Annual Financial Report Year ended 30 June 2012 ABN: 95 000 969 362 Table of Contents for the year ended 30 June 2012 TTHE BOARD OF DIRECTORS THE SENIOR MANAGEMENT TEAM CEO AND CHAIRMAN’S COMMENTARY DIRECTORS’ REPORT CORPORATE GOVERNANCE STATEMENT STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF FINANCIAL POSITION STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION DIRECTORS’ DECLARATION AUDITOR’S INDEPENDENCE DECLARATION INDEPENDENT AUDITOR’S REPORT 2 2 3 4 13 20 21 22 23 24 43 46 47 48 Dicker Data Limited | Annual Report 2012 1 Dicker Data Ltd for the year ended 30 June 2012 Board of Directors David Dicker Chairman and Chief Executive Offi cer Fiona Brown Non-Executive Director Mary Stojcevski Executive Director Michael Demetre Executive Director Chris Price Executive Director The Senior Management Team Senior management team serving at year end David Dicker Chairman and Chief Executive Offi cer Chris Price Commercial Director Mary Stojcevski Chief Financial Offi cer Michael Demetre Logistics Director Vladimir Mitnovetski Category Manager 2 Dicker Data Limited | Annual Report 2012 CEO Commentary for the year ended 30 June 2012 Welcome to our second Annual Report as a public company. Our results for this year, with revenue of $457m and net profi t after tax of $8.3m show a very solid improvement from last year. The economic conditions have probably been more diffi cult but the tremendous performance by our employees and management team have allowed us to improve on the previous year. Despite the diffi cult economic conditions the results are our best ever reported, refl ecting consistent strong performance. As at 15th August 2012 our shares were trading at 45 cents, up from the IPO fi gure of 20 cents. We are also adding 5,000 square metres to our existing warehouse of 4,000 square metres. All good and all auguring well for the future. However despite the results, we continue to struggle with the majority of the analyst community. I am constantly told that our dividends are too high, we do not have ‘independent’ directors and there are not enough shares with the public. Rather than discuss this in detail I will just say that our results speak loudly and that I am very comfortable with our strategies. We expect to increase the public holding in DDR to 15% this year. David Dicker CEO and Chairman Sydney, 31 August 2012 Dicker Data Limited | Annual Report 2012 3 Directors’ Report for the year ended 30 June 2012 Your directors present their report on Dicker Data Limited (Dicker Data) for the year ended 30 June 2012. 1. Principal activities The principal activities of the company during the year were wholesale distribution of computer hardware and related products. There were no signifi cant changes in the nature of the activities carried out during the year. 2. Dividends Record Date Payment Date Type Cents $’000 Dividends declared and paid during the fi nancial year: 21-Sep-11 5-Jan-12 26-Mar-12 28-Sep-11 12-Jan-12 4-Apr-12 Final 2011 Interim 2012 Interim 2012 $ 0.0200 $ 0.0093 $ 0.0093 2,530 1,176 1,176 Dividends declared during the fi nancial year but not paid: 27-Jun-12 6-Jul-12 Interim 2012 $ 0.0150 1,897 3. Operating and fi nancial review A snapshot of the operations of the company for the full year and the results of those operations are as follows: Operating Revenues Gross Profi t Earnings Before Tax Earnings Before Interest, Tax and Depreciation (EBITDA) Net Profi t after Tax Earnings Per Share (cents) 2012 (in 000’s) 2011 (in 000’s) % Change 456,648 385,246 32,367 12,265 16,098 8,276 6.55 26,178 8,788 11,779 6,132 5.02 18.5% 23.6% 39.6% 36.7% 35.0% 30.5% Total revenue for the full year was $457m (2011 - $385m), an improvement of 18.5% on the same period last year. The strong revenue growth was primarily driven by the improved logistics capacity that the new purpose built warehouse provided, which was not available for the full period in the previous corresponding year. The company relocated to the new facility in November 2010. Revenue growth can also be attributed to growth in new vendors ASUS, Buffalo and Lenovo for which a full 12 months is not refl ected in the previous corresponding period. We were appointed distributor for these vendors during the latter half of the previous corresponding year or during this fi nancial year. We also managed to increase our market share with our existing vendors resulting in our highest annual revenue to date. Gross profi t for the full year was $32m (2011: $26m) an increase of 23.6% which is refl ective of increased sales volume in the current year. The increase in gross profi t is also as a result of aligning our revenue with more profi table product lines and ceasing distribution of unprofi table vendors. This is in line with the company’s overall objective of constantly reviewing our vendor and product mix. 4 4 Dicker Data Limited | Annual Report 2012 Dicker Data Limited | Annual Report 2012 Directors’ Report for the year ended 30 June 2012 Profi t before tax amounted to $12.3m (2011: $8.8m) an increase of 39.6% for the full year. Net Profi t after tax amounted to $8.3m (2011: $6.1m) an increase of 35% for the full year. Earnings per share increased by 30.5% to 6.55 cents per share. 4. Earnings per share Basic Earnings Per Share (cents) Diluted Earnings Per Share (cents) * * on basis options exercised 2012 2011 6.55 6.48 5.02 5.00 5. Signifi cant changes in the state of affairs In December 2011, Dicker Data entered into a new banking relationship with St George Bank for a total facility amount of $56.8m, which included debtor fi nancing, asset fi nancing and other working capital facilities. The new facility has provided the company with greater fl exibility in funding our working capital requirements. There were no other signifi cant changes in the state of affairs of the company during the year. 6. Signifi cant events after the balance date In August the company entered into a contract to extend the current warehouse facility by an additional 5,000 square metres. This will more than double the existing warehouse capacity and sets the Company up for future growth. Construction should commence in September 2012 and the project is expected to be completed in 26 weeks. The construction will be fi nanced from the Company’s cash fl ows and drawing on existing funding already in place with St George Bank. 7. Likely developments and expected results In the 2013 fi nancial year we will continue to focus on reviewing our vendor and supplier mix and adjust accordingly to meet current market conditions. Consequently, the objective will be long term profi tability for Dicker Data. Signifi cant focus will be placed on off-premise IT capabilities (datacentre and cloud strategies), which is anticipated will result in higher infrastructure, service and annuity revenues. The increased warehouse capacity will also position the Company for future growth and improvements in effi ciency. Further information on likely developments in the operations of the company and the expected results of operations has not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the company. 8. Directors The following persons were directors of Dicker Data Limited during the whole of the fi nancial year end up to the date of this report. Directors were in offi ce for this entire period unless otherwise stated. David J Dicker Fiona T Brown Mary Stojcevski Chris Price Michael Demetre Dicker Data Limited | Annual Report 2012 Dicker Data Limited | Annual Report 2012 5 5 Directors’ Report for the year ended 30 June 2012 David Dicker – CEO and Chairman David is the co-founder of the Company and has been a director of the company since its inception. David’s role as CEO requires focus on Dicker Data’s business strategy and decision making and under David’s strategic guidance the Company has enjoyed material growth, establishing Dicker Data as one of the leading Australia-based distributors of IT products. Interest in Equities Interest in Contracts Special Responsibilities 63,750,000 shares in Dicker Data Limited Nil Chairman and responsible for the overall business management as chief executive offi cer. Other Current Listed Company Directorships None Other Current Listed Company Directorships Held in Previous 3 Years None Fiona Brown – Non-Executive Director Fiona Brown is the co-founder of Dicker Data and currently serves as Non-Executive Director of the Company. Fiona has been involved with the business since it started in 1978 and has been a director of the Company since 1983. Fiona acted as General Manager and Marketing Manager of Dicker Data from the inception of the business until 2004 when she left her executive position. Fiona’s business development, negotiation, management and leadership skills were of material importance to the success and growth of Dicker Data. As a Non-Executive Director, Fiona brings her knowledge of the business and 25 years of experience in the IT distribution industry. Interest in Equities 56,250,000 shares in Dicker Data Limited Interest in Contracts Nil Special Responsibilities None Other Current Listed Company Directorships None Other Current Listed Company Directorships Held in Previous 3 Years None Mary Stojcevski – Chief Financial Offi cer Mary joined Dicker Data as Financial Controller in 1999. Her responsibilities include all of the fi nancial management, administration and compliance functions of the Company. Prior to joining Dicker Data Mary had over 15 years’ experience in accounting and taxation. Mary holds a Bachelor of Commerce Degree with a major in Accounting from the University of New South Wales. Mary is also an Executive Director of the Company and has been a director since 31 August 2010. Interest in Equities Interest in Contracts Special Responsibilities 10,000 shares in Dicker Data Limited Nil Responsible for the overall fi nancial management of the Company. Other Current Listed Company Directorships None Other Current Listed Company Directorships Held in Previous 3 Years None Chris Price – Commercial Director Chris joined Dicker Data as Sales Manager in 2006. His sales experience and IT industry knowledge have been instrumental in the Company’s growth over recent years. Dicker Data’s revenues have grown materially since Chris has been heading the Company’s sales team. Chris brings over 14 years of IT industry experience to the Company. 6 Dicker Data Limited | Annual Report 2012 Directors’ Report for the year ended 30 June 2012 Prior to joining Dicker Data, Chris worked in various positions with distributors Ingram Micro and Tech Pacifi c as well as with vendors Dell and IBM. Chris holds a Bachelor of Commerce Degree from the University of Newcastle. Chris is also an Executive Director of the Company and has been a director since 21st September 2010. Interest in Equities Interest in Contracts Special Responsibilities Other Current Listed Company Directorships None Other Current Listed Company Directorships Held in Previous 3 Years None 15,500 shares in Dicker Data Limited Nil Responsible for the sales operations of the Company. Michael Demetre – Logistics Director Michael joined Dicker Data in 2001 as a Systems and Web Maintenance Administrator. He later took up the position of Warehouse Storeman which he held for about 5 years. Michael’s experience in the operations of the warehouse, general knowledge of the Company and established relationships with other employees allowed him to undertake the position of Logistics Director. He has successfully held this position since 2007. Michael is also an Executive Director of the Company and has been a director since 21st September 2010. Interest in Equities Interest in Contracts Special Responsibilities 10,000 shares in Dicker Data Limited Nil Responsible for the warehouse and logistic operations of the Company. Other Current Listed Company Directorships None Other Current Listed Company Directorships Held in Previous 3 Years None 9. Company secretary Mrs Leanne Ralph B.Bus, ACIS, AAICD was appointed to the position of Company Secretary on the 8th of February 2011. Leanne has over 21 years’ experience as a Chief Financial Offi cer and Company Secretarial roles for various publicly listed and unlisted entities. Leanne is a qualifi ed Chartered Secretary and Director of Boardworx Australia Pty Ltd which provides bespoke outsourced Company Secretarial services to companies. 