Dicker Data focuses on 'extracting maximum value' from its acquisitions

Dicker Data focuses on 'extracting maximum value' from its acquisitions

New Zealand contributed 18 per cent of major distributor Dicker Data's revenues

David Dicker (Dicker Data CEO)

David Dicker (Dicker Data CEO)

Credit: Supplied

Facing challenging margins in New Zealand especially, ASX-listed distributor Dicker Data is signalling further integration of its acquired businesses.

Dicker Data told shareholders today it earned A$3.1 billion in revenue during the year to 31 December, an increase of 25 per cent or A$619.9 million. The company's New Zealand businesses contributed A$550.1M, or around 18 per cent of that total.

2022 marked the distributor's first full year of owning New Zealand-founded distributor Exeed, which it acquired for NZ$68M in July 2021. In 2020, the last financial year before that buyout, Dicker Data reported New Zealand revenue of $151.8 million.

Gross profit was up 23.2 per cent to A$283.7M in 2022, however gross profit margins declined from 9.3 per cent to 9.1 per cent. 

Margins in the New Zealand business, which were already lower than in Australia, fell further during the year, from 7.6 per cent to 6.5 per cent.

Operating costs increased as a proportion to revenue to 5.0 per cent from 4.7 per cent in 2021 as the company invested in servicing the the new customer and vendor relationships it obtained from buying Exeed and Hills' security and IT division, shareholders heard.

All of that had Dicker Data undertaking "a level of organisational introspection" in late 2022, the company told shareholders.

"The recently acquired businesses across Australia and New Zealand that were fully integrated in 2022 will be accelerated in 2023 to align the metrics of those businesses to those of the company's proven, long-term operating model," Dicker Data said.

"Furthermore, we expect to realise the benefits of shared operational functions across the group in FY23 as the focus shifts from integrating businesses to extracting the maximum value from them whilst closely managing the associated costs."

CEO David Dicker said unpredictable challenges beyond the company's control such as rising interest rates and inflation among others increased the cost of operations.

"I remain optimistic about business conditions and very optimistic about our company's ability to generate another strong result in 2023," he said.

Market demand for some technologies, such as devices, was also expected to soften in 2023 after the thirst for digital transformation and the need to support hybrid workforces spurred an "unnatural level of demand".

This demand was expected to continue in 2023 despite the market dynamics settling and become more predictable.

Technology refresh cycles were expected to return to pre-pandemic intervals and Dicker Data expected enterprise and government to drive market demand in 2023 as they embarked on their next phases of digital transformation.

Conversely, SMB spending was expected to abate.

Dicker Data's profit after tax for the year was A$73M, down by a marginal 0.7 per cent.

Executive director and chief operating officer Vlad Mitnovetski Dicker said Data's performance throughout 2022 period was strong, delivering a significant increase in revenue and delivering a gross margin of over nine per cent.

"Despite the one-off integration costs and significantly increased wages from onboarding hundreds of new staff, we delivered an outstanding result inside of the factors we can control," he said.

The acquisition of the Hills Security and IT division and the subsequent launch of Dicker Access and Surveillance (DAS) business positioned the distributor "extremely well" for 2023, Mitnovetski said.

In February, Dicker Data inked a deal to buy NZ-based Connect Security Products for NZ$5.0M, comprised of NZ$3.5m for goodwill with the balance being business assets, predominantly inventory. 

This enabled Dicker Data  to launch its DAS business in New Zealand, delivering benefits that would be used to further grow the business across A/NZ, the company told shareholders.

The velocity of the DAS business increased towards the end of the year, with gross margin finalising around 50 per cent higher than seen in the IT side of the business. 

DAS across A/NZ was expected to operate at gross margins double that of the IT business in 2023 as growth accelerated and the operation was refined and capitalised on shared services.

A total of 3244 resellers purchased from DAS in the eight months to December 2022. 2595 of these accounts were net new customers acquired from the Hills Security and IT division, with the remaining 649 being existing Dicker Data IT partners. 

"This demonstrates the convergence of the IT and security markets that is expected to continue in FY23," Dicker Data told shareholders. 

"Security partners are also expected to increase their reliance on IT products as cloud storage, networking, power and Al becomes increasingly integral to modern security solution design."

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