Vlad and Mary have been buying the latest dip on market yet again.

5000 shares each just above $9.

Dicker data released results yesterday for their first half, which you can see on the below link as well as listen to managements comments on the call and some better than usual Q & A afterwards.

https://openbriefing.com/OB/Dicker-Data-Limited/2024/8/30/Half-Year-2024-Results-Presentation/5564.aspx

Key takeaway for me was it was a very soft 1st quarter and then a much stronger 2nd quarter, so revenue came in flat for the half and profit came in 5% down vs 1H 2023 (mostly due to some higher costs and change in the margin mix of what was sold).

While that doesn't look great at first glance for a business that has been compounding sales at 15% p.a. for the last 5 years, it is what Vlad and Mary advised was likely to be the case at the AGM in May. So I give them a tick for reasonable guidance and also for them not giving specific ranges of guidance and just a general view. They also said they expected the 2nd half to be much stronger in May and they then reiterated that again yesterday.

Catalysts for stronger growth over the next 12 months are -

• Windows 10 support ending Oct 2025, so many businesses/government will need to upgrade equipment and software

• They are confident AI adoption is going to expand considerably over the next few years, so again many businesses/government will need to upgrade equipment and software

• They are getting nice market share growth in NZ, so can hopefully keep getting closer to the market leader there like they are in Australia

• Hopefully interest rates are at a peak, so financing larger orders will get a little cheaper moving forward

So, if most of that's the case and they can sustain growth for the next 5 years at only half the rate of the past 5 years, I expect to still get a return in the mid teens from the current share price of $9.10 in Aug 24. No change to valuation at this point.

Will be watching the 2nd half results closely to see how genuine the above expectations they are setting are.

I have update the Inside Ownership of Dicker Data, I left my previous straw showing Directors ownership from over 12 months ago, so you can compare!

Inside Ownership           Ordinary Shares    % DDR Issued        Net Value at $8.96

David Dicker                        38,032,417                 21.09%                       $340.77m

Fiona Brown                       55,777,110               30.93%                        $499.762m

Vladimir Mitnovetski            928,176                      0.51%                         $8.316m

Mary Stocjcevski                 339,335                      0.19%                         $3.04m

Ian Welch                            85,000                        0.05%                         $761.6K

Leanne Ralph                      3553                           0.00%                         $31.8K

Kim Stewart-Smith               4941                           0.00%                         $44.3K

Total                                  95,170,532               52.77%                     $852.728m

Vladimir brought some more shares as announced today. Please find below the summary of purchase below for last 6 months

Buying 6 Month Summary

Vladimir Mitnovetski 

·      29 May 2024

Direct              20,000 shares average price $9.025 ($180,500)

·      21 May 2024

Direct              20,000 shares average price $9.025 ($180,500)

·      11 March 2024

Direct              5,000 shares average price $10.70 ($53,500)

Mary Stojcevski

·      21 May 2024

Indirect              12,000 shares average price $9.04 ($108,480)

·      6 March 2024

Indirect           9,334 shares average price $10.84 ($101,228.52)

Ian Welch

·      11 March 2024

Direct                    7,000 shares average price $10.93 ($76,550)

Leanne Ralph

·      1 March 2024

Direct              46 shares average price $11.3920 ($524.032)

Selling

David Dicker

·      05 March 2024

Direct              8,651,041 shares average price $10.90 ($94,296,346.90)

Indirect           9,967,583 shares average price $10.90 ($108,646,655)

I attended the DDR AGM in Kurnell yesterday and wanted to share my takeaways while they’re fresh.

David Dicker, CEO was not there in person, zoomed in on video instead as he’d received a death threat if he turned up due to share price being down (a brave but anonymous warrior in Elon’s Twitter army I suspect). This was initially met with a few chuckles from the audience but seems it was legit, the police turned up but there were no scuffles, shots fired or arrests that I noticed.

David took the opportunity to emphasis that he had not wanted to sell any shares and only did so under the obligation of a highly unfavourable divorce judgement.

So timing was seemingly out of his hands too?

Presentation

This went for about an hour – led by David, followed by Exec Directors Mary the CFO and Vlad the COO.

Overarching theme was that business conditions are tough across ANZ at the moment, which doesn’t bode well for the remainder of 1H 24.