10. Director meetings The numbers of meetings of the Company’s Board of directors and of each Board committee held during the year and the number of meetings attended by each director were: Board Meetings David Dicker Fiona Brown Mary Stojcevski Chris Price Michael Demetre Leanne Ralph (Secretary) Number Eligible to Attend Number Attended 7 7 7 7 7 7 7 7 7 7 6 7 Dicker Data Limited | Annual Report 2012 7 Directors’ Report for the year ended 30 June 2012 11. Remuneration report All information in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. The remuneration report is set out under the following main headings: A Principles used to determine the nature and amount of remuneration B Details of remuneration C Service agreements D Share-based compensation E Additional information (A) Principles used to determine the nature and amount of remuneration The board addresses remuneration policies and practices generally, and determines remuneration packages and other terms of employment for senior executives. Executive remuneration and other terms of employment are reviewed annually by the board having regard to performance against goals set at the start of the year and relevant comparative information. Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the company’s operations, achieving the company’s strategic objectives, and increasing shareholder wealth. Executives The executive pay and reward framework includes the following components: - Base pay and benefi ts - Performance-related bonuses - Other remuneration such as superannuation. The combination of these comprises the executive’s remuneration. Base pay Base pay is structured as a total employment cost package which may be delivered as a combination of cash and prescribed non-fi nancial benefi ts at the executive’s discretion. There are no guaranteed base pay increases included in any senior executives’ contracts. Performance-related bonuses Performance-related cash bonus entitlements are linked to the achievement of fi nancial and non-fi nancial objectives which are relevant to meeting the company’s business objectives. A major part of the bonus entitlement is determined by the actual performance against net profi t margin targets. Using a profi t target ensures variable reward is only available when value has been created for shareholders and when profi t is consistent with the business plan. The executives’ cash bonus entitlements are assessed and paid monthly based on the actual performance against the relevant monthly profi t with reconciliation at the end of the fi nancial year against full-year actual profi t. The chairman and CEO is responsible for assessing whether an individual’s targets have been met Non-executive directors Fees and payments to non-executive directors refl ect the demands which are made on, and the responsibilities of, the directors. The board determines remuneration of non-executive directors within the maximum amount approved by the shareholders from time to time. This maximum currently stands at $250,000 per annum in total for salary and fees, to be divided among the non-executive directors in such a proportion and manner as they agree. The Board does not currently have any independent directors. The only current non-executive director is Fiona Brown, who represents a major shareholder. No director fees have been received by Fiona Brown (B) Details of remuneration Compensation paid to key management personnel is set out below. Key management personnel include all directors of the company and executives who, in the opinion of the board and CEO, have authority and responsibility for planning, directing and controlling the activities of the group directly or indirectly. The following also includes the four most highly remunerated executives of the company. 8 Dicker Data Limited | Annual Report 2012 Directors’ Report for the year ended 30 June 2012 Details of Remuneration for Directors and Key Management Personnel Short-Term Long-Term Share Based Payments Cash Short term Incentive Cash Bonus Super- annuation Non-Cash Long Service Shares Options Total FY Salary & Fees FBT Reportable Leave Proportion of remuneration that is performance based % of Value of remuneration that consists of share Based Payments $ $ $ $ $ $ $ $ $ % Executive Directors David Dicker – Chief Executive Offi cer 2012 2011 Chris Price - Commercial Director 2012 2011 701,385 63,125 12,313 556,164 50,055 11,955 Mary Stojcevski - Chief Financial Offi cer 2012 200,000 123,410 29,107 2011 191,003 89,822 25,274 Michael Demetre - Logistics Director 2012 200,000 123,410 29,107 2011 184,505 89,822 24,689 Fiona Brown - Non-Executive Director 2012 2011 Other Key Management Personnel Vladimir Mitnovetski - Category Manager - 393,022 35,372 95,673 235,416 29,798 2012 2011 Total - - 776,823 100.00% 618,174 100.00% 352,517 35.01% 306,099 29.34% 352,517 35.01% 299,017 30.04% - - 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 428,394 100.00% 360,887 65.23% 0.00% 0.00% 2012 400,000 1,341,227 156,710 12,313 2011 471,181 971,224 129,816 11,955 0 0 0 0 0 0 1,910,250 1,584,177 (C) Service agreements Terms of employment for the executive directors and other key management personnel are by way of Consultancy Agreement or an Executive Service Agreement (ESA). The contract details the base salary and performance-related bonuses. Consultancy Agreement for David Dicker The Company has engaged Rodin FZC (a company incorporated in Dubai) to provide the services of David Dicker to act as the Chief Executive Offi cer and Executive Director of the Company on an as-needed basis. The Consultancy Agreement is dated 26 October 2010. The engagement is for an indefi nite term. Either party may terminate the agreement on the provision of 6 months’ notice. No fee is payable by the Company to Rodin FZC for the provision of the services. The agreement contains a number of post-termination restraints. Dicker Data Limited | Annual Report 2012 9 Directors’ Report for the year ended 30 June 2012 Deed of Adherence for David Dicker The Company and David Dicker have entered into a Deed of Adherence whereby Mr Dicker has agreed to adhere and comply with all covenants and obligations of Rodin FZC (a company incorporated in Dubai) set out in the Consultancy Agreement (between the Company and Rodin FZC) to the maximum allowable extent permitted by law as if Mr Dicker was named as Rodin FZC therein. The Deed is dated 26 October 2010. Executive Service Agreement for Chris Price The Company has appointed Chris Price as Commercial Director and Director of the Board of the Company by way of an Executive Service Agreement (ESA). The ESA is dated 25 October 2010. The ESA confi rms Mr Price’s continuous service with the Company for all purposes commenced from 21 September 2010. The appointment of Mr Price is for an unspecifi ed time. Either the Company or Mr Price may terminate the ESA with 3 months’ notice. The remuneration payable to Mr Price is equal to 6.75% of the Company’s net profi t per month, subject to net profi t margin before tax not being less than 2.5%, less his total motor vehicle expenses for that month. Mr Price is also entitled to a company car (with expenses to be deducted from his remuneration) and a mobile telephone and laptop, of which all business related telephone calls and service plan fees are paid for by the Company. The ESA also contains a number of post-termination restraints. Executive Service Agreement for Mary Stojcevski The Company has appointed Mary Stojcevski as Chief Financial Offi cer and Director of the Board of the Company by way of an Executive Service Agreement (ESA). The ESA is dated 25 October 2010. The ESA confi rms Ms Stojcevski’s continuous service with the Company for all purposes commenced from 31 August 2010. The appointment of Ms Stojcevski is for an unspecifi ed time. Either the Company or Ms Stojcevski may terminate the ESA with 3 months’ notice. The remuneration payable to Ms Stojcevski comprises of a base remuneration of $218,000 per annum (inclusive of mandatory employer superannuation contributions). Ms Stojcevski is also entitled to a performance bonus equal to 1% of the Company’s net profi t before tax, subject to net profi t margin before tax not being less than 2.5%. The ESA also contains a number of post-termination restraints. Executive Service Agreement for Michael Demetre The Company has appointed Michael Demetre as Logistics Director and Director of the Board of the Company by way of an Executive Service Agreement (ESA). The ESA is dated 25 October 2010. The ESA confi rms Mr Demetre’s continuous service with the Company for all purposes commenced from 21 September 2010. The appointment of Mr Demetre is for an unspecifi ed time. Either the Company or Mr Demetre may terminate the ESA with 3 months’ notice. The remuneration payable to Mr Demetre comprises a remuneration package of $218,000 per annum (inclusive of mandatory employer superannuation contributions). Mr Demetre is also entitled to a performance bonus equal to 1% of the Company’s net profi t before tax, subject to net profi t margin before tax not being less than 2.5%. The ESA also contains a number of post-termination restraints. Executive Service Agreement for Vladimir Mitnovetski The Company has appointed Vladimir Mitnovetski as Category Manager by way of an Executive Service Agreement (ESA). The ESA is dated 1 January 2011. The appointment of Mr Mitnovetski is for an unspecifi ed time. Either the Company or Mr Mitnovetski may terminate the ESA with 3 months’ notice. The remuneration payable to Mr Mitnovetski is $22,750 per month, subject to achieving monthly net profi t target for the Business Unit of $250,000 per month and a net profi t margin of 2.5%. The company will pay a further 15% of net profi t that is above the monthly target of $250,000 per month. The ESA also contains a number of post-termination restraints. (D) Share-based compensation No shares, rights, or options were granted to directors or key management personnel during the year ended 30 June 2012, no rights or options vested or lapsed during the year, and no rights or options were exercised during the year by directors. 10 Dicker Data Limited | Annual Report 2012 Directors’ Report for the year ended 30 June 2012 (E) Additional information Relationship between remuneration and company performance The overall level of executive reward takes into account the performance over the fi nancial year with greater emphasis given to improving performance over the prior year. Compared to previous period, net profi t before tax has grown by 39.6%, as a result the average executive remuneration has increased. Since 2007, the net profi t before tax has grown at an average rate of 24% per annum, whilst the average executive remuneration has increased by an average of 27% per annum. Shareholder wealth has also increased at an average rate of 21% per annum over this period. This concludes the remuneration report which has been audited. 12. Shares options On the 9th of August, 2011 Newport Capital Group Pty Ltd exercised all the options held at the strike price of $0.20c per share. The company has received the payment for the options and has issued the shares to Newport Capital Group Pty Ltd In the 2011 fi nancial year options were granted to Stonebridge Securities Ltd and related parties. The options granted were to acquire 1,200,000 fully paid ordinary shares, exercisable at $0.25 anytime within 36 months from the date of granting, expiring on 24 January, 2014. These options have not been exercised. 13. Indemnifi cation and insurance of directors and offi cers During the fi nancial year, Dicker Data Limited paid a premium of $22,145 to insure the directors and members of the executive management team of the Company against any liability incurred by them in their capacity as offi cers, unless the liability arises out of conduct involving a lack of good faith. The executive offi cers of the Company are also indemnifi ed against any liability for costs and expenses incurred in defending civil or criminal proceedings involving them as such offi cers if judgement is given in their favour or if they are acquitted or granted relief. 14. Indemnity and insurance of auditor The company has not, during or since the fi nancial year, indemnifi ed or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the fi nancial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. 15. Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. 