Dick Smith Holdings Limited: Timeline of Events:

Dick Smith Holdings Limited: Timeline of Events:

  • Dick Smith commenced a business chain selling electronic components in 1968.
  • Dick Smith sold the company for $25 million to Woolworths in 1982.
  • On 26th November 2012, Dick Smith Sub-Holdings Pty Ltd acquired 100% of the share capital of DSE Holdings Pty Ltd (“Dick Smith”) trading as Dick Smith the online and store retailer from Woolworths Ltd for $115,208,000.
  • On 4th December 2013, Dick Smith Holdings Ltd was listed on the Australian Stock Exchange. Anchorage Capital floated the company for $520 million (236.5 million shares at $2.20 each).
  • 2015 Performance – Extract from Dick Smith 2015 Annual Report (published 18th August 2015).
    Chairman and CEO letter (2015 Annual Report, Page 2) state: “Our strong performance in 2015 is consistent with delivering on our five strategic growth initiatives. Your Directors are pleased to report that sales grew 7.5%, with comparative sales growth of 1% and Australian sales growth of 10%. Underlying net profit after tax (NPAT) grew 3.1% to $43.4 million, despite a challenging retail environment. At the time of listing on the Australian Stock Exchange, your Directors indicated streamlining to a sustainable performance structure would continue after we became a listed entity. This year’s statutory profit includes restructuring charges of $5.5 million incurred in positioning Dick Smith for continued stronger performance. As a result, Dick Smith’s statutory NPAT is $37.9 million compared to last year’s IPO restructure impacted NPAT of $19.8 million”.
  • On 30th November 2015, only 2 months after declaring a net Profit after tax (NPAT) of $43.4 million for Financial Year Ending 30th June 2015, Dick Smith Holdings Ltd writes down their inventory by $60 million.
  • 5th January 2016, Board of Dick Smith Holdings Ltd placed the Company into voluntary administration (McGrath Nicol).
  • 5th January 2016, major banks appointed Ferrier Hodgson partners as receivers and Managers of Dick Smith Holdings Ltd.
  • 25th February 2016, Ferrier Hodgson, Receivers and Managers to Dick Smith Holdings Ltd announced that the remaining Dick Smith and Move Stores in Australia and New Zealand will close.

 

Required:

You are a recent graduate working for a Big 4 accounting firm and your manager has asked you to prepare a report that is to be submitted to the senior management group of ABC Equities Ltd (ABC), a very large client firm who has invested a substantial amount in Dick Smith Holdings Ltd (ASX code: DSH).  They want you to primarily investigate why Dick Smith has failed?  The report must include the following:

  • Covering letter, table of contents and executive summary.
  • Introduction: background information on Dick Smith Holdings Ltd (DSH).
  • Describe in your own words the key reasons you think DSH failed. In the process of completing this, consider the following:
    • Define what constitutes “best practice corporate governance”.
    • Did DSH Board of Directors adhere to ASX best practice corporate governance regulations and rules?
    • Were there any breaches of corporation’s law by DSH Board of Directors?
    • Consider the integrity of DSH accounting practices such as adherence to accounting standards.
    • Define the term “Earnings Management”.
    • Review the accounts of DSH leading up to its collapse to consider whether there was any management of earnings on accounts that impact profitability.
    • Consider the relationship between best practice corporate governance and earnings management. Describe in your own words, does the adherence to corporate governance structures and regulations constrain earnings management?

 

To consolidate your learning in ACCT5021 Accounting for Managers, you are to undertake an analysis of Dick Smith Holdings Ltd (ASX code: DSH). Apart from examining DSH 2014 and 2015 annual reports, all other relevant disclosures made (e.g., quarterly and half yearly reports), ASX disclosures and other information relevant to their performance. It is expected that your research effort will extend beyond annual reports and Morningstar DatAnalysis. Accordingly, you may choose to access and interpret publicly available information on DSH from sources such as the ASX, the Australian Accounting Standards Board; online databases such as ABI, IBIS World, ORBIS, ProQuest, Factiva, Morningstar DatAnalysis Analysis, etc; stock broker research reports; relevant websites such as http://www.bloomberg.com.au; business publications such as the Australian Financial Review and business oriented periodicals.

 

Report Requirements:

You should use appropriate headings to organise your material, provide references to accounting standards (including specific paragraphs) and cite relevant academic and practitioner oriented articles.

 

Your assignment must be typed using 12 font, 1.5 line spacing and 2.5 cm margins on all sides, with a maximum length of 2,500 words (excluding in-text references and bibliography). State the word count at the beginning of the assignment. All material over 2,500 words will be not be graded.

 

Referencing:

You can refer to real world cases, recent news, book chapters, and research papers to support your arguments or analyses. Do NOT use another student’s paper or a website as your reference. This report must be your own work.

All your references must be properly cited in your content and included in the reference list at the end of report.

 

Plagiarism is a serious academic offence. Students should get familiar with Curtin policy on plagiarism to avoid committing the offence. Student Guidelines for Avoiding Plagiarism and Student Checklist to Prevent Plagiarism can be downloaded from

http://academicintegrity.curtin.edu.au/global/studentbook.cfm.

 

Submission:

The hard copy of your report must be submitted to Brian Perrin in class on the due date and at the specified time.

The soft copy of your work must also be submitted via Turnitin on Blackboard by the due date and time. Please refer to http://www.youtube.com/watch?v=PcbGIAcNXjs for how to submit your Turnitin assignment.

 

Please note that the Blackboard site may be taken offline occasionally for maintenance purposes. During these maintenance periods, you will not have access to the materials on Blackboard and will not have access to Turnitin. Curtin Information Technology Services (CITS) will notify the university community of the scheduled maintenance work generally around two weeks in advance. Please make sure to check your Curtin email regularly and to pay attention to the maintenance schedule notified by CITS since this can affect the submission of your assessment tasks.

 

Late submissions will not be accepted.

 

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