Vlad made the point that DDR has historically taken market share in up and downturns but this usually is faster in downturns.

They seem to think about the business like owners (because they are) so a little unorthodox in some of their presentation / thinking but mostly in a good way.

Moat seems to be largely cultural and defensible (operating efficiency is a big feature can't really be a moat as this can be copied by competitors).

CFO

Cycling difficult comps – specifically they were a big beneficiary of Covid IT demand in FY21, then impacted by supply chain issues in FY22. These resulted in a big pcp for Mar-23 Qtr when a lot of the high demand, then low supply from FY22 worked its way through, a lot of which got invoiced in Q1 23. This made Q1 24 Revenue hard to comp on a like for like basis.

My take is that they are confident that better times are coming but probably not in Q2, hopefully H2.

Dividend policy to pay out 100% of NPAT on a quarterly basis to fund the F1 ambitions of all shareholders will not be changing while David remains alive / a shareholder.

COO

NZ is seen as a big opportunity in terms of both market share (they are 2^nd) and margin as they work through the acquisitions they made there.

They are looking to sign ANZ vendor and partnership agreements as opposed to being siloed to leverage the strength of the Aussie business to expand the NZ arm.

That said, the NZ economy is doing it tougher than here.

Digital is a larger piece, growing steadily, higher margin and expected to continue for the foreseeable.

Official business

The unorthodox Rem Report got a 2nd strike but the spill was easily defeated.

Given David's attitude towards it, I expect this to be a feature - lots of strikes but no spills to protest but not punish the board / Rem & Nom committee.

Site Tour

Did a site tour afterwards.

The CFO led us through with the head of property mgmt. and about 15 other shareholders, fund managers (I only recognised the Hayborough guys) and punters / brokers?

Kurnell is an Impressive set up, very modern, lots of capacity, and DA being sought to add another adjacent 30k sq feet (in addition to the 22 + 17 = 39k sq foot facilities they have currently operational but not fully utilised.

Disc: Held

COO Vladimir Mitnovetski has purchased $180,500 of shares on market this week. Encouraging sign that the market reaction might be overdone.

Interim Dividend In line with the Company’s dividend policy to pay out 100% of after-tax profits, the Company will retain the current policy of paying quarterly dividends. The proposed rate for the interim dividends for FY24 will be 11.0 cents per share fully franked, an increase on the 10.0 cents per share paid in Q1 2023. The first interim dividend was declared 13th May 2024. It is expected that as per prior years the final dividend for FY24 to be paid in March 2025.

DICKER DATA LIMITED (ASX:DDR) - Ann: Q1 FY24 Market Update, page-1 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

The Company remains well positioned in the market, retaining its strong market share across all key vendor partnerships. This demonstrates the broader market trends impacting the wider industry, which have been generally subdued. Our ability to hold our market share, despite the challenging economic climate, underscores our competitive strength and the effectiveness of our strategic market positioning. It reflects our resilience and adaptability in the face of industry-wide headwinds, and our commitment to delivering value to our customers remains unwavering. The Company retains an optimistic outlook for the second half of the FY24 period. Authorised for release by the Board of Dicker Data Ltd.

Punished down 13%

Q1-FY24-Market-Update.PDF

Dicker Data released a dividend announcement this morning.

Dividend of 11c per share for Q1 (They pay dividends every quarter and report on a calender year basis).

This compares to dividends of 10c per share in Q1FY23 but still down from 13c in Q1FY22.

Given that DDR have a policy of paying out 100% of NPAT as a dividend, I expect NPAT to be around $19.8m for Q1FY24. Although I'm sure they will release a market update in the coming days.

Disc: Held IRL and on Strawman

Interesting point from Wesfarmers's strategy day (re Officeworks) which has impacts for DDR and DTL.

"With the rise of AI, management noted that AI-enabled personal computers will be hitting the market in the next few months, and both Officeworks and its suppliers are of the view that this will lead to a major replacement cycle over the coming years."

Two directors buying around 110k worth of shares between them on market at current prices.

positive signs

David Dicker now claiming his ex-wife’s shares

David Dicker may be the Australian business magnate whose antipodean absence and general low profile we most rue.