16. Environmental regulation and performance The company is not subject to any particular and signifi cant environmental regulations. Dicker Data Limited | Annual Report 2012 11 Directors’ Report for the year ended 30 June 2012 17. Rounding The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. 18. Offi cers of the company who are former audit partners of BDO Chartered Accountants There are no offi cers of the Company who are former audit partners of BDO Chartered Accountants. 19. Auditor independence and non-audit services BDO Chartered Accountants (formerly PKF Chartered Accountants) continue in offi ce in accordance with section 327 of the Corporations Act 2001. During the year an amount of $79,465 in fees was paid or payable to the auditor for non-audit services. Non-audit services The company employs BDO Chartered Accountants (formerly PKF Chartered Accountants) in addition to its statutory duties where the auditor’s expertise and experience with the company are important. The board of directors has considered the position and is satisfi ed that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 The directors are satisfi ed that the provision of non-audit services by the auditor (refer above) did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: - all non-audit services have been reviewed by the board of directors to ensure they do not impact the impartiality and objectivity of the auditor - none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 47. This report is made in accordance with a resolution of the directors. David Dicker CEO and Chairman Sydney, 31 August 2012 12 Dicker Data Limited | Annual Report 2012 Corporate Governance Statement for the year ended 30 June 2012 Unless disclosed below, all the best practice recommendations of the ASX Corporate Governance Council have been applied by Dicker Data Limited (Dicker Data or Company). Principal 1: Lay Solid Foundations for Management and Oversight Recommendation 1.1: Companies should establish the functions reserved to the Board and those delegated to senior executives and disclose those functions. The Board is accountable to shareholders for the performance of Dicker Data and has overall responsibility for its direction and management and the formulation of policies to be applied in Dicker Data’s business. The Board has adopted a Charter which outlines the responsibilities reserved for the Board in detail. This Charter is published on Dicker Data’s website ww.dickerdata.com.au. Some key responsibilities of the Board are as follows: (a) appoint and review the performance of the Chairman and management; (b) develop and approve strategy, planning and major capital expenditure; (c) arrange for effective budgeting and fi nancial supervision; (d) ensure that appropriate audit arrangements are in place; (e) ensure that effective and appropriate reporting systems in place will, in particular, assure the Board that proper fi nancial, operational, compliance and risk management controls function adequately; and (f ) report to shareholders. The Board is also responsible to shareholders for Dicker Data’s strategic direction and the execution of Dicker Data’s overall objective, which is to increase long-term shareholder value. Decisions which are not part of the day to day management of Dicker Data or which have not been delegated to the Chief Executive Offi cer or executive team, must be made by the Board. Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives. The Board is responsible for reviewing the performance of the Chief Executive Offi cer and also monitoring the performance of key management personnel. The performance of the Chief Executive Offi cer is measured by comparing actual performance against planned performance in terms of the budget, the Company’s share price and Corporate strategy development. The Chief Executive Offi cer is responsible for assessing the performance of the key executives within Dicker Data. The basis of evaluation of senior executives is on agreed performance measures, examining the effectiveness and quality of the individual, assessing key contributions, identifying areas of potential improvement and assessing whether various expectations of shareholders have been met. Performance evaluations are undertaken annually, in September, by managers. This policy is reviewed annually. Principal 2: Structure the Board to Add Value Recommendation 2.1: A majority of the board should be independent directors. As at the reporting date, the Board is composed of the following fi ve Directors, including one non-executive Director: Name David Dicker Position Chairman and Chief Executive Offi cer Fiona Brown Non-Executive Director Mary Stojcevski Executive Director Chris Price Michael Demetre Executive Director Executive Director When considering independence, Dicker Data considered the following recommendation made by the ASX Corporate Governance Council: ‘When determining the independent status of a director the board should consider whether the director: 1. is a substantial shareholder of the company or an offi cer of, or otherwise associated directly with, a substantial shareholder of the company; 2. is employed, or has previously been employed in an executive capacity by the company or another group member, and there has not been a period of at least three years between ceasing such employment and serving on the board; Dicker Data Limited | Annual Report 2012 13 Corporate Governance Statement for the year ended 30 June 2012 3. has within the last three years been a principal of a material professional adviser or a material consultant to the company or another group member, or an employee materially associated with the service provided; 4. is a material supplier or customer of the company or other group member, or an offi cer of or otherwise associated directly or indirectly with a material supplier or customer; or 5. has a material contractual relationship with the company or another group member other than as a director.’ The Chief Executive Offi cer is a substantial shareholder of Dicker Data and has been engaged by Dicker Data on a consultancy basis. He is not considered to be independent. Three of the Directors are employed by Dicker Data and are not considered to be independent. Fiona Brown, the non-executive Director, is a substantial shareholder of Dicker Data and is not considered to be independent. As such, there are currently no independent Directors on the Board. The Board considers that its composition is appropriate to Dicker Data’s size and operational structure, the directors’ experience and their collective knowledge of Dicker Data’s assets. Details on the skills, experience and expertise of each director in offi ce are outlined on page 7 of the Annual Report. Should the Directors determine to expand the Board by the appointment of one or more non- executive Directors, such non-executive Directors will be selected on the basis of their capacity to add value to the business, and to provide independent governance to the operations of Dicker Data. At this stage, the Board has made no offers to any person to join the Board. Expansion of the Board is subject to various contingencies including some over which the Board has no control, including but not limited to the availability of suitably qualifi ed and experienced individuals with a desire to join the Board. The Board has chosen not to undertake an annual review of its performance and composition during the year ended 30 June 2012. This is due to the fact that the Board has only been existence since listing on the ASX in January 2011 and the operations of the business do not require additional skillsets at this point in time to drive the business and shareholder returns. As the business evolves, the Board expects to conduct a review of its performance and composition, to ensure that it has the appropriate mix of expertise and experience, taking into account the size and nature of Dicker Data’s activities. In time, the Board may consider the appointment of independent directors as it deems appropriate. Directors may obtain independent professional advice at the Company’s expense, subject to prior approval by the Chairman, on matters arising in the course of Dicker Data’s business. Directors also have unrestricted access to any employees of Dicker Data and, subject to the law, access to all Dicker Data records and information held by employees and external advisers. Recommendation 2.2: The chairperson should be an independent director. The current Chairman of the Board is not an independent Director. The Board considers this to be appropriate to Dicker Data’s size, structure, history of the business and the nature of its activities. Recommendation 2.3: The roles of chairperson and chief executive offi cer should not be exercised by the same individual. The roles of Chairman and Chief Executive Offi cer are currently being carried out by the same individual. The Board considers this to be appropriate for the Company’s current operational structure and the nature of its activities. Recommendation 2.4: The board should establish a nomination committee. The Board does not currently have a nomination committee. The Board considers that its relatively small size and the expertise of its directors allow the full Board to perform a nomination committee function. Accordingly, the Board does not consider it necessary or appropriate in the context to establish a separate committee for this purpose. Recommendations of candidates for new Directors are to be made to and by the Board. The Board as a whole must make such appointments as it considers the most appropriate for Dicker Data. The Board believes that the requirements and nomination processes are currently appropriate for the Company. The Board will establish a nomination committee in the future should the requirement arise. 14 Dicker Data Limited | Annual Report 2012 Corporate Governance Statement for the year ended 30 June 2012 Recommendation 2.5: Companies should disclose the process for evaluating the performance of the board, its committees and individual directors. The Board does not currently undertake an assessment of individual performance of Directors in the Board context, or of the Board as a whole. For the reasons outlined above, the Board is of the view that it is currently of the appropriate size and composition required to carry out its role. There are currently no committees of the Board which require a review. The Board acknowledges the benefi t of establishing a process to review and evaluate the performance of individual Directors and the Board as a whole, and due consideration will be given to this in the next 12 months. It is anticipated that such an annual review will include consideration of the following measures: (a) assessment of the performance of the Board over the previous twelve months having regard to the corporate strategies, operating plans and the annual budget; (b) review the Board’s interaction with management; (c) identifi cation of any particular goals and objectives of the Board for the next year; (d) review the type and timing of information provided to the Directors; and (e) identifi cation of any necessary or desirable improvements to Board. The method and scope of the performance evaluation will be set by the Board and may include a Board self- assessment checklist to be completed by each Director. The Board may also use an independent adviser to assist in the review. Committees Similar procedures to those for the Board review will be applied to evaluate the performance of any Board committees established by Dicker Data in the future. An assessment will be made of the performance of each committee against each charter and areas identifi ed where improvements can be made. Non-executive Directors The Chairman will have primary responsibility for conducting performance appraisals of non-executive Directors in conjunction with them, having particular regard to: (a) contribution to Board discussion and function; (b) degree of independence including any confl icts of interest; (c) availability for and attendance at Board meetings and other relevant events; (d) contribution to Company strategy; (e) membership of and contribution to any Board committees; and (f ) suitability to Board structure and composition. Where the Chairman, following a performance appraisal, considers that action must be taken in relation to a Director’s performance, the