Dicker Data Ltd (ASX: DDR) late yesterday released its annual results for the half year ended 30 June 2017 reporting net profit after tax of $12.9 million on the back of revenues of $632.5m, increases of 3.3% and 7.1% respectively on the prior corresponding period or pcp.
Its pre-tax operating profit came in at $19.4m which is an increase of 7.3%.
Helping to achieve these results were contributions from new vendors which boosted the company's revenue by just over $17m and revenue from existing vendors growing 9.4% on the pcp.
The company explains that its net profit was affected by increased tax expenses relating to a franking deficit amount, however the company has lodged a request for remission with the ATO which, if allowed, may improve the bottom line down the track.
Operating cash flow was down almost 18% to $38.4m, but the main reason for this is that the majority of the tax already provisioned for the 2016 financial year was paid in the first half of the 2017 financial year due to delays by the ATO in issuing an updated assessment percentage after the company had switched its tax year-end from June to December.
This seems to be more of a one-off issue which shouldn't affect the ongoing cash flows of the business.
Also, the company's margins have remained broadly stable, albeit down slightly to 9% from 9.1% due to increases in market competition.
The big news from Dicker Data though in the last couple of weeks has been the loss of its contract with Cisco in New Zealand. It's anticipated that the New Zealand business will be restructured so that the costs with running the business there are appropriate for the lower revenues now expected.
Whilst this is disappointing, management have reaffirmed its previous guidance of $40m in pre-tax operating profit for the financial year to December 2017 which implies a slightly faster rate of growth in the second half.
Looking to the future, the company's new distribution centre in Kurnell, Sydney is progressing, however, capital expenditures relating to this build aren't anticipated until early next year and shouldn't affect this year's net profit.
The newer and much larger distribution centre appears to be a vote of confidence in the company's ability to compete and grow profitably for years to come, but it could well come at the expense of lower profits in the 2018 financial year.
For long-term focused investors though, this shouldn't be too much of a concern as long as management keep a tight rein on costs and continue to onboard new vendors both in Australia and New Zealand.
Dividends paid so far this year come to 8.4 cents per share, and with the company reiterating guidance for its full year pre tax operating profits, there doesn't appear to be any change to the expected 16 cents per share for the full year providing shareholders with a forward fully franked dividend yield of just under 6.4%.
