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Dicker Data share price surges 6% on strong half year update

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The Dicker Data Ltd (ASX: DDR) share price has surged 6.4% higher so far today, following the release of a very strong set of numbers in its unaudited H1 FY 2020 results.

Dicker Data has evolved to become Australia’s largest value added distributor of hardware, software, cloud and other emerging technologies.

Why the Dicker Data share price is climbing

Revenue growth climbs higher during the pandemic

Total half year revenue from ordinary activities broke through the $1 billion milestone for Dicker Data. It was up by 18.1% to $1,006 million for the six months ending 30 June 2020.

Particularly strong growth during the half has been driven by a surge in demand for remote and virtual work solutions during the coronavirus pandemic. This strong demand has been witnessed across both Dicker Data’s hardware and software portfolios.

Recurring software revenue was a real performer during the half, up by 53.1% to $225 million.

Profit surges higher on climbing revenues and increasing margins

Net profit also grew very strongly for Dicker Data. Net Profit before tax amounted to $42.0 million, an increase of 30.4%. Net Profit after tax was up by 23.5% to $29.4 million.

At a country level, New Zealand was the strongest performer, with revenues up by 31.6%. Australia’s revenue base grew by 17.2% during the six month period.

Gross profit increased by 24.8%, driven by growth in overall revenue and an improving margin. The driver of this growth has been a heightened focus on both the mid-market and the SMB market. Dicker Data specialises in servicing both of these market segments and specifically targets the pre-sales and value added services markets. The company also targets emerging solutions in the hybrid, end-to-end technology market.

During FY 2019 and H1 FY 2020, new vendors accounted for $26.3 million of incremental revenue during the half. Existing vendor relationships that were established in FY 2018 or prior, grew at 15.1% over the prior corresponding period, driven by access to new product lines.

Emerging opportunities

Dicker Data highlighted 5G as a particular area that it can tap into during the rest of 2020 and beyond.

As 5G is rolling out across Australia, more computing technology is required at the ‘Edge’ of the network. Dicker Data believes it is well placed to help supply the new devices and infrastructure required to support this growing trend.

How has the Dicker Data share price been performing?

The Dicker Data share price has been a strong performer since the beginning of 2019. It has increase from $3.10 to now be trading at $7.50. That’s an increase of 142%. However, most of that growth occurred in the first half of 2019. Dicker also pays an attractive forward dividend yield of 4.26%, fully franked.

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Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. 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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