Chairman will consult with the remainder of the Board regarding whether a Director should be counselled to resign, not seek re-election, or in exceptional circumstances, whether a resolution for the removal of a Director be put to shareholders. Principal 3: Promote ethical and responsible decision making Recommendation 3.1: Companies should establish a code of conduct and disclose the code or a summary of the code as to: • • • The practices necessary to maintain confi dence in the company’s integrity The practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders The responsibility and accountability of individuals for reporting and investigating reports of unethical practices. Dicker Data has two codes of conduct – one specifi cally for directors and key offi cers and another outlining the obligation to stakeholders. Generally, Dicker Data requires that its Directors, management and staff comply with and respect the law, conduct themselves professionally and commit to the standards of employment set down by Dicker Data. Dicker Data also requires that all potential confl icts of interest are reported and that it’s Code of Conduct for Dicker Data’s obligations to Stakeholders and Code of Conduct for directors and key offi cers be otherwise complied with. Dicker Data Limited | Annual Report 2012 15 Corporate Governance Statement for the year ended 30 June 2012 Recommendation 3.2: Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them. The company has not adopted a formal Diversity Policy at this stage. The Board will consider how appropriate such a policy is for the Company in due course. Currently, the Board does not consider a formal policy to be warranted as the Company is one which has an open policy to diversity, including gender diversity. This is evident in the number of females to males in the whole organization, at management level and also on the Board. Recommendation 3.3: Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them. The Board has not set any specifi c gender diversity objectives for the Company as it does not yet have a formal Diversity Policy. The Board is of the view that there is an adequate balance between genders across the business and the numbers disclosed below refl ect this. Recommendation 3.4: Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. The Company employs the following ratio of women to men throughout the organisation: Organisation-wide: 37 Females (40%): 56 Males (60%) Senior Executive Positions: The Board of Directors: 2 Females: 3 Males Principal 4: Safeguard integrity in fi nancial reporting Recommendation 4.1: The board should establish an audit committee. The Board considers that its relatively small size and the expertise of existing directors allows the full Board to perform an audit committee function. Accordingly, the Board does not consider it necessary or appropriate in the context to establish a separate committee for this purpose. Rather, the Board will have processes and procedures in place which will address the issues that would otherwise be considered by the audit committee including: • • monitoring the independence of the external auditor who is required to confi rm such independence on at least a semi-annual basis; and monitoring and the performance and terms of the audit engagement on an annual basis and updating, changing or replacing them as appropriate. The Board will review the audit requirements and processes of Dicker Data at least on an annual basis, and otherwise as Dicker Data’s operations evolve, to ensure that its audit requirements are being appropriately handled. The Board will establish an Audit Committee in the future as it deems appropriate. Recommendation 4.2: Structure the audit committee so that it consists of: - only non-executive directors - a majority of independent directors - an independent chairperson, who is not chairperson of the board - at least three members For the reasons noted above and due to the relative size and nature of Dicker Data’s activities, the Board does not consider it necessary or appropriate to adopt Recommendation 4.2. However, should an Audit Committee be established in the future, it will be structured to be commercially cost effective and appropriate to Dicker Data’s size and structure, having regard to Recommendation 4.2. Recommendation 4.3: The audit committee should have a formal charter. For the reasons noted above and due to the relative size and nature of Dicker Data’s activities, the Board does not consider it necessary or appropriate to adopt Recommendation 4.3. However, should an Audit Committee be established in the future, a formal Audit Committee Charter will be adopted in compliance with Recommendation 4.3. 16 Dicker Data Limited | Annual Report 2012 Corporate Governance Statement for the year ended 30 June 2012 Principal 5: Make timely and balanced disclosure Recommendation 5.1: Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance and disclose those policies or a summary of those policies. The Board aims to ensure that the market is properly informed of all the information that is required to be disclosed under the Listing Rules of the ASX. The ultimate determination as to whether or not to disclose in doubtful cases may be made by the Board and/or the Chairman, taking into account the overall situation of Dicker Data and, if necessary, legal or other advice. The Board will consider establishing a Continuous Disclosure Compliance Committee to deal with continuous disclosure issues when and if it is deemed necessary. In this event, the Continuous Disclosure Compliance Committee will consist of the Chairman, the Company Secretary and, where available, any other Director. Dicker Data has adopted a formal Continuous Disclosure Policy which is available on the company website on www.dickerdata.com.au. Under the Board’s Continuous Disclosure Policy, all senior personnel must ensure that all reporting staff report any material event or development within their area of responsibility to their manager and to one or more of the Chairman and the Company Secretary. The Company Secretary is the point of contact with the ASX. As a listed company, Dicker Data will not release information that is for release to the market to any person until it has given the information to the ASX and has received an acknowledgement from the ASX that the information has been released to the market. Principal 6: Respect the Rights of Shareholders Recommendation 6.1: Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. Dicker Data aims to convey to its shareholders pertinent information in a detailed, regular, factual and timely manner. The Board has ensured that the annual report includes relevant information about the operations of Dicker Data during the year, and changes in the state of affairs of Dicker Data, in addition to the other disclosures required by the Corporations Act. Information will be communicated to shareholders by Dicker Data through: 1. Placement of market announcements on Dicker Data’s web-site www.dickerdata.com.au after the information has been given to the ASX and the usual acknowledgement has been received; 2. The annual and interim fi nancial reports; 3. Disclosures to the ASX; 4. Notices and explanatory memoranda of annual general meetings; and 5. All shareholders are invited to attend and raise questions at the annual general meeting. All shareholders are welcome to communicate directly with Dicker Data. All queries will be answered to the maximum extent possible (with consideration given to commercially sensitive information, privacy requirements and Dicker Data’s disclosure obligations) and in a timely fashion. Dicker Data has not established any other formal policy document other than as noted above. Principle 7: Recognise and Manage Risk Recommendation 7.1: Companies should establish policies for the oversight and management and management of material business risks and disclose a summary of those policies. Although no formal policy has been adopted, the Board is committed to ensuring that the risks associated with Dicker Data’s business activities are properly identifi ed, monitored and managed and to embedding in its management and reporting systems a number of risk management controls. The Board is to monitor and receive advice on areas of operational and fi nancial risk, and consider strategies for appropriate risk management arrangements. Specifi c areas of risk to be regularly considered at Board meetings are to include intellectual property, changes in government regulation, technology changes, human resources, integrity of data, statutory compliance and continuous disclosure obligations. Dicker Data Limited | Annual Report 2012 17 Corporate Governance Statement for the year ended 30 June 2012 Recommendation 7.2: The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks. The fi nancial statements and notes thereto give a true and fair view, in all material respects, of the fi nancial position and performance of the company as required by Section 297 of the Corporations Act 2001; and Any other matters are prescribed by the regulations in relation to the fi nancial statements and the accompanying notes are satisfi ed. The Chief Executive Offi cer manages Dicker Data’s material business risks and reports to the Board. Principle 8: Remunerate Fairly and Responsibly Materiality thresholds Dicker Data regularly reviews procedures, and ensures timely identifi cation of material information and materiality thresholds. Materiality judgments can only be made on a case by case basis, when all the facts are available. In accordance with Accounting Standard AASB 1031, the Board would consider an amount which is: (a) equal or more than 10% of an appropriate base amount to be material unless there is evidence or convincing argument to the contrary; and (b) equal to or less than 5% of an appropriate base amount to be immaterial unless there is evidence or convincing argument to the contrary. The level between 5% and 10% of an appropriate base amount is considered to be a subjective area to be resolved by the Board. Recommendation 7.3: The board should disclose whether it has received assurance from the chief executive offi cer (or equivalent) and the chief fi nancial offi cer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to fi nancial reporting risks. Recommendation 8.1: The board should establish a remuneration committee. The Board considers that its relatively small size and the expertise of directors allows the full Board to also perform a remuneration committee function. Accordingly, the Board does not consider it necessary or appropriate in the context to establish a separate committee for this purpose. Rather, the Board will have processes and procedures in place which will address the issues that would otherwise be considered by the remuneration committee including ensuring that fees and remuneration to director’s accord with principles set out in 8.2 below. Recommendation 8.2: The remuneration committee should be structured so that it: - consists of a majority of independent directors - - has at least three members is chaired by an independent chair The Board will establish a remuneration committee in the future if it deems appropriate. Recommendation 8.3: Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives. The Board confi rms that the Chief Executive Offi cer and the Chief Financial Offi cer have made the following certifi cations to the Board: With respect to non-executive Directors, the Board (or if established, the Remuneration Committee) is to ensure that: The fi nancial records of the company have been properly maintained in accordance with Section 286 of the Corporations Act 2001; The fi nancial statements and notes thereto comply with the relevant accounting standards in all material respects as required by Section 296 of the Corporations Act 2001; (a) fees paid to non-executive Directors are within the aggregate amount approved by shareholders and make recommendations to the Board with respect to the need for increases to that aggregate amount at the Annual General Meeting; (b) non-executive Directors are remunerated by way of fees (in the form of cash and/or superannuation benefi ts); 18 Dicker Data Limited | Annual Report 2012 Corporate Governance Statement for the year ended 30 June 2012 (c) non-executive Directors are not provided with retirement benefi ts other than statutory