Dicker Data
Annual Report 2020

Plain-text annual report

EXPERIENCE is the difference PH: 1800 688 586 www.dickerdata.com.au investors@dickerdata.com.au ASX ANNOUNCEMENT 25 February 2021 ANNUAL REPORT Dicker Data Limited (Dicker Data) (ASX:DDR) is pleased to release its Annual Report for the year ended 31 December 2020. Authorised for release by the Board of Dicker Data Limited. David Dicker Chairman and CEO For further information please contact: Investor Relations 1800 688 586 investors@dickerdata.com.au https://www.dickerdata.com.au/investor About Dicker Data Dicker Data (ASX: DDR) is an Australian-owned and operated, ASX-listed technology hardware, software, and cloud distributor with over 42 years of experience. Our sales and presales teams are experienced product specialists who are dedicated to helping you tailor solutions to suit your client’s needs. As a distributor, we sell exclusively to our valued partner base of over 6,000 resellers. We pride ourselves on developing strong long-term relationships with our customers, and helping them grow. This customer-first approach means we are proactive in engaging with our resellers and allows us to dynamically shift with changing market conditions, in turn helping to increase profitability. Dicker Data distributes a wide portfolio of products from the world’s leading technology vendors, including Cisco, Citrix, Dell Technologies, Hewlett Packard Enterprise, HP, Lenovo, Microsoft, and other Tier 1 global brands. As the leading Australian distributor for many of these vendors, Dicker Data is dedicated to helping our partners deliver industry-leading solutions built on the world’s best technologies. https://www.dickerdata.com.au/ EXPERIENCE is the difference PH: 1800 688 586 www.dickerdata.com.au investors@dickerdata.com.au ANNUAL REPORT Dicker Data Limited ABN 95 000 969 362 0 2 0 2 We listed DDR at 20 cents per share, on 24 January 2011, with a market cap of $25m. Ten years later our shares are trading around $12 and we have a market cap of $2b. DAVID DICKER CEO and Chairman Dicker Data is an Australian owned and Operated, ASX listed distributor of computer hardware, software and related products with over 42 years experience. Incorporated in 1978, Dicker Data’s mission is to inspire, educate and enable ICT resellers to achieve their full potential through the delivery of unparalleled service, technology and logistics. Dicker Data is Australia’s largest locally owned and operated ICT distributor. Serving in excess of 6,900 active registered reseller partners annually, Dicker Data finished the FY20 year with revenues of $2.0bn. Since listing on the ASX in January 2011, Dicker Data has delivered consistently profitable results for shareholders whilst maintaining a 100% dividend payout policy. 2 TABLE OF CONTENTS 4 5 6 7 7 8 10 11 12 13 14 31 32 33 34 35 39 69 70 71 74 Our ANZ Vendor Portfolio CEO Commentary Board of Directors & Senior Management Results Highlights Results Summary Who we are 2020 in Review 2021 and Beyond New Building Update Corporate Social Responsibility Directors’ Report Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Operating Segment Information Directors’ Declaration Auditor’s Declaration Of Independence Independent Auditor’s Report Shareholder Information 3 OUR ANZ VENDOR PORTFOLIO 4 DAVID DICKER CEO and Chairman CEO COMMENTARY Again, we have had a record year compared to the previous one and the one before that, etc, etc. However last year was a significant result, not so much because we excelled, but because we achieved that excellence under very difficult conditions. This is all the more impressive and I really thank everyone. We have a tremendous group of people. We have also finished our new facility and from what I have been told and seen from pictures, it looks fantastic. I’m hoping that travel sanity will return soon and I can end my exile in NZ and see it for myself. One event that did happen and can never be repeated is our tenth anniversary as a public company. This date also marked the 100th anniversary of my Father’s birthday. I sometimes wonder what he might think of it all. We listed DDR at 20 cents per share, on 24 January 2011, with a market cap of $25m. Ten years later our shares are trading around $12 and we have a market cap of $2b. An original shareholder’s stake of 10,000 shares at $2,000 would now be worth around $120,000. A very satisfying outcome. 5 BOARD OF DIRECTORS & SENIOR MANAGEMENT DAVID DICKER Chairman and Chief Executive Officer MARY STOJCEVSKI Executive Director and Chief Financial Officer BOARD OF DIRECTORS SENIOR MANAGEMENT IAN WELCH Executive Director, Chief Information Officer and Director of Operations VLADIMIR MITNOVETSKI Executive Director and Chief Operating Officer FIONA BROWN Non-executive Director LEANNE RALPH Non-executive Director MICHAEL DEMETRE Executive Director and Logistics Director Resigned 24/12/2020 6 RESULTS SUMMARY Key Financial Data Total revenue from ordinary activities* Gross profit Earnings before interest, tax, depreciation [EBITDA]* Net operating profit before tax ** Net profit before tax Net profit after tax [NPAT] Statutory earnings per share (cents) Underlying earnings per share (cents)** Dividends paid Dividends per share (cents) 2020 $’000 2019 $’000 2,000,112 1,761,296 191,391 158,437 91,390 81,859 81,859 57,182 33.95 33.95 59,546 35.50 73,779 64,104 75,873 54,311 33.69 28.38 43,518 27.00 * 2019 - Total revenue excludes profit on sale of property of $12.2m ** 2019 - Net operating profit before tax excluding profit on sale of property of $12.2m and costs for Employee share Scheme of $450k RESULTS HIGHLIGHTS REVENUE ($M) GROSS PROFIT ($M) $2,000.1 $1,761.3* $1,493.6 $1,306.0 $191.4 $158.4 $117.8 $132.4 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 EBITDA ($M) $91.4 $73.8 NET PROFIT BEFORE TAX ($M) $81.9 $64.1** $54.4 $48.1 $46.6 $40.2 FY17 FY18 FY19 FY20 FY17 FY18 FY19 FY20 * FY19 - Revenue excludes Profit on sale of property of $12.2m ** FY19 - Operating Profit before tax excluding profit on sale of property of $12.2m and costs for Employee share Scheme of $450k 7 WHO WE ARE Established in 1978, Dicker Data (ASX: DDR) has grown to become Australia’s largest value-add distributor of IT hardware, software, cloud and emerging technology solutions for the corporate and commercial ANZ market. In operation for over 42 years, the company boasts a long history of strong revenue and profit growth, with a current market cap of close to $2.0b. With an experienced founder-led management team, the company made its mark on the ASX in January 2011 and has since delivered a financial return of over 60 times or 5,900 percent on initial investments in the company’s IPO, all whilst paying out 100 percent of profits in dividends. Fast forward to 2020, Dicker Data was added to the S&P/ASX 300 Index and S&P/ASX All Technology Index. Dicker Data is the vital link in the technology value and supply chain that supports over 6,900 IT reseller partners to design, configure, deliver and deploy the technology that helps address the challenges of today with the solutions of tomorrow, for hundreds of thousands of Australian and New Zealand (ANZ) end- user businesses each year. As digital transformation is now a business reality, Dicker Data is a trusted advisor that provides technology driven solutions into all levels of over 6,900 active reseller partners in Australia & NZ Government, Enterprise, Small to Medium Businesses via its partner network to improve operational efficiency and deliver a superior experience for their customers. Deemed as an essential service throughout the pandemic, Dicker Data is the catalyst for new technology adoption and continues to be one of the driving forces behind Australia’s uptake of advanced technologies and digital solutions. The company’s consistent and strong results over the years consolidates its status as a true Australian success story. Operating on the cutting-edge of technology and representing vendors from all walks of tech, Dicker Data continues to derive growth from new technical innovations, services and trends whilst leveraging its market position as the trusted advisor and enabler of business continuity to thousands of IT reseller partners and enterprises across ANZ. Dicker Data is renowned for its customer centric approach offering agility, flexibility and foresight to build capabilities in adjacent sectors to identify the next source of growth. Dicker Data’s performance-based culture, management incentives and shareholder alignment are key drivers to consistent growth and success. founded 1978 DICKER DATA MILESTONES 1987 2000 2011 Appointed as first Toshiba distributor Annual revenue exceeds $100m Listed on the ASX (ASX: DDR) 8 over 77% our resellers choose to purchase online 2020 INDUSTRY AWARDS DISTRIBUTOR OF THE YEAR AUSTRALIA & NZ 86 vendors across Australia and NZ Hardware Distributor of the Year Software Distributor of the Year Homegrown Distributor of the Year FROM IDG 2014 2015 2019 2020 2021 Acquired Express Data Holdings Revenue exceeds $1b and CloudPortal Launched Awarded Cisco Global Distributor of the Year Annual Revenue exceeds $2b Relocated to new facility 9 2020 IN REVIEW In a year of unprecedented disruption, Dicker Data responded swiftly to COVID-19 supply chain challenges to capitalise on the changing market dynamics and to cement its position as the leading technology distributor across ANZ. Strategic inventory investments set the company apart as demand for devices and related peripherals surged amid Government enforced lockdowns, spurring the largest work from home movement in history. Manufacturers across the world struggled to keep up with demand, supply chain constraints were brought to light and companies scrambled to enable remote working at scale quickly. In parallel to the unnatural demand and market disruption, Dicker Data remained focused on its objective of partnering with the world’s leading technology suppliers to provide its reseller partners with access to the best range of solutions to solve the challenges faced by their end-users. Dicker Data’s vast network of vendors have repeatedly recognised the company on a global, regional, and local level for its operational excellence and local expertise, demonstrating the value Dicker Data brings to their technology supply chains and in turn, reaffirming the company’s competitive advantage. In addition to the 8 new vendors onboarded in 2020, a large amount of focus and effort was placed on pursuing a new distribution agreement with industry heavyweight, VMware. Securing Over $200m in revenue generated online equating to 11% of total revenue Hardware & Virtual Services $1,492m +13% YoY Total Revenue $2,000m Software $496m +16% YoY Services $11m +39% YoY Other $1.2m the deal in February 2021, the company expects to commence trading with VMware in the first half of 2021 and is buoyant about the outlook. Despite the unforeseen conditions in 2020, Dicker Data forged ahead with the construction of its new headquarters, located at 238 Captain Cook Drive, Kurnell NSW 2231. The new facility saw total warehouse capacity increase by over 80% and total office floorspace more than double. The state-of-the-art facility was completed in late 2020 and the Dicker Data team completed the move into the facility in late February 2021. over 200,000 orders placed online +15% web orders Over 500,000 devices shipped in 2020 over 4,300 resellers transacted each quarter 10 10 2021 AND BEYOND As Australia and New Zealand continue to deal with the threat of COVID-19, some semblance of ‘normal’ life is returning. As businesses invite employees to return to their workplaces, there’s new expectations being placed on the role of technology to continue bridging the gap between onsite and remote work. As hybrid work models are adopted, 5G will underpin the connectivity requirements for businesses and their employees and today’s meeting rooms will need to be upgraded with the latest collaboration technology to enable a seamless experience, whether an employee is present physically or virtually. Security is high on the priority list as businesses look for measures to protect their corporate environments and employees from anywhere, anytime. Backup, storage, and management will continue to play a key role as businesses become increasingly reliant on using their data as a competitive advantage. Dicker Data will continue to evolve and differentiate our offerings, as part of our commitment and role in supporting the A/NZ technology channel ecosystem including our vendors and reseller partners and being the catalyst for the adoption of new, cutting edge technologies. COLLABORATION SECURITY DATA MANAGEMENT 11 11 NEW BUILDING UPDATE Over 80% increase in warehouse space* *Stage One Dicker Data acquired the 17ha site for the company’s new headquarters and distribution facility approximately 5 years ago. Located at 238 Captain Cook Drive, Kurnell NSW, the company had a vision to create a unique campus- style facility to support its next phase of growth. The new facility embraces environmentally friendly initiatives and offers a modern workplace environment that’s designed to attract and retain the best talent. With an approved development application to construct 39,550 sqm of warehouse space and 7,995 sqm of office and amenities, Dicker Data commenced construction of its new facility in November 2019. Stage one of the development, comprising of 22,965 sqm of warehouse space and 5,960 sqm of office and amenities space, was completed in February 2021. Dicker Data is now fully operational from its new premises. As part of a stage two opportunity, for future expansion, the company has additional warehouse capacity of 16,585 sqm and office space of 2,035 sqm already approved in the Development Application. The facility includes a dedicated configuration centre which enables end-to-end system building and deployment services for the company’s partner network. Services offered include asset tagging, device imaging, hardware installation and pre-shipment testing to name some. Furthermore, new dedicated partner rooms for hire allow Dicker Data’s customers to come onsite and complete work on their end-user’s new systems prior to shipment. A dedicated lobby-style foyer with two-story vertical gardens surrounds the commercial hub, providing a space for our staff, vendors and our customers to continue their learning and development and build upon business opportunities in a welcoming space that is optimised for collaboration. As part of the company’s commitment to ecology and sustainability, the building features solar panels, eight electric vehicle charging stations, recycled water systems and over 30,000 new seedlings and trees on the grounds surrounding the new facility. Original concrete structures found during excavation of the site have been retained and repurposed to create large outdoor planters, adding to the site landscape for staff and visitors to enjoy. To encourage the wellbeing and team culture, nature walks with barbecue areas and outdoor seating are available on site. The development of the new Kurnell facility is a pivotal moment in the company’s history and will play a significant role in next phase of growth. 