DDR - Dicker Data

[peter2]

David Dicker has sold 2.5M shares at 15.40 (great price) and now holds 58M (33.6% voting power of DDR)

It seems that his sale has spooked the market, as price has fallen significantly lower.

 

[galumay]

I wondered how many actually knew what had gone on? Maybe they just sold because they saw the price drop the day he unloaded his 2,5m shares? It has run multiples ahead of my estimate of fair valuation so I am not entirely surprised to see a reset, still very expensive in reality!

I just keep holding, its a cash cow for me in relation to my initial cost price.

 

[kenny]

Can we find out who picked up the $42.2M shares David Dicker sold down? They'd be underwater a chunk right now. Clients of Barrenjoey Capital Partners perhaps?

I wonder how many were bought to close out squeezed short positions?

 

[Smurf1976]

I wondered how many actually knew what had gone on?

I didn't - I sold simply because the stop was hit.

Given the magnitude and speed of the drop, I probably wouldn't be the only one in that situation - out but no idea as to why other than that price fell.

I sold at a profit so not complaining, but still.....

 

[peter2]

David Dickers explanation for his recent sale of DDR shares.

 

[galumay]

Its a bit arrogant really, assuming the drop in price was purely a response to his sale of shares. Even as a long term SH its obvious its very over priced, post the FY2021 results its hardly surprising some of the wind has been knocked out of the sails. Its still priced like a SaaS Stonk rather than a electronics distributer!

 

[peter2]

No, I didn't catch the DDR falling knife but waited until it hit and struck support. I grabbed it as it was quivering. Spec position only of course.
The Dicker statement made all the difference to the market sentiment.

 

[kenny]

It looks like "new" director Vlad MITNOVETSKI topped up another 5000 shares at $11.90 on the 5th October. It's nice to see him accumulating whenever there's a dip.

 

[peter2]

Very satisfying day for holders. I feel for long term investors (LTI) as I wonder if they ever feel joy. They're sitting there, accumulating vast fortunes. They've sat through dips, falls and rallies. Volatility has dulled their emotions. Nothing surprises them. On the other hand are the short term traders. Who analyse and anguish over every price dip and rally. As one of the later, today was a joyful one as DDR rallied on the latest update. I bought the falling knife, added on the reversal setup and today's price spike delivers pure joy.

I'm jumping on the bed, sofa, full of energy and the LTI, well, they're asking, should we open a bottle of wine with dinner tonight, dear?

 

[Miner]

Very satisfying day for holders. I feel for long term investors (LTI) as I wonder if they ever feel joy. They're sitting there, accumulating vast fortunes. They've sat through dips, falls and rallies. Volatility has dulled their emotions. Nothing surprises them. On the other hand are the short term traders. Who analyse and anguish over every price dip and rally. As one of the later, today was a joyful one as DDR rallied on the latest update. I bought the falling knife, added on the reversal setup and today's price spike delivers pure joy.

I'm jumping on the bed, sofa, full of energy and the LTI, well, they're asking, should we open a bottle of wine with dinner tonight, dear?

@peter2 - looks like this week you have earned enough to treat all of us with few bottles of Penfold- congratulations mate.

 

[galumay]

Very satisfying day for holders. I feel for long term investors (LTI) as I wonder if they ever feel joy. They're sitting there, accumulating vast fortunes. They've sat through dips, falls and rallies. Volatility has dulled their emotions. Nothing surprises them. On the other hand are the short term traders. Who analyse and anguish over every price dip and rally. As one of the later, today was a joyful one as DDR rallied on the latest update. I bought the falling knife, added on the reversal setup and today's price spike delivers pure joy.

I'm jumping on the bed, sofa, full of energy and the LTI, well, they're asking, should we open a bottle of wine with dinner tonight, dear?

As a LTI, i felt a twinge of joy today!

 

[JohnDe]

A great performer

$14.220​

Today's Change Up $0.680 (5.02%)​

Some analysts have been say sell for the past few months.

​

 

[galumay]

The increase in dividend announced today was the reason for the jump I suspect, up over 8% now to $14.60.
Divvy for 2021 ended up at 42c, up 27% from 33c last year. Thats a yield of 25% on my entry at around $1.60.
Buy & Hold doesnt work anymore, eh?!

 

[Dona Ferentes]

We should all be on the hunt for fairly valued companies likely to deliver reasonable compound profit growth.