The Dicker Data founder and CEO – who looks more like Colonel Sanders with every passing year – upped sticks and moved to the liberal utopia that is Dubai in 2019 because Australia was (even then) an “authoritarian shithole”.

He’s dumped stock to fund the purchase of a private jet. He signs all his disclosure forms from Apartment 702 of Dubai’s pricey Kempinski Hotel. And his main passion these days seems to be getting his Rodin motorcars into Formula 1,which he tried and failed to do last year.

If only for the colourful copy, we should pay him more attention. And what better way to start than with his second, recent divorce and the spot of capital reallocation it’s forced.

David Dicker is a permanent resident of Dubai’s Kempinski Hotel. 

At his eponymous ASX-listed hardware distributor Dicker Data, Dicker last week sold 18.3 million shares, citing a divorce settlement. The sale, which presumably netted ex-wife Delwyn Dicker some $200 million, was secured via a Barrenjoey block trade at $10.90 a pop, and represented some 10.2 per cent of the company’s issued capital.

Dicker still owns, his most recent 3Ys suggest, most of Dicker Data. But shareholders needn’t fear any more sales, given he has a six-month escrow on his remaining holdings.

But what are those?

His filings say Dicker speaks for 97 million shares. That includes a “relevant interest” in 55 million shares long held by his other ex-wife. Nonetheless, Dicker Data co-founder and director Fiona Brown “does not enjoy any power to vote in respect of the shares unless she becomes CEO of the company”, by virtue of a bloc agreement entered into in 2010.

The 3Y notices also refer to sections of the Corporations Act that define “relevant interest” as having the right to both vote and sell shares, suggesting Dicker sees Brown’s shares as his in every way that counts.

While the bloc agreement is almost 15 years old, reference to it in Dicker’s director interest statements is relatively recent, having first been made in June last year. And Brown, who files her own notices, doesn’t seem on board.

Three of her 3Ys, the last of which was lodged in December, state that: “Ms Brown considers that the bloc agreement is of historical relevance only [and has] ceased to be legally binding on the parties”. As a result, the 3Y notices explain, she doesn’t include Dicker’s shares in her relevant interests, and doesn’t think he has any relevant interest in hers.

This bloc agreement was discussed in Dicker Data’s prospectus. As described, it bound Dicker Data’s non-CEO founder (that is, Brown) to follow the voting recommendations of its CEO founder (that is, Dicker), while also giving both Dicker and Brown first right of refusal on the other’s share sales and transfers.

Brown clearly views the whole thing as “historical” and thus moot. And Dicker, evidently, disagrees, and told this newspaper last year that if he lost control of Dicker Data he’d “probably leave”.

This is no quibbling dispute. It affects shares worth $592 million, or a bit less than a third of the company. Dicker Data’s annual reports, including the most recent released in February, have long counted Brown as a separate, significant shareholder. And yet, recently, and as he completes his second divorce, Dicker has started prominently telling shareholders all his ex-wife’s shares might as well be his!

We asked Dicker Data if the dispute over who has a relevant interest in the shares had been resolved, and whether Dicker’s escrow applies to the shares actually owned by Brown. We didn’t hear back.

The last annual report also reveals Dicker was, in FY23, a debtor to the company he founded. For example, Dicker Data Financial provided Dicker with $524,968.91 at “arms length commercial rates”, which he had repaid by January 24 this year.

Brown’s transactions with the company were on the other side of the ledger. She advanced Dicker Data a short-arm loan of $20 million at some point during 2023, for which she was paid “commercial market” interest of $398,213.92.

Do you think Dicker could have just asked her for the cash and kept it off the company’s books? Suppose, for as long as he’s claiming her shares, and she disagrees, that’s not really an option.

Director buying ~80k worth of shares on market at $10.8

Big drop for Dicker Data this morning with the announcement that David Dicker has sold over 10% of the shares on issue for the company. This is similar drop to the last time this happened although this time the reason given is due to a divorce settlement. Last time he was spending on money toys such as his goal of entering a team in F1 that was ultimately knocked back.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02781655-2A1510016

Dicker Data released their FY23 results a few days ago. From their presentation:

I thought the result was pretty good considering FY22 was a disappointing year. Overall gross margins finished at 9.7% which is the highest in 5 years.

Revenue reporting will change from this report onwards due to a difference in revenue recognition. Above shows how revenue would have been reported in FY22 under the new reporting standard.

