FINANCIAL ANALYSIS FOR DSG International Plc

Financial Analysis for DSG International Plc



Financial Analysis for DSG International Plc

Part A

Company Description

DSG International Plc (DSG) is one of Europe's largest specialist electrical retailers. The company through its subsidiaries is engaged in multi-channel retailing electrical and computing products. The company principally operates in three business divisions namely Electricals, Computing and E-commerce. Its product offerings include consumer electronics, personal computers, domestic appliances, photographic equipment and communication products. It also offers financial services, such as credit facilities, as well as provides after-sales support services, including advice, access to help lines, repair, or replacement. The group specializes in the sale of consumer electronics, personal computers, domestic appliances and photographic equipment. The group operates primarily in Europe. It is headquartered in Hertfordshire, the UK and employs about 40,700 people.

Financials

The group recorded revenues of £8,545.9 million (approximately $17,152.1 million) during the financial year (FY) ended May 2008, an increase of 7.8% over 2007. The operating loss of the group was £199.3 million (approximately $400 million) during FY2008, in comparison to operating profit of £103.1 million (approximately $206.9 million) in 2007.The net loss was £260.8 million (approximately $523.4 million) in FY2008, decreased from a profit of £5 million (approximately $10.0 million) in 2007.

SWOT Analysis

Strengths

Market leadership

Strong brand equity

Extensive product offerings

Weaknesses

Declining sales in the UK & Ireland

Weak operating performance

Opportunities

Intense competition

Increased minimum wages in the UK

Low consumer confidence in the UK

Threats

Store refurbishments and new store openings

Growth in online retail spending

Demand for household products

Financial performance

DSG International operates in an increasingly challenging environment, in which the falling prices of a wide range of electrical goods has put a growing pressure on company profits. Increasing competition from non-traditional electrical goods retailers, particularly major grocery retailers expanding their non-food offer, and online players, will continue to exacerbate the downward pressure on prices in DSG International's core product categories and encouraging consumers to look for promotions and deals when purchasing electrical goods.

These pressures are particularly prominent in DSG International's core developed markets, especially the UK, where the major supermarket operators, including Tesco and Wal-Mart-owned Asda, have significantly expanded the range of electrical goods that they offer within their aggressive pricing strategies, while the rise of the internet retailing giant Amazon as a major competitor for consumer electronics is expected to remain unabated.

The challenging competitive conditions faced by DSG International have spurred bold strategic responses on the part of the company. DSG International shifted the Dixons brand from the high street towards being a purely online presence, re-branding all 190 Dixons durable goods stores in the UK as Currys.digital in 2007. The stores had minor refits to improve the displays and increase the range of flat panel TVs during the year, as well as introducing new product categories, including small domestic appliances and white goods. In May 2008, DSG International announced that it was planning to close 77 out of the remaining 177 Currys.digital outlets as their leases expired over the following five years. The closures form part of DSG International's plans to cut costs by £50 ...