Kerr Neilson says rising bond yields means serious investors can prosper again as tech valuations crash back to earth and free cash flow yields return as a dominant driver of investment returns. [He] also urged retail investors to use the new economic cycle as a touchstone to refocus on pre-pandemic valuations and realistic returns.

“If you compound returns at 14 per cent a year for 20 years you get 13 times your initial stake,” Mr Neilson said. “I’m just trying to get people to love the idea that if you do what is sensible you will confound yourself at the outcome. If you’re a serious investor through time, and you keep moving from highly priced to less highly priced, you will accumulate incredible wealth.”

 

[JohnDe]

Trading Halt

Dicker Data makes $20m play for Hills SIT division​

MATT BELL
Dicker Data enters into a conditional business sale agreement to acquire the Security and Information Technology (SIT) distribution division of Hills Limited for circa $20m.
The purchase price represents a premium to the net assets sold and the final amount is largely dependent upon inventory related balances at the completion date.
Under the terms, Dicker Data will acquire the business for cash consideration structured as a partial net asset sale.
"Upon completion Dicker Data will acquire the business, inventory, customer and vendor relationships, employees and their entitlement obligations, and certain other net assets of the Hills security and information technology division," the company says.
The SIT division of Hills generated $123.2m revenue in FY21, with $98.7m of the total attributed to security and the remaining $24.4m to IT products.
Directors of Hills are unanimously recommending that shareholders vote in favour of the transaction when a vote is held in April.
The proposed takeover also remains subject to approval by an independent expert concluding the transaction is "fair and reasonable".

Proposed divestment of Hills security and IT distribution business

• Proposed divestment of Hills security and information technology distribution business for an estimated $20 million cash consideration
• Consideration represents a premium to net assets
• Hills to focus on strong growth prospects in its health technology business and technical services operations
• Significant reduction in working capital requirements post transaction

Hills Limited (ASX:HIL) (“Hills” or the “Company”) announces it has signed a conditional business sales agreement (“BSA”) to divest its security and information technology distribution (SIT) division to ASXlisted company [Dicker Data Limited] (ASXDR). The proposed divestment is part of the Company’s ongoing strategy to focus on the strong growth prospects associated with the Hills Health Solutions division and technical services operation.

Under the terms of the BSA, Dicker Data will acquire the business for cash consideration structured as a partial net asset sale. Upon completion Dicker Data will acquire the business, inventory, customer and vendor relationships, employees and their entitlement obligations, and certain other net assets of the SIT division. Hills will retain the Hills brands, and the trade receivables and payables existing at completion.

The purchase price represents a premium to the net assets to be sold and the final amount is largely dependent upon inventory-related balances at the completion date. The price is estimated to be in the range of $20 million.

Hills is retaining the Technical Services business that is currently a part of the broader Distribution division and will continue to pursue its existing customer and geographic diversification growth strategy for this technology installation focused business.

The divestment of the SIT division follows Hills’ exit, in late 2021, of its New Zealand security distribution operations.

Completion of the proposed divestment is subject to the following key conditions:

• Hills shareholder approval by a simple majority, which will be sought at a general meeting of shareholders, expected to be held in early April 2022.
• Independent Expert opinion that concludes that the proposed transaction is “fair and reasonable” to Hills shareholders.
• Consent of key suppliers and landlords of the SIT division to novate existing contracts to Dicker Data.
• Approval of the Commonwealth Bank of Australia in accordance with the terms of the existing loan agreement.
• No material adverse change occurring in the SIT division between the date of the agreement and transaction completio...

 

[divs4ever]

i do hold HIL

HIL another incredible shrinking company

hope DDR can make it work out

*** • Hills to focus on strong growth prospects in its health technology business and technical services operations ***

they haven't managed that in the last 11 years , why should you believe them now

 

[galumay]

Full year 2021 results for DDR looked good on the headline profit, but the big drop in FCF tells the story of the challenges that have faced the business in the last 12 months. As always my main concern with DDR is the excessive debt they carry in order to maintain the very high divvies for Davey's race car project in NZ. Really cant complain, it just keeps growing revenue, profit and divvies, year after year. Its been one of my best positions for many years.

 

[JohnDe]

Full year 2021 results for DDR looked good on the headline profit, but the big drop in FCF tells the story of the challenges that have faced the business in the last 12 months. As always my main concern with DDR is the excessive debt they carry in order to maintain the very high divvies for Davey's race car project in NZ. Really cant complain, it just keeps growing revenue, profit and divvies, year after year. Its been one of my best positions for many years.

