Dicker Data
Annual Report 2022

Plain-text annual report

TABLE OF CONTENTS 2022 Highlights CEO Commentary Who We Are Board of Directors & Executive Management Our ANZ Vendor Portfolio 2022 In Review Industry Recognition 2023 Outlook Environmental Social & Governance Directors’ Report Information on Directors Remuneration 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 Directors’ Declaration Auditor’s Declaration Of Independence Shareholder Information 2 4 6 8 10 12 13 14 16 32 39 43 55 56 57 58 59 93 94 98 Dicker Data acknowledges that Aboriginal and Torres Strait Islander peoples are the First Peoples and Traditional Custodians of Australia. We thank them for their custodianship of Country — land, seas and skies. We acknowledge the diversity of First Nations cultures, histories and peoples, recognise their enduring connection to our country, and we pay our deepest respects to Elders past, present and emerging. 2022 HIGHLIGHTS $3.1b Total Revenue Up 25.0% YOY $129.8m EBITDA Up 9.4% YOY $743.9m Recurring Revenue Up +42.5% YOY $73.0m Net Profit After Tax Down -0.7% YOY Launched Dicker Access and Surveillance (DAS) in the Australian market 8,200 Active AU Partners 2,000 Active NZ Partners Construction of warehouse expansion commenced in late FY22 54.0c Dividend Paid Per Share Up +44.0% YOY Diversity & Inclusion Champion Hardware Distributor of the Year 2021 & 2022 10TH CONSECUTIVE YEAR Dicker Data is an Australian owned and Operated, ASX listed distributor of computer hardware, software and related products with over 44 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 10,000 registered reseller partners annually, Dicker Data finished the FY22 year with revenues just over of $3.1b. Since listing on the ASX in January 2011, Dicker Data has delivered consistently profitable results for shareholders whilst maintaining a 100% dividend policy. 2 3 CEO COMMENTARY In last year’s report, I said ‘Another year with difficult and unpredictable conditions’. Conditions in 2022 were similar. However, given the strength of our business and our people, we again delivered a satisfying financial performance. Our sales result was pleasing, with revenue finalising at $3.1b, an increase of 25%. Ongoing challenges from factors outside of our control that could not have been predicted, expected, or avoided in any meaningful way, did weigh on our final outcome for FY22. Rising interest rates, inflation and other factors increased our cost of operations with no upside. Despite this, we delivered on our gross margin guidance and finished the year ahead of our competitors yet again. I remain optimistic about business conditions and very optimistic about our company’s ability to generate another strong result in 2023. David Dicker CEO AND CHAIRMAN Results Summary Key Financial Data Total revenue from ordinary activities Gross profit Earnings before interest, tax, depreciation [EBITDA] Net operating profit before tax Net statutory profit before tax Net profit after tax [NPAT] 2022 $’000 2021 $’000 3,104,408 2,484,459 283,659 129,849* 106,977* 104,853 73,047 230,336 118,728** 106,075** 105,097 73,562 Earnings per share (cents) 41.80 42.63 Dividends paid Dividends per share (cents) * Add back one off integration and restructure costs of $2.1m ** Add back one of acquisition costs of $978k 94,311 54.00 64,676 37.50 Revenue ($m) $1,761.3* $2,000.1 $3,104.4 $2,484.5 Gross Profit ($m) $191.4 $158.4 $283.7 $230.3 FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 EBITDA ($m) $91.4 $73.8‡ $129.8^ $118.7† Net Profit before Tax $81.9 ($m) $64.1‡ $106.1† $107.0^ FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 * FY19 - Revenue excludes Profit on Sale of property ‡ FY19 - Operating Profit before tax excluding Profit on Sale of property and cost for Employee Share Scheme † FY21 - Operating Profit before tax excludes one off acquisition transaction costs of $978k ^ FY22 - Operating Profit before tax excludes one off integration and restructure costs of $2.1m 4 5 WHO WE ARE Established in 1978, Dicker Data (ASX: DDR) has grown to become Australia and New Zealand’s largest value-add distributor of IT hardware, software, cloud, access control, surveillance and emerging technology solutions for the corporate and commercial market. In operation for nearly 45 years, the Company boasts a long history of strong revenue and profit growth, with a market cap reaching highs of $2.5b in FY22. 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 2023, Dicker Data is a member of the S&P/ASX300 Index and S&P/ASX All Technology Index. Dicker Data is the vital link in the technology value and supply chain that supports over 10,000 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 the trusted advisor that provides technology driven solutions into all levels of Government, Enterprise and 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, 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 technology, 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. Dicker Data Services team members at our Kurnell headquarters founded 1978 6 1987 2000 2011 2014 2015 2019 2020 2021 2022 Appointed as first Toshiba distributor Annual Revenue exceeded $100m Listed on the ASX (ASX: DDR) Acquired Express Data Holdings Annual Revenue exceeded $1b and CloudPortal Launched Awarded Cisco Global Distributor of the Year Annual Revenue exceeded $2b Relocated to new facility in Kurnell and acquired Exeed Ltd Launched DAS and Annual Revenue Exceeded $3b 7 BOARD OF DIRECTORS & EXECUTIVE MANAGEMENT The following persons were Directors of Dicker Data Limited during the Financial year end and up to the date of this report. Directors were in office for this entire period unless otherwise stated. BOARD OF DIRECTORS EXECUTIVE MANAGEMENT DAVID DICKER Chairman and Chief Executive Officer FIONA BROWN Non-Executive Director KIM STEWART-SMITH Non-Executive Director LEANNE RALPH Non-Executive Director • Founded Dicker Data • Has been Director of the Company since inception in 1978 • Focuses on business strategy and decision making • Founded Dicker Data • Has been Director of the Company since inception in 1978 • Focuses on business strategy and decision making • Joined the Board 29 • Experienced governance March 2021 • Experienced governance professional • Extensive Executive experience professional • Ex-CFO in the importing, wholesaling and retail sector • Extensive ASX-related • Skilled business, finance experience and tax advisor MARY STOJCEVSKI Executive Director and Chief Financial Officer VLADIMIR MITNOVETSKI Executive Director and Chief Operating Officer IAN WELCH Executive Director, Chief Information Officer and Director of Operations • Joined Dicker Data as Financial • Joined Dicker Data as Category • Joined Dicker Data in March 2013 as Controller in 1999 • Responsibilities include all the financial management, administration and compliance functions of the Company • Has been an Executive Director of the Company since August 2010 Manager in 2010 General Manager IT • Appointed to the Board as Executive • Was appointed Executive Director in Director in 2014 • Has over 20 years’ of distribution industry experience having previously worked for Tech Pacific and Ingram Micro August 2015 • Responsible for all IT systems and business technologies, as well as operational processes, warehousing and logistics 8 9 OUR ANZ VENDOR PORTFOLIO Security Made Smarter 10 10 11 11 2022 IN REVIEW Hardware & Virtual Services $2,278.0m +21.6% YOY Total Revenue $3,104.4m INDUSTRY RECOGNITION Other Revenues $0.8m -85.3% YOY Software $813.8m +36.7% YOY 2022 was a year filled with opportunities for Dicker Data. The digital transformation of businesses, governments and communities across Australia and New Zealand continued to boom and the appetite for further digitisation in almost all sectors showed no signs of slowing. Distributor of the Year - NZ Distributor of the Year - APJ Distributor of the Year - NZ Supplier of the Year - NZ Services $11.8m +8.3% YOY Partner of the Year - APAC Top Distribution Growth of the Year - Asia Pacific IDG Distributor of the Year - AU IDG Distributor of the Year - NZ The Company entered new markets, grew its vendor line card to offer the most diverse range of solutions in the Company’s 44-year history and capitalised on market convergence trends. The IT sector continues to expand beyond its traditional boundaries, with digitally driven initiatives delivering transformational success in adjacent industries. We announced our intention to acquire the Security and IT division of fellow technology distributor, Hills Limited, in February 2022, with the deal completing in May 2022. The acquisition was quickly followed by the launch of a new division, Dicker Access and Surveillance (DAS), based on the novation of over 60 vendor contracts. The acquisition brought 4,500 new customer accounts to Dicker Data, with over 3,200 of these accounts transacting with the Company in the first 8 months. A branch network of 10 trade-only shopfronts is now operational across Australia enabling just-in-time access to stock for the DAS division’s extensive network of customers. The integration of the acquired business was completed during the FY22 period. Dicker Data reintroduced its flagship roadshow event, TechX, in 2022, attracting over 50 of the world’s leading vendors as sponsors with over 3,500 of the Company’s customers in attendance across Australia and New Zealand (ANZ). Broadly recognised as the ANZ IT industry’s largest IT channel event, TechX provides the Company with an unparalleled opportunity to showcase its technology range, set the technology agenda for thousands of its customers and to recruit new vendors and customers into the Company’s ecosystem. Pressure on the bottom line intensified in 2022. A combination of rising interest rates, significant inventory holdings and higher than forecast salary costs as a result of recent acquisitions compounded, impeding the overall profitability of the Company. A number of one-off costs associated with the acquisitions added further pressure to profitability. We faced continued supply-chain disruption in 2022, with the global chip shortage continuing to impact stock availability across a number of technologies. This was compounded by the ongoing logistical shortages facing both Australia and New Zealand as demand for delivery services continues to grow. However, we have successfully