Dicker Data share price surges higher after revealing strong first half profit growth

The Dicker Data Ltd (ASX:DDR) share price is surging higher after the release of a first half market update this morning. Here’s how it is performing…

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The Dicker Data Ltd (ASX: DDR) share price has been a standout performer on the ASX on Thursday.

In morning trade the shares of the wholesale distributor of computer software and hardware are up over 8% to $7.59.

Why is the Dicker Data share price storming higher?

Investors have been fighting to get hold of Dicker Data’s shares after the release of a first half market update.

According to the release, Dicker Data’s strong performance continued in the second quarter and led to solid sales and profit growth during the first half.

The company has recorded over $1 billion of unaudited revenue during the half, which represents an 18.3% increase over the prior corresponding period.

Almost a quarter of this revenue was generated in the final month of the half. Dicker Data delivered record revenue for June of $224 million.

Things were even better on the bottom line during the half. The widening of its margins led to its unaudited net profit before tax coming in at approximately $40 million for the six months. This represents a 25% jump on its profit before tax during the first half of FY 2019.

What has driven this strong half?

Today’s update was short on detail, but it is likely that the same drivers of its strong first quarter carried over into the second quarter.

In the first quarter, management advised that strong demand for remote working solutions was a key driver of its sales growth.

Management commented: “With many organisations enabling their workforces to work remotely we have seen a surge in demand for remote working solutions across both our hardware and software portfolios, highlighting IT distribution’s role as an essential component for business continuity.”

The increased sales led to operating cost leverage being achieved, which was also supported by savings in finance costs as a result of the lower interest rate environment.

Dividend.

No update was given in relation to its dividend plans. This appears to indicate that it continues to expect to pay an interim fully franked 7.5 cents per share dividend for the first half.

After which, management has guided to a full year dividend of 35.5 cents per share fully franked. This represents a 31.5% increase on FY 2019’s dividend.

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