View attachment 138424

Agreed. I've been advised to sell but as you mention, it keeps growing.

 

[galumay]

My question is always, if I sold something, how certain am I that I can deploy that capital somewhere else where it will produce better returns. Thats a tough ask with DDR, look at these numbers over 10 years,

 

[JohnDe]

Simple lessons in David Dicker’s 25-year overnight success
It took until the fast car enthusiast was 50 to realise what he needed to change to be a success in business – pay staff well, hire more women and stay out of the way. The results have been startling.

David Dicker was turning 50, going through a divorce, and had failed to sell his computer hardware and software company for about $10m a year or two before.
He had spent most of the 1980s designing and building his own interpretation of what a general computer should be, but had failed. It meant Dicker had to focus on distributing computers in Australia for big names such as Toshiba, Compaq and Hewlett Packard.

Yet his company, Dicker Data, had in his words “drifted”, and Dicker says he remembers being particularly conscious of coming to a time in his life when he might become irrelevant.

“The issue you have is that and no one wants to talk about it, but once you get over 50 you’re invisible to society,” he recalls in his typically blunt manner.

“So there I was, 50 years old. I was probably worth $4m or $5m. You might say wow, but I’d already been in it for 25 years so it was next to nothing. It was just complete crap. I was just fortunate I owned the company, so you’re more or less at the mercy of your own destiny and you’ve got on with it.”

Today, Dicker Data simply keeps delivering profits and dividends, year in and year out. It has become a market darling among small cap and mid cap fund managers, and has grown so valuable that it has put Dicker within reach of billionaire status thanks to his shareholding. His ex-wife Fiona Brown, who helped start the company and still sits on the board, is also on The List due to her large stake.

Dicker, now 68, got working and eventually oversaw an ASX listing for Dicker Data in January 2011 that valued the business at $25m.

“My aim for the business was to be worth $50m. I would have been absolutely completely satisfied. So it is incredible now, really,” he says.

That turnaround over almost two decades is down to some simple management principles that Dicker has stuck to. He doesn’t think there is anything particularly complicated about his leadership style, though – it’s perhaps best described as keeping it as simple as possible, paying people well and staying out of the way when needs be – and at times he sounds incredulous that others make management sound so complex.

His way has eventually worked. Dicker Data is now a roughly $2.5bn company, selling and distributing technology hardware, software and cloud products for big names such as Cisco, Citrix, Dell, Lenovo, Microsoft.

It took some time for the share price to take off, but Dicker’s company has been one of the best performers on the ASX in recent years and has increased by about five times in value since 2019.

Dicker owns about 35 per cent of the company. With that comes the trappings of wealth that he now enjoys – including the road racing car business Rodin Cars that he reckons he’s sunk $40-50m into as it works on building its own line of electric sports cars.

A corporate jet is on order, and while he admits it sounds extravagant, when borders finally open Dicker will flit between Australia, Dubai and New Zealand for board meetings and company business, and attend computer conferences in the US to justify his – not the company’s – outlay.

It all sounds like a corporate leader’s dream.

Yet if Dicker were to write a management textbook explaining the secrets behind his company’s success, it would likely be a slim volume.

There are few simple themes though.

To start with, it is about persevering and sticking to what you’re capable of doing.

Dicker was no fan of school and wanted to become an apprentice sail maker but his parents wouldn’t let him. Instead, he worked in roof installation and refrigeration mechanics – “airconditioning is not exciting. I tried to get excited by it, but it’s not exciting” – and in a building business where small calculators were needed to calculate angles and lengths.

That led to using small computers, and Dicker was hooked. He travelled to America and sourced a supply of new microcomputers from a now defunct company called Vector Graphic, and had an initial aim of selling 10 computers a month in Australia.

Dicker Data now has about $2bn in annual revenue.

“A blind man could see how much potential [the industry] had, and then it was just a matter of staying in it,” he says.

Dicker Data was formed in 1978 and that stint in the 1980s when Dicker unsuccessfully tried to build his own computer followed, which also forced him to make the company strong enough to fund that project and continue after its failure. It also gave him a strong understanding of how computer systems work and how to sell the products.

“You know, if you can stay in almost anything for a long enough time you’re bound to do well,” Dicker explains. “The problem most people have is that they just chop and change all the time. They do this for three years, then they’ll go off and do that for two years and so on.”

