Dicker offsets margin squeeze thanks to vendor rebates

Dicker Data recorded strong revenue and profit growth for the first half of the financial year despite a fall in PC sales.

In a statement to the ASX, chief executive David Dicker praised the addition of HP's printing range. "Also driving our increase in revenues in the half year is the extension of our HP agreement to include the full range of HP printing and supply product at the beginning of FY14. This has more than offset our decline in revenues from some of our traditional PC vendors, including HP."

For the first half, revenue increased 5.2 percent to $224.5 million, up from $213.5 million in the previous corresponding period. That fed into an 11.3 percent increase in net profit before tax of $5.2 million. Net profit after tax also increased 12.8 per cent to $3.7 million.

Profits were helped by an increase in margin, "driven by the higher revenue and, therefore, meeting or exceeding vendor rebate targets".

According to Dicker, "Gross profit increased to $18.2 million (2012: $15.9 million) representing an increase in gross margins to 8.1 percent (2012: 7.5 percent). While our front-end margins were down on a year-on-year basis with increased pressure from our competitors on pricing and keeping inventory at moderate levels, higher revenues has meant an increase in our rebates as we have constantly met and exceeded our vendor expectations that have helped offset some of the lower margins we have seen in first half of FY14."

Dicker also provided commentary around the recent acquisition of Express Data, which is scheduled to complete on 1 April.

"As a result of this transaction, Dicker Data will become one of the largest distributors of IT products in the Australian market. The acquisition also includes a well-established operation in New Zealand presenting additional growth opportunities in the future."

David Dicker said that as a result of the acquisition, the company has entered into a contract to complete the last stage of the warehouse facility at Kurnell, which will be expanded by an additional 5,000sqm.

"The extension will provide a further 4,000sqm of warehouse and 1,000sqm of office space. This will allow the company to accommodate the integration of the Express Data business into the one location."