superannuation entitlements; and (d) non-executive Directors are not entitled to participate in equity-based remuneration schemes designed for executives without due consideration and appropriate disclosure to Dicker Data’s shareholders. There is currently only one non-executive director on the Board of Dicker Data, Fiona Brown and she does not receive any remuneration for her role. With respect to executives, the Board (or if established, the Remuneration Committee) is to ensure that: (a) executive remuneration packages involve a balance between fi xed and incentive pay, refl ecting short and long term performance objectives appropriate to Dicker Data’s circumstances and objectives; (b) a portion of executives’ remuneration is structured in a manner designed to link reward to corporate and individual performances; and (c) recommendations are made to the Board with respect to quantum of bonuses to be paid to executives. Dicker Data Limited | Annual Report 2012 19 Statement of Comprehensive Income for the year ended 30 June 2012 Revenue Changes in inventories Consumables used Employee benefi ts expense Depreciation and amortisation expenses Finance costs Insurance Profi t / (Loss) on Asset Disposals Bad Debts Credit Card Fees Consultancy Fees IPO Expenses Other expenses Profi t before income tax Income tax expense Profi t for the period Profi t attributable to members of the company Other comprehensive income, net of tax Total Comprehensive Income for the period Total comprehensive income attributable to members of the company Earnings per share - basic earnings per share (cents) - diluted earnings per share (cents) Note 2 4 5 30-Jun-12 $’000 456,648 1,223 (423,892) (12,767) (684) (3,149) (1,174) 48 (706) (802) (577) - (1,903) 12,265 (3,989) 8,276 8,276 - 8,276 8,276 6.55 6.48 30-Jun-11 $’000 385,246 15,724 (373,589) (9,734) (698) (2,292) (914) (836) (713) (676) (515) (439) (1,776) 8,788 (2,656) 6,132 6,132 - 6,132 6,132 5.02 5.00 The statement of comprehensive income is to be read in conjunction with the attached notes. 20 Dicker Data Limited | Annual Report 2012 Statement of Financial Position as at 30 June 2012 Note 30-Jun-12 $’000 30-Jun-11 $’000 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Other fi nancial assets Inventories Total Current Assets Non-Current Assets Property, plant and equipment Intangible assets Deferred tax assets Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Borrowings Current tax liabilities Short-term provisions Total Current Liabilities Non-Current Liabilities Borrowings Deferred tax liabilities Long-term provisions Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained profi ts TOTAL EQUITY 9 10 11 12 13 14 15 16 17 15 18 17 15 18 19 20 222 68,670 0 41,323 1 63,554 0 40,101 110,216 103,655 16,548 93 621 17,262 16,636 - 798 17,433 127,478 121,089 58,520 46,145 1,342 580 72,831 27,618 1,224 414 106,587 102,088 959 1,183 202 2,343 108,930 18,548 844 370 17,334 18,548 964 1,226 58 2,249 104,336 16,752 540 374 15,838 16,752 The statement of fi nancial position is to be read in conjunction with the attached notes. Dicker Data Limited | Annual Report 2012 21 Statement of Changes In Equity for the year ended 30 June 2012 Class ‘A’ Class ‘B’ Ordinary Retained Earnings Share Option Reserve Capital profi ts reserve Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 Balance at 30 June 2010 Share capital restructure 5 (5) 5 (5) 13,811 - 369 14,191 Share Capital - IPO Costs associated with IPO Share Offer Share Option Reserve Total comprehensive income for the year Subtotal Dividend Paid Balance at 30 June 2011 Total comprehensive income for the year Dividend Paid Share Issue Newport Capital Share Option Reserve - 10 1,000 (465) (5) 6,132 - - - - 540 19,943 (4,105) 540 15,838 8,276 (6,780) 300 4 - 1,000 (465) - 6,132 369 20,857 (4,105) 369 16,752 8,276 (6,780) 300 - 369 18,548 5 5 5 (4) 1 Balance at 30 June 2012 - - 844 17,334 The statement of changes in equity is to be read in conjunction with the attached notes. 22 Dicker Data Limited | Annual Report 2012 Statement of Cashfl ows for the year ended 30 June 2012 Note 30-Jun-12 $’000 30-Jun-11 $’000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Interest received Payments to suppliers and employees (inclusive of GST) Interest and fi nance costs paid Income tax paid 495,798 5 (501,911) (3,149) (3,738) 398,831 10 (388,785) (2,292) (2,764) NET CASH FROM (USED IN) OPERATING ACTIVITIES 25(b) (12,994) 5,000 CASH FLOWS FROM INVESTING ACTIVITIES Payments for property plant and equipment Proceeds from sale of property plant and equipment Payments for intangibles NET CASH FROM (USED IN) INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from share issue Share issue expenses Proceeds/(Repayment) from borrowings Payment of dividends (970) 325 (93) (738) 304 - 18,521 (4,871) (2,241) 1,821 - (420) 1,000 (470) (2,718) (2,411) NET CASH FROM (USED IN) FINANCING ACTIVITIES 13,954 (4,600) NET CASH FLOWS Cash at beginning of fi nancial year CASH AT THE END OF FINANCIAL YEAR The statement of cashfl ows is to be read in conjunction with the attached notes. 222 1 222 (20) 21 1 Dicker Data Limited | Annual Report 2012 23 Notes to the Financial Statements for the year ended 30 June 2012 The fi nancial statements cover Dicker Data Limited (Dicker Data) as an individual entity. Dicker Data is a listed public Company incorporated and domiciled in Australia. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Preparation The fi nancial report is a general purpose fi nancial report that has been prepared in accordance with Australian Accounting Standards (including Australian Accounting Interpretations) of the Australian Accounting Standards Board and the Corporations Act 2001, as appropriate for profi t oriented entities. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a fi nancial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the fi nancial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this fi nancial report are presented below. They have been consistently applied unless otherwise stated. The fi nancial report has been prepared on an accruals basis and is based on historical costs modifi ed by the revaluation of selected non-current assets, and fi nancial assets and fi nancial liabilities for which the fair value basis of accounting has been applied. The fi nancial report is presented in Australian Dollars and was authorised for issue by the directors on 31 August 2012. (a) Income Tax Income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profi t or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Current and deferred income tax expense (income) is charged or credited outside profi t or loss when the tax relates to items that are recognised outside profi t or loss. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profi t or loss. Deferred income tax expense refl ects movements in deferred tax asset and deferred tax liability balance during the year as well as unused tax losses. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability settled, based on tax rates enacted or substantively enacted as at the end of the reporting period. Their measurement also refl ects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profi t will be available against which the benefi ts of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which signifi cant amounts of deferred tax assets or liabilities are expected to be recovered or settled. (b) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. 24 Dicker Data Limited | Annual Report 2012 Notes to the Financial Statements for the year ended 30 June 2012 (c) Trade Receivables Trade receivables, which are non-interest bearing and generally due for settlement within 30 days from end of month, are recognised initially at fair value and subsequently measured at amortised cost, less an allowance for impairment. Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the Company will not be able to collect all amounts due according to original terms. Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy or fi nancial reorganisation and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of the estimated future cash fl ows, discounted at the original effective interest rate. Other receivables are recognised at amortised cost, less any provision for impairment. (d) Inventories Inventories are measured at the lower of cost and net realisable value. Costs are assigned to individual items of inventory on the basis of weighted average cost. Net realisable value is the estimated selling price in the ordinary course of business. (e) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses. Depreciation The depreciable amount of all fi xed assets including buildings and capitalised leased assets, but excluding freehold land, are depreciated on a straight line basis over their estimated useful lives to the entity commencing from the time the asset is held ready for use. The useful life in years used for each class of depreciable asset is: Class of Fixed Asset Buildings Property Improvements Plant and equipment Motor vehicles Useful Life 25 years 10 – 20 years 2 - 10 years 8 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the income statement. When re-valued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. (f) Intangible Assets Intangible assets acquired are initially recognised at cost. Intangible assets are subsequently measured at cost less amortisation and any impairment. The gains and losses recognised in profi t or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of fi nite life intangibles are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Website Design and Development Signifi cant costs associated with the website design and development are deferred and amortised on a straight line basis over a period of its expected benefi t, being its fi nite life of 5 years. Amortisation of the asset is to commence when the website becomes fi rst available for use. (g) Leases Leases of fi xed assets, where substantially all the risks and benefi ts incidental to the ownership of the asset, but not the legal ownership are transferred to the company are classifi ed as fi nance leases. Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight line basis over the shorter of their estimated useful lives or the lease term. Dicker Data Limited | Annual Report 2012 25 Notes to the Financial Statements for the year ended 30 June 2012 Lease payments for operating leases, where substantially all the risks and benefi ts remain with the lessor, are charged as expenses in the periods in which they are incurred. (h) Financial Instruments Initial recognition and measurement Financial instruments, incorporating fi nancial assets and fi nancial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for fi nancial assets that are delivered within timeframes established by marketplace convention. Financial instruments are initially measured at fair value plus transactions costs. Where the instrument is classifi ed ‘at fair value through profi t or loss’ transactions costs are expensed to profi t or loss immediately. Classifi cation and subsequent measurement Financial instruments are subsequently measured at either, fair value, amortised cost using the effective interest rate method or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as: (i) the amount at which the fi nancial asset or fi nancial liability is measured at initial recognition; (ii) less principal repayments; (iii) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and (iv) less any reduction of impairment. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction cost and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the fi nancial instrument to the net carrying amount of the fi nancial asset or fi nancial liability. Revisions to expected future net cash fl ows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profi t or loss. (i) Financial assets at fair value through profi t or loss Financial assets are classifi ed at ‘fair value through profi t or loss’ when they are either held for trading for the purpose of short term profi t taking. Such assets are subsequently measured at fair value with changes in carrying value being included in profi t or loss. The company has not held any fi nancial assets at fair value through profi t and loss in the current or comparative fi nancial year. (ii) Loans and receivables Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period, which will be classifi ed as non-current assets. (iii) Held-to-maturity investments Held-to-maturity investments are included in non- current assets, except for those which are expected to mature within 12 months after the end of the reporting period, which will be classifi ed as current assets. If during the period the company sold or reclassifi ed more than an insignifi cant amount of the held-to- maturity investments before maturity, the entire category of held-to-maturity investments would be tainted and would be reclassifi ed as available-for-sale. (iv) Available-for-sale fi nancial assets Available-for-sale fi nancial assets are included in non- current assets, except for those which are expected to be disposed of within 12 months after the end of the reporting period, which will be classifi ed as current assets. (v) Financial liabilities Non-derivative fi nancial liabilities (excluding fi nancial guarantees) are subsequently measured at amortised cost. Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. Impairment At the end of each reporting period, the company assesses whether there is objective evidence that a fi nancial instrument has been impaired. In the case of available-for-sale fi nancial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of comprehensive income. 26 Dicker Data Limited | Annual Report 2012 Notes to the Financial Statements for the year ended 30 June 2012 (i) Impairment of assets At the end of each reporting period, the company assesses whether there is any indication that an asset may be impaired. The assessment will include considering external sources of information and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profi ts. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income. Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. (j) Employee Benefi ts Provision is made for the company’s liability for employee benefi ts arising from services rendered by employees to the end of the reporting period. Employee benefi ts that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefi ts payable later than one year have been measured at the present value of the estimated future cash outfl ows to be made for those benefi ts. In determining the liability, consideration is given to employee wage increases and the probability that the employee may not satisfy vesting requirements. Those cash fl ows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cash fl ows. (k) Trade and other payables These amounts represent liabilities for goods and services provided to the Company prior to the end of the fi nancial year and which are unpaid. Due to their short term nature they are measured at amortised cost and not discounted. The amounts are unsecured and are usually paid within 30 -60 days of recognition. (l) Provisions Provisions are recognised when the company has a legal or constructive obligation, as a result of past events, for which it is probable that an outfl ow of economic benefi ts will result and that outfl ow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. (m) Revenue and Other Income Revenue is measured at the fair value of the consideration received or receivable. Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the goods, the risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed as revenue are net of sales returns. Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a fi nancial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the fi nancial asset to the net carrying amount of the fi nancial asset. All revenue is stated net of the amount of goods and services tax (GST). Other revenue is recognised when it is received or when the right to receive payment is established. (n) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in expenses in the period in which they are incurred. (o) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Offi ce. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of fi nancial position are shown inclusive of GST. Cash fl ows are presented in the Statement of Cash Dicker Data Limited | Annual Report 2012 27 Notes to the Financial Statements for the year ended 30 June 2012 Flows on a gross basis, except for the GST component of investing and fi nancing activities, which are disclosed as operating cash fl ows. (p) Contributed Equity Ordinary shares are classifi ed as equity. Incremental costs directly attributable to the issue of shares or options are shown in equity as a deduction, net of tax from proceeds. (q) Comparative Figures When required by Accounting Standards, comparative fi gures have been adjusted to conform to changes in presentation for the current year. (r) Critical Accounting Estimates and Adjustments The directors evaluate estimates and judgements incorporated into the fi nancial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the company. The directors have identifi ed the following critical accounting policies for which signifi cant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect the fi nancial results or the fi nancial position in future periods. Further details on the nature of these assumptions and conditions are noted below: Consumables Used Cost of goods are represented in the Statement of Comprehensive Income net of supplier rebates. Supplier rebates can be paid monthly, quarterly or half yearly. At the end of the fi nancial year an estimate of rebates due, relating to the fi nancial year is accounted for based on best available information at the time of the rebate being paid. Income tax The company is subject to income taxes based on the income tax laws of Australia. Signifi cant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The company recognises liabilities for anticipated tax expense based on its current understanding of the tax law. Recovery of deferred tax assets Judgement is required in assessing whether certain deferred tax assets and deferred tax liabilities are recognised on the Statement of Financial Position. Deferred tax assets including those arising from capital losses are recognised only when it is considered more likely than not that they will be recovered, which is dependent on the generation of future capital profi ts. An assumption has been made that it is unlikely that future capital profi ts will be earned. Estimation of useful lives of assets The company determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and defi nite life intangible assets. The useful lives could change signifi cantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Long service leave provision The liability for long service leave is recognised and measured at the present value of the estimated future cash fl ows to be made in respect of all employees at the reporting date. Provision for impairment of receivables The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and specifi c knowledge of the individual debtors’ fi nancial position. The impairment for receivables has been calculated net of estimated insurance recoveries Provision for impairment of inventories The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory obsolescence. Share Option Reserve The share option reserve represents fair value of options on grant date. Fair value is independently determined using Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. 28 Dicker Data Limited | Annual Report 2012 Notes to the Financial Statements for the year ended 30 June 2012 (s) Adoption of New & Revised Accounting Standards During the current year, the company has adopted all of the new and revised Australian Accounting Standards and Interpretations applicable to its operations which became mandatory. The adoption of these Standards has not had any material impact on the fi nancial statements of the company. Any new revised or amending Accounting standards or interpretation that are not yet mandatory have not been adopted (t) New Accounting Standards for Application in Future Periods The following Australian Accounting Standards issued or amended which may be applicable to the Company but are not yet effective and have not been adopted in preparation of the fi nancial statements at reporting date. The new and amended Accounting Standards and interpretations are not expected to have any material impact on the annual fi nancial statements of the Company. AASB No. Title 9 10 11 12 13 Financial Instruments Consolidation Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement 1053 Application of Tiers of Australian Accounting Standards Issue Date Dec 2010 Aug 2011 Aug 2011 Aug 2011 Sep 2011 Jun 2010 Operative Date (Annual reporting periods beginning on or after) 1 Jan 2015 1 Jan 2013 1 Jan 2013 1 Jan 2013 1 Jan 2013 1 Jul 2013 2010 – 2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements Jun 2010 1 Jul 2013 2010 – 7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127] Dec 2010 1 Jan 2013 2010 – 8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112] Dec 2010 1 Jan 2012 2010 – 10 Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters [AASB 2009-11 & AASB 2010-7] 2011 - 4 2012 - 2 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements [AASB 124] Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities [AASB 7 & AASB 132] Dec 2010 1 Jan 2013 Jul 2011 1 Jul 2013 Jun 2012 1 Jan 2013 2012 - 3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities [AASB 132] Jun 2012 1 Jan 2014 2012 - 5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle [AASB 1, AASB 101, AASB 116, AASB 132 & AASB 134 and Interpretation 2] Jun 2012 1 Jan 2013 Dicker Data Limited | Annual Report 2012 29 Notes to the Financial Statements for the year ended 30 June 2012 2. REVENUE AND OTHER INCOME Sales revenue: Sale of goods Other revenue: Interest received Discounts received Recoveries Other revenue Total Revenue (a) Interest received from: Other corporations 3. EXPENSES FOR THE YEAR Expenses: Finance costs Cost of sales Bad and doubtful debts Net loss on disposal of non-current assets: Property, plant and equipment 4. INCOME TAX EXPENSE (a) The components of tax expense comprise: Current tax Over/(Under) provision in respect of prior years Deferred tax Over/(Under) provision in respect of prior years Reversal of tax effect on capital tax losses Note 2(a) 15 (b) The prima facie tax payable on profi t before income tax is reconciled to the income tax as follows: Prima facie tax payable on profi t before income tax at 30% (2011: 30%) Add tax effect of: Under provision for income tax in prior year Non-deductible expenses Income tax expense attributable to entity The applicable weighted average effective tax rates are as follows: 30 Dicker Data Limited | Annual Report 2012 2012 $’000 2011 $’000 455,036 384,043 5 746 592 269 10 580 387 226 456,648 385,246 5 10 3,149 422,669 706 48 3,819 36 3,856 (119) 28 224 133 3,989 3,679 288 21 3,989 3,989 32.5% 2,292 357,866 713 (836) 2,798 (13) 2,785 (146) 17 - (129) 2,656 2,637 4 16 2,656 2,656 30.2% Notes to the Financial Statements for the year ended 30 June 2012 Note 2012 2011 5. EARNING PER SHARE (a) Basic earnings per share (cents) From continuing operations attributable to the ordinary equity holders of the company (b) Diluted earnings per share (cents) From continuing operations attributable to the ordinary equity holders of the company (c) Weighted average number of shares used as denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share Weighted average number of ordinary shares and options granted are used as the denominator in calculating diluted earnings per share 6. KEY MANAGEMENT PERSONNEL COMPENSATION Note Short-term benefi ts Post employment benefi ts Total compensation Shares held by the directors as disclosed in the Directors’ Report remain unchanged from the previous year. 7. AUDITORS’ REMUNERATION Auditing or reviewing the fi nancial report Taxation advice and tax and FBT return preparation and lodgement 8. DIVIDENDS Distributions paid Dividend paid: Fully franked ‘A’ class dividend of $360.072 (2010: $220.044) per share franked at the rate of 30% (2010: 30%) Fully franked ‘B’ class dividend of $211.042 (2010: $220.044) per share franked at the rate of 30% (2010: 30%) Final dividend - 30 June 2011. Fully franked at $0.0200c per ordinary share paid 28 September 2011 (2010: $0.01) Interim dividend - 30 June 2012. Fully franked at $0.0093c per ordinary share paid 12 January 2012 (2011: $0.00) 6.55 6.48 5.02 5.00 126,336 122,151 127,568 122,734 2012 $’000 1,754 157 1,910 102 79 181 - - 2,530 1,176 2011 $’000 1,454 130 1,584 92 