Dixons-Carphone plc

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Contents
Introduction......................................................................................................................................1

Key features:................................................................................................................................1

Key Resources.............................................................................................................................1

Challenges....................................................................................................................................1

Capital structure and Investment appraisal......................................................................................2

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 Capital Structure..........................................................................................................................2

Evaluation of the Financial Statement.............................................................................................2

Comparing With the Competitors....................................................................................................5

Conclusion.......................................................................................................................................7

References........................................................................................................................................9

Appendixes....................................................................................................................................10

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Introduction
For this assignment, the selected company must operate in telecommunications. The selected
company for the analyses is Dixons Carphone. It was founded in London, England, and has since
expanded to become a major international hardware and electronics retailer. Carphone
Warehouse, Dixons Travel, Dixons Carphone plc World, Id mobile, Elgiganten, Gigantti, and
Elkjop are all brands distributed by Dixons Carphone plc, a multichannel retailer of electronics
and telecommunications. Dixons Carphone, a relatively prosperous company, has been able to
develop and enter new areas due to intelligent planning.

Key features:
The services offered by Dixons Carphone plc include repair, installation, and maintenance,
technical assistance, product advisory services, computer, and telecommunications services,
repair and protection, financing and insurance, reserve and collect, and click and collect. The
company runs retail locations in various European nations, including the United Kingdom,
Ireland, Greece, Sweden, Norway, Finland, Iceland, and Denmark. Its headquarters are located in
the Greater London area of London.

Key Resources
The term "resources" refers to the materials and persons essential to the operation of a business.
The core asset of the company is its communications equipment. The company's operations
encompass telecommunications, transportation, and electronics. In addition to people,
technology, and finance, the firm has access to additional resources.

Challenges
Dixons Carphone has endured a difficult couple of weeks, with the disclosure of a data breach
and the announcement of preliminary annual results indicating a 23.6% fall in pre-tax profits.
The company's difficulties in the mobile sector were a significant cause of the decline, as was a
slowdown in the UK's electrical industry.

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Capital structure and
Investment appraisal
Capital comprises of the amount
invested by the shareholders of
the company as well as the
capital employed by the
company in form of debt and
loans by the public or the
financial
institutions. The capital
structure and the investment
appraisal of the company
will be
discussed in this part of the
report.
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Capital structure and
Investment appraisal
Capital comprises of the amount
invested by the shareholders of
the company as well as the
capital employed by the
company in form of debt and
loans by the public or the
financial
institutions. The capital
structure and the investment
appraisal of the company
will be
discussed in this part of the
report.
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Capital structure and Investment appraisal
The capital of a corporation consists of the funds contributed by its shareholders as well as any
debt or loans obtained from the general public or financial institutions. This section of the report
will focus on the company's capital structure and investment evaluation.

Capital Structure
A corporation's capital structure is the mix and composition of the numerous sources of funding
it employs to generate revenue and fund ongoing operations. This section will explain how
Dixons-Carphone plc is financed (Myers, 2001).

A company's capital structure is comprised of long-term debts and shareholders' equity. To raise
money, the corporation offers only debentures and no preferred stock.

Equity – Equity is the capital committed to a company by its investors or shareholders; in

exchange for their equity investments, investors and shareholders are granted ownership stakes
in the company (Bendixen, 2004). Authorized capital refers to the maximum number of equity
shares that a firm can issue. In contrast, paid-up equity shares refers to the actual number of
equity shares awarded to shareholders and investors. When a corporation has surplus cash and is
willing to donate a portion of those funds to its investors, dividends are paid to shareholders.
Otherwise, if a company's profits are not released to shareholders in the form of dividends, that
money is maintained as "retained earnings" and used for the expansion and growth of the
business. (Betz 2018).