navigated these challenges with our customers through transparency, openness and by capitalising on strategic inventory opportunities with our suppliers. These strategies continue to place the Company in good stead to endure the ongoing market conditions which are expected to last into the second half of the Company’s FY23 period. The Company focused much of FY22 consolidating the customer and vendor relationships obtained through the acquisition of the Exeed and Hills businesses. With the Exeed business, approximately 60 vendors were integrated across various business units, making a full year contribution of $398.0m in FY22. The acquisition of the Hills IT and Security division added a further 50 vendors and contributed $73.3m in the 8 months since the acquisition. The Company introduced a smaller number of other new vendor relationships that contributed a further $22.2m during the year. ISG Distributor of the Year - NZ Distributor of the Year - NZ Best Performing Distributor of the Year- ANZ Software Distributor of the Year- ANZ Value Added Distributor Award- APJ Staff celebrate the Company being named Hardware Distributor of the Year for the 10th consecutive year at the annual industry awards. WOMEN IN ICT AWARDS 2021 & 2022 Diversity & Inclusion Champion Hardware Distributor of the Year - AU 10 CONSECUTIVE YEARS 12 Software Distributor of the Year - NZ 13 2023 OUTLOOK The changing nature of the IT industry is nothing new to our business, however, the disruption experienced over the last three years has significantly changed the landscape in which our business operates. From surges in demand as the pandemic took hold, to significant backlogs of orders that were unable to be fulfilled as chip shortages strangled supply chains, the IT sector has faced its share of challenges. With these headwinds almost behind the Company, 2023 is set to be another prosperous year, but will also not be without its own unique challenges. The surge in demand and chip shortages of 2020, 2021 and 2022 will finally subside in late 2023 as the production capabilities of the Company’s vendors reaches the capacity to service market demand. As in many sectors, demand can increase, or decrease, very quickly, but the supply-side cannot adapt at the same pace due to the complexity of what is required to manufacture many of the products the Company distributes. As a result, buying power will shift back into the end-customer’s hands in 2023 as order backlogs are fulfilled and vendors manufacture new inventory in line with the dynamics of the previous years, with supply expected to outstrip demand. End-customers will have the ability to choose the technology they want, which is in stark contrast to previous years where many end- customers were forced to take whichever products were available at the time to meet their technology needs. Interest rate increases in FY22 had a material impact on the Company’s profitability. The trend for increasing interest rates is expected to continue in FY23 requiring a more disciplined approach to capital management and more strategic inventory investments. The Company is increasing its focus on its weeks of inventory holdings and general business hygiene as the cost of capital continues to increase. Managing access to capital, inventory holdings and customer credit is part of the Company’s core competencies, and we expect to gain operational efficiencies in these areas as we place increased focus on them, particularly within the businesses that have been recently acquired. The Company undertook a level of organisational introspection in late FY22 to identify areas for improvement and rationalisation. The recently acquired businesses across Australia and New Zealand that were fully integrated in FY22 will be accelerated in FY23 to align the metrics of those businesses to those of the Company’s proven, long-term operating model. Furthermore, we expect to realise the benefits of shared operational functions across the group in FY23 as the focus shifts from integrating businesses to extracting the maximum value from them whilst closely managing the associated costs. The launch of the Company’s access and surveillance, or DAS, business in FY22 unlocked new revenue streams and new customers. In the 8 months of trading to 31 December 2022, the Company returned the acquired business to growth, with the operational focus of the DAS business now shifting towards accelerating the business and delivering on its full profit potential. On 9th February 2023, the Company entered into a binding Sale and Purchase Agreement (SPA) to acquire the business of Connect Security Products Limited (CSP) in New Zealand for a purchase price of NZD $5.0m. This acquisition marks the entry of the Company’s DAS business in New Zealand, which brings with it a number of synergies that will be leveraged across both countries to further grow the DAS business. With a number of branch relocations and refurbishments now complete, the Company has reduced branch operating costs significantly, representing a gain that will be realised in the FY23 period. The convergence of the IT and access and surveillance markets is expected to accelerate in FY23. With over 600 