63 156 1,800 1,055 1,250 - Dicker Data Limited | Annual Report 2012 31 Notes to the Financial Statements for the year ended 30 June 2012 Note 8. DIVIDENDS (continued) Interim dividend - 30 June 2012. Fully franked at $0.0093c per ordinary share paid 4 April 2012 (2011: $0.00) Dividends declared but not paid Interim dividend - 30 June 2012. Fully franked at $0.0150c per ordinary share declared 18 June 2012 and paid 06 July 2012 (2011: $0.00) Franking credit balance: Franking credits available for subsequent fi nancial years based on a tax rate of 30% (2011: 30%) 2012 $’000 1,176 1,898 6,780 6,146 2011 $’000 - - 4,105 5,419 The above amounts represent the balance of the franking account as at the end of the fi nancial year adjusted for franking credits arising from: - franking credits from dividends recognised as receivables at year end - franking credits that will arise from payment of the current tax liability - franking debits arising from payment of proposed dividends recognised as a liability 9. CASH AND CASH EQUIVALENTS Cash on hand Cash at bank 10. TRADE AND OTHER RECEIVABLES CURRENT Other receivables Trade debtors Less provision for impairment of receivables (a) Loans to related corporations: Beginning of the year Loans advanced / repaid End of year (b) Provision for impairment of receivables Movements in the provision for impairment of receivables: Opening balance Charge for the year Closing balance 32 Dicker Data Limited | Annual Report 2012 - 222 222 4,406 64,369 (104) 64,265 68,670 - - - 135 (32) 104 1 - 1 9,107 54,583 (135) 54,447 63,554 900 (900) - 106 29 135 Notes to the Financial Statements for the year ended 30 June 2012 Past due but not impaired The following table details the company’s trade receivables exposed to credit risk with ageing analysis and impairment provided for thereon. Amounts are considered as ‘past due’ when the debt has not been settled within the terms and conditions agreed between the company and the customer or counterparty to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are specifi c circumstances indicating that the debt may not be fully repaid to the company. Customers with balances past due but without provision for impairment of receivables amount to $4,495,729 as at 30 June 2012 (2011: $2,140,523). The company did not consider a credit risk on these balances after reviewing credit terms of customers and trading history. Past due and impaired : Gross Impaired Receivables over 90 days Less: Expected Insurance Recoveries Past due but not impaired:: 31 – 60 days overdue 61 – 90 days overdue 11. FINANCIAL ASSETS CURRENT Available-for-sale fi nancial assets (a) Available-for-sale fi nancial assets: Shares in unlisted companies 12. INVENTORIES CURRENT At cost: Stock on hand Less provision for impairment of stock 13. PROPERTY, PLANT AND EQUIPMENT Freehold land Buildings Less accumulated depreciation Note (a) 2012 $’000 205 (101) 104 3,556 940 4,496 - - - 41,687 (364) 41,323 6,904 8,312 (340) 7,973 2011 $’000 404 (268) 135 1,857 13 2,141 - - - 40,472 (371) 40,101 6,904 8,225 (133) 8,092 Total land and buildings 14,876 14,996 Dicker Data Limited | Annual Report 2012 33 Notes to the Financial Statements for the year ended 30 June 2012 Note Fitout Costs - 230 Captain Cook Drive Less accumulated depreciation Plant and equipment Less accumulated depreciation Motor vehicles Less accumulated depreciation Total plant and equipment Total property, plant and equipment Carrying amount of motor vehicles under fi nance lease. 2012 $’000 1,025 (209) 817 1,127 (686) 440 710 (295) 415 1,672 16,548 405 13(a) MOVEMENT IN CARRYING AMOUNTS Movements in carrying amounts for each class of property, plant and equipment. Balance at 1 July 2010 Additions Capitalised borrowing costs Disposals Depreciation expense Freehold land Property improvements Buildings Plant and equipment Motor vehicles $’000 8,434 $’000 444 (1,530) (343) (101) $’000 8,238 861 273 (1,116) (164) $’000 690 1,039 (20) (339) $’000 364 33 (32) (94) 2011 $’000 1,025 (87) 938 1,356 (925) 431 627 (357) 270 1,640 16,636 258 Total $’000 18,170 1,932 273 (3,041) (698) Carrying amount at 30 June 2011 6,904 0 8,092 1,370 270 16,636 Additions Disposals Depreciation expense 87 (207) 336 (63) (386) 547 (310) (92) 970 (373) (684) Carrying amount at 30 June 2012 6,904 0 7,973 1,257 415 16,548 34 Dicker Data Limited | Annual Report 2012 Notes to the Financial Statements for the year ended 30 June 2012 14. INTANGIBLE ASSETS Website development – at cost Less accumulated amortisation Total intangible assets 15. TAX (a) Liabilities CURRENT Provision for income tax NON CURRENT Deferred Tax Liability The balance comprises temporary differences attributable to: Amounts recognised in profi t or loss: Land and Buildings Plant and Equipment Accrued income Deferred tax liability Movements in Deferred Tax Liability Opening Balance Credited / (charged) to profi t or loss Credited / (charged) to equity Closing Balance (b) Assets NON CURRENT Deferred Tax Assets The balance comprises temporary differences attributable to: Amounts recognised in profi t or loss: Provision for receivables impairment Provision for employee entitlements Accrued expenses Inventory Capitalised expenditure Tax losses Amounts recognised in equity: Transaction costs on share issue Deferred tax asset Note 2012 $’000 93 - 93 2011 $’000 - - - 1,342 1,224 220 96 867 1,183 1,226 (44) - 1,183 31 235 17 114 104 - 120 621 220 51 956 1,226 1,012 215 - 1,226 41 142 39 78 115 224 160 798 Dicker Data Limited | Annual Report 2012 35 Notes to the Financial Statements for the year ended 30 June 2012 Note Movements in Deferred Tax Asset Opening Balance Credited / (charged) to profi t or loss Credited / (charged) to equity Closing Balance The tax effect of capital tax losses has been reversed as future capital profi t unlikely. 16. TRADE AND OTHER PAYABLES CURRENT Trade creditors Unearned Revenue Other creditors 17. BORROWINGS CURRENT Debtor Finance Lease liability Bank loan - secured NON CURRENT Lease liability (a) T otal current and non-current secured liabilities: Debtor Finance Bank loans Lease liability 2012 $’000 798 (177) - 621 54,809 1,031 2,680 58,520 45,988 156 - 46,145 959 45,988 - 1,115 47,103 2011 $’000 255 344 199 798 72,337 - 494 72,831 20,230 230 7,158 27,618 964 20,230 7,158 1,194 28,582 (b) The carrying amounts of non-current assets pledged as security are: Mortgaged land and buildings 1,223 16,636 (c) The debtor fi nance facility is secured by a registered fi xed and fl oating charge over all assets and undertakings of the company, fi xed charge over all debtors, a Deed of Amendment and Acknowledgement between the fi nancier and a major supplier to the aggregate of the fi nance facility and assignment of trade debtor insurance. The covenants within the bank borrowings require meeting minimum interest cover ratios, current ratio, minimum EBITDA calculation and minimum net tangible assets calculations, and a limit on the maximum amount of debt. Dicker Data has complied with all other externally imposed capital requirements during the year. 36 Dicker Data Limited | Annual Report 2012 Notes to the Financial Statements for the year ended 30 June 2012 Note 2012 $’000 2011 $’000 18. PROVISIONS Provision for long service leave: Opening balance at 1 July Additional provisions raised Amounts used Balance at 30 June 2012 Provision for annual leave: Opening balance at 1 July Additional provisions raised Balance at 30 June 2012 Total Provisions Opening balance at 1 July Additional provisions raised Amounts used Balance at 30 June 2012 Analysis of Total Provisions Current Non-current 19. ISSUED CAPITAL 126,500,000 fully paid Ordinary class shares The company has share capital amounting to: 126,500,000 fully paid Ordinary class shares (a) Ordinary Class Shares At beginning of reporting period Shares Issued on exercise of options Share Option reserve At the end of the reporting period Date 09.08.11 09.08.11 232 174 (41) 365 241 176 417 473 350 (41) 782 580 202 782 844 844 $ 539,895 300,000 4,162 173 66 (7) 232 143 98 241 316 164 (7) 473 414 58 473 540 540 Number 125,000,000 1,500,000 - 844,057 126,500,000 Fully paid ordinary shares rank equally in all respects. All ordinary shares issued as at 30 June 2012 are fully paid. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote. The issue of shares in the company, subject to legislative requirements, is under the control of the directors. Dicker Data Limited | Annual Report 2012 37 Notes to the Financial Statements for the year ended 30 June 2012 (b) Share Options On the 9th of August 2011, Newport Capital Group Pty Ltd exercised 1,500,000 options at the strike price of $0.20c per share. The company has received the payment for the options and has issued the shares to Newport Capital Group Pty Ltd. In the 2011 fi nancial year options were granted to Stonebridge Securities Ltd and related parties. The options granted were to acquire 1,200,000 fully paid ordinary shares, exercisable at $0.25 anytime within 36 months from the date of granting, expiring on 24 January, 2014. As at the date of this report these options have not been exercised. (c) Capital Management Management controls the capital of the company in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and to ensure that the company can fund its operations and continue as a going concern. The company’s debt and capital includes ordinary share capital and fi nancial liabilities, supported by fi nancial assets. Management effectively manage the company’s capital by assessing the company’s fi nancial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholder and share issues. The Company announced in December 2011 a new dividend policy providing for quarterly dividends to be paid, with the aim to pay out dividends of up to 100% of underlying after tax profi ts from operations. In determining the amount of dividends management will take into account historical earnings of the Company, available free cash fl ow from trading and projected capital expenditure. Note 20. RESERVES (a) Capital Profi ts Reserve (Pre-CGT) The capital profi ts reserve records non-taxable profi ts on sale of investments. (b) Share Option Reserve The share option reserve is used to recognise the grant fair value of options issued but not exercised. 2012 $’000 369 1 370 2011 $’000 369 5 374 The share option reserve represents fair value of options on grant date. Fair value is independently determined using Black- Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. The share option reserve has been adjusted for options exercised during the period. 21. CAPITAL AND LEASING COMMITMENTS (a) Operating Lease Commitments Non-cancellable operating leases contracted for but not capitalised in the fi nancial statements Payable: not later than 12 months between 12 months and fi ve years (b) Capital Expenditure Commitments Capital expenditure commitments contracted for: Construction of warehouse and offi ce facilities including road works as per development application 38 Dicker Data Limited | Annual Report 2012 159 346 505 3,600 104 324 428 409 Notes to the Financial Statements for the year ended 30 June 2012 22. RELATED PARTY TRANSACTIONS Other than the noted transactions all dealings with related parties are trivial or domestic in nature and occurred within a normal employee/customer/supplier relationship on terms and conditions no more favourable than those which it is reasonable to expect would have been adopted than if dealing at arm’s length in the circumstances. Note 2012 $’000 2011 $’000 Transactions with related parties: (a) Loans to/(from) directors The directors had unsecured loan accounts, which have since been paid out. (b) Loans to related entities Dicker Data Ltd has made loans to associated companies. These loans were unsecured and at call. All loans were paid out in the current year 23. OPERATING SEGMENTS - - - - During the year the company operated in one business segment being wholesale distribution of computers and related products. It’s operations were carried out mainly in Australia. 