As a result of a statutory profit of £12 million, a gain on re-translation of overseas operations of

£46 million, an actuarial gain (net of taxation) on the defined benefit pension deficit for the UK
pension scheme of £43 million, gains on investment revaluation of £8 million, and other
movements of £8 million, the Group's total equity increased during the period from £2,280
million to £2,381 million (2020-2021).

Evaluation of the Financial Statement

Compared to its financial statement, it has been determined that Dixons-Carphone plc has
effectively managed its financial situation, allowing it to work towards the company's expansion.
Regarding the telecommunications business, it has become evident that the company's many
divisions are financially separate (Robinson et al., 2015). Ratio analysis can be used as a

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financial tool to correlate with the many components of an organization in order to take into
account all of the firm's financial elements. The ratios for Dixons-Carphone plc's 2020 and 2021
fiscal years were evaluated, as these were the first two years for which the company's financial
statements were accessible for examination.

Dixons Carphone was fined half a million pounds in January 2020 for failing to protect its
customers' personal information adequately. Ten million customers' information was
compromised due to the Dixons Carphone Warehouse data breach, which affected the company's
Currys PC World and Dixons Travel locations. The Currys PC World and Dixons Travel retail
chains had 5,390 registers infected with malicious malware. During this time, the flaw was not
discovered, and hackers gained access to a trove of sensitive information. Dixons discovered the
data leak. In the following days, the corporation dispatched a dedicated security response team to
investigate what had happened. Dixons Carphone has not yet been able to say what information
was stolen or how much was taken. Investigations Director Steve Eckersley claimed that the ICO
had discovered "systematic failings" in the way that DixonsCarphone looked after its customers'
data. An increase in the danger of fraud due to such sloppy data loss "is likely to have caused
distress to many people," Data protection laws were broken, according to the ICO, since Dixon
Carphone had inadequate security measures in place. (Neil, 2018).

The gross profit in 2020 was 20%, down from 21% in 2021. This is due to 2021's cost of goods
sold increasing from 79% in 2018 to 80% in 2021. In addition, the percentage of revenue
allocated to operating expenses remained unchanged between 2018 and 2019. The decline in net
income from 2% in 2018 to -3% in 2020 was dramatic.

By calculating the return on capital employed (ROCE), a standard financial measure, it is

possible to determine both the profitability of a corporation and its capital utilization efficiency.
This ratio indicates the effectiveness with which Dixons Carphone plc converts capital into
profit. This ratio measures a company's profitability and is used to judge whether or not it is a
worthwhile investment.

The company's return on capital decreased from 8.74% in 2020 to 7.92% in 2021. A high return
on capital employed is indicative of effective utilization of capital. The 7.92% ROCE shows that
Dixons Carphone plc is utilizing capital less efficiently than it did in 2020 and is, therefore, a
poor indicator of financial performance.

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The strategic financial analysis places a premium on calculating various ratios to assess a
company's profitability, creditworthiness, solvency, efficiency, etc. A product's gross profit
margin (GPM) is the percentage of profit made after adding a markup to the product's total cost.
After deducting all expenses, both direct and indirect, the net profit margin reveals what
proportion of revenue was retained (Kogadeeva and Zamboni, 2016). When looking into Dixon
Carphones' GPM, 2019 showed negative movement as it fell from 25.89% to 22.44%. In 2019,
sales were up 17_96% yearly because of the company's dedication to providing premium goods
at competitive prices.

Working cash is a necessary element for a business to remain operational. In the previous two
years, the company's current and quick ratios have progressively increased from 0.70 to 1.04 and
from 0.10 to 0.58, respectively. When a company's current assets are equal to or greater than its
current obligations, it is solvent and able to satisfy its daily operating requirements without
acquiring debt (Dixons-Carphone plc, 2021). On the other hand, it has been considered that the
company's exceptional P/E ratio and positive earnings per share have resulted in exceptional
market returns (EPS). Regarding earnings per share and the P/E, the P/E grew from 6.39 to 8.89
in 2021, falling back to 6.92 in 2022. Due to the significant growth in earnings per share over the
past three years, the company's share price has surely dropped considerably.

