Dicker Data Posts Higher Q1 2023 Revenue And Profit

Higher Q1 2023 Revenue and Profit

Dicker Data looks set to deliver on shareholder expectations for the 2023 financial year after posting a first quarter 14.7 percent increase in revenue to $772 million and a 6.7 percent lift in operating profit before tax to $25.4 million. This operating profit would have been 2.1 percent higher but for one-off redundancy costs of $513,000. After allowing for the full quarter contribution from the Hills acquisition not in the corresponding 2022 first quarter, the revenue contribution from year-on-year organic growth was a respectable 9.7 percent.

Gross profit margin for the March quarter at 9.2 percent is in line with expectations and an improvement on the 8.6 percent achieved in the comparative quarter. Software recurring and subscription revenues across Australia and New Zealand increased by 42 percent to $744 million.

A 10 cents per share fully franked dividend is payable on 1 June and the Company intends to maintain its current policy of paying quarterly dividends to shareholders.

Back orders currently sit at $235 million as supply constraints restrict the Company’s ability to fulfil some client orders. The situation is improving with 75 percent of the Company’s vendors now being able to match market demand. Indications are that these constraints should ease further by the third quarter. In a strategic response to these supply chain constraints, Dicker Data will reach practical completion of its 16,636 square metre warehouse expansion by the end of June 2023. The increased floor space will facilitate the storage of thousands of additional pallets and products on site, enabling just-in-time inventory solutions for its Australian partner community.

Looking Ahead

FY22 was impacted by rising interest rates, higher inflation, rising energy costs higher freight bills and unpredictable supply chain conditions that required additional working capital which prevented the Company from receiving early settlement discounts from suppliers. These challenges were compounded by chip shortages and other supply-side disruptions that created order backlogs. The Company now has full visibility on these external factors which have been incorporated into current business plans. Dicker Data has its sights firmly focused on key performance measures like weeks of inventory holdings, customer debt and general business hygiene, to drive operational efficiencies. Furthermore, the Company’s significantly expanded warehouse, its focus on reducing aged stock levels and the cost synergies enabled by shared core services such as logistics, finance, marketing, IT and operations, are expected to meaningfully contribute to the 2023 financial year result.

The need to support hybrid workforces and the push to digital transformation has spurred an unnatural level of customer demand that is likely to be maintained into the 2023 financial year.   Cybersecurity continues to be an area of growth following high profile data security breaches that are driving the need for comprehensive cybersecurity solutions. Interestingly, the Company’s CEO observed that consolidation of the technology distribution market in Australia and New Zealand continues to create unique opportunities for Dicker Data to grow. These factors are creating a positive backdrop to FY23 earnings and are supportive of continued earnings growth beyond the current financial year.