Up for the cup

As England face Sweden in the World Cup next Tuesday, the team at DSG
International will be going through final rehearsals before their own big day on

This will be the day when the City learns just how well the owners of Dixons
and Currys have done out of football premier competition.

What’s happened?

Sales of flat screen digital and high-definition ready televisions have gone
through the roof, providing a welcome boost to the FTSE 100 retailer currently
re-branding its high street Dixons stores to reflect the digital revolution. But
like the couch-bound football fans, DSG has been on a spending spree of its own.

In April it acquired a 75% stake in Fotovista Group, owner of Euro e-tailer
Pixmania, for £185m and back in January it bought Markantalo, the number two
electrical retailer in Finland for ¤49m (£33m).

But the course of the digital revolution has been uneven for chief executive
John Clare and his finance director Kevin O’Byrne as their mobile and computing
divisions have not been having such a good time – PC World has suffered the
affects of price deflation in the computer sector while The Link has seen
like-for-like sales down more than 20% on last year’s performance.

What’s going to happen?

On Wednesday 21 June, Clare and O’Byrne will sit down with analysts and
reveal their preliminary results for year ending April 2006. Expectations will
be high on both sides of the table.

A month ago DSG released a trading update saying it expects its full year
underlying profit before tax to be ahead of current market expectations, and in
the £312m – £318m range. This was down on the previous year’s profit of £332.8m
but the City was clearly relieved as DSG’s share price rose 7.5% during that
day’s trading.

Analysts and investors will be keen to hear how many new TVs have been
shifted (currently, the group sells a TV every 15 seconds) but they will know
that this boom will not last forever.

The switch-over from analogue to digital broadcasting in the coming years
will have an impact. But if computer sales remain flat and the mobile phone
tills aren’t ringing, then investors will be looking at the performance of DSG’s
own purchases across Europe, which, like the England against the Swedes, will be
make or break.


Consumer confidence is rather like a certain footballer’s metatarsal. As
DSG’s Clare said recently: ‘My feeling is that the [UK] customer is still fairly
fragile. There’s still some nervousness around what news could be in the
pipeline about tax increases, council tax in particular, and unemployment is
starting to increase. We’re hesitant to believe that confidence is returning to
the customer. Rather we’re seeing technology, particularly televisions and
internet music products likeMP3s and iPods bucking the trend.’

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