The Motley Fool

Why the Dicker Data share price is on the rise this week

The share price of Dicker Data Ltd (ASX: DDR) has risen around 6% in the past week to $6.96 per share (at the time of writing), following the release of its interim financial report last Wednesday. The IT distribution business delivered another excellent result with both the top and bottom lines growing strongly. 

A look at Dicker Data’s interim performance

For the 6 months ended 30 June 2019, Dicker Data reported an 18.7% increase in revenue to $852 million, which was ahead of management’s expectations. The business continues to add new vendors and expand the breadth of products offered by its existing vendors. 

In 2018 and for the first-half of 2019, Dicker Data added 10 new vendors who contributed $18.8 million in incremental first-half revenue. However, it was the $115.6 million (a 16.2% increase) in additional revenue from existing vendors that was the main catalyst in the company’s top-line growth. On a sector breakdown, hardware and virtual services sales increased 16.9% to $670.2 million and software sales rose 26.4% to $176.5 million.

Dicker Data’s gross profit for the first half of FY19 increased 21.4% to $77.2 million. Gross profit margin rose to 9.1%, a 20 basis points improvement over the prior corresponding period. The improvement in gross profit margin was primarily driven by an increase in vendor rebate payments on overachievement of vendor targets. 

On the expense side, first-half operating expenses increased by 5.1% over the prior corresponding period. This was significantly lower than the increase in revenue and as a result operating expenses as a percentage of sales declined from 5.5% to 4.9%. Furthermore, total costs as a percentage of sales fell from 6.1% to 5.4%. 

The top-line growth in conjunction with a higher gross profit margin and cost control resulted in operating profit before tax soaring 51.2% to $32.3 million. Net profit after tax was up 50.5% to $23.8 million and earnings per share increased 49.7% to 14.73 cents.

Outlook

Dicker Data is upbeat about its second-half prospects and remains confident of achieving its previously issued guidance of $51.4 million in operating profit before tax for FY19. With around 63% of its full-year guidance achieved in the first-half, it is likely that Dicker Data will end up exceeding its full-year guidance.  

Shares in Dicker Data have now risen 150% in 2019 due to a number of strong earnings reports. Other small cap stocks that have risen by more than 100% in 2019 include Audinate Group Ltd (ASX: AD8) and Megaport Ltd (ASX: MP1).

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Tim Katavic owns shares of Dicker Data Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of MEGAPORT FPO. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO and Dicker Data Limited. The Motley Fool Australia has recommended MEGAPORT FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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