of Dicker Data’s IT partners transacting with DAS in FY22, the foundations are now in place to capitalise on the market convergence and to use the learnings and data from these engagements to drive further cross- over between the two markets. The velocity of the DAS business increased towards the end of FY22, with gross margin finalising approximately 50% higher than the IT side of the business. The DAS business across Australia and New Zealand is expected to operate at gross margins double that of the IT business in FY23 as its growth is accelerated, the operation is refined and as the division capitalises on shared services. Market demand for some technologies, such as devices, is expected to soften in FY23. The disruption caused by the pandemic, the thirst for digital transformation and the need to support hybrid workforces spurred an unnatural level of demand that has remained constant. This demand is expected to continue in 2023 despite the market dynamics settling and become more predictable. Technology refresh cycles are expected to return to pre-pandemic intervals and we expect enterprise and government to drive market demand in 2023 as they embark on the next phases of their digital transformation, while SMB spending is expected to abate. These dynamics create a unique opportunity for the Company. We have been the demand stimulation and generation engine for our vendors for many years, particularly in the SMB and mid-market segments, and their reliance on our Company to perform this function will be at its highest during FY23 as they seek to improve on their FY22 results by leveraging the strengths of our Company. As a hybrid distribution business focused on value-added services and stock holding, the Company is well- positioned to navigate the challenging market dynamics with its extensive mix of public cloud, security, data management, hybrid and on premise solutions; segments in which the Company’s portfolio is unmatched and our internal skillsets are far superior in comparison to the rest of the market. DAS team members showcasing the latest products in one of our branches. 14 15 We recognise sustainability is an ongoing process and that there is always room for improvement. This is why we regularly review and realign our sustainability strategies, and why we are committed to transparently reporting on our progress in this area. We are proud of the advancement we have made, but we also understand that there is still much work to be done. We remain committed to continuously improving our sustainability performance and to make a positive impact on the world. ENVIRONMENTAL SOCIAL & GOVERNANCE We believe that sustainable business practices are essential for long-term success and we’re proud to share our progress and achievements in creating a more sustainable future for our stakeholders. From reducing our environmental footprint to fostering a diverse, inclusive and ethical workplace, we are committed to creating value for all our stakeholders through sustainable business practices that benefit people and the planet. Our key areas of impact in our FY22 reporting period were: Our People High-performing, empowered people from diverse backgrounds who thrive in our inclusive environment build their own, and our Company’s, success. Our Facilities Custom-designed and built headquarters that integrates seamlessly with the surrounding natural environment, creating a more eco-positive and biodiverse habitat. Our Operations Taking positive steps to reduce our environmental impact and increase our environmental awareness with every decision we make. Our Technology Helping our partner community to make sustainable technology choices today and become the sustainability champions of tomorrow for their customers. Our Wider Impact Enabling our staff and leveraging our success to increase the positive impact we’re collectively making. Governance Dicker Data lodges a separate Corporate Governance Statement. To view the latest version of this document, please visit the Investor Centre on our website: www.dickerdata.com.au/investors 16 17 OUR PEOPLE Dicker Data has a long history of celebrating the diverse nature of its workforce, its inclusive culture and realising the Company’s full potential through empowering our people to do their best work. The knowledge, relationships and expertise our teams bring have built Dicker Data into a world-class employer and consistently high-performing ASX300 Company. Despite employment trends experienced by many organisations globally in 2022, Dicker Data maintained a low turnover rate and retained all key Executive and Senior Management personnel. The consistency of the Company’s people is a significant competitive advantage that has underpinned its success through turbulent market conditions. Dicker Data staff, vendors and key customers at TechX 2022 Sydney. 57% female representation on our Board of Directors and 48% in Senior Management Staff and vendor representatives celebrate at the Company’s 2022 Melbourne Cup event. NZ Staff at Harvey Norman Awards 87% of our people indicated they’re proud to work for Dicker Data DAS team members outside a newly refurbished branch location. ARN Diversity and Inclