The Dicker Data Ltd (ASX: DDR) share price is roughly flat today, despite the company reporting record revenue and profit for the first half of 2020 (because Dicker Data reports in line with the calendar year).
Dicker Data reported revenue of just over $1 billion, up 18.1% on the first half last year with profit of $29.4 million, up an impressive 23%, with higher gross margins more than offsetting a slightly increased tax rate.
Work from home accelerating growth
In the half year report today, Dicker Data made it clear that it was benefitting from extra demand arising from the rise in working from home.
When we pressed for further details, Chief Operating Officer Vladimir Mitnovetski said, “We are seeing strong demand for traditional end point devices like laptops, especially with the impacts of COVID-19 and the large number of Australians that are now working from home. In addition, there’s strong demand for network infrastructure, such as WiFi access points, firewalls, routing, home networking, etc to connect all of the edge devices back to the cloud or datacentre.”
Dicker Data is a remarkable company for its long history of steady growth and its habit of paying out substantially all its earnings in quarterly dividends. For this quarter, the company maintained its dividend of 7.5 cents per share. There’s every chance it will increase over the year, because it has only declared 15 cents of dividends in the first two quarters, but the first half earnings per share was just over 17 cents.
Strong growth in software
It was only a few years ago that Dicker Data was almost entirely focussed on distributing IT hardware from its warehouse. However, in the last few years, it has built an admirable software distribution business, and can now boast over $200 million in recurring revenue from software sales.
On top of that, the software segment grew by 43%, whereas the hardware segment grew just over 11%. This is a good sign that Dicker Data is becoming more diversified, and less risky over time.
It’s hard to imagine that Dicker Data will be badly managed, since the founders still own more than half the company, but that doesn’t mean it’s worth buying today. For more on this half yearly, including a discussion of what is driving the improved margins, check out this report on Dicker Data’s half year results for A Rich Life.