12 $10K the Foundation for National Parks & Wildlife + on-going donations through ”buy a tree” scheme on Dicker Data Portal $100K donated to the Australian Wildlife Conservancy to provide wildlife safe habitats in the wake of the January 2020 bushfires CORPORATE SOCIAL RESPONSIBILITY Our approach to Corporate Social Responsibility is based on our ethos to conduct business with respect for our planet and the human race. We are committed to ensuring ethical business processes throughout our entire organisation and aim to foster community engagement, environmental sustainability and economic development. collected 255kg food for Foodbank to prepare meals for charities staff raised $2,951 + OVER 3 MILLION STEPS STEPtember for people living with cerebral palsy HPE and Services raised $6,398 movember for mens health 75 lives saved through blood and plasma donations at Australian Red Cross Lifeblood staff raised $4,203 running in the city2surf staff raised $1,300 Dimmocks Retreat Wildlife Rehabilitation & Rescue + Dicker Data donated an additional +$1,500 13 DIRECTORS’ REPORT The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘consolidated entity’) consisting of Dicker Data Limited (referred to hereafter as the ‘company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 31 December 2020. The following persons were directors of Dicker Data Limited during the financial year end up to the date of this report. Directors were in office for this entire period unless otherwise stated. DIRECTORS David Dicker Fiona Brown Mary Stojcevski Vladimir Mitnovetski Ian Welch Leanne Ralph Michael Demetre (Resigned 24/12/2020) 14 PRINCIPAL ACTIVITIES The principal activities of the consolidated entity during the year were wholesale distribution of computer hardware, software and related products. There were no significant changes in the nature of the activities carried out during the year. DIVIDENDS Dividends paid during the financial year were as follows: Record Date Payment Date 14-Feb-20 02-Mar-20 14-May-20 01-Jun-20 14-Aug-20 01-Sep-20 16-Nov-20 01-Dec-20 Dividend /Share (in Cents) 0.1300 0.0750 0.0750 0.0750 Amount (in 000’s) Type FY Amount Franked $21,010 Final 2019 $12,727 Interim 2020 $12,902 Interim 2020 $12,907 Interim 2020 100% 100% 100% 100% Total 0.3550 $59,546 The total dividends declared and paid during the financial year were 35.5 cents per share or a total of $59.5m, fully franked. (2019: 27.0 cents per share, $43.5m), representing an increase of 31.5% Our dividend policy provides for fully franked dividends to be paid on a quarterly basis, with the intent to pay out 100% of the underlying after-tax profits from operations after taking into account projected capital expenditure and cash requirements. The Dividend Reinvestment Plan (DRP) introduced in March 2014 was retained for the 2020 year. Of the $59.5m dividends paid, $53.9m were paid as cash dividends and $5.6m participated in the DRP. A final dividend for FY20 of 10.5 cents per share was declared on 9 February 2021 with a record date of 15 February 2021 and a payment date of 1 March 2021. With the three interim dividends paid during FY20, this will bring total dividends paid for the FY20 year to 33.0 cents per share. This is equal to the total dividend paid for the FY19 year which also included an additional special interim dividend paid for the realised profit on the sale of the building at 230 Captain Cook Drive, Kurnell. Excluding the FY19 special dividend, the FY20 dividend paid represents an increase over FY19 of 17.9%. Type FY Payment Date Interim 2020 01-Jun-20 Interim 2020 01-Sep-20 Interim 2020 01-Dec-20 Final 2020 01-Mar-21 Special Div TOTAL 2020 Dividend /Share (in Cents) 0.075 0.075 0.075 0.105 0.330 0.330 FY 2019 2019 2019 2019 2019 2019 Payment Date 03-Jun-19 02-Sep-19 02-Dec-19 02-Mar-20 04-Oct-19 Dividend /Share (in Cents) 0.050 0.050 0.050 0.130 0.280 0.050 0.330 15 OPERATING AND FINANCIAL REVIEW A snapshot of the operations of the consolidated entity for the full year and the results of those operations are as follows: Dec 2020 (in 000’s) Dec 2019 (in 000’s) Increase $ (in 000’s) Increase % Total revenue $2,000,112 $1,773,515 $226,597 12.8% Total revenues from ordinary activities * $2,000,112 $1,761,296 $238,816 13.6% Gross profit $191,390 $158,437 $32,953 20.8% Net operating profit before tax * $81,859 $64,104 $17,755 27.7% Net profit before tax $81,859 $75,873 $5,986 7.9% Net profit after tax attributable to members $57,182 $54,311 $2,871 5.3% * Dec-19 - revenue from ordinary activities excludes profit on sale for property of $12.2m * Dec-19 - net operating profit before tax excluding profit on sale of property of $12.2m and cost of Employee Share Scheme of $450k REVENUE The revenue for the consolidated entity for the 12 months to 31 December 2020 was $2,000.1m (2019: $1,773.5m), up by $226.6m (+12.8%). Revenue from ordinary activities was $2,000.1m, (2019: $1,761.3m - excluding the profit on the sale property), an increase of $238.8m or 13.6%. At a country level, Australia grew $211.8m (+12.9%) and New Zealand grew $27.0m (+23.3%). Total revenue from sales of goods and services, excluding other revenue was $1,998.8m (2019: $1,758.5m) up by $240.3m representing increase of 13.7%. Dicker Data has continued to add new vendors and increased the breadth of products offered by existing vendors whilst still driving growth. In 2020 a total of 8 new vendors were added, contributing incremental revenue of $9.8m. Existing vendors grew $230.5m (+13.1%) as vendor consolidation continues to provide access to new product sets or as full value was achieved from vendors added to the portfolio over the previous years with vendors onboarded in 2018 and 2019 adding $52.7m in YoY growth. Growth of existing vendors was also driven by the increase in demand for remote working solutions, surge in demand for virtual capabilities and accelerated digital transformation of businesses as a result of the COVID-19 pandemic. At a sector level, the Company maintained strong growth across all business units, with hardware and support sales up $170.3m (+12.9%), software sales up $66.8m (+15.6%) and the services business unit up $3.1m (+38.7%). Within our software business the strongest growth came from our recurring revenue products increasing to $434.9m (2019: $366.5m) an increase of 18.7%. GROSS PROFIT Gross profit for the reporting period was up 20.8% at $191.4m (2019: $158.4m). Gross profit margins improved significantly in the current year at 9.6% (2019: 9.0%). The increase in profit margins is largely attributable to the increased focus on mid-market and SMB business and partly to some strategic buying decisions early on in the year. EXPENSES Operating Expenses Operating costs for the reporting period were $101.0m (2019: $86.8m), an increase of $14.2m, up by 16.4%, and increasing as a proportion to revenue at 5.1% (2019: 4.9%). The increase in costs is attributed primarily to an increase in salary related expenses. Excluding value of Employee Share Scheme costs in the previous year, salary costs were $86.2m (2019: $73.0m) an increase 16 of $13.2m (+18.1%), increasing as a proportion of revenue to 4.3% (2019: 4.1%). The increase in salary costs is attributed to investment in additional headcount as a result of new vendor signings and growth in existing vendors. With strong performance based remuneration packages the increase in salary costs is driven by the increase in revenue and operating profit growth experienced. Headcount across the group finished at 525 (+8.2%) (2019: 485). Other operating expenses increased by $1.3m but fell as a proportion of sales to 0.7% (2019: 0.8%). Depreciation, Amortisation and Interest Depreciation and amortisation for the reporting period was $6.4m, an increase of $1.8m. Included in this number is $1.4m for amortisation of customer contracts. The increase is also attributable to the growth in the Dicker Data Financial Services business and depreciation of equipment under operating leases of $1.4m. There was also some increases in plant and equipment depreciation with additional PP&E purchases with an increase of additional headcount in the financial year. With the adoption of the new accounting standard AASB16, depreciation on the Right of Use Assets (ROUA) for capitalised leases amounted to $3.1m. Finance costs in the reporting period were $3.5m, significantly down from the prior year (2019: $5.7m), mainly attributed to the payout of a $40m corporate bond in March 2020. This was replaced with an increase in the Company’s Westpac receivables facility to $180m limit, also providing participation in the lower variable interest rate environment. There was also a partial debt reduction throughout the year after raising $65m (before costs) in a share issue in May and June 2020. PROFIT Profit before tax finalised at $81.9m (2019: $75.9m) up by 7.9%. However in FY19 profit before tax included profit on sale of property of $12.2m and costs relating to share issue for Employee Share Scheme of $450k. On a comparable basis operating profit before tax in FY19 finalised at $64.1m, representing a 27.7% increase for FY20. Net profit after tax increased to $57.2m (2019: $54.3m), up by 5.3%. Weighted average earnings per share increased to 33.95 cents per share (2019: 33.69 cents), up by 0.8%. Earnings in FY19 included the profit on the sale of the building which was over and above operational earnings in the comparative period, as well as the impact of the incremental 10.5m shares issued during FY20. Underlying weighted average earnings per share, adjusted for the profit on the sale of the property in FY19 increased from 28.38 cents per share to 33.95 cents per share for FY20, representing an increase of 19.6%. STATEMENT OF FINANCIAL POSITION Total assets as at 31 December 2020 increased to $581.9m (2019: $507.5). The statement of financial position reflected a very marginal increase in working capital investment as the company maintained very cautious working capital disciplines. Total investment in net working capital was $167.0m, up by $1.6m from previous year (2019: $165.4m). Cash finalised at $30.4m, up by $7.8m (2019: $22.6m). Trade and other receivables were up from the previous year to $327.0m (2019: $295.9m). The company showed a measured decrease in inventory with inventories finishing at $113.2m (2019: $120.4m), inventory days down to 22.8 days down (2019: 27.4 days). Trade and other payables were up to $273.2m (2019: $250.9m). Property, plant and equipment increased to $78.0m during the period (2019: $32.0m) an increase of $46.0m as the company completed works on the new distribution centre and office complex. Total liabilities as at 31 December 2020 were $420.3m, up from the prior period (2019: $412.5m). Current borrowings comprising the drawn amount on the receivables purchase facility with Westpac was at $120.0m as at 31 December 2020, $30.0m higher than prior year (2019: $90.0m). However overall total borrowings were lower than FY19, with total debt in FY19 at $129.9m, reflecting the impact of the $40m corporate bond repayment and overall debt reduction. Equity has increased to $161.6m during the year (2019: $95.1m) primarily due to the impact of the capital raising in May and Share Purchase Plan in June, with some contribution from DRP. 17 Equity Movement Equity 31 Dec 2019 Comprehensive Income for FY2020 Dividends Paid Share Issue (DRP) Share Capital Raising and SPP Equity 31 Dec 2020 (in 000’s) 95,067 56,818 (59,546) 5,656 63,618 161,613 With the increase in equity from the capital raising and resulting lower debt, the debt to equity ratio improved to 0.74x (2019: 1.37x). The net tangible assets position continued to improve finalising at $136.7m (2019: $68.2m). SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Capital Raise On 7th May 2020 the Company completed a $50m share placement at an issue price of $6.70 per share, followed by a further $15m share purchase plan on 5 June 2020 at an issue price of $6.625 per share resulting in 9,726,837 new shares being issued. The net proceeds were invested in the construction of the new distribution centre and to support the growth of Dicker Data Financial Services and investment in working capital. The capital raise increased the public float in the Company to approximately 33% and provided financing headroom to facilitate capacity for future growth. New Building Update The construction of the new distribution centre at 238 Captain Cook Drive Kurnell was completed by the end of the year, with a practical completion date of 23 December 2020. The cost of the project, including fitout as at 31 December 2020 was $55.8m. All staff relocated to the new building in February 2021. The size of the first stage of the new distribution centre is 28,925 sqm with 22,965 sqm of it being warehouse space. This is an increase of approx 10,000 sqm from the previous warehouse facility representing an increase in capacity of 80%. There is a further 18,620 sqm warehouse and office space approved as part of the Development Application to be built as part of a second stage providing future expansion options. COVID-19 Update On 31 January 2020, the World Health Organisation (WHO) announced a global health emergency because of a new strain of coronavirus (COVID-19 outbreak) and the risks to the international community as the virus spread globally beyond its point of origin. Because of the rapid increase in exposure globally, on 11 March 2020, the WHO classified the COVID-19 outbreak as a pandemic. The business to date has proved resilient to the negative economic impact of COVID-19. For the first half of the financial year there was significant growth experienced due to increase in demand for remote working solutions, surge in demand for virtual capabilities and accelerated digital transformation of businesses as a result of the COVID-19 pandemic. In the second half of the year the Company continued to grow operations however at more normalised levels and within expected growth rates. The Company did not access any government COVID-19 related grants in the period or to the date of signing of this report. There is still significant uncertainty as to the full impact that the pandemic will have on the economy overall which could impact the Company’s earnings in the new financial year, however our teams are now well positioned to ensure continuity of supply. The full impact of the COVID-19 outbreak continues to evolve at the date of this report. 