Interesting interview with the laconic CEO of DDR, David Dicker, on Ausbiz last week.
He outlines the company's acquisition strategy funded 100% by debt, his frustration with the lack of access to decent corporate bond markets in Australia and briefly touches on his ambitious F1 project.
I heavily favour straight shooter CEOs like David who aren't in any way promotional. There's just something about leaders who cut to the chase that to my mind is a reliable indicator of future success.
Based on what he has to say in this interview, it's a good bet that there'll be an international acquisition within the next year or two to bolster the top line and provide some avenue for growth.
It's a risky move – given most acquisitions fail – but if all goes well any 'value' buy they get their hands on could end up being very profitable if they execute on what David is implying about cost savings, operational efficiencies & margin expansion within the acquired business.
Revenue up 18.3%, details to be released 23/7/20
My overall opinion of this business is very high, and they tick (or lead the way) in a number of key metrics. However, I am looking for help trying to quantify the risk associated their high levels of systemic debt.
The good bits first; the FY19 results:
Now on to the side of the business where I need help.
Keen to have a chat through the forum with anyone who has a strong conviction either way on this.
Dicker Data Limited (ASX: DDR), today announces a fully underwritten institutional placement to raise $50 million (“Placement”) and a non-underwritten Share Purchase Plan (“SPP”) to raise up to an additional $5 million [at $6.70/share; the SPP will be priced at $6.70/share or a 2% discount to the 5-day VWAP up to the SPP closing date - whichever is lower - details below.]
Proceeds of the equity raising will provide balance sheet flexibility and support the Company’s long-term growth objectives, including partially funding the construction of Dicker Data’s new distribution centre and continuing our investment in Dicker Data Financial Services (“DDFS”).
In addition, the equity raising provides the opportunity to broaden and diversify Dicker Data’s share register, increase free-float to above 30% and potentially improve trading liquidity.
Dicker Data’s Chairman and CEO, David Dicker said, “the equity raising will be used to support Dicker Data’s long-term growth objectives, and ensure we remain well positioned as Australia’s leading value added technology distributor”.
As previously announced in our Q120 update on 29 April, Dicker Data has not experienced any material adverse change to its overall sales pipeline or earnings as a result of the COVID-19 pandemic.
The Company has seen strong Q120 performance with record monthly revenue achieved in March 2020. The Company is also pleased to announce strong performance for the month of April 2020, with total monthly revenue for April 2020 of $163.7m, up 37.7% on the comparative period last year.
The surge in demand has been driven by significant mobilisation to remote working solutions, reinforcing IT distribution’s role as an essential component for business continuity.
Whilst this performance provides a strong start for Q220 [Q2 of FY2020], at this stage it is too early to determine the market conditions for the second half of the year, and as such the Company cannot provide guidance in terms of expected growth for the year on an annualised basis.
Details of the Placement
Dicker Data is undertaking a fully underwritten Placement of new fully paid ordinary shares in Dicker Data (“New Shares”) to eligible institutional investors to raise $50 million.
The Placement will be conducted at a price of $6.70 per New Share (“Placement Price”), representing a 6.7% discount to the closing price of $7.18 per share on Wednesday, 6 May 2020.
Approximately 7.5 million new Dicker Data ordinary shares will be issued in connection with the Placement (equivalent to 4.6% of existing shares on issue).
New Shares issued under the Placement are expected to settle on 12 May 2020 and be issued, and commence trading on the following business day, 13 May 2020. New Shares issued under the Placement will rank equally with existing Dicker Data ordinary shares from the date of issue.
The Placement is fully underwritten by J.P. Morgan Securities Australia Limited.
Details of the Share Purchase Plan (SPP)
Following completion of the Placement, Dicker Data will offer eligible Australian and New Zealand shareholders the opportunity to acquire up to $30,000 in New Shares via a SPP. The SPP will be capped at $5m, may be subject to scale backs and is not underwritten.
The issue price for New Shares issued under the SPP will be the lower of the Placement price and a 2% discount to the 5-day Volume Weighted Average Price (“VWAP”) of Dicker Data shares up to, and including, the closing date of the SPP.
No brokerage or transaction costs are payable for New Shares issued under the SPP and New Shares issued under the SPP will rank equally with existing shares from the date of issue.
Full details of the SPP will be set out in the SPP Offer Booklet which is expected to be released to the ASX and dispatched to eligible shareholders on 14 May 2020.
[...click on the link above for the rest of the announcement - including key dates - the SPP offer opens and the SPP offer booklet will be dispatched on Thursday, 14 May 2020 and the SPP offer closes on Friday, 29 May 2020.]
29-Apr-2020: Q1 FY20 Market Update
Dicker Data Limited (DDR), today provides an update on the Company’s Q120 results, interim dividends and operational trading update in the context of current COVID-19 situation.
The Company achieved the following results for Q1 of FY2020:
In line with the Company’s dividend policy to pay out 100% of after-tax profits, the Company will retain the current dividend policy of paying quarterly dividends. To provide consistency and certainty for investors the Company proposes that each interim dividend will be at an equal rate.
The proposed rate for the interim dividends for FY20 will be 7.5 cents per share fully franked. This would bring total proposed dividend to be paid in the FY20 year to 35.5 cents per share, an increase of +31.5% from FY19 of 27.00 cents per share. This increase is despite the total dividend from FY19 including a one-off special dividend of 5.0 cps.
The Board of Directors recognise that with a strong start to FY20 in Q1, and to date there being no material change to our overall sales pipeline, the proposed interim dividend would be on the basis that there is no overall downturn experienced in H220. Should any of the circumstances change and the Board deems it prudent to alter the interim dividend amount, an update will be provided to the market. As we are in unprecedented times, at this stage it is too early to determine the market conditions for the second half of the year, and as such the Company will not be providing guidance in respect of annual earnings.
Operational Trading Update
The Company provides the following business operational update in the context of the current COVID-19 pandemic and effect on operations:
Annual General Meeting
On 20-March-2020, ASIC announced that due to the COVID-19 pandemic, any companies that are required to hold their AGM by 31-May-2020:
The Board has agreed that the most suitable course of action would be to postpone the AGM until July 2020, with a date yet to be confirmed.
--- ends ---