macmahon Holdings Limited (ASX:MAH, 7.9%).  I actually have holdings in those two myself.  My MAH position is larger than my RUL position, because I think Macmahon have greater near-term upside.  Not TGA however.  I hope it works out for him!  As a FOR shareholder, I REALLY do.  However, I maintain my opinion that lower tier lenders are fraught with risk, and that applies even more so during an economic downturn, particularly in a recesssion.

23-Apr-2020:  COVID-19 Update

TGA is up +48% to 12c (from yesterday's 8.1 cps close) - at 1pm Sydney time - on the back of this update.  I don't hold TGA shares, but I hold FOR shares and FOR (the Forager Australian Shares Fund) holds TGA as a top 10 holding, so I do have exposure to TGA indirectly.  

It's an indication of just how much money they were losing that they have risen so much on the back of announcing that they are going to close ALL of their Radio Rentals stores permanently and that Radio Rentals will continue into the future as an online retailer.

Excerpts:

THORN ANNOUNCES EXPANSION OF DIGITAL PRESENCE  AFTER PERMANENT CLOSURE OF RADIO RENTALS STORES  
 
Closure of Radio Rentals Stores  
 
Thorn Group Limited (ASX:TGA) (“Thorn”) announces today the expansion of its online presence and the permanent closure of the 62 Radio Rentals stores and selected warehouses, amid the coronavirus-driven downturn in the retail sector. 
 
The closures and the resultant redundancies of approximately 300 casual and full-time staff at the outlets and head office will be undertaken over the next three months. 

Thorn will undertake the run-down of Radio Rentals’ loan book, worth approximately $123 million as at 31 March 2020, which will be value creating and not draw down capital. The run-down is expected to immediately generate significant cash, above the redundancy and other costs.  

Strategy Update  
 
The core of the Radio Rentals’ business will continue to operate and will be leveraged to develop a new, digital business model.  Radio Rentals’ online store (www.radio-rentals.com.au) will be enhanced with a relevant product range to more closely match the needs of our customer base. 
 
Thorn has also introduced new credit policies and collection processes, as well as cutting head office costs, to ensure our business model remains sustainable in the face of these adverse business conditions. 
 
Chief Executive Officer, Mr Peter Lirantzis, said “I am disappointed that we have been forced to make hard decisions regarding our staff and store network, however they have had to be made to ensure Thorn Group continues to operate and thrive in the future. We intend to re-develop both the Radio Rentals’ digital business model and Thorn Business Finance once the COVID-19 crisis has passed.  
 
“The group presently has circa $40 million cash at bank and is actively pursuing a range of cost-cutting initiatives and recoveries, through which we expect to generate increased cash flow over the next year”, he concluded. 
 
The adverse business conditions created by the COVID-19 crisis are causing increased arrears in both Radio Rentals and Thorn Business Finance and will result in corresponding write-offs. 
 
These conditions are expected to continue to create a range of challenges and complex conditions for the Thorn business over coming months. 

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This business still has significant debt and plenty of headwinds as well, as they have outlined above.  While a +48% SP rise in a single day is welcome, it always pays to put that into some perspective.  At 12c (i.e. even after today's +48% rise), they're still -73.8% down from their $0.458 (45.8c) 12-month high (back in May last year) and -96% down from their $2.94 peak in early December 2014.  TGA has been an absolute disaster for shareholders - unless you purchased them in the last 7 weeks.

Update:  5:30pm, 24-Apr-2020:  TGA ended up +60.49% yesterday (at 13c) and rose another +19.23% today to finish the day at 15.5 cps.  Still -66% down from their 12-month high of 45.8 cps, and still -95% down from their $2.94 high in early December 2014.  It just goes to show how much of a gain you need in percentage terms to recoup losses of this magnitude.  It seems to me that they were priced earlier this week as though there was a 95% chance they would go broke, and now they've been repriced as though there is "only" an 80% chance they'll go broke.  I would think that the chances are still probably closer to 90%, but time will tell.