24. FINANCIAL RISK MANAGEMENT The company’s fi nancial instruments consist mainly of accounts receivable and payable and fi nance and lease liabilities. The totals for each category of fi nancial instruments are as follows: Note Financial Risk Management Financial Assets Cash and cash equivalents Loans and receivables Total Financial Assets Financial Liabilities Trade and other payables Borrowings Total Financial Liabilities 9 10 16 17 2012 $’000 222 68,670 68,893 58,520 47,103 2011 $’000 1 63,554 63,555 72,831 28,582 105,624 101,413 Dicker Data Limited | Annual Report 2012 39 Notes to the Financial Statements for the year ended 30 June 2012 Financial Risk Management Policies The directors’ overall risk management strategy seeks to assist the company in meeting its fi nancial targets, whilst minimising potential adverse effects on fi nancial performance. Although the company does not have any documented policies and procedures, the key management personnel manage the different types of risks to which the company is exposed by considering risk and monitoring levels of exposure to interest rate and credit risk and by being aware of market forecasts for interest rates. Ageing analyses and monitoring of specifi c credit allowances are undertaken to manage credit risk. Liquidity risk is managed through general business budgets and forecasts. The main purpose of non-derivative fi nancial instruments is to raise fi nance for company operations. The company does not have any derivative instruments at year end. The directors and key management personnel meet on a regular basis to analyse fi nancial risk exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. Specifi c Financial Risk Exposures and Management The main risks the company is exposed to through its fi nancial instruments are (a) credit risk (b) liquidity risk and (c) interest rate risk: (a) Credit risk Exposure to credit risk relating to fi nancial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a fi nancial loss to the company. Credit risk is reviewed regularly by the directors and key management personnel. It arises from exposures to customers, as well as through deposits with fi nancial institutions. The company’s exposure to credit risk is limited due to debtor insurance which is held over its trade receivables. The insurance policy limits the exposure of the company to 10% of the individual customer’s balance plus the excess as specifi ed in the policy after an aggregate fi rst loss of $200,000. Receivables balances are monitored on an ongoing basis with the result that the company’s exposure to bad debts has not been signifi cant. It is the company’s policy that all customers who wish to trade on credit terms are subject to credit verifi cation procedures including an assessment of their credit rating, fi nancial position, past experience and industry reputation. Credit limits are set for each individual customer in accordance with parameters set by the directors. These credit limits are regularly monitored. Customers that do not meet the company’s strict credit policies may only purchase in cash or using recognised credit cards. Credit risk exposures The maximum exposure to credit risk by class of recognised fi nancial assets at balance date, excluding the value of any collateral or other security held, is equivalent to the carrying value and classifi cation of those fi nancial assets (net of any provisions) as presented in the statement of fi nancial position. The company has no signifi cant concentration of credit risk with any single counterparty or group of counterparties. Trade and other receivables that are neither past due or impaired are considered to be of high credit quality. (b) Liquidity Risk Liquidity risk arises from the possibility that the company might encounter diffi culty in settling its debts or otherwise meeting its obligations related to fi nancial liabilities. The company manages this risk through the following mechanisms: - preparing forward-looking cash fl ow analyses in relations to its operational,investing and fi nancing activities; - monitoring undrawn credit facilities; - obtaining funding from a variety of sources; - maintaining a reputable credit profi le; - managing credit risk, related to fi nancial assets. The tables below refl ect an undiscounted contractual maturity analysis for fi nancial liabilities. Financial guarantee liabilities are treated as payable on demand since the company has no control over the timing of any potential settlement of the liability. Cash fl ows realised from fi nancial instruments refl ect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash fl ows presented in the table to settle fi nancial liabilities refl ect the earliest contractual settlement dates and do not refl ect management’s expectations that banking facilities will roll forward. 40 Dicker Data Limited | Annual Report 2012 Notes to the Financial Statements for the year ended 30 June 2012 Financial liability maturity analysis Financial liabilities due for payment Trade and other payables Borrowings Total contractual outfl ows Note 2012 $’000 2011 $’000 Within 1 Year Within 1 Year 58,520 46,145 72,831 27,618 104,665 100,449 Financial liabilities due for payment 1 to 5 Years 1 to 5 Years Borrowings Total contractual outfl ows Financial Liabilities Trade and other payables Borrowings Total expected outfl ows 959 959 58,520 47,103 964 964 72,831 28,582 105,624 101,413 16 17 Financial assets pledged as collateral Certain fi nancial assets have been pledged as security for the debt and their realisation into cash may be restricted subject to terms and conditions attached to the relevant debt contracts. (c) Interest Rate Risk The company’s main interest rate risk arises from borrowings. All borrowings are at variable interest rates and expose the company to interest rate risk which will impact future cash fl ows and interest charges and is indicated by the following fl oating interest rate fi nancial liabilities: Floating rate instruments Debtor fi nance Bank loans - secured Note 17 17 2012 $’000 45,988 - 45,988 2011 $’000 20,230 7,158 27,389 Sensitivity Analysis The company has performed a sensitivity analysis relating to its exposure to interest rate risk at balance date. If interest rates changed by -/+ 1% from the year end rates with all other variables held constant, post tax profi t would have been $321,920 lower/higher (2011: $191,720 lower/higher) as a result of higher/lower interest payments. The company constantly analyses its interest rate exposure. Within this analysis consideration is given to alternative fi nancing and the mix of fi xed and variable interest rates. Dicker Data Limited | Annual Report 2012 41 Notes to the Financial Statements for the year ended 30 June 2012 Note 2012 $’000 2011 $’000 25. CASH FLOW INFORMATION (a) Reconciliation of Cash Cash at the end of fi nancial year as shown in the Statement of Cash Flows is reconciled to the related items in the statement of fi nancial position as follows: Cash Cash at bank (b) Reconciliation of cash fl ow from operations with profi t Profi t after income tax Non-cash fl ows in profi t: Depreciation Loss on disposal of fi xed assets Changes in Assets & Liabilities: Decrease (increase) in current inventories Decrease (increase) in current receivables Decrease (increase) in deferred tax assets (Decrease) increase in deferred tax liabilities (Decrease) increase in payables & Other (Decrease) increase in provisions (Decrease) increase in non current assets (Decrease) increase in current tax liabilities Net cash provided by (used in) operating activities - 222 222 1 - 1 8,276 6,132 684 - - (1,223) (6,994) (14) (44) (14,311) 278 44 118 (12,994) 698 - - (15,724) (24,477) (543) 215 37,451 191 836 221 5,000 (c) Credit Stand-by Arrangement and Loan Facilities In December 2011, Dicker Data entered into a new banking relationship with St George Bank for a total facility amount of $56.8m, which included debtor fi nancing, asset fi nancing and other working capital facilities. The new facility has provided the company with greater fl exibility in funding our working capital requirements. The unused limits of the facility as at balance date amounted to $9,335,000 (2011: $948,583). 26. CONTINGENT LIABILITIES As at 30 June 2012 a bank guarantee totalling $70,000 (2011: $nil) was provided to Sydney Water Corporation for works and adjustment to a Sydney Water asset at 230 Captain Cook Drive, Kurnell. The works have been completed, but the guarantee will remain in place until Sydney Water Corporation has reviewed all documents and inspected the adjusted asset. 27. EVENTS AFTER BALANCE DATE In August the company entered into a contract to extend the current warehouse facility by an additional 5,000 square metres. This will more than double the existing warehouse capacity and sets the Company up for future growth. Construction should commence in September 2012 and the project is expected to be completed in 26 weeks. The construction will be fi nanced from the Company’s cash fl ows and drawing on existing funding already in place with St George Bank. There is no other matter or circumstance that has arisen since 30 June 2012 that has signifi cantly affected, or may signifi cantly affect the Company’s operations, the results of those operations or the Company’s state of affairs in future fi nancial years. 42 Dicker Data Limited | Annual Report 2012 Shareholder Information for the year ended 30 June 2012 The shareholder information set out below was applicable as at 22 August 2012 Ordinary Share Capital As at 22 August 2012, the issued capital of the Company was 126,500,000 ordinary fully paid shares. Distribution of equity securities Analysis of numbers of equity security holders by size of holding: Holding 1 to 1,000 1,001 to 5000 5,001 to 10,000 10,001 to 100,000 100,000 and over ORDINARY SHARES OPTIONS Number of Holders Number of Shares Number of Holders Number of Shares 2 24 296 25 9 356 1,004 84,723 2,953,212 937,876 122,523,185 126,500,000 - - - - 2 2 - - - - 1,200,000 1,200,000 There was 1 holder of less than a marketable parcel of ordinary shares. Unquoted Options The Company had the following unquoted options on issue: Option holder Number of Options Percentage Stonebridge Securities Ltd Exit Out Pty Ltd 600,000 600,000 1,200,000 50% 50% 100% Dicker Data Limited | Annual Report 2012 43 Shareholder Information for the year ended 30 June 2012 Twenty largest holders of quoted equity securities Name Mr David John Dicker Ms Fiona Tudor Brown Mr D Dippie & Mrs J Dippie & Bramwell Grossman Trustees (Dippie Family A/c) Bluedale Pty Ltd (Comb Superannuation Fund A/c) Mr S F Borness & Mrs C A BornessMr L H Trinh Total for TOP 20 44 Dicker Data Limited | Annual Report 2012 Number Held Percentage of issued shares % 63,750,000 56,250,000 50.40% 44.47% 925,925 602,310 240,000 227,700 204,279 162,071 160,900 100,000 95,000 80,721 73,668 71,250 63,290 52,868 36,044 36,000 31,900 30,000 30,000 20,000 20,000 0.73% 0.48% 0.19% 0.18% 0.16% 0.13% 0.13% 0.08% 0.08% 0.06% 0.06% 0.06% 0.05% 0.04% 0.03% 0.03% 0.03% 0.02% 0.02% 0.02% 0.02% 123,223,926 97.41% Shareholder Information for the year ended 30 June 2012 Substantial Holders Substantial holders in the company are set out below: Name Number Held Percentage of Issued Shares % Mr David John Dicker Ms Fiona Tudor Brown 63,750,000 56,250,000 120,000,000 50.40% 44.47% 94.87% Voting Rights The voting rights attaching to each class of equity securities are set out below: (a) Ordinary Shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. (b) Options No voting rights. Dicker Data Limited | Annual Report 2012 45 Director’s Declaration for the year ended 30 June 2012 The directors of the company declare that: 1. In the Directors’ opinion the fi nancial statements and notes, as set out on pages 5 to 42 are in accordance with the Corporations Act 2001, including: (a) (b) giving a true and fair view of the company’s fi nancial position as at 30 June 2012 and of its performance, for the fi nancial year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001. 2. the fi nancial report also complies with International Financial Reporting Standards issued by the International Accounting Standards Board as disclosed in Note 1; and 3. there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations by the Chief Executive Offi cer and the Chief Financial Offi cer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Board of Directors. David Dicker CEO & Chairman Sydney 46 Dicker Data Limited | Annual Report 2012 Dicker Data Limited | Annual Report 2012 47 48 Dicker Data Limited | Annual Report 2012 Dicker Data Limited | Annual Report 2012 49 230 Captain Cook Drive, Kurnell NSW 2231 Phone: 1800 688 586 Fax: 1800 688 486 www.dickerdata.com.au ABN: 95 000 969 362