Dixons Group plc is Europe’s largest specialist retailer of consumer electronics. The Group has more than 1, 370 stores across the UK, the Republic of Ireland, and the Nordic countries, France, Spain, Italy, Hungary and the Czech Republic. The Group specialises in the sale of hightechnologyconsumer electronics, personal computers, domestic appliances, photographic equipment, communications products and related financial and after sales services through Dixons, Currys, PC World and The Link in the UK, Elkjï¿½p in the Nordic region, PC City in Spain, France and Italy, UniEuro in Italy and Electro World in Hungary and the Czech Republic.
Display 1: Graph to disclose the concern of poor performance. As it can be seen from the diagram above company’s performance was declining onwards from year 1999. Approaching 2003 the share price has fallen to its five years low. This gives us the base for analysing the historical performance in order to prove that it needs to undergo some change to improve its financial performance.
Value Based Management We shall start our financial analysis based on Value Based Management principles and Ratio Analysis. VBM demonstrates how every decision that company’s management team makes can consistently create shareholder value. There are three steps to value based management:
1. Mission statement must state value for shareholders at its core. 2. Measuring shareholder value consistently for the entire Dixons Group to be productive. 3. Actively managing to create shareholder value – Requires: identifying and understanding the sources of value, target setting, allocating resources, measuring performance constantly, developing reward systems and cultivating a suitable shareholder value generatingculturethroughout the company.
Therefore, the first approach to measure shareholder value from the perspective of a quoted company is total shareholder return (TSR) that is, share price appreciation plus dividends. It can be calculated using the following formula: D1 + (P1 – P0) TSR= P0 TSR represents the change in capital value of a company over a one-year period, plus dividends, expressed as a plus or minus percentage of the opening value. Rappaport considers a company’s stock price as the clearest measure of market expectations of its performance.