18 MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Rollover of Westpac Receivables Facility The Westpac receivables facility was renewed on 12th February 2021 for a further 12 months with a limit of $180m. This rollover ensures the ongoing funding for the current financial year. There were no other significant matters subsequent to the end of the financial year. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The COVID-19 pandemic triggered unprecedented disruption to the lives of millions of people across the globe, however, it also cemented the power and role of technology in our lives. Whether we look at workplaces, schools, communities or everyday social interactions, all of them were upended in 2020, and all of them have used technology to bridge the gap and re-establish some form of normal. Businesses who were not digitally ready were exposed, and the pace of digital transformation in our economy has never been more rapid than what we saw in 2020. As we move into 2021 and beyond, the digital transformation agendas of Australian and New Zealand businesses will continue to accelerate. The new hybrid working environment is driving the need for smart collaboration platforms that bridge the physical and virtual user experience. Connectivity and bandwidth are top of mind for governments, businesses, schools, communities and individuals as they embrace an always- on, connect-from-anywhere approach using technologies such as 5G. The Everything-as-a-Service (XaaS) movement is increasing commercial confidence in the adoption of technology via subscription models, which is an area that benefited many businesses throughout the pandemic as they scaled their subscription commitments to meet the changing needs of their business’. Security will be a key area of focus for every business in 2021. The rapid shift to remote working that occurred as lockdowns swept across the country resulted in many businesses focusing on keeping their lights on whilst their security posture, both internal and external to their organisation, fell lower down the priority list. 2021 will be the year these businesses refocus on security, invest in the required technologies and ensure their corporate environments are protected against a rapidly evolving global cyberthreat landscape. Technologies such as Zero Trust will become more prevalent to protect both businesses and their employees as they connect to their corporate networks from anywhere, anytime. We saw an unprecedented spike in demand for devices throughout 2020 and we expect this to continue through 2021. PC manufacturers are innovating at a rate not seen since the introduction of the personal computer as they vie for more market share and attempt to address the shortcomings of traditional devices in light of new technology, such as augmented reality (AR), that is gaining momentum and revolutionising the way consumers interact with products. We are anticipating a high level of growth in automation, machine learning and data capture and analysis tools as businesses and governments seek increased efficiency and productivity within their operations. 2021 presents an unparalleled opportunity for the entire technology sector, and in particular Dicker Data, as we continue in our role supporting the Australian and New Zealand technology channel ecosystem and being the catalyst for the adoption of these new, cutting edge technologies. ENVIRONMENTAL REGULATION The consolidated entity is subject to the requirements of the Product Stewardship (Televisions and Computers) Regulations 2011. There have been no instances of non-compliance throughout the year. CORPORATE GOVERNANCE Our policies in respect of corporate governance, code of conduct and whistleblower policy can be found at www.dickerdata.com.au/investor. This includes our Corporate Governance Statement. 19 DIRECTORS INFORMATION SENIOR MANAGEMENT BOARD OF DIRECTORS DAVID DICKER Chairman and Chief Executive Officer 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: 60,740,000 Ordinary shares in Dicker Data Ltd 10,000 Ordinary shares held by his wife INTEREST IN CONTRACTS: Nil SPECIAL RESPONSIBILITIES: Chairman and responsible for overall business management & strategy as Chief Executive Officer. Member of the Audit and Risk Management Committee 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. As a Non-Executive Director, Fiona brings her knowledge and experience in the IT distribution industry for over 40 years, of which the first 26 years was in the role of General Manager of the business. INTEREST IN EQUITIES: 53,792,531 Ordinary shares in Dicker Data Ltd 1,279,717 Ordinary shares held by Fi Brown Trust N01 97,495 Ordinary shares held by South Coast Developments Pty Ltd as trustee for the Brown Family Superfund INTEREST IN CONTRACTS: Nil SPECIAL RESPONSIBILITIES: Chair of the Audit & Risk Management Committee Member of the Nomination and Remuneration Committee Member of the Work Health and Safety Committee OTHER CURRENT LISTED COMPANY DIRECTORSHIPS: None OTHER CURRENT LISTED COMPANY DIRECTORSHIPS HELD IN PREVIOUS 3 YEARS: None 20 VLADIMIR MITNOVETSKI Executive Director and Chief Operating Officer INTEREST IN EQUITIES: 905,000 Ordinary shares in Dicker Data Ltd 25,953 Ordinary shares held by Mitnovetski Pty Ltd as Trustee for Mitnovetski Superannuation Fund 20,627 Ordinary shares held by his wife Vlad joined the company in 2010 in his role as Category Manager. In this role he was responsible for the establishment and growth of key volume vendors and was instrumental in the introduction of new vendors to Dicker Data’s portfolio. Vlad is a business technology professional with over 20 years of distribution industry experience. Vlad started his career at Tech Pacific and then Ingram Micro where he worked in various roles before progressing to business unit manager roles in enterprise and personal systems, working closely with many leading vendors. Vlad holds a bachelor of business degree from University of Technology and a master degree in Advanced Marketing and Management from the University of New South Wales. Vlad was appointed to the position of Chief Operating Officer on 8th September 2014. INTEREST IN CONTRACTS: Nil SPECIAL RESPONSIBILITIES: Responsible for the sales, vendor alliances and operations of the consolidated entity. Member of the Audit and Risk Management Committee. OTHER CURRENT LISTED COMPANY DIRECTORSHIPS: None OTHER CURRENT LISTED COMPANY DIRECTORSHIPS HELD IN PREVIOUS 3 YEARS: None MARY STOJCEVSKI Executive Director and Chief Financial Officer INTEREST IN EQUITIES: 54,748 Ordinary shares in Dicker Data Ltd 192,858 Ordinary shares held by Stojen Pty Ltd as trustee for Stojinvest Superannuation Fund Mary joined Dicker Data as Financial Controller in 1999. Her responsibilities include all of the financial management, administration and compliance functions of the company. Prior to joining Dicker Data Mary had over 10 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 CONTRACTS: Nil SPECIAL RESPONSIBILITIES: Responsible for the overall financial management and compliance functions of the consolidated entity OTHER CURRENT LISTED COMPANY DIRECTORSHIPS: None OTHER CURRENT LISTED COMPANY DIRECTORSHIPS HELD IN PREVIOUS 3 YEARS: None 21 DIRECTORS INFORMATION SENIOR MANAGEMENT BOARD OF DIRECTORS IAN WELCH Executive Director, Chief Information Officer and Director of Operations Ian joined Dicker Data in March 2013 as General Manager – IT before he was appointed Chief Information Officer on 6th August 2015. Prior to officially joining Dicker Data Ian spent more than 15 years consulting to Dicker Data in various roles. During this period Ian had been instrumental in establishing and maintaining the IT Systems for Dicker Data and as a result has a deep understanding of the business and all related processes. Ian started his career as an IT Professional working as consultant to businesses in various sectors. A large proportion of these were in the logistics space which have allowed Ian to develop a fundamental understanding of such operations. Ian is also an Executive Director of the company and was appointed 6th August 2015. INTEREST IN EQUITIES: 64,528 Ordinary shares in Dicker Data Ltd INTEREST IN CONTRACTS: Nil SPECIAL RESPONSIBILITIES: Responsible for IT operations, systems and processes OTHER CURRENT LISTED COMPANY DIRECTORSHIPS: None OTHER CURRENT LISTED COMPANY DIRECTORSHIPS HELD IN PREVIOUS 3 YEARS: None MICHAEL DEMETRE Executive Director and Logistics Director Resigned 24/12/2020 Michael joined Dicker Data in 2001, where 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 and since taking on this role has overseen and been responsible for expansion of the company’s logistic capabilities. He successfully held this position since 2007. Michael was also an Executive Director of the company since 21st September 2010 but resigned as Director on 24th December 2020. INTEREST IN EQUITIES: 18,571 Ordinary shares in Dicker Data Ltd INTEREST IN CONTRACTS: Nil SPECIAL RESPONSIBILITIES: Responsible for the warehouse and logistics operations. OTHER CURRENT LISTED COMPANY DIRECTORSHIPS: None OTHER CURRENT LISTED COMPANY DIRECTORSHIPS HELD IN PREVIOUS 3 YEARS: None 22 INTEREST IN EQUITIES: 3,140 Ordinary shares in Dicker Data Ltd 15,663 Ordinary shares held by related parties INTEREST IN CONTRACTS: Nil SPECIAL RESPONSIBILITIES: Chair of the Nomination & Remuneration Committee Member of the Audit & Risk Management Committee OTHER CURRENT LISTED COMPANY DIRECTORSHIPS: None OTHER CURRENT LISTED COMPANY DIRECTORSHIPS HELD IN PREVIOUS 3 YEARS: None LEANNE RALPH Non-executive Director Leanne was appointed as an independent non-executive director on 13 December 2019. Prior to her appointment Leanne was the founder and director of Boardworx Australia Pty Ltd, a provider of outsourced company secretarial services, until its sale in 2017. Leanne is a highly experienced governance professional with over 15 years in this field, having held the role of Company Secretary for a number of ASX-listed entities across a diverse range of industries. She currently holds the roles of Non-Executive Director of Raise Foundation, and is Company Secretary for various listed entities. Leanne’s prior executive positions focussed on accounting and finance for almost 20 years, as CFO of International Brand Management Pty Ltd, a business of importing, wholesaling and retailing luxury fashion brands, and Principal Client Advisor with Altus Financial, providing management accountant and company secretarial services to clients. Leanne holds a Bachelor of Business with majors in Accounting and Finance, is a Graduate Member of the Australian Institute of Company Directors and a Fellow of the Governance Institute of Australia. ERIN MCMULLEN Company Secretary Erin McMullen was appointed to the position of Company Secretary on 6th November 2018. Erin has over 9 years’ experience in company secretarial roles for various publicly listed and unlisted entities. Prior to this Erin worked in Executive Support and Managerial roles across a number of sectors. 23 DIRECTOR MEETINGS The number 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: Directors Mr David Dicker Ms Fiona Brown Mr Vladimir Mitnovetski Ms Mary Stojcevski Mr Michael Demetre (Resigned 24/12/20) Mr Ian Welch Ms Leanne Ralph Board Audit and Risk Management Committee Meetings eligible to attend Meetings attended Meetings eligible to attend Meetings attended 12 12 12 12 12 12 12 12 12 12 12 10 12 12 2 2 2 - - - 2 2 2 2 - - - 2 Note: The Nomination and Remuneration Committee was established 18 December 2020. REMUNERATION REPORT (AUDITED) 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) c) d) e) f) Details of remuneration Service agreements Share-based compensation Additional information Additional disclosures relating to key management personnel Principles used to determine the nature and amount of remuneration a) In determining the remuneration packages of its executives, the board adopts principles that ensures the level and composition of remuneration aligns with the interests of shareholders, and allows us to retain our high performing talent. These key principles are: • A focus on the performance of the business – executives are paid on the performance of the business; • A minimum performance threshold has to be met before any performance awards are paid. This ensures the variable reward is only available when value has been created for shareholders and when profit is in line with the approved budget; • The remuneration framework is simple, clear and transparent; • Competitive remuneration packages to ensure the retention of highly skilled long-serving resources. 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. 