The gearing ratio has constantly declined over the past three years, while the interest coverage
ratio has increased. Due to the interest coverage ratio improvement, the company has been able
to regulate its interest. It is more effective than in prior years at repaying the interest owed to it.
The company's return on assets has increased over the previous three years, indicating that it
utilizes its assets more efficiently to enhance revenue and grow. In contrast, while the company
is addressing the difficulties described in the preceding section, the profitability ratio of the
business has not changed much (Dixons-Carphone plc, 2021). Operating leverage from improved
sales and cost savings more than compensated for the fall in gross margins caused by the shift to
online sales, resulting in higher operating margins. The outcome was a cash flow increase of
£438 million, which, together with the inflow of working capital, gave the business a net cash
position of £169 million at the end of the year.

It has been determined that because the firm operates in the telecommunications industry, it has a
greater inventory ratio, which is favorable for the business because the ratio has decreased,

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meaning the home is supplied faster. The company can produce income faster. The ratio for the
current year was 513 days, while for 2021, it was 556 days. According to the company's ratio to
its creditors, debtors are collected within 12 to 14 days, and payments are made within 95 to 97
days (Dixons-Carphone plc, 2018). The corporation has been able to maximize profits by
carefully monitoring and controlling numerous financial indicators.

Comparing With the Competitors

It is impossible to comprehend the backdrop of Dixons-Carphone plc's efficiency until its
competitors are contrasted with clarity. Financial ratios are vital when they are discussed
effectively, and all factors that influence them are accounted for. We will discuss the
competitors' financial ratios relative to their own. Considered are the same businesses that
competed with Dixons-Carphone plc for the past two years (2020–2021). Gymsharka and
Autozone Inc. are the two competitors that must be considered.

Dixons-Carphone plc has generally been more successful than both Autozone Inc. and
Gymsharka Plc. Dixons-Carphone plc has been ahead of the Autozone development in terms of
stock days, but they have lagged in terms of payments to creditors and debtors (Autozone, 2021).
In order to maintain its competitive edge throughout 2021, the corporation has been making good
use of its current assets and quick ratios. It has been recognized that the gearing ratio and the
capital used have been effectively good due to the company's careful management of these
factors. Finally, the P/E and EPS have been favorable and good relative to the other two
corporations.

Dixons-Carphone plc was deemed to have effectively expanded in 2021 and utilized its assets
less than Autozone Inc. Moreover, it has been discovered that the company's profitability has
improved over the years despite its quality being consistent. Throughout the year, the number of
Debtor days decreased significantly (Autozone Inc, 2021).

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 Figure 1: Major Competitors of Dixons-Carphone plc

The company's high-profit growth in 2021 demonstrates that the company's liquidity has been
beneficial compared to competitors like Autozone Inc and Gymsharka Plc. Additionally, the
company's interest coverage is better than the other two companies, and it has witnessed a
decrease in stock days, all of which are encouraging developments. The corporation makes more
efficient use of the asset than its competitors (Gymsharka Plc, 2021).

Compared to its key competitors, Autozone Inc and Gymsharka Plc, the company has grown
dramatically, seen an increase in profit, successfully seized more market, and boosted output
during the past three years.

In 2021, Dixons Carphone recorded sales of GBP 10.34 billion, up from GBP 10.17 billion in the
previous year. This is an increase of 1.71 percent compared to the prior year, indicating that
business accelerated between 2012 and 2013. In contrast, the company's 2019 sales were GBP
10.43 billion, down from GBP 10.53 billion in 2018. From 2018 to 2021, the company's revenue
looks to have increased gradually. Specifically, the increase in profitability from 2020 to 2021
demonstrates that Dixons Carphone's strategy to increase sales was successful.

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 Figure 2: 5-year financial performance of Dixons Carphone Plc

In 2018, the firm's net income was 160.00M GBP. 2019's -320.00 reduction in net income is a
year-over-year decline of -292.77%. However, in 2020 the company made major operational
modifications that increased its net income by 49.06% to - GBP 163,000,000. In 2021, the
company reported a net income of GBP 12,000,000, up 107.14 percent from the previous year.
Due to the popularity of its brand and the level of competition in the market, the company
regards its ability to raise revenue as a crucial performance measure. In addition, by 2021, the
company's free cash flow had increased from GBP 109 million in 2020 to GBP 438 million, all
due to the management's resource optimization plan (See Appendix).

Conclusion
The investigation concludes that Dixons-Carphone plc was one of the finest companies to choose
a joint venture because it will provide the company with more possibilities for enhanced
flexibility and revenue growth. Over the past three years, the company's ratio has been
continuously strengthened, and it has utilized its assets to extend its income streams. This is why
the suggestion for the joint venture was made. Additionally, it has been discovered that the
company has a high return on investment, showing that they have a stable clientele and efficient
management that contribute to attaining their organizational objective. Additionally, the
company's development has been compared to that of Autozone Inc. and Gymsharka Plc to
evaluate its efficacy. The company's performance has been superior to its rivals due to increased

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profitability and robust cash reserves. The company has a high market performance and
effectively utilizes its assets and equity. These are why the company would make an excellent
addition to the joint venture.

Even though it has only existed for a short time, Dixons Carphone has already achieved
tremendous success. The breadth of the company's product and service offerings enables it to
serve a wide range of customers. As a result of creating multiple brands, some of which are
directed at specific subsets of the public business sector, the corporation has attained worldwide
fame and recognition. All of the organization's primary markets have continued to flourish.
Dixons Carphone PLC has positioned itself strategically to improve its operations and revenues
during the company's business transformation in 2020, during which it will become a fully-
fledged omnichannel retailer and place a greater emphasis on e-commerce and customer care. To
comprehend Dixon Carphone's operating results and financial status, it is necessary to examine
the company's asset, liability, equity, and income developments during the past three years. This
pattern can aid shareholders in determining the ideal time to invest in the company. Figure 1
depicts the five-year financial performance of the company.

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References
Bendixen, M., Bukasa, K.A. and Abratt, R., 2004. Brand equity in the business-to-business
market. Industrial marketing management, 33(5), pp.371-380.

Betz, U.A., Betz, F., Kim, R., Monks, B. and Phillips, F., 2019. Surveying the future of science,
technology and business–A 35 year perspective. Technological Forecasting and Social
Change, 144, pp.137-147.

Dawson, J. and Usui, K., 2011. Renewal and transformation of value in an international retailer:
Dixons retail plc. In Fallstudien zum Internationalen Management (pp. 589-609). Gabler Verlag,
Wiesbaden.

John, M., Neil, D., David, F., Greer, J. and Sue, S., 2018. Strengthening the connections between
leadership and learning: Challenges to policy, school and classroom practice. Routledge.

Laitinen, E.K., 2018. Financial reporting: Long-term change of financial ratios.

Myers, S.C., 2001. Capital structure. Journal of Economic perspectives, 15(2), pp.81-102.

Saleem, Q. and Rehman, R.U., 2011. Impacts of liquidity ratios on profitability. Interdisciplinary

journal of research in business, 1(7), pp.95-98.

Sharma, A., 2009. Implementing balance scorecard for performance measurement. ICFAI

Journal of Business Strategy, 6(1), pp.7-16.

Subramanyam, K., 2009. Financial statement analysis: Includes index.

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Appendixes
Appendix 1: 2021 Financial performance

Appendix 2: 2020 Financial performance

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Appendix 3: Dixons Carphone Income Statement

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Appendix 4: Liabilities & Shareholders' Equity

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Liabilities & Shareholders' Equity

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