AUS
NZ
UK
CA
USA
IND
Summary
- Despite a solid 1H FY2020 delivered by IT hardware and software distributor, Dicker Data Limited, the share price was down ~1.7% at the end of the trading session.
- Total revenue for the Company increased by 18.1% to A$1,006.1 million while net profit after tax was up 23.6% at A$29.4 million.
- Dicker Data continues to witness robust demand in 2H FY2020 as customers focusing strongly on business growth tactics during and after the pandemic.
- With the 5G network rollout, the Company feels that it would have a revolutionary effect within the industry in which it operates.
Dicker Data Limited (ASX:DDR) delivered an impressive performance in the first half of FY2020 (period ended 30 June 2020). Building on the long history of strong performance, the Company’s record results can be attributed to a combination of revenue growth, increase in gross profit margins and maintenance and control of operational leverage.
Despite the favourable financial numbers, DDR’s shares ended the day’s trade at A$7.640, down 1.673% from the previous close. DDR has a market cap of A$1.34 billion and around 172.03 million outstanding shares.
Dicker Data Limited is Australia’s leading locally-owned distributor of ICT hardware, software, cloud and IoT solutions for reseller partners. During this period, the business remained resilient to the adverse economic impact of COVID-19. The key priority during this period was to ensure the continuity of service to its customers and continue to remain to be a reliable partner to the supplier during the global pandemic.
With a rise in the remote working culture, Dicker Data witnessed a growing demand for virtual working solutions through its software and hardware portfolios.
DO READ: Tech Gamble or Bubble: Dicker Data, Xero, NEXTDC, Bigtincan
On that note, let us look at the key highlights during 1H FY2020.
- Total revenue during the period was A$1,006.1 million, up 18.1% as compared to the previous corresponding period (pcp).
- Out of the total revenue, recurring software revenue stood at A$224 million, up 53.1% on pcp.
- Gross profit rose 24.8% to A$96.5 million.
- Gross profit margins improved to 9.6%. The margins were majorly due to increased focus on mid-market and SMB business.
- Operating expenses rose by A$7.9 million, up by 19.1% on pcp but were maintained as a percentage of sales at 4.9%.
- Depreciation and amortisation expense went up by A$1.3 million to A$3.2 million.
- Finance costs declined by A$770,000 to A$2.2 million attributable to the lower interest rate environment plus the payout of the corporate bond in March 2020.
- Net profit before tax went up by 30.2% to A$42 million.
- Net profit after tax stood at A$29.4 million, up 23.6%.
- Earnings per share improved by 16% to 17.08 cents.
Let us look at the key indications from the balance sheet:
- Total investment in working capital was A$162.1 million, down by A$3.3 million.
- Fixed asset investment rose by A$27.4 million. This was mainly regarding capital expenses for the formation of the new distribution centre.
- Borrowings fell by A$39.9 million with the repayment of the corporate bond in March 2020.
- Equity soared by A$63.6 million to A$158.6 million, attributable to the net proceeds from the share placement in May 2020 coupled with the proceeds from the share purchase plan in June 2020.
Key highlights concerning DDR’s cash flows include:
- Net cash from operating activities: A$30.270 million.
- NET cash used in investing activities: A$28.467 million.
- Net cash used in financing activities: A$6.982 million.
- Cash and cash equivalents at the end of the period: A$17.394 million.
Outlook:
As highlighted above, the business has proved to be resilient in the first half of FY2020. It has entered into the second half of FY2020, and there is a continuous increase in the demand with customers focusing strongly on business growth strategies during and after COVID-19. The most significant opportunity for Dicker Data in the upcoming 6 to 12 months is supporting the business with their return to work strategies in a post-COVID-19 environment.
The Company also highlighted that the rollout of the 5G connectivity would have a revolutionary effect within the industry in which it operates. The rollout of 5G connectivity would drive the explosion of data and a substantial increase in the usage of AI and machine learning technologies. Dicker Data also pointed that through its speciality in servicing in the mid-market and SMB communities, there is a tremendous opportunity with all its hardware and software vendors. Further, DDR would continue to assist and support its customers and strengthening relationships with new and current investors. DDR would continue to evolve to distinguish its offerings and value proposition to vendors as well as reseller partners. Presently, DDR is placed well to support all partners through this digital transformation.
Another critical factor which would support growth in the upcoming 12 months is the Company’s investment in the construction of the new distribution centre at 238, Captain Cook Drive Kurnell. The construction is expected to finish by the end of the year. Once the distribution centre gets completed, Dicker Data feels that there would be an increase in capacity by nearly 80%. There is also the approval of additional 20,000 sqm warehouse space as part of the Development Application to be built as part of a second stage offering future development options.
Despite a relatively small fall in the share price today, the impressive 1H FY2020, coupled with a positive outlook, is likely to have a favourable influence on the market participants in the future.