Overall a good result in a sector with some good tailwinds. The increase in computing needed to drive the AI sector will benefit DDR going forward. Also the windows refresh cycle will begin soon with Windows 10 losing support later this year.

Disc: Held IRL and on Strawman.

Net Profit of $82.1m and a really good story on the impact of AI on the business were the key takeaways for me from today’s results call. The pc refresh cycle that Vlad flagged last call is still be touted but now in the second half of calendar 24. Still holding IRL and hoping to get a good entry point for Strawman portfolio.

Dicker Data announced a final dividend for FY23 of 15c per share for the December quarter. Total dividends for FY23 came in at 45c per share.

Given that DDR have a 100% NPAT payout policy, we can assume that EPS will be around 45c per share or around $81m NPAT (compared to FY22 NPAT of $73.4m).

Disc: Held IRL and on Strawman.

I came across this blog post by Tomasz Tunguz, a venture capitalist, estimating software spending growth for 2024:

His analysis is based on a Gartner report . It is mainly concerned with cloud spending but breaks out some subcategories of IT spending. 

Dicker Data released an encouraging update last week which showed an 8% increase in revenue compared to the prior corresponding period.

If the forecasts are correct this is promising for Dicker Data sales growth going forward. Although software only makes up a small percentage of their revenue I would assume it is higher margin (but I couldn’t confirm what this is from a brief search.)

Also worth noting is that hardware, which is the bulk of DDR’s revenue, is also forecast to grow modestly after two grim years.

This is all speculative, obviously, but my thinking is that IT spending has been constrained recently but that can't continue forever.

Disc: Held IRL 

Dicker Data released an update for their Q3 performance yesterday (Note they report on a calendar year basis).

I thought this was a pretty good result considering the issues they have been having in the past few years with supply chain and also the decreasing gross margin.

The newest segment DAS has been a good contributor to the growth in Revenue and Profit.

They mentioned that YTD gross margin has come in around 9.6% which is a good turnaround from it being sub 9% in FY22. This has been a result of increased gross margins in their NZ segment of the business.

The next few years will be interesting as they have mentioned that there will be a new refresh cycle for Microsoft devices with Microsoft stopping support for Windows 10 devices in October 2025. Management predict that there the current downturn in PC demand will bottom out in the current half and accelerate towards the end of next year.

Full Announcement Here

Disc: Held IRL and on Strawman.

I just got off the call for the HY update and feel very positive about the next couple of years given the way Vlad broke down the business performance by segment. As previously noted there was a marked decline on the PC side of the business (which makes sense given the covid boom), but this was offset by big jumps in areas with better margins ie software and DAS.

The upcoming retirement of Windows10 support by Microsoft and the next refresh cycle to support compute power required for AI adoption - ongoing digital tranformation, cybersecurity focus etc - looks like some very nice tail winds.

I feel like I'm missing something with Dicker Data's half year results.

The vibe here on SM seems positive, and the share price jumped. But the results strike me as poor. Rev of $1596, which included $73m from new DAS business/acquisition. If we take out the acquisition boost, we get 4.5% pa organic growth. And they said that this period showed a normalising of supply and included a catch up in backlogged orders. Without those backlogged orders there wouldn't have been much growth at all.

Given software grew 21%, and it's roughly a quarter of revenue, there must have been a decline in revenue from other parts of the business.

There's also a lot of attention given to the new DAS business, which concerns me given it makes up less than 5% of total revenue.

Given they grew 25% in 2022, feels like growth is falling off a cliff. If so, I can't see how 20x PE is warranted.

What are other strawpeople predicting for growth over the coming 1-5 years?

Dicker Data released some unaudited results today:

Company said that the increase in revenue was partly due to an increased demand for networking and storage products, software and the new DAS business (access and surveillance) which offset a decrease in demand for personal computing devices. The decrease was attributed to an increase in hybrid working environments.

Pleasingly, gross margins improved back to above 9%, finishing at 9.4% which was up from 8.8% from pcp.

DDR also mentioned that there were signs that the supply chain was normalising which had impacted them with large amounts of backorders in previous periods having been completed this half.

Audited results will be out Aug 30.

Full announcement here

Disc: Held IRL and on Strawman.

