The Dicker Data
(ASX: DDR) share price has risen 7.5% in early trading after providing a market update for the nine months to September 2019.
Dicker Data is Australia’s largest and oldest distributor of information technology products. Having started in 1978, it has been operating for over 40 years and was listed on the ASX in 2011. Some of the brands Dicker Data sells include HP, Cisco, Microsoft, Lenovo, Symantec, RSA, Toshiba, Samsung, ASUS and so on. Dicker Data has over 5,000 reseller customers.
Dicker Data’s Market Update
The IT product company announced that its total revenue has increased by 17.8% to $1.29 billion in the nine months to September 2019.
Dicker Data said that the revenue growth can be attributed to strong performance across all vendor partnerships and receiving the full value for new vendors. There has been strong growth in subscription revenue, stronger than revenue growth of other segments.
But its profit has been growing even quicker. Operating profit before tax has increased by 38.6% to $47.4 million, which excludes the realised profit of $12 million on the sale of property in August 2019.
Management said that costs as a percentage of sales are tracking slightly higher than the half year, but operating profit is growing faster than revenue growth. Costs are slightly higher because of increased headcount investment which is expected to continue into the fourth quarter to support new vendor additions and future growth. The net profit margin was 3.7%.
Based on the strong growth achieved so far in 2019 and the numbers tracking ahead of the forecast numbers, the company expects a good finish to the year.
Management are now expecting full year operating profit before tax to be above $60 million for FY19. If achieved, this would be an increase of more than 30%.
Dicker Data seems to be offering a rare combination of strong growth and dividends because it pays out most of its profit each year. Due to the big rise of the share price this year the fully franked dividend yield is 3%, which is still decent in this era of low interest rates.
It’s hard to say whether this strong growth can continue. But businesses are continually investing in better technology. The growth shares in the free report below could be even better bets for growth in the coming years.
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