24 Executives Remuneration Framework The executive pay and reward framework includes the following components: • Base pay and benefits • 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-financial benefits 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 financial and non-financial 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 profit margin targets. Using a profit target ensures variable reward is only available when value has been created for shareholders and when profit is consistent with the business plan. Refer to individual service agreements below for a detailed explanation of the performance conditions. The executives’ cash bonus entitlements are assessed and paid either monthly or quarterly based on the actual performance against the relevant monthly profit with reconciliation at the end of the financial year against full-year actual profit. The performance-related award is un-capped after the threshold performance metric has been achieved. The chairman and CEO is responsible for assessing whether an individual’s targets have been met. There are currently no long term incentive plans in place. The rationale for this approach to our remuneration framework is that all executives have significant individual DDR shareholdings and many continue to buy voluntarily, so there is already alignment between the interests of executives and shareholder interests. The graphs below demonstrate the alignment between executive pay, performance of the company and long-term shareholder value. NET PROFIT BEFORE TAX ($M) WEIGHTED AVERAGE EPS (IN CENTS PER SHARE) 2 2 . 3 % C A G R 81.9 64.1 36.6 40.2 46.6 0 . 6 % C A G R 2 33.95 28.38 16.04 16.81 20.22 FY16 FY17 FY18 FY19** FY20 FY16 FY17 FY18 FY19** FY20 ** FY19 - Operating Profit before tax excluding profit on sale of property of $12.2m and costs for Employee share Scheme of $450k Non-executive directors Fees and payments to non-executive directors reflect 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. Leanne Ralph was appointed to the board as a non-executive independent director in December 2019. The other current non-executive director is Fiona Brown, who is also a major shareholder, and therefore not considered independent. 25 Details of remuneration (b) 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. SHORT TERM SHORT TERM LONG TERM SHARE BASED PAYMENTS Directors FY Cash Salary & Fees Incentive Cash Bonus Non-Cash Super FBT Annual Leave Long Service Leave Shares Options Total Proportion of remuneration that is performance based % of value of remuneration that consists of share Based Payments $ $ $ $ $ $ EXECUTIVE DIRECTORS David Dicker Chief Executive Officer Vladimir Mitnovetski Chief Operating Officer Mary Stojcevski Chief Financial Officer Ian Welch Chief Information Officer Michael Demetre Logistics Director (Resigned 24/12/2020) $ - - - - $ - - - - 3,274,289 311,057 2,562,326 243,421 Dec-20 Dec-19 Dec-20 Dec-19 Dec-20 203,077 1,227,858 135,939 Dec-19 200,000 960,872 110,283 Dec-20 253,846 818,572 101,880 Dec-19 250,000 640,582 84,605 Dec-20 228,461 818,572 99,468 Dec-19 225,000 640,582 82,230 NON-EXECUTIVE DIRECTORS Fiona Brown Leanne Ralph TOTAL Dec-20 50,228 Dec-19 50,228 Dec-20 54,300 Dec-19 2,107 - - - 4,772 4,772 5,700 200 Dec-20 789,913 6,139,291 658,816 Dec-19 727,335 4,804,362 525,511 * 100% of short-term incentive cash bonuses have vested - - - - - - - - - - - - - - - - 11,541 10,029 -11,414 10,029 3,846 3,342 2,951 3,306 10,577 4,178 17,150 4,133 -4,760 3,760 -9,877 3,791 - - - - - - 21,204 21,309 -1,190 21,187 - - - - - - - - - - - - - - - - - - - - - - - - $ - - % - - 3,606,916 100.00% 2,804,362 100.00% 1,574,062 85.42% 1,277,412 76.71% 1,189,053 75.38% 996,471 70.39% 1,145,502 78.25% 941,654 74.49% 55,000 0.00% 55,000 0.00% 60,000 0.00% 2,308 0.00% 7,630,533 6,077,205 - - % - - 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% - - Service agreements C) 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 Officer and Executive Director of the company on an as-needed basis. The Consultancy Agreement is dated 26 October 2010. The engagement is for an indefinite 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. 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 Vladimir Mitnovetski The company has appointed Vladimir Mitnovetski as Chief Operating Officer and Director of the Board of the company by way of an Executive Service Agreement (ESA). The ESA is dated 1 September 2014. The 26 appointment of Mr Mitnovetski is for an unspecified time. Either the company or Mr Mitnovetski may terminate the ESA with 3 months’ notice. The remuneration payable to Mr Mitnovetski will be a performance based salary of the higher amount of either: (i) $50,000 per month; or (ii) 4% of net operating profit before tax in the quarter. Profit bonus is subject to the company achieving a net profit margin of 2.5% in a calendar quarter. Superannuation is uncapped and payable on total of base and performance payments at 9.5%. 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 Officer 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 confirms Ms Stojcevski’s continuous service with the company commenced from 31 August 2010. The appointment of Ms Stojcevski is for an unspecified 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 $200,000 per annum. Ms Stojcevski is also entitled to a performance bonus equal to 1.5% of the company’s net operating profit before tax. This is subject to net profit margin before tax not being less than 2.5%, unless otherwise agreed. Superannuation is uncapped and payable at 9.5% on total of base and performance payments. The ESA also contains a number of post-termination restraints. Executive Service Agreement for Ian Welch The company has appointed Ian Welch as Chief Information Officer and Director of the Board of the company by way of an Executive Service Agreement (ESA). The ESA is dated 1 September 2015. The ESA confirms Mr Welch’s continuous service with the company commenced from 30 March 2013. The appointment of Mr Welch is for an unspecified time. Either the company or Mr Welch may terminate the ESA with 3 months’ notice. The remuneration payable to Mr Welch comprises a base remuneration of $250,000 per annum. Mr Welch is also entitled to a performance bonus equal to 1% of the Company’s net profit before tax. This is subject to net profit margin before tax not being less than 2.5%, unless otherwise agreed. Superannuation is uncapped and payable at 9.5% on total of base and performance payments. 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 confirms Mr Demetre’s continuous service with the company commenced from 21 September 2010. The appointment of Mr Demetre is for an unspecified time. Either the company or Mr Demetre may terminate the ESA with 3 months’ notice. The remuneration payable to Mr Demetre comprises a base remuneration of $225,000 per annum. Mr Demetre is also entitled to a performance bonus equal to 1% of the company’s net operating profit before tax. This is subject to net profit margin before tax not being less than 2.5%, unless otherwise agreed. Superannuation is uncapped and payable at 9.5% on total of base and performance payments. The ESA also contains a number of post-termination restraints. As the net profit margin percentage performance threshold was achieved for FY20, each director received 100% of the performance bonus they were entitled to. Share-based compensation d) No shares, rights, or options were granted to directors or key management personnel during the year ended 31 December 2020, no rights or options vested or lapsed during the year, and no rights or options were exercised during the year by directors. Additional information e) Relationship between remuneration and company performance The overall level of executive reward takes into account the performance over the financial year with greater emphasis given to improving performance over the prior year. Excluding profit on sale of property and employee share plan costs from the previous year operating profit for the consolidated entity grew by 27.7% during the year. On an average over the last 4 years operating profit grew by 27.1%. As a large proportion of the executive’s remuneration package is based on net operating profit outcomes the average executive remuneration also increased. Since 2016, the net profit before tax has grown at an average rate of 27.1%, whilst the average executive remuneration has increased by an average of 17.6%. Shareholder wealth has increased at an average rate of 21.3% per annum over this period. For the financial year, underlying earnings per share increased by 19.6% whilst dividends paid to shareholders increased by 31.5%. 27 Voting & comments made at the company’s 2019 Annual General Meeting (AGM) At the 2019 AGM, 83.44% of the votes received supported the adoption of the remuneration report for the financial year ended 31 December 2019. The company did not receive any specific feedback at the AGM regarding its remuneration practices. (f) Additional disclosures relating to key personnel shareholding The number of shares in the company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their related parties, is set out below: Vladimir Mitnovetski 729,316 222,264 December 2020 ORDINARY SHARES David Dicker Fiona Brown Mary Stojcevski Ian Welch Michael Demetre Leanne Ralph December 2019 ORDINARY SHARES David Dicker Fiona Brown Balance at the start of the year Additions Disposals 60,563,495 186,505 54,602,140 567,603 210,863 60,000 18,571 1,600 36,743 4,528 - 17,203 116,185,985 1,034,846 Balance at the start of the year Additions Disposals 60,563,495 - 54,045,303 556,837 Vladimir Mitnovetski 566,405 162,911 Mary Stojcevski Ian Welch Michael Demetre Leanne Ralph 190,563 30,000 18,571 20,300 30,000 - - 1,600 115,414,337 771,648 This concludes the remuneration report which has been audited. 28 Balance at the end of the year 60,750,000 55,169,743 951,580 247,606 64,528 18,571 18,803 117,220,831 Balance at the end of the year 60,563,495 54,602,140 729,316 210,863 60,000 18,571 1,600 116,185,985 - - - - - - - - - - - - - - - - TRANSACTIONS WITH RELATED PARTIES There were a number of related party transactions during the year with the entity Rodin Cars Ltd, a New Zealand based entity owned by David Dicker. The transactions included provision of marketing and IT services and sales of goods and services which are billed to Rodin Cars Ltd on a monthly basis at commercial market rates. Total amount billed to Rodin Cars Ltd for FY20 was $157,815. Dicker Data Financial Services Pty Ltd has also provided finance to Rodin Cars Ltd at arms length commercial rates. The amount payable as at 31 December 2020 was $1,015,412.32. The principal amount financed was $3,993,922.57. In addition to these transactions some payments have been made on behalf of director David Dicker throughout the year that were subsequently reimbursed, or funds were deposited in advance to cover these expenses. Total amount of funds paid on behalf of David Dicker by the Company as at 31 December 2020 was $2,780,466.46. SHARE OPTIONS There were no outstanding options at the end of this financial year. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of liability and the amount of the premium. INDEMNITY AND INSURANCE OF AUDITOR The company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. 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. NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 25 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 25 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. 29 OFFICERS OF THE COMPANY WHO ARE FORMER AUDIT PARTNERS OF BDO There are no officers of the company who are former audit partners of BDO Audit Pty Ltd. ROUNDING OF AMOUNTS The company is of a kind referred to in ASIC Corporations (Rounding in Financial / Directors’ Report) Instrument 2016/191, 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. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 70. AUDITOR Accounting Firm BDO Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors, David Dicker CEO and Chairman Sydney, 25 February 2021 30 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For The Year Ended 31 December 2020 REVENUE Sales revenue Other revenue: Interest received Recoveries Profit on sale of property Other revenue EXPENSES Changes in inventories Purchases of inventories Employee benefits expense Depreciation and amortisation Finance costs Borrowing Costs Other expenses Profit before income tax expense Income tax expense Profit after income tax expense for the year Profit attributable to members of the company Other comprehensive income, net of tax Items that may be reclassified subsequently to profit or loss Foreign Currency Translation Total comprehensive income for the year Total comprehensive income attributable to members of the company WEIGHTED EARNINGS PER SHARE Basic earnings per share Diluted earnings per share CONSOLIDATED Note 31-Dec-20 ($’000) 31-Dec-19 ($’000) 1,998,785 1,758,521 375 4 - 948 155 5 12,219 2,615 4 2,000,112 1,773,515 5 5 (7,187) 14,944 (1,800,207) (1,615,028) (86,232) (73,481) (6,379) (3,527) - (4,579) (5,701) (421) (14,721) (13,376) (1,918,253) (1,697,642) 81,859 75,873 6 (24,677) (21,562) 57,182 57,182 54,311 54,311 (364) 56,818 107 54,418 4 56,818 54,418 31 31 Cents 33.95 33.95 Cents 33.69 33.69 The statement of profit or loss and other comprehensive income is to be read in conjunction with the attached notes. 31 STATEMENT OF FINANCIAL POSITION As at 31 December 2020 CONSOLIDATED Note 31-Dec-20 ($’000) 31-Dec-19 ($’000) 10 11 12 15 13 14 8 16 15 17 7 18 15 9 18 19 20 30,368 326,963 113,246 22,573 295,921 120,433 470,577 438,927 2,276 78,024 24,933 6,135 111,368 581,945 5,191 31,981 26,290 5,151 68,613 507,540 273,193 250,932 2,243 3,072 120,000 129,930 4,937 13,354 8,849 10,082 413,727 402,865 514 4,154 1,937 6,605 2,604 4,809 2,196 9,609 420,332 412,473 161,613 95,067 131,790 270 29,553 161,613 62,516 634 31,917 95,067 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Inventories Total Current Assets NON-CURRENT ASSETS Right of Use Asset Property, plant and equipment Intangible assets Deferred tax assets Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Lease Liabilities Borrowings Current tax liabilities Short-term provisions Total Current Liabilities Non-Current Liabilities Lease Liabilities Deferred tax liabilities Long-term provisions Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Equity attributable to Equity Holders Issued capital Reserves Retained profits TOTAL EQUITY The statement of financial position is to be read in conjunction with the attached notes 32 STATEMENT OF CHANGES IN EQUITY For The Year Ended 31 December 2020 Consolidated Issued Capital (in 000’s) Retained Profits (in 000’s) Note Reserves (in 000’s) Total Equity (in 000’s) Balance at 1 January 2019 57,982 21,453 527 79,962 Adjustment in respect of first time adoption of AASB16 - (329) - (329) Adjusted Balance at 1 January 2019 57,982 21,124 527 79,633 Profit after income tax for the year Other comprehensive income for the year net of tax Total comprehensive income for the year Transactions with the owners in their capacity as owners: - - - - Share Issue (DRP) 19 4,084 Share Issue - Employee Share Scheme (ESS) 450 54,311 - 54,311 - 107 107 54,311 107 54,418 - - - - - 4,084 450 (43,518) Dividends Paid 21 - (43,518) Balance at 31 December 2019 62,516 31,917 634 95,067 Consolidated Balance at 1 January 2020 Profit after income tax for the year Other comprehensive income for the year net of tax Total comprehensive income for the year Transactions with the owners in their capacity as owners: Issued Capital (in 000’s) Retained Profits (in 000’s) Note Reserves (in 000’s) Total Equity (in 000’s) 62,516 31,917 634 95,067 57,182 - 57,182 - (364) (364) 57,182 (364) 56,818 - - - - - - - - - 5,656 63,618 (59,546) Share Issue (DRP) 19 5,656 Share Issue - Capital Raising and Share Purchase Plan (SPP) 63,618 Dividends Paid 21 - (59,546) Balance at 31 December 2020 131,790 29,553 270 161,613 The statement of changes in equity is to be read in conjunction with the attached notes. 