Then there is making sure you pay your staff well, so they stay and to ensure they work hard. Dicker says the reality is that most staff work to earn money, so all he thinks of doing is making sure to pay his employees more than his competitors. That included giving every employee $1000 worth of Dicker Data shares when the company turned 40 in 2018.

“That’s how you find high-quality people, and that’s how you’re going to beat the other guy. It is such a simple thing.

“You look at professional sport. The winning teams have always almost got the highest-paid players, because they’re the best players. When you’ve got the best players you’re going to do better than others. It’s so obvious that you think people would translate that to business. But they never seem to.”

Dicker was also a pioneer in employing women, particularly mothers seeking a return to the workforce, who could set the hours that they worked around family and personal commitments. Again, he sees it as a simple yet effective way of doing business.

“We did it because we thought we’d get an advantage, not because it was a virtue-signalling thing. If you craft a policy that’s going to work then you’re going to be able to get into a decent market of people that have plenty of capability. And it just provides a much better environment all round I think.”

Many entrepreneurs running private businesses also complain about the added complexities of going public, including dealing with market regulations, investors and other financial requirements.

Dicker says that floating Dicker Data on the ASX instantly gave him better access to capital and more credibility with the banks, to an extent, and that the company was getting to a size as a private entity that its reporting requirements to the corporate regulator were substantial enough already.

Any other issues, he says, he has learnt to deal with by staying out of the way and delegating.

“It’s not that onerous, and I don’t deal with the fund managers anymore because we nearly came to blows a few times in the early days. So we decided it’d be better for Mary and Vlad [chief financial officer Mary Stojcevski and chief operating officer Vlad Mitnovetski] to do it.”

Dicker admits to some frustration though. The structure of Dicker Data’s industry means it is dominant in Australia and New Zealand, but other companies have similar distribution deals in other countries around the world.

It makes it hard to expand.

Dicker says that he was laughed at by banks when he proposed a $3bn proposal to buy US firm Tech Data six or seven years ago, despite drawing up projections that have since happened.

“Then when Ingram [Micro, a US firm] was for sale for $6bn recently, we tried again and said we could get it to the metrics we have in our company and when you did that it would all be worth $25-30bn. Again, you just can’t get the money.”

If that sounds ambitious, it pales next to Dicker’s other great passion with his Rodin Cars. He has built a 2.8km racetrack on farmland on New Zealand’s South Island, where he can race his collection of Ferraris and other fast cars.

It is also where he has poured tens of millions into top-class manufacturing facilities for what was first meant to be building the world’s fastest road racing car. It is a quest that hasn’t been without issues, as Dicker admits.

“People say to me, did you have a budget? And I just say, no, I didn’t have a budget. I just got myself into a position where I figured that no matter how much it costs to be able to pay for it, and even that got a little bit tight.

“It is relatively easy selling something but when you look at making things, that’s the real problem. You’re building something from scratch, and it’s a massive task.”

More recently, Dicker has narrowed his focus. As car makers around the world pursue Tesla in building electric vehicles, Dicker – who has amassed a collection of Ferraris and other fast cars – now wants to build an electric sports car. His theory is that while there’s plenty of demand coming for mass-market electric cars, trucks and sports utility vehicles, few are thinking about up-market fast sports versions.

“Where I am in New Zealand, I go to the supermarket on a Sunday and it’s about a 175km round trip. And I really just enjoy getting in the car and driving it. So look, maybe I’m crazy but there are 8 billion people in the world so we figure there are enough people who enjoy that sort of thing for there to be a market for it.”

Dicker is a Ferrari admirer in that the legendary Italian car maker limits annual production, and therefore drives up the demand – and price – of its product.

His ambition for the Rodin electric sports car is to eventually build demand for 50 to 100 cars annually, stick to that and resist the ambition to grow any more.

In that way, it is applying the same discipline he has in his core business, his final management lesson.

“Don’t be greedy. This is the biggest problem that people make with capitalism and the thing that they don’t understand. They think that the mantra of capitalism is to make as much as you can, whereas our capitalism mantra is, well, let’s decide what we want to make.”

“This is our target and that’s how we run Dicker Data. We work out a target for the year, break it up into monthly sub-targets, and all we want to do is get that number.

“That’s all we do. So we have a really clear focus on what the job at hand is. It’s straightforward, really.”

The 2022 edition of The List - Australia’s Richest 250 is published on Friday in The Australian.

JOHN STENSHOLT EDITOR, THE LIST