The shares have hit a level of support around $7.80 multiple times over the past couple of years, with the price holding each time. We saw that yesterday too, with a brief overshoot below those levels followed by a good close, and today we seem to have some follow through as well.

Generally bullish portends, though the ceveat is that the more times a support level is tested, the more likely it will eventually break as well :)

Dicker Data released a market update this morning. From their release:

Overall a good improvement compared to info they released towards the end of last FY. Gross margins improving back to above 9% having dropped below for the previous few quarters.

Dividend is expected to be 10c per share (down from 13c PCP). Most likely the decrease is related to an increase in share count given they did a raise last year. Dividend policy unchanged at paying out 100% of NPAT.

Will maintain my valuation for now until we get some more information but seems like the business is stabilising after a disappointing FY22.

Full Announcement here

I do also note that CEO Vlad Mitnovetski purchased 20000 shares last week.

Disc: Held IRL and on Strawman

Potential Hyperscaler Headwinds

A bit about the industry

As someone who works in this space, I thought I’d leave some food for thought on changes that may impact all technology distributers (or 'disties' as they're called in the industry).

Disties such as Dicker act as an intermediary between technology resellers and IP owners / technology manufacturers. They transact with major retailers such as JB-HIFI who provide a B2C and B2B motion; and resellers such as SoftwareOne, NTT, Insight and D#3 who primarily support a B2B motion.

If a business goes to their reseller to buy some Adobe or Citrix licenses, or perhaps some laptops etc, the reseller then goes to a distie to buy the IP (software licence / subscription) or technology. Sometimes the reseller goes direct to the IP owner / technology manufacturer, but this is dictated by the IP owner / technology manufacturers GTM strategy. 

One of the main reasons why IP owners / manufacturers may want to use disties and resellers is to get better and quicker access to the market without having to heavily invest in local sales operations.  

There are numerous other disties in Australia but some of the major ones include: Aquion, Ingram Micro, Nextgen and Tech Data.

Potential Headwinds – Hyperscaler Disruption

For B2B software transactions the market has long been used to a model supported by a small number of resellers who deal directly with software publishers or via disties. The customer is forced to buy from a reseller if they want access to enterprise agreements and volume discounts for large purchases, or access to charity / educational discounts and so forth.

Hyperscaler marketplaces may disrupt this motion. Hyperscalers are the big cloud suppliers such as Amazon (with Amazon Web Services or AWS) and Microsoft (with Azure). Both these companies have launched their own online marketplaces which sell subscriptions to applications that are designed to run on the platforms that Amazon / Microsoft host. 

The marketplaces however can also support technology transactions – and just think about it, Amazon is a world leader in provide e-commerce experience excellence. What Amazon and Microsoft are doing is engaging with other IP owners to get them to sell their software as a subscription through their marketplaces (i.e., they’re becoming disties). They can pit the IP owners against each other to drive adoption – e.g., if NitroPDF are onboarded to Amazon’s marketplace, it motivates Adobe to get onboarded too.

What Amazon and Microsoft do is sell multi-year pre-commit agreements that are heavily discounted e.g., pay $5m up front to get $6m credit over 3 years. This is offered on a ’use it or lose it basis’. This pool of funds can be spent on both cloud services provided by the hyperscaler as well as subscriptions available on the marketplace. This means that if a business is mid-way through their agreement term and they are tracking under the spend forecast e.g. it looks like they won’t spend that $6m, they could look to spend that money on subscriptions from other providers through the marketplace, to ensure that they don’t waste their pre-pay. This then could take money away from the distie.

It's very early days on this front and it’s difficult at this stage to assess the magnitude of this risk and what it will mean for companies like Dicker, but as software publishers continue to move to SaaS models and start to transition away from using disties and resellers, companies like Dicker will be impacted.

Into the future

The good news is that distributing software is only a portion of Dicker’s business and this potential headwind does not appear to be particularly disruptive at this stage. One of the reasons that disties and resellers exist is that like good travel agents, they advocate on behalf of the customer to get the best technology solution for the best price. So many companies will still want to continue to work with resellers and the disties because it minimises the number of vendor relationships that procurement teams need to manage and it provides customers peace of mind that they have a partner advocating for them both in terms of technology fit and hunting discounts. Oh, and don’t forget that cost savings is a procurement KPI and can mean the difference between going on that holiday or not when it comes to bonus time. So it’s important to not understate the power that resellers and disties have here when they’ve been able to demonstrate a strong track record of delivering cost savings to their customer’s procurement counterparts.

For this reason, we may even see a blended model emerge where disties and / or resellers clip the ticket or receive rebates on transactions through the hyperscalers where they have been supporting the presales process on behalf of the IP owner.

It will be interesting to see how the hyperscaler marketplaces start to disrupt these traditional technology supply chain motions.

I’ll be sure to provide further updates as I learn more and would be glad to share my experience if there are any questions people may have about how these businesses operate.

Disclosure: I hold Dicker in RL and on Strawman

*Edited due to some typos

DDR Acquisitions/ Land Purchase

·      February 2022 Hills Security and IT Division $19.35m - largest distributor of physical security products in the Australian market https://www.asx.com.au/asxpdf/20220221/pdf/4565x601gdk7ny.pdf

·      July 2021 Exeed Group $68m - is a leading distributor of key technology brands including Apple, HP, Hewlett Packard Enterprise and Microsoft, with a focus on both the commercial and retail sectors. Exeed carries a number of exclusive distributorships in New Zealand including Motorola, Ruckus and Webroot. The business employs a total of 119 staff, with 95 based in New Zealand and 24 in Australia. https://www.asx.com.au/asxpdf/20210730/pdf/44yvv0w3nfbjdg.pdf

·      February 2016 Purchase additional adjacent land in Kurnell - $18m for additional 17.2 hectares of land adjacent to current facility. (Sale of 230 Captain Cook Dr, Kurnell $36m August 2019 https://www.asx.com.au/asxpdf/20190801/pdf/4474ckh41hb5t2.pdf ) https://www.asx.com.au/asxpdf/20160225/pdf/435bf97pl50hj3.pdf

·      February 2014 Express Data Holdings $65.5m - acquisition includes both the Australian and New Zealand operations and Express Online.  Express Data offers a comprehensive selection of software and hardware products from a blue-chip vendor base which has very little overlap with Dicker Data’s existing vendor portfolio https://www.asx.com.au/asxpdf/20140211/pdf/42mn0zdx8h5bj5.pdf

Capital Raises

·      August 2022 Raised $71.8m - $50m Institutional, $21.8m SPP Retail

·      May 2020 – Raised $65m - $50m Institutional, $15m SPP Retail

·      August 2015 - Raised $45.5m - $40.25m Institutional , $5.25m SPP retail

·      March 2015 - Raised $40m Corporate Bond offering https://www.asx.com.au/asxpdf/20150316/pdf/42x98gn9sv5jvf.pdf

·      January 2011 - IPO Raised $1m

• Revenue: 3,104.4 - up 25%
• EBITDA: 129.8 - up 9.3%
• * Operating profit before tax: 106.9 - up 0.8%
• NPAT: 73.4 - down 0.3%
• Dividend for march was slashed down to 2.5c from 15c

In small print the operating profit before tax excluding one-off costs of 2.1m relating to hills acquisition and restructure costs.

“As a result of increased costs, in particular increased salary and finance costs. Continued disruption in the supply chain and the requirement to hold higher levels of inventory resulted in increased drawn debt throughout the year further, impacted by increasing interest rates. Additional operating costs were also incurred whilst the company was integrating the acquired Exeed and Hills businesses throughout the year.

The company has focused on consolidating and servicing the customer and vendor relationships it gained through these recent acquisitions and has yet to realised many significant cost synergies it strived for continued top line growth.”

Share price took a shellacking

Finally got the chance to read through the whole update, here's some highlights:

• Profit remained flat when compared against a massive previous period, but still considered strong by the company
• With Hills security and IT division (now the DAS), the company has returned the acquired portfolio to growth four months after taking ownership. Revenue, profitability on positive trajectory for that area of the business
• Dicker Data NZ is now fully operational from its CBD office and distribution facility
• Cybersecurity continues to be an area of growth for the company, particularly following high-profile attacks on Australian companies in recent months. Company is well positioned to assist its partner network. (nice tailwind for the DAS)
• Q4 outlook: demand strong, increased complexity driving more opportunity in partner community.
• Capital raise/warehouse expansion - has been costed up and will be complete approx end of June 2023, they expect it will come under the estimated cost. Surplus funds will be used to increase balance sheet flexibility and support long-term growth objectives.

Q3 Revenue $775.5m - +19% increase on previous comparative period

• Revenue for Sep 2022 vs Sep 2021 increased by 29.9% (2,234.9 vs 1,720.4 the previous year)
• Net operating profit before tax only increased by 0.1% (76.7m vs 76.6m the previous year)
• YTD gross profit margin finalised at 9.0%, in line with guidance.
• Overall profitability has been impacted by costs associated with rising interest rates, freight costs and increased depreciation and amortisation as a result of recent acquisitions.
• Salary costs increased on the prior corresponding period but have remained stable at 4.8% of revenue

There wasn’t much of a profit increase, but to be perfectly honest I was expecting this update to be a lot worse. I think DDR will do fine in the long term, I just expect to see a lot of not going anywhere particularly exciting in the next year.

After raising $50m from institutional investors, Dicker Data opened a share purchase plan for retail investors with the aim of raising a further $10m. Subsequently $21.8m in new shares were applied for and DDR opted against a scale back.

I'm always interested in the numbers behind the capital raising and DDR obliged providing further info in their release. There were 14,111 eligible shareholders who could apply. Of that number only 9.7% (1373) actually did so at an average of $15,856 (maximum allowable of $30k). The share price at times did hover slightly below the issue price of $10.30 and is currently still doing so. An extra $70m sures up the balance sheet with storm clouds on the horizon given the current macro thematic which one would think will be putting further pressure on the share price in the near term. There has been a continuation of director buying so internally there still appears to be a lot of confidence in the business still.

Disclosure; I hold IRL but did not partake in the SPP as it has grown to be my largest holding so held off due to weighting

They want to increase warehouse space by 70% so they've gone to the market

• 4.9m new shares
• Shares issued at $10.30 a 10.3% discount from the $11.48 it was frozen at. Same price for institutional investors
• Up to $30,000 of shares for existing shareholders

I'm assuming this is to attempt to mitigate supply chain issues with logistics given they will probably need to hold onto stock for longer, but ouch dilution.

Dicker Data released their Interim Financial report for HY

General stuff

• Revenue $1459.4m up $390.2m - up 36.5% from FY21.
• Excluding Exeed and Hills underlying revenue grew by 16.8%
• Operating expenses increased by $19.5m - up 38.2% including 1.6m in one-off acquisition and integration costs. Largest increase in expenses was due to salary costs with staffing additions through the acquisitions: salary related expenses up $14.7m - 33.1%
• Total operating expenses slight improvement down to 4.7% from 4.8% the previous year
• The Hills acquisition, purchase price at $21.3m, brought in $18m in revenue in 2 months.
• Supply shortage forecast to continue into 2023, back order book of $393m
• Cash from operating activities down from $38.738m to $35.136m
• Profit $128m - up 28.5% from FY21
• Margin decrease from 9.3% to 8.8% due to increased freight costs, expectation of normalisation to 9% within the year.

Region breakdown

• $204.1m growth - up 20.7% in Australia.
• $186.4m in NZ - up 226.6%.

Sector breakdown

• Hardware and virtual service sales - $1085m - up 35%.
• Software sales - $365.5m - up 41.7%
• Services - $6.5m - up 34.1%

Some stuff that stood out to me

• It is looking like the acquisitions are integrating pretty quickly and giving decent chunks of revenue
• Adding Hills has given DDR the opportunity to sell cybersecurity to their existing networks
• There was a mention of contraction of perpetual software sales over transition to recurring revenue models

Disc: Held IRL and in Strawman

Dicker Data released a Q1 update this afternoon (they report on a calendar year basis). From their release:

• Revenue in Q1 2022 finalised at $673.6m, up by $225.9m representing an increase of 50.5%
• The revenue split between Australia and New Zealand was $534.9m and $138.7m respectively
• The increase in revenue is partly attributed to full quarter contribution from the Exeed acquisition that was not available in the comparative period, with the balance attributable to organic growth
• The revenue contribution from the Exeed business across Australia and New Zealand (ANZ) was $90.3m in the Q1 2022 period • Existing and new vendor additions delivered $135.5m in incremental revenue, driven by increased demand for virtual capabilities and accelerated digital transformation of businesses across ANZ
• In line with the Company’s expectations, supply chain disruptions have continued and together with the introduction of the retail business in NZ, gross margins finalised lower for the quarter at 8.6% as a result
• Despite lower margins for the quarter, the Company expects to see margins finalising around 9.0% for the full year ending 31 December 2022
• Net profit before tax for the first quarter was $23.8m, an increase of 22.7% on the prior corresponding period (pcp)
• Operating expenses increased by 17.5%, finalising at 4.4% of revenue, down from 5.6% in the pcp

My Takeaway:

A pretty good quarter from DDR with good organic growth coupled with a full quarter contribution from Exeed (compared to FY21 Q1). I think this was needed given the decreasing margins that management have stated. I expect NPBT margins to be around 3.6% which is similar to FY19.

If revenue growth stays at 50% compared to FY21 then NPBT growth would come in around 23%. I see shares at around fair value at the moment trading at a PE of around 28x so I will maintain my valuation of $12.75. Was also good to see directors buying in the last few weeks.

Disc: Held IRL and on Strawman.

Dicker Data released their FY21 results today (they report on a yearly basis). From their release:

• Total revenue of $2.48b for the year, representing an increase of 24.2%, or $484.3m
• Australian revenue grew by $300.3m, representing an increase of 16.3%
• New Zealand revenue grew by $184.1m, representing an increase of 128.7%
• Nine new vendors were added in FY21 (excluding Exeed) which contributed an incremental $54.7m
• Software recurring revenues increased by 19.7% to $520m
• Statutory net profit before tax increased to $105.1m, representing an increase of 28.4%
• Earnings per share increased to 42.63 cents per share, an increase of 25.6%

Another solid year of business for a DDR. I think this slide in particular outlines what a high quality company this is:

At the current share price ($14.15) they are on a PE of around 33x. Historically shares have traded at a PE of between 10 and 20 however since 2020 there has been some multiple expansion and shares have traded between 20x and 40x.

I have updated my valuation based on their latest results. If the PE got down to 20x ($8.50) I would likely back up the truck.

Disc: Held IRL and on Strawman

Dicker Data has gone into a trading halt today pending announcement of an acquisition.

You tend to shudder when some companies do things like that but you'd have to back David Dicker in to know what he's doing. The bloke just keeps putting runs on the board over a very long period.

[Not held]

DDR just 'keeps on keeping on'... Today they provided their 3rd quarter update

Highlights as follow:-

 With two months contribution from Exeed Group business, total revenue YTD to September 2021 was $1,720.4m, an increase of 16.1% on the prior corresponding period (PCP)

• Net profit before tax YTD to September 2021 was $76.6m, an increase of 26.0% on the PCP
• Excluding the contribution from Exeed business total revenue was $1.655.2m, up 11.7% on PCP and net profit before tax at $74.7m, up 22.9% on PCP
• A strong result despite ongoing supply constraints being experienced during the year
• Supply constraints are predicted to continue for the foreseeable future, however, our ability to forecast and manage allocation of stock continues to strengthen each quarter
• Despite the global chip shortages, we are experiencing increased stock allocations across a large number of categories, improving the overall health of the supply chain
• There is still a significant backlog of orders that we expect to fulfil in the last quarter of 2021

Still one of my best income & dividend stocks

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02441323-2A1333575?access_token=83ff96335c2d45a094df02a206a39ff4

According to this article, a Motley Fool sell recommendation caused the share price drop after the results

EDIT~New attachment

Distribution Amount  AUD 0.10500000

Ex Date Friday February 12, 2021

Record Date Monday February 15, 2021

Payment Date Monday March 1,

2021 DRP election date Tuesday February 16, 2021 17:00:00

Disc: Long time happy holder

Since I have owned these share from back at $2- DDR has, as nearly all analysts say, been way to highly priced. But they keep delivering, esp with the div which is why I fisrt bought them

07-May-2020:  Equity Raising   and   Investor Presentation

Equity Raising

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”.  
 
Market update

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.

• [The announcement contains a table at this point titled, "An overview of the Company’s April 2020 and year to date revenue performance" ...which I can't replicate here - so click on the link above to access that.]

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.]