33 - - - - - - STATEMENT OF CASH FLOWS For The Year Ended 31 December 2020 Note 31-Dec-20 ($’000) 31-Dec-19 ($’000) CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) 2,168,061 1,897,964 Payments to suppliers and employees (inclusive of GST) (2,075,493) (1,865,543) Interest received 4 375 155 Interest and other finance costs paid Income tax paid (3,338) (5,581) (30,227) (15,466) NET CASH FROM OPERATING ACTIVITIES 29 59,378 11,529 CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment (48,122) (10,136) Proceeds from sale of property plant and equipment Payments for intangibles Payments associated with sale of property plant & equipment 64 (3) - 36,000 (2) (753) NET CASH USED IN INVESTING ACTIVITIES (48,061) 25,109 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from share issue Repayment of bond Drawdown / (Repayments of borrowings) Principal paid on lease liabilities Interest paid on lease liabilities Payment of dividends NET CASH USED IN FINANCING ACTIVITIES NET CASH FLOWS Cash and cash equivalents at the beginning of the period CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 10 The statement of cash flows is to be read in conjunction with the attached notes. 63,618 (40,000) 30,000 (3,061) (190) - - 20,000 (1,574) (120) (53,889) (38,984) (3,522) (20,678) 7,795 22,573 30,368 15,960 6,613 22,573 34 NOTES TO THE FINANCIAL STATEMENTS For The Year Ended 31 December 2020 1. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out below and in the following notes. These policies have been consistently applied to all the years presented, unless otherwise stated. New, revised or amending Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any other new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. New Accounting Standards and Interpretations not yet Mandatory or early Adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 31 December 2020, unless otherwise stated. The consolidated entity has not yet performed an assessment of the impact of these new or amended Accounting Standards and Interpretations. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in the notes. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 27. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Dicker Data Limited (‘company’ or ‘parent entity’) as at 31 December 2020 and the results of all subsidiaries for the year then ended. Dicker Data Limited and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its 35 involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Foreign Currency Translation The financial statements are presented in Australian dollars, which is Dicker Data Limited’s functional and presentation currency. Foreign Currency Transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign Operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rate at the date of the transaction, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Current and Non-Current Classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is current when: it is expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within twelve months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non- current. A liability is current when: it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. 36 Goods and Services Tax (‘GST’) and Other Similar Taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from, or payable to, the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Rounding of Amounts The company is of a kind referred to in ASIC Corporations (Rounding in Financial / Directors’ Reports) Instrument 2016/191, 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. 2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed at each note. 37 3. OPERATING SEGMENTS Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Identification of Reportable Operating Segments The consolidated entity is organised into two operating segments: Australian and New Zealand operations. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources. Operating segments have been aggregated where they are below the quantitative thresholds and where the aggregation criteria has been met per AASB8. The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). Reportable revenue is for only the one product range being sale of IT goods and services. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on at least a monthly basis. Intersegment Transactions During the year there was no dividend paid from Dicker Data NZ Ltd to Express Data Holdings Pty Ltd (2019: $Nil). Intersegment Receivables, Payables and Loans Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are eliminated on consolidation. No single customer represents more than 10% of revenue. 38 OPERATING SEGMENT INFORMATION Consolidated - December 2020 Australia ($’000) NZ ($’000) Eliminations/ Unallocated ($’000) TOTAL ($’000) REVENUE Sale of goods Other revenue: Interest received Recoveries Other revenue TOTAL REVENUE EBITDA Depreciation & Amortisation Interest received Finance costs Profit before income tax Income tax expense Profit after income tax expense Segment Current Assets Segment Non Current Assets SEGMENT ASSETS Segment Current Liabilities 1,855,901 142,884 - 467 4 934 - 14 - 14 - - (106) - - 1,998,785 - 375 4 948 1,857,306 142,912 (106) 2,000,112 88,485 (5,609) 361 (3,423) 79,814 (24,088) 55,726 441,782 109,858 551,640 394,968 2,905 (770) 14 (210) 1,939 (589) 1,350 28,970 1,510 30,480 18,815 - - - 106 106 91,390 (6,379) 375 (3,527) 81,859 - (24,677) 106 57,182 (175) 470,577 - 111,368 (175) (56) 581,945 413,727 Segment Non Current Liabilities 6,091 514 - 6,605 SEGMENT LIABILITIES 401,059 19,329 (56) 420,332 39 OPERATING SEGMENT INFORMATION Consolidated - December 2019 Australia ($’000) NZ ($’000) Eliminations/ Unallocated ($’000) TOTAL ($’000) REVENUE Sale of goods and services* 1,642,804 115,717 Other revenue: Recoveries Profit on sale of property Other revenue Interest received TOTAL REVENUE EBITDA Depreciation & Amortisation Interest received Finance costs Profit before income tax Income tax expense Profit after income tax expense Segment Current Assets Segment Non Current Assets SEGMENT ASSETS Segment Current Liabilities Segment Non Current Liabilities SEGMENT LIABILITIES *Revenue by product type and geographic location is disclosed at Note 4 5 12,219 2,417 125 - - 199 29 1,657,569 115,945 84,199 (3,954) 125 (5,646) 74,724 (21,237) 53,487 411,236 66,465 1,799 (625) 29 (55) 1,149 (325) 825 27,695 2,148 477,700 29,843 384,097 8,581 18,771 1,028 392,678 19,798 - - - - - - - - - - - - - (3) - (3) (3) - (3) 1,758,521 5 12,219 2,615 155 1,773,515 85,998 (4,579) 155 (5,701) 75,873 (21,562) 54,311 438,927 68,613 507,540 402,865 9,609 412,473 40 4. REVENUE Sales from contracts with customers The company sells hardware, software (including software licensing), warranties, logistics and configuration services. The performance promise that is the responsibility of the company is to procure and supply or provide access to these products and services and revenue is recognised at the point of sale. Whilst each revenue stream represents a performance obligation, the performance obligation that is created is to deliver these goods and services hence the entity has determined point of sale as the most relevant way to recognise revenue per performance obligation. The company bears the inventory and credit risk and has pricing control for the products and services supplied. Amounts disclosed as revenue are net of sales returns and any customer rebates. Returns and customer rebates represent a variable consideration but do not represent a judgement by management. There is no constraint on the amount of revenue recognised. In some limited contractual agreements, the company acts as an agent. In such circumstances the revenue is recognised on a net basis. Disaggregation of revenue The group has disaggregated the revenue from customer contracts into various categories in the following table which is intended to: • depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic data; and • enable users to understand the relationship with revenue segment information provided in Note 3 For hardware products the performance obligation is satisfied when the products are delivered. For software, subscription and virtual products the performance obligation is satisfied when access is facilitated. For 3rd party warranties the performance obligations is satisfied when the hardware is allocated to a warranty. Services revenue is recognised when the service is performed. YEAR TO 31 DECEMBER 2020 Product Type Description Revenue recognition (PIT/OT) Agent/ Principal AU NZ Consolidated Infrastructure Hardware products Point in time Principal 1,294,609 60,626 1,355,234 Virtual Services Sales of 3rd party warranties and services Software Perpetual & subscription licensing including cloud products Dicker Data Services 3rd party logistics and configuration services Point in time Principal 131,319 5,025 136,345 Point in time Principal 418,673 77,245 495,918 Point in time Principal 5,239 -13 5,226 Partner Services Agent commission Point in time Agent 6,062 - 6,062 1,855,902 142,883 1,998,785 41 YEAR TO 31 DECEMBER 2019 Product Type Description Revenue recognition (PIT/OT) Agent/ Principal AU NZ Consolidated Infrastructure Hardware products Point in time Principal 1,135,349 48,417 1,183,765 Virtual Services Sales of 3rd party warranties and services Software Perpetual & subscription licensing including cloud products Point in time Principal 135,137 2,360 137,497 Point in time Principal 364,186 64,933 429,119 Dicker Data Services 3rd party logistics and configuration services Point in time Principal 4,296 Partner Services Agent commission Point in time Agent 3,837 7 - 4,303 3,837 1,642,804 115,717 1,758,521 OTHER REVENUE Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial 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 financial asset to the net carrying amount of the financial asset. Other Revenue Other revenue is recognised when it is received or when the right to receive payment is established. CONSOLIDATED Note 31-Dec-20 ($’000) 31-Dec-19 ($’000) 1,998,785 1,758,521 375 4 - 948 155 5 12,219 2,615 2,000,112 1,773,515 Sales from contracts with customers: Sale of goods and services Other revenue: Interest Recoveries Profit on sale of property Other revenue Total Revenue 42 5. EXPENSES Cost of Sales Cost of goods sold are represented net of supplier rebates and settlement discounts. Supplier rebates can be paid monthly, quarterly or half yearly. At the end of the financial year an estimate of rebates due, relating to the financial year is accounted for based on best available information at the time of the rebate being paid. Estimate of rebates is based on information provided by our suppliers on our tracking to targets and on management’s judgement based on historical achievements Depreciation and amortisation Depreciation is calculated on a straight line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives. Amortisation of intangibles is calculated on a straight-line basis over their expected useful lives, as either determined by management or by an independent valuation. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred, including: • • • interest on any bank overdraft interest on short-term and long-term borrowings interest on finance leases Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Operating leases Operating leases have been capitalised with recognition of a right-to-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure and leases relating to low-value assets). 43 Depreciation Building Plant and equipment Right of use asset Total depreciation Amortisation Website development Software Customer contracts Total amortisation Total depreciation and amortisation Finance costs CONSOLIDATED Note 31-Dec-20 ($’000) 31-Dec-19 ($’000) 32 1,923 3,065 5,020 - 17 1,342 1,359 6,379 460 1,130 1,603 3,193 11 26 1,349 1,386 4,579 Interest and finance charges paid / payable 3,527 5,701 Superannuation expense Defined contribution superannuation expense 5,884 5,048 Operating leases Property rental expense Equipment rental expense 6. INCOME TAX 24 - 24 49 12 61 The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. With the change in financial year, the Company has applied and has been approved for a substituted accounting period for the lodgement of its tax return based on the calendar year January to December. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered, or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits 44 will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entity’s which intend to settle simultaneously. Dicker Data Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income tax consolidated group from 01 April 2014, under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. Income Tax Critical Judgements The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant 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 consolidated entity recognises liabilities for anticipated tax audit issues based on the consolidated entity’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made. (A) The components of tax expense comprise: Current tax Over/(Under) provision in respect of prior years Deferred tax (expense/benefit) Over/(Under) provision in respect of prior years Over/(Under) provision in respect of prior years Deferred tax included in income tax expense comprises: (Increase) Decrease in deferred tax assets Increase (Decrease) in deferred tax liabilities Deferred tax included in statement of changes in equity C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 25,722 12 25,734 (1,045) (12) - (1,057) 24,677 (509) (655) 118 (1,045) 23,733 (1,361) 22,372 (961) 24 127 (810) 21,562 (1,492) 401 130 (961) 45 (B) The prima facie tax payable on profit before income tax is reconciled to the income tax as follows: Prima facie tax payable on profit before income tax at 30% 24,557 22,762 C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) ADD TAX EFFECT OF: Under provision for income tax in prior year Non-deductible expenses Deferred Tax on intangibles LESS TAX EFFECT OF: Differences in overseas tax rates Income tax expense attributable to entity 3 112 - (1,210) 202 (187) 24,672 21,567 5 (5) 24,677 21,562 The applicable weighted average effective tax rates are as follows: 30.1% 28.4% 7. CURRENT TAX Current tax liability 8. DEFERRED TAX ASSET Deferred tax asset comprises temporary differences attributable to: 4,937 8,849 Amounts recognised in profit or loss: Provision for receivables impairment Provision for employee entitlements Accrued expenses Inventory Capitalised expenditure Property Plant and Equipment Capitalised right-of-use assets Amounts recognised in equity: Share Issue Costs Deferred tax asset Movements in Deferred Tax Asset Opening Balance Credited / (charged) to profit or loss Credited / (charged) to equity Closing Balance 46 695 3,351 640 728 8 (344) 583 474 6,135 5,151 509 475 6,135 142 2,639 202 682 63 99 1,324 - 5,151 3,682 1,595 (126) 5,151 9. DEFERRED TAX LIABILITIES The balance comprises temporary differences attributable to: Amounts recognised in profit or loss: Capitalised right-of-use assets Prepayments Accrued income Intangible assets Deferred tax liability Movements in Deferred Tax Liability Opening Balance Credited / (charged) to profit or loss Closing Balance C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 446 19 1,555 2,134 4,154 4,809 (655) 4,154 1,186 29 1,058 2,536 4,809 4,407 402 4,809 10. CASH AND CASH EQUIVALENTS Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short- term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash at bank 30,368 22,573 11. TRADE AND OTHER RECEIVABLES Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days from end of month. Other receivables are recognised at amortised cost, less any provision for impairment. Other receivables mainly includes vendor rebates receivable and are due to be paid within 3 months. Trade receivables Less: Provision for impairment of receivables Other receivables Related party receivable 298,415 (2,319) 296,096 28,087 2,780 270,791 (475) 270,316 25,606 - 326,963 295,921 47 Impairment of receivables The expected loss rates are based on the Group’s movement of balances from one ageing category to the next to indicate increase in collection time which is an indicator of the probability of default. The value of debtors insurance is then applied to these balances to indicate the exposure at default. These loss rates are then applied to the individual ageing categories to calculate an expected credit loss. The entity has used their ability to apply the effects of debtor’s insurance as a suitable collateral to reduce the exposure of default. The consolidated entity has recognised an increase in the provision of $1.8m (2019: $209k) in profit or loss in respect of impairment of receivables for the year ended 31 December 2020. 12. INVENTORIES Finished goods are stated at the lower of cost or net realisable value. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Stock in transit is stated at the lower of cost and net realisable value. Cost comprises purchase and delivery costs, net of rebates and discounts received or receivable. Net realisable value is the estimated selling price (plus any applicable supplier claims as per revenue recognition policy) in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Impairment of Inventories The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory obsolescence. Finished Goods Less: Provision for Impairment C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 114,956 (1,710) 121,822 (1,389) 113,246 120,433 13. PROPERTY, PLANT AND EQUIPMENT Land and buildings are carried at cost less subsequent depreciation for buildings and accumulated impairment for land and buildings. Each class of plant and equipment and property improvements is carried at cost less, where applicable, any accumulated depreciation and impairment losses. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Buildings Property improvements Leasehold improvements Plant and equipment Plant and equipment under lease Motor vehicles - - - - - - 40 Years 10 - 20 Years 10 - 20 Years 2-10 Years 2-10 Years 8 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. 48 Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits. Estimation of Useful Lives of Assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly 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. Freehold land Building - at cost Total land and buildings Fitout & Leasehold improvements - at cost Less accumulated depreciation Plant and equipment - at cost Less accumulated depreciation Motor vehicles Less accumulated depreciation Total plant and equipment Total property, plant and equipment C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 18,435 53,360 71,795 4,174 (1,568) 2,606 6,881 (3,266) 3,615 252 (244) 8 6,229 78,024 18,435 9,335 27,770 1,807 (1,594) 213 5,475 (1,488) 3,987 252 (241) 11 4,211 31,981 49 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: FREEHOLD LAND ($’000) BUILDINGS ($’000) FITOUT COSTS ($’000) PLANT & EQUIPMENT ($’000) MOTOR VEHICLES ($’000) TOTAL ($’000) Balance at 1 January 2019 25,339 19,074 Additions Depreciation expense - - 5,958 (289) Disposals (6,904) (15,408) Effect of movements in exchange rate - - Balance at 31 December 2019 18,435 9,335 1,174 17 (172) (806) - 213 Additions Depreciation expense Disposals Effect of movements in exchange rate - - - - 44,025 2,425 - - - (32) - - Balance at 31 December 2020 18,435 53,360 2,606 1,163 4,126 (1,125) (181) 4 15 46,765 - 10,101 (4) (1,590) - - (23,299) 5 3,987 11 31,981 1,672 (1,920) (114) (10) 3,615 - 48,122 (3) (1,955) - - (114) (10) 8 78,024 14. INTANGIBLES Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the de-recognition 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 finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Customer Contracts Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite life which varies between 18 months and 12 years. Software Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 4 years. 50 Impairment of Intangibles Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in- use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Goodwill Customer contracts Less: accumulated amortisation Software - at cost Less: accumulated amortisation Total intangibles C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 17,799 17,657 (10,545) 73 (51) 17,799 17,657 (9,203) 120 (83) 24,933 26,290 Goodwill ($’000) Customer Contracts ($’000) Software ($’000) Development Website ($’000) Total ($’000) Balance at 1 January 2019 17,799 9,803 Additions Amortisation expense Disposal Effect of movements in exchange rate - - - - - (1,349) - - Balance at 31 December 2019 17,799 8,454 Additions Amortisation expense Disposals Effect of movements in exchange rate - - - - - (1,342) - - Balance at 31 December 2020 17,799 7,112 61 2 (26) - - 37 3 (17) - (1) 22 46 27,709 - 2 (11) (1,386) (35) (35) - - - - - - - - 26,290 3 (1,359) - (1) 24,933 Goodwill and other Indefinite Life Intangible Assets Estimates The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows 51 The recoverable amount of the consolidated entity’s goodwill has been determined by a value-in-use calculation using a discounted cash flow model, based on a 1 year EBITDA projection period approved by management and extrapolated for a further 4 years using a steady rate, together with a terminal value. Management considers the cash generating units (CGU) of the group to be Australia and New Zealand. Goodwill has been allocated $10.5m and $7.3m, respectively. The following key assumptions were used in the discounted cash flow model for each cash generating unit: a. 9.15% (2019: 9.76%) post-tax discount rate; and b. 2.5% (2019: 1.7%) for the Australian CGU and 2.5% (2019: 102.1%) for the New Zealand CGU in year 1 and 2.5% thereafter (2019: 2.5%) per annum EBITDA growth rate. The discount rate of 9.15% post-tax reflects management’s estimate of the time value of money and the consolidated entity’s weighted average cost of capital, the risk free rate and the volatility of the share price relative to market movements. Management believes the projected EBITDA growth rate is reasonable based on forecasted organic and general market growth. Based on the above, the recoverable amount of each cash generating unit exceeded the carrying amount and therefore no impairment of goodwill. Sensitivity Analysis As disclosed in note 2, the directors have made judgements and estimates in respect of impairment testing of goodwill. Management believes that any reasonable changes in the key assumptions on which the recoverable amount of division goodwill is based would not cause the cash-generating unit’s carrying amount to exceed its recoverable amount. The sensitivities are as follows: (a) EBITDA would need to decrease by more than 75% to trigger impairment for the Australian CGU, and 64% for the New Zealand CGU, with all other assumptions remaining constant; b) The discount rate would be required to increase to 45.1% to trigger impairment for the Australian CGU, and 19% for the New Zealand CGU, with all other assumptions remaining constant. 15. LEASES All leases are accounted for by recognising a right-of-use asset and a lease liability except for: • Leases of low value assets; and • Leases with a duration of 12 months or less AASB16 was adopted 1 January 2019 without restatement of comparative figures. The following policies apply subsequent to the date of the initial application, 1 January 2019. Lease Liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the group’s incremental borrowing rate on commencement of the lease is used. Key judgements used in the calculation of the lease liability include incremental borrowing rate of 2.9%. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition the carrying value of the lease liability includes: • amounts expected to be payable under any residual value guarantee; • the exercise price of any purchase option granted in favour of the group if it is reasonable certain to assess that option; and • any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of the termination option being exercised. Right of use assets are initially measured at the amount of the lease liability, reduced for any lease incentives 52 received, and increased for: • • • lease payments made at or before the commencement of the lease; initial direct costs incurred; and the amount of any provision recognised where the group is contractually required to dismantle, remove or restore leased assets. Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term. When the group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of the lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining revised lease term. If the carrying amount of the right-of- use asset is adjusted to zero, any further reduction is recognised in profit and loss. Nature of leasing activities The Company leases 4 properties in Australia and New Zealand for which the lease contracts provide for payments to increase each year by inflation or to be reset periodically to market rental rates. The table below reflects the current proportion of lease. Property leases with periodic uplift to market rentals 4 - 100 +/- 138 Lease Contracts Number Fixed Payments % Variable Payments % Sensitivity Retained Earnings impact of adopting AASB 16 Right-of-Use Asset Opening balance Additions Amortisation Effect of modification to lease terms Variable lease payment adjustment Effect of movements in exchange rate Closing balance 31-Dec-20 ($’000) 31-Dec-19 ($’000) - 329 C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 5,191 - (3,065) - 178 (28) 2,276 2,000 4,794 (1,603) - - (28) 5,191 53 Lease Liabilities Opening balance Additions Interest Expense Effect of modification to lease terms Variable lease payment adjustment Lease payments Foreign exchange movements Closing balance C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 5,676 - 190 - 178 (3,251) (36) 2,757 2,457 4,794 120 - - (1,695) (36) 5,676 Lease Commitments The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits. Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis over the term of the lease. Lease Commitments Within 1 year Between 1 to 5 Years 2,243 514 2,757 3,072 2,604 5,676 16. TRADE AND OTHER PAYABLES These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 - 60 days of recognition. Trade payables Other payables Related party payables 17. BORROWINGS 250,319 228,405 22,874 - 19,767 2,760 273,193 250,932 Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. 54 Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the loans or borrowings are classified as non-current. Current Receivables facility Corporate bond Total current borrowings (a) Total current and non-current secured liabilities: Receivables facility (b) The receivables facility is secured by a fixed charge over all the debtors The Corporate Bond was an unsecured facility. C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 120,000 - 90,000 39,930 120,000 129,930 120,000 90,000 (c) Receivables facility limit 180,000 130,000 The drawn amount of these facilities as at the report date is as per Note 17 above. Receivables Facility The Westpac receivables facility was renewed on 12 March 2018 for a period of 3 years with an increased limit of $130,000 million. As of February 2020, this limit was increased to $180m, being an increase of $50m supported by the increase in the receivables balance. The Company believes that this increased facility provides the required debt capacity to fund its present needs. The Westpac receivables facility was renewed on 12th February 2021 for a further 12 months whilst maintaining the limit of $180m. This rollover ensures the ongoing funding for the current financial year. The Company may adjust the amount of debt (by taking on new debt or repaying present debt) in the future depending on funding needs and to optimise weighted average cost of capital. Corporate Bond The corporate bond was repaid on 16th March 2021, the repayment being facilitated by the increase in the Westpac receivables facility. 