Elton plc is a manufacturer of computer hardware and accessories (Information Technology or IT from now on).
It was established in the UK in 1980 and has become a well-established supplier to IT retailers particularly in Western Europe and North America (but has begun to make progress in selling to the African, Asian, Middle Eastern and South American markets).
This growth into a multi-national company (based from the UK) was supported by becoming a publically listed company (plc) in 1995, listed on the London Stock Exchange.
The present Chair of the company is David Brown, he has been with Elton since 1988 and is the son of the company’s founder, John Brown, who died in 2004, after which David become Chair.
Elton’s product range
The three core products for Elton have followed the general evolution in IT.
The company still manufacturers’ desktop computers, though the demand for this product has been in general decline. It has a customer base which tends to be businesses, who need the higher processing power and the larger hard drive space.
For customers buying computers for personal use, the laptop has generally replaced the desktop computer in the last 5 years as the main device for IT purposes. There is a wide range of laptop manufacturers in the market but is a product which presently makes the highest contribution to Elton’s revenue.
The last core product is the tablet representing the shift to more mobile IT devices. This is a growth area in both the personal and business IT market and is expected to become Elton’s main product by 2017.
Elton also sells a number of accessories to complement the above products including keyboards, mice, printers, laptop cases, tablet covers etc…
Elton has also been focusing on the development and launch into the market of two types of new products, which are based on making use of the increasing trends in the use of mobile IT. These are:
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A hybrid (combination) of two core products the tablet and laptop, which allows the consumer to enjoy the advantages of both products. Sales of the hybrid have been good and presently have not impacted on the sales of either laptops or tablets in their separate form.
Elton has also been focused on wearable technology which includes products like smart watches, and digital eyewear. These products have been popular with consumers who like to possess the latest IT products, but have also developed specific groups of consumers. For instance, the smart watches are popular with consumers who enjoy running and the digital eyewear is frequently used by surgeons in the medical sector.
Elton plc is in a two phase expansion strategy.
Phase one – which commenced at the start of 2015 is based around supplying a new range of products to the market. (Noted above)
Phase two – In 2017 Elton is seeking to take this wider range of products to make further progress in the African, Asian, Middle Eastern and South American Markets. This will require the company to develop production capability either in or close to these new markets. They therefore need to secure finance and they have approached you at Spencer Consulting to advise them.
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You have just completed your MSc Management and joined Spencer Consulting as a trainee management consultant. You have been assigned Elton plc as your first assignment because you previously gained work experience as a financial analyst. You will produce a 3,500 word business report for the Board of Directors which sets out your findings and makes recommendations.
Prepare a 3,500 word business report for the Board of Directors providing analysis and business advice on the following:
Format – Business Report – headings/sub-headings, paragraphs, etc. 1 mark
Executive Summary – key highlights/findings linking to the main body of the report 4 marks
Note: No introduction is required. No marks will be awarded for an introduction.
Part 1 Heading: Business Performance Analysis
Heading: Interpretation of the Statement of Profit or Loss
Using the information in the case study, analyse and comment on the financial performance of Elton plc (exhibit 1). Your analysis should critically evaluate the lines of the Statement of Profit or Loss. Use the additional financial information (exhibit 2) and meeting notes (exhibit 5) to support your evaluation. You will need to calculate and use appropriate ratios in your analysis.