DSG International Plc Ordinary 2.5p (DSGI)

Company overview

DSG International plc (Dixons Store Group) is one of the largest consumer electronics retailers in Europe. The company operates the Dixons, Dixons Travel, Currys, Currys digital, PC World and Electro World stores along with many other brands across Europe including Pixmania, Equanet and Advent Computers. The company, formerly known as Dixons Stores Group plc, specializes in selling high technology consumer electronics products, audio-video equipment, PCs, small and large domestic appliances, photographic equipment, communication products and related financial and after sales services. The company is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index..

HL Comment (25 June 2010)

Europe's second largest electrical retailer recently (24th June 2010) announced DSG International will become Dixons Retail, though there are no plans to rebrand any of the company' s High Street stores. Management is making the change because suppliers, investors and customers still refer to the firm by its former name. The announcement came (subject to shareholder approval) on the day the group reported a return to profitability, with a £112.7million full-year, pre-tax profit against a £123.6million loss a year earlier. The group achieved the performance after renovating stores and reducing the amount of stock it holds. Revenue rose 3 per cent to £8.53billion, while like-for-like sales increased 2 per cent. Operating profits in Britain and Ireland, rose 21 per cent to £71.1million.

Negative Points:

• The group concede that the economic backdrop in Europe will remain challenging.
• DSG faces considerable competition on the high street in the form of US electrical giant Best Buy and Kesa Electricals which owns Comet and Darty, Argos and the various supermarkets which are attempting to expand electrical sales.
• There are no plans to resume paying a dividend.
• The coalition government’s emergency Budget announcement to raise VAT to 20 per cent is worthy of mention.

Positive Points:

• The firm reported that sales of televisions increased 50 per cent in the UK over the last six weeks because of the World Cup.
• Demand for iPads has been impressive with DSG in Britain being the biggest seller of Apple products.
• The company has more than halved its net debt during the year to £220.6million.
• The company had renovated 200 stores by the year-end in May, with average profits at those shops 20 per cent higher, and two-thirds of all UK stores will be in the new format by October.

Consensus

On balance, market consensus indicates a buy.

All yield figures are variable and not guaranteed.

Fundamental Data

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (p)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
01-05-2010	8,532.50	112.70	2.00	22.10	0.20	103.00	n/a	n/a
02-05-2009	8,317.80	(123.60)	(6.20)	41.20	n/a	(92.00)	n/a	n/a
03-05-2008	8,488.00	(184.10)	(15.58)	5.20	n/a	635.00	5.45	10.70
28-04-2007	7,929.70	114.10	1.33	89.40	n/a	(86.00)	6.54	5.50
29-04-2006	7,072.00	302.90	8.63	14.70	3.70	4.00	6.23	4.60