18. PROVISIONS Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. Current Employee benefits Lease make-good provision Non Current Employee benefits 13,127 227 13,354 9,866 216 10,082 1,937 2,196 55 EMPLOYEE BENEFITS Short-Term Employee Benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised in current liabilities in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Other Long-Term Employee Benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are recognised in non-current liabilities, provided there is an unconditional right to defer settlement of the liability. The liability is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Amounts not expected to be settled within the next 12 months The current provision for employee benefits includes all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer settlement. However, based on past experience, the consolidated entity does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken within the next 12 months: C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) Employee benefits obligation expected to be settled after 12 months 6,109 3,718 Lease Make Good Provision A provision has been made for the present value of anticipated costs for future restoration of leased premises. The provision includes future cost estimates associated with closure of the premises. The calculation of this provision requires assumptions such as application of closure dates and cost estimates. The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for sites are recognised in the statement of financial position by adjusting the asset and the provision. Reductions in the provision that exceed the carrying amount of the asset will be recognised in profit or loss. 19. ISSUED CAPITAL Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Ordinary shares - fully paid 172,134,046 131,790 161,615,513 62,516 Dec 2020 Shares Dec 2020 ($’000) Dec 2019 Shares Dec 2019 ($’000) 56 Movements in ordinary share capital DETAILS Opening Balance Issue of shares DRP Issue of shares DRP 1-Jan-19 1-Mar-19 3-Jun-19 Issue of shares - Employee Share Scheme (ESS) 30-Aug-19 Issue of shares DRP Issue of shares DRP Issue of shares DRP Balance 2-Sep-19 4-Oct-19 2-Dec-19 31-Dec-19 DATE ISSUE PRICE NO OF SHARE ($’000) $3.09 $4.83 $6.66 $5.96 $7.37 $6.88 160,714,369 57,982 104,227 604,443 67,500 44,170 44,923 35,881 323 2,918 450 265 332 247 161,615,513 62,516 Issue of shares DRP 2-Mar-20 $6.89 614,980 4,235 Issue of shares - Capital Raising 7-May-20 $6.70 7,462,687 48,618 Issue of shares DRP Issue of shares - Share Purchase Plan (SPP) Issue of shares DRP Issue of shares DRP Balance 1-Jun-20 5-Jun-20 1-Sep-20 1-Dec-20 $7.04 69,531 491 $6.63 2,264,150 15,000 $7.52 $10.17 62,756 44,429 474 456 31-Dec-20 172,134,046 131,790 Ordinary Shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. 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. Capital Raise On 7th May 2020 the Company completed a $50m share placement at an issue price of $6.70 per share, followed by a further $15m share purchase plan on 5 June 2020 at an issue price of $6.625per share resulting in 9,726,837 new shares being issued. The net proceeds were invested in the construction of the new distribution centre and to support the growth of Dicker Data Financial Services and investment in working capital. The capital raise increased the public float in the Company to approximately 33% and provided financing headroom to facilitate capacity for future growth. Employee Share Scheme There were no new shares issued under any employee share scheme during the FY20 financial year as per the previous year. During FY19 the Company announced that in recognition of all the work and contribution by our staff free shares were offered to all eligible employees. Under the share plan staff were offered $1,000 worth of new fully paid ordinary shares for nil monetary consideration. The issue price for the shares was $6.660 and all eligible staff received 150 shares each. Total number of new shares issued to staff under the Employee Share Scheme was 67,500 shares at a value of $450k. Share Buy-Back There is no current on-market share buy-back. 57 Capital Risk Management The consolidated entity’s objectives when managing capital is to safeguard its ability to continue as a going concern whilst enhancing long-term shareholder value through funding its business at an optimised weighted average cost of capital. In seeking to optimise its weighted average cost of capital, the consolidated entity may adjust its capital structure from time to time, including varying the amount of dividends paid to shareholders, by returning capital to shareholders, by issuing new shares or taking on or reducing debt. The consolidated entity is subject to certain financing arrangements and covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 31 December 2019 Annual Report. 20. RESERVES Capital Profits Reserve (Pre-CGT) Foreign currency reserve C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 369 (99) 270 369 265 634 Capital Profits Reserve (Pre-CGT) The capital profits reserve records non-taxable profits on sale of investments. Foreign currency reserve The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations. Movements in reserves Opening Balance Foreign currency translation Closing Balance 21. DIVIDENDS 634 (364) 270 527 107 634 Dividends declared or paid during the financial year 59,546 43,518 Type FY Payment Date Dividend per share (in cents) Dividend per share (in 000’s) FY Payment Date Dividend per share (in cents) Dividend per share (in 000’s) Final 2019 2-Mar-20 Interim 2020 1-Jun-20 Interim 2020 1-Sep-20 Special Dividend 2020 - 0.130 0.075 0.075 - 21,010 2018 1-Mar-19 12,727 2019 3-Jun-19 12,902 2019 2-Sep-19 - 2019 4-Oct-19 Interim 2020 1-Dec-20 0.075 12,907 2019 2-Dec-19 0.070 0.050 0.050 0.050 0.050 11,250 8,041 8,071 8,077 8,079 0.355 59,546 0.270 43,518 The tax rate that dividends have been franked is 30% (2019: 30%) 58 Franking credit balance: C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) Franking credits available for subsequent financial years based on a tax rate of 30% (2019: 30%) 12,704 12,754 The above amounts represent the balance of the franking account as at the end of the financial 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 22. FAIR VALUE DISCLOSURES When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principle market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Fair Value Measurement Hierarchy The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. The company has a number of financial instruments which are not measured at fair value in the statement of financial position, including cash, receivables, payables and borrowings. The fair value of these financial assets and financial liabilities approximates their carrying amount. 59 The fair value of Borrowings in Note 17, is estimated by discounting the future contractual cash flows at the current market interest rates for loans with similar risk profiles and has been measured under Level 2 of the hierarchy. The carrying value of borrowings classified as financial liabilities measured at amortised cost approximates fair value. 23. FINANCIAL INSTRUMENTS Derivative Financial Instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Derivatives are classified as current or non-current depending on the expected period of realisation. Investments and Other Financial Assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on the purpose of the acquisition and subsequent reclassification to other categories is restricted. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. Impairment of Financial Assets The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that a financial asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty of the issuer or obligor; a breach of contract such as default or delinquency in payments; the lender granting to a borrower concessions due to economic or legal reasons that the lender would not otherwise do; it becomes probable that the borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active market for the financial asset; or observable data indicating that there is a measurable decrease in estimated future cash flows. Financial Assets and Liabilities Financial Assets Cash and cash equivalents Trade and other receivables Total Financial Assets Financial Liabilities Trade and other payables Borrowings Lease liabilities Total Financial Liabilities 60 C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 30,368 22,573 326,963 357,331 295,921 318,494 273,193 120,000 2,757 250,932 129,930 5,676 395,950 386,538 The amount of the impairment allowance for financial assets carried at cost is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the current market rate of return for similar financial assets. Financial Risk Management Policies The directors’ overall risk management strategy seeks to assist the company in meeting its financial targets, whilst minimising potential adverse effects on financial 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 specific credit allowances are undertaken to manage credit risk. Liquidity risk is managed through general business budgets and forecasts. The main purpose of non-derivative financial instruments is to manage foreign currency risk. The company had open forward contracts as at the end of the financial year to mitigate this risk. The directors and key management personnel meet on a regular basis to analyse financial risk exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. Specific Financial Risk Exposures and Management The main risks the company is exposed to through its financial instruments are: • credit risk • • • liquidity risk interest rate risk foreign exchange risk Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the company. Credit risk is reviewed regularly by the directors and key management personnel. It predominantly arises from exposures to customers. 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 individual customer’s balance plus the excess as specified in the policy after an aggregate first loss of $200,000. Receivables balances are monitored on an ongoing basis and as a result the Company’s exposure to bad debts has not been significant. It is the company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their credit rating, financial 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 and criteria may only purchase in cash or using recognised credit cards. The company has no significant concentration of credit risk with any single counterparty or group of counterparties. The profile of all counterparties is largely the same being reseller partners and have been grouped together in assessing expected credit loss. Trade and other receivables that are neither past due or impaired are considered to be of high credit quality. Credit Risk Exposures - The maximum exposure to credit risk by class of recognised financial assets at reporting date, excluding the value of any collateral or other security held, is equivalent to the carrying value and classification of those financial assets (net of any provisions) as presented in the statement of financial position. Liquidity Risk Liquidity risk arises from the possibility that the company might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The company manages this risk through the following mechanisms: • preparing forward-looking cash flow analyses in relation to its operational, investing and financing activities; • monitoring undrawn credit facilities; • obtaining funding from a variety of sources; • maintaining a reputable credit profile; and • managing credit risk related to financial assets. The tables below reflect an undiscounted contractual maturity analysis for financial liabilities. Financial 61 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 flows realised from financial instruments reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflect the earliest contractual settlement dates and do not reflect management’s expectations that banking facilities will roll forward. Financial liability maturity analysis Financial liabilities due for payment Trade and other payables Within 6 Months 6 Months - 1 Year 1 - 2 Years 2 - 5 Years Borrowings Within 6 Months 6 Months - 1 Year 1 - 2 Years 2 - 5 Years Lease liabilities Within 6 Months 6 Months - 1 Year 1 - 2 Years 2 - 5 Years C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 273,193 250,932 - - - - - - 273,193 250,932 120,000 132,060 - - - 1,709 2,404 605 120,000 136,778 1,647 596 514 - 2,757 1,497 1,575 2,157 447 5,676 Total contractual outflows 395,950 393,386 Financial Assets Pledged as Collateral Certain financial 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. Refer to Note 16. 