Financial Highlights from Two ASX-Listed IT Stocks: DDR and WTC

The S&P/ASX 200 Information Technology (Sector) was trading upward by 21.9 points (1.56%) to 1,408.1, while the benchmark index S&P/ASX 200 was trading at 6,608.1, up 55.1 points (0.83%), on 05 September 2019 (AEST 01:15 PM). Let us dig into financial highlights of two IT sector players, Dicker Data Limited and WiseTech Global Limited, which have recently released their half yearly results and full year results, respectively. Both the companies have delivered strong growth in their results for the respective reporting period.

Dicker Data Limited

Company Overview:

Dicker Data Limited (ASX:DDR) is an ASX listed company, is a wholesale distributor of products including hardware and software for computers. The company caters to reseller partners of all shapes and sizes, helping them to attain their full potential via the delivery of unparalleled technology, in addition to value-added services and logistics.

IH19 Results:

On 28 August 2019, Dicker Data Limited released its 1H19 results for the half year ended 30 June 2019.

The company reported an increase of 18.7% in revenue from ordinary activities to $852.011 million as compared to the previous corresponding period. The net operating profit before tax increased by 48.4% to $32.282 million, while net profit after tax grew by 50.5% to $23.775 million. Growth in revenue was reported by established vendors as well as new vendors. The company’s profit margins were also slightly better than the last corresponding period. The addition of 10 new vendors in 2018 and 1H19 made an addition of $18.8 million in the first half of 2019.

On a country level, sales revenue increased by more than 17.8% year-on-year to $120.4 million in Australia and 36.1% year-on-year to $14 million in New Zealand.

On a sector basis, the company was able to maintain strong growth across all business segments. Sales of hardware and virtual services was reported at $670.2 million, which represents a more than 16.9% growth when compared with the same period a year ago. Software sales in the first half of 2019 also increased by more than 26.4% to $176.5 million, while service revenue posted an increase of 10.2% to $4 million over the prior corresponding year.

Total gross revenue apart from other revenues increased from $63.6 million in 1H 2018 to $77.2 million in 1H 2019, which represents a rise of 21.4% year-on-year. The company also registered improved gross margins during the first half of 2019, on the back of growth in vendor rebate payments on overachievement of vendor goals.

During the period, Dicker Data also reported an increase in operating expenses by 5.1% to $2 million as compared to the previous corresponding period. Increase in salary related expenses was also registered due to rise in achievement-based commissions, employee-related provisions and higher headcount. The depreciation and amortisation expenses also grew by $547,000 year-on-year to $1.8 million.

Balance Sheet Highlights and Cash Flow statement:

Balance sheet of the company witnessed an increase in net assets from $79.962 million in 2H 2018 to $87.284 million in 1H 2019. During the period, the company reported a significant increase in receipts from customers. As a result, net cash from operating activities for the period stood at $15.696 million. Net cash inflow through financing activities was reported at $3.950 million, while net cash outflow in investing activities was $1.906 million. The net cash and cash equivalents of DDR by the end of 1H 2019 was $24.353 million.

Outlook:

In 2H 2019, DDR’s focus would remain on key growth areas including increasing demand for hybrid IT infrastructure, edge computing as well as growing demand for As-a-Service procurement. The recently launched division of the company, Dicker Data Financial Services would be addressing the ever-growing demand for As-a-Service solutions followed by a shift from capital expenses to operational expenses.

The company also expects to register good growth in the sales of devices and PCs over the coming one year. Dicker Data is confident based on this outlook that it would be able to achieve its previous guidance of posting $51.4 million in pre-tax operating profit for FY2019.

FY19 Guidance (Source: AGM Presentation in May 2019)

Stock Performance:

The shares of DDR have provided an outstanding YTD return of 143.82%. The stock of the company on 5 September 2019 opened at a price of A$6.960, up by A$0.06 from its previous close. At AEST 01:18 PM, the stock was trading at a price of A$6.960, up by 0.87% as compared to its previous closing price. DDR has a market cap of A$1.11 billion, with an annual dividend yield of 3.1%, ~ 161.53 million outstanding shares and a PE ratio of 27.480x.

WiseTech Global Limited

Company Overview:

WiseTech Global Limited (ASX: WTC), an IT sector player, is into the business of developing as well as implementing and providing software solutions to the logistics industry across the globe. The company has a client base of more than 12k logistics organisations across more than 150 nations.

Recent Update:

FY2019 Results:

The company reported an increase of 57% in total revenue to $348.3 million in FY19 ended 30 June 2019 as compared to $221.6 million registered in the previous corresponding period. The operating profit and net profit after tax of WTC grew by 37% to $80.2 million and 33% to $54.1 million, respectively. EPS increased by 27% to 17.7 cents, while dividend went up by 18% to 1.95 cents per share.

Integrated global software solution, CargoWise One is the company’s industry-leading flagship technology. For the technology, the company reported 99% recurring revenue.

The balance sheet of WTC witnessed a significant increase in net assets from $352.155 million in FY2018 to $766.567 million in FY2019. The growth in net assets was majorly due to substantial increase in total assets. The total shareholders’ equity for the period was $766.567 million.

The company noted that there was a substantial increase in cash receipts from customers during the period, which helped in increasing cash inflow from operating activities from $71.618 million in FY2018 to $112.459 million in FY2019. The company also raised capital by issuing shares during the period. Thus, the net cash inflow via financing activities of the company was $310.252 million. The company acquired businesses, made payments for intangible assets, as well as purchased property, plant and equipment, thus, its net cash outflow for investing activities stood at $285.054 million. Net cash and cash equivalents by the end of FY2019 with WTC were $260.092 million.

Outlook:

During FY20, WTC is expecting revenue to be in the range of $440 million to $460 million, representing an increase of 26% - 32% year-on-year, respectively. Moreover, it is hoping to register $145 million - $153 million in EBITDA in FY20, up 34% - 42% when compared with the FY19 EBITDA.

Source: FY19 Results Investor Presentation

Stock Performance:

The shares of WTC have provided an outstanding YTD return of 119.67%. The shares on 5 September 2019 opened at a price of A$37.110, down by A$0.300 from its previous close. AT AEST 01:21 PM, the stock was trading at a price of A$37.250, down by 0.428% as compared to its previous closing price. WTC has a market cap of A$11.9 billion, with an annual dividend yield of 0.09%, ~ 318.18 million outstanding shares and a PE ratio of 211.360x.