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 flows and interest charges and is indicated by the following floating interest rate financial liabilities 62 Interest Rate Risk Floating rate instruments Receivable finance facility Corporate Bond 120,000 - 90,000 39,930 120,000 129,930 Due to the current interest rate environment the Company has not entered into any interest rate swap at any other time during the year. Management will continue to monitor the interest rate environment to determine whether entering into a new swap agreement will be prudent to do so in the future. Sensitivity Analysis The company has performed a sensitivity analysis relating to its exposure to interest rate risk at reporting date. If interest rates changed by -/+ 1% from the year end rates with all other variables held constant, post-tax profit would have been $840,000 lower/higher (2019: $909,510 lower/higher) as a result of higher/lower interest payments. The company constantly analyses its interest rate exposure. Within this analysis consideration is given to alternative financing and the mix of fixed and variable interest rates. Foreign Exchange Risk The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. In order to protect against exchange rate movements, the consolidated entity has entered into forward foreign exchange contracts. These contracts are hedging highly probable forecasted cash flows for the ensuing financial year. Management has a risk management policy to hedge between 30% and 80% of anticipated foreign currency transactions for the subsequent 4 months. The maturity, settlement amounts and the average contractual exchange rates of the consolidated entity’s outstanding forward foreign exchange contracts at the reporting date was as follows: Sell Australian dollars Average exchange rates Sell New Zealand dollars Average exchange rates 31st Dec 2020 ($’000) 31st Dec 2019 ($’000) 31st Dec 2020 ($’000) 31st Dec 2019 ($’000) 31st Dec 2020 ($’000) 31st Dec 2019 ($’000) 31st Dec 2020 ($’000) 31st Dec 2019 ($’000) Buy US dollars Maturity: 0 - 3 months 29,794 24,101 0.7398 0.6886 2,496 1,325 0.6825 0.6576 0 - 3 months Buy Australian dollars Maturity: 0 - 3 months 0 - 3 months - - - - - - - - 2,194 1,337 0.9415 0.9423 - - - - The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the reporting date was as follows: 63 Consolidated Cash at bank Trade receivables Trade payables Net statement of financial position exposure 31-Dec-20 US$’000 NZ$’000 304 11,148 3,872 16,467 (22,327) (15,458) (10,875) 4,881 Based on the financial instruments held at 31 December 2020, a strengthening/weakening of AU$ against US$ and NZ$ would have resulted in the following changes to the Groups reported profit and loss and/or equity. E Q U I T Y P R O F I T O R L O S S Sensitivity Analysis (Effects in Thousands) US$ (5% movement) NZ$ (5% movement) Strengthening Weakening Strengthening Weakening - (587) - 587 544 (244) (544) 244 24. KEY MANAGEMENT PERSONNEL COMPENSATION Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term benefits Long-term benefits Post employment benefits Total compensation C O N S O L I D A T E D 31-Dec-20 $ 31-Dec-19 $ 6,950,408 5,530,507 21,309 21,187 658,816 525,511 7,630,533 6,077,205 25. REMUNERATION OF AUDITORS During the financial year the following fees were paid or payable for services provided by BDO, the auditor of the company, its network firms and unrelated firms: Audit services - BDO Auditing or reviewing the financial report 265,000 260,000 Other services - BDO Indirect tax services Tax and corporate services 217,000 - 235,000 207,000 452,000 207,000 Other services - Other BDO Network Firms Tax & corporate services 16,000 13,000 64 The BDO entity performing the audit of the group transitioned from BDO East Coast Partnership to BDO Audit Pty Ltd on 1 August 2020. The disclosures include amounts received or due and receivable by BDO East Coast Partnership, BDO Audit Pty Ltd and their respective related entities. 26. CONTINGENT LIABILITIES The directors are not aware of any contingent liabilities related to the Consolidated entity as at the report date. Capital Commitments Capital expenditure commitments contracted for at reporting date but not recognised as liabilities: Property, plant and equipment Lease Commitments C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 3,507 37,914 The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. 27. PARENT ENTITY INFORMATION Set out below is the supplementary information about the parent entity: Statement of profit or loss and other comprehensive income Profit after income tax Total comprehensive income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Reserves Retained profits Total Equity 56,838 56,838 53,683 53,683 415,989 537,413 390,564 394,122 131,790 369 11,132 143,291 383,222 457,614 377,318 380,889 62,515 369 13,840 76,724 65 Guarantees Entered into by the Parent Entity in Relation to the Debts of its Subsidiaries The parent entity and some of its subsidiaries are party to a deed of cross guarantee under which each company guarantees the debts of the others. No deficiencies of assets exist in any of these subsidiaries. Capital Commitments – Property, Plant and Equipment The parent entity had the capital commitments for property, plant and equipment as detailed in Note 26. Significant Accounting Policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 1 and throughout the notes. 28. INTERESTS IN SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following wholly- owned subsidiaries in accordance with the accounting policy described in note 1: NAME Dicker Data New Zealand Ltd Express Data Holdings Pty Ltd Dicker Data Financial Services Pty Ltd Principal place of business / country of incorporation New Zealand Australia Australia O W N E R S H I P I N T E R E S T 2020 % 100% 100% 100% 2019 % 100% 100% 100% 29. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH Profit after income tax Adjustments for: Depreciation Amortisation on intangibles Amortisation on Leased assets Amortisation of borrowing costs (Profit) / Loss on the Disposals of PPE 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 current tax liabilities Net cash from operating activities 66 C O N S O L I D A T E D 31-Dec-20 ($’000) 31-Dec-19 ($’000) 57,182 54,311 1,958 1,359 3,065 70 50 7,187 (32,886) (984) (655) 22,450 4,494 (3,912) 59,378 1,620 1,388 - 285 (11,915) (14,944) (57,389) (1,470) 401 29,801 2,277 7,164 11,529 30. NON-CASH INVESTING AND FINANCING ACTIVITIES Shares issued under dividend reinvestments plan (DRP) 5,656 4,084 31. EARNINGS PER SHARE Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Dicker Data Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Profit after income tax 57,182 54,311 Profit after income tax attributable to the owners of Dicker Data Limited Weighted average number of shares used as denominator Number Number Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 168,106,292 161,231,566 Weighted average number of ordinary shares and options granted are used as the denominator in calculating diluted earnings per share 168,106,292 161,231,566 Basic earnings per share (cents) Diluted earnings per share (cents) 32. RELATED PARTY TRANSACTIONS Parent entity: Dicker Data Limited is the parent entity. Subsidiaries: Interests in subsidiaries are set out in note 28. Cents 33.95 33.95 Cents 33.69 33.69 Key management personnel: Disclosures relating to key management personnel are set out in note 24 and the remuneration report in the directors’ report. Transactions with related parties: There were a number of related party transactions during the year with the entity Rodin Cars Ltd, a New Zealand based entity owned by David Dicker. The transactions included provision of marketing and IT services and sales of goods and services which are billed to Rodin Cars Ltd on a monthly basis at commercial market rates. Total amount billed to Rodin Cars Ltd for FY20 was $157,815. Dicker Data Financial Services Pty Ltd has also provided finance to Rodin Cars Ltd at arms length commercial rates. The amount payable as at 31 December 2020 was $1,015,412.32. The principal amount financed was $3,993,922.57. In addition to these transactions some payments have been made on behalf of director David Dicker throughout the year that were subsequently reimbursed, or funds were deposited in advance to cover these expenses. Total amount of funds paid on behalf of David Dicker by the Company as at 31 December 2020 was $2,780,466.46. 67 33. SUBSEQUENT EVENTS Rollover of Westpac Receivables Facility The Westpac receivables facility was renewed on 12th February 2021 for a further 12months with a limit of $180m. This rollover ensures the ongoing funding for the current financial year. 68 DIRECTORS’ DECLARATION In the directors’ opinion: • • • • the attached financial statements and notes thereto comply with the Corporations Act 2001 (Cth), the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes thereto comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; the attached financial statements and notes thereto give a true and fair view of the consolidated entity’s financial position as at 31st December 2020 and of its performance for the financial year ended on that date; there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and • There were reasonable grounds to believe that the Company and the controlled entities identified in Note 28 of the financial statements will be able to meet any obligations or liabilities to which they are or may become subject by virtue of the Deed of Cross Guarantee between the Company and those controlled entities pursuant to ASIC Class Order 98/1418. This declaration has been made after receiving the declarations required to be made to the directors by the Chief Executive Officer and Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 (Cth) for the financial year ended 31 December 2020.The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001 (Cth). On behalf of the directors David Dicker CEO and Chairman Sydney, 25 February 2021 69 AUDITOR’S DECLARATION OF INDEPENDENCE 70 Level 11, 1 Margaret St Sydney NSW 2000 Australia Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. DECLARATION OF INDEPENDENCE BY TIM AMAN TO THE DIRECTORS OF DICKER DATA LIMITED As lead auditor of Dicker Data Limited for the year ended 31 December 2020, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Dicker Data Limited and the entities it controlled during the period. Tim Aman Director BDO Audit Pty Ltd Sydney, 25 February 2021 INDEPENDENT AUDITOR’S REPORT 71 Level 11, 1 Margaret St Sydney NSW 2000 Australia Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. INDEPENDENT AUDITOR'S REPORT To the members of Dicker Data Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Dicker Data Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. INDEPENDENT AUDITOR’S REPORT 72 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Carrying value of goodwill Key audit matter How the matter was addressed in our audit As disclosed in Note 14 to the financial report, Goodwill amounted to $17,799,000 at 31 December 2020. This was determined to be a key audit matter as the determination of the "Value in Use" of each cash generating unit (CGU) and whether or not an impairment charge is necessary involved judgements by management about the future growth rates of the business in each CGU, discount rates applied to future cash flow forecasts for each CGU and sensitivities of inputs and assumptions used in the cash flow models. Furthermore, the goodwill balance is material. Our audit procedures to address the key audit matters included, but not limited to:  Evaluating and challenging the assumptions used in the discounted cash flow analysis, in particular the key assumptions for each CGU;  Recalculating management’s discount rates based on external data (where available);  Applying a sensitivity analysis on the Group's discounted cash flow models for each cash generating unit to assess whether changes in the assumptions made would result in impairment;  Assessing the historical accuracy of management's forecasts in the context of the value in use model; and  Evaluating the adequacy of the disclosures in Note 14 about those assumptions to which the outcomes of the impairment test are most sensitive, that is, those that will have the most significant effect on the determination of the recoverable amount. Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 31 December 2020, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the Financial Report INDEPENDENT AUDITOR’S REPORT 73 The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 24 to 28 of the directors’ report for the year ended 31 December 2020. In our opinion, the Remuneration Report of Dicker Data Limited, for the year ended 31 December 2020, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit Pty Ltd Tim Aman Director Sydney, 25 February 2020 SHAREHOLDER INFORMATION Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report is as follows. This information is current as at 3 February 2021. ORDINARY SHARE CAPITAL Analysis of numbers of equity security holders by size of holding: Size of Holding 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Number of Shareholders Number of Shares % of Issued Capital 45 732 898 3,660 6,437 138,407,604 80.41 15,762,531 6,678,664 8,768,076 2,517,171 9.16 3.88 5.09 1.46 11,772 172,134,046 100.00 UNQUOTED OPTIONS The Company had no unquoted options on issue as at 3 February 2021. LESS THAN MARKETABLE PARCELS OF ORDINARY SHARES There were 171 holders of less than a marketable parcel of ordinary shares. The number of shares in aggregate of these unmarketable parcels is 1,444. 74 20 LARGEST HOLDERS OF QUOTED EQUITY SECURITIES Shareholder Mr David John Dicker Ms Fiona Tudor Brown J P Morgan Nominees Australia Pty Limited Citicorp Nominees Pty Limited Hsbc Custody Nominees (Australia) Limited Fiona Brown National Nominees Limited Certane CT Pty Ltd Mr Vladimir Mitnovetski Jeremy And Lynette King Superannuation Pty Ltd Neweconomy Com Au Nominees Pty Limited HSBC Custody Nominees (Australia) Limited - A/C 2 Certane Ct Pty Ltd Sandhurst Trustees Ltd Bnp Paribas Noms Pty Ltd Diales Pty Limited Mrs Rochelle Gilmore Mrs Leona Reddall & Mr Benjamin Reddall & Mr Matthew Reddall Broadgate Investments Pty Ltd Mcniven & Co Pty Ltd TOTAL SUBSTANTIAL HOLDERS Number of Ordinary Fully Paid Shares % of Issued Capital 60,740,000 53,754,532 5,118,586 3,744,300 3,554,187 1,279,717 1,123,931 926,021 905,000 600,000 416,017 395,848 375,480 305,178 305,080 270,000 254,824 241,685 233,155 217,034 35.29 31.23 2.97 2.18 2.06 0.74 0.65 0.54 0.53 0.35 0.24 0.23 0.22 0.18 0.18 0.16 0.15 0.14 0.14 0.13 134,760,575 78.29 The names of the Substantial Shareholders listed in the Company’s Register as at 3 February 2021: Shareholder Mr David John Dicker Ms Fiona Tudor Brown VOTING RIGHTS Number of Ordinary Fully Paid Shares % of Issued Capital 60,740,000 53,754,532 35.29 31.23 In accordance with the Constitution each member present at a meeting whether in person, or by proxy, or by power of attorney, or in a duly authorised representative in the case of a corporate member, shall have one vote on a show of hands, and one vote for each fully paid ordinary share, on a poll. ON-MARKET BUY-BACKS There is no current on-market buy-back in relation to the Company’s securities. 75 Dicker Data Limited ABN 95 000 9696 362 Registered Office 238 Captain Cook Drive Kurnell NSW 2231 T. 1800 688 586 F. 1800 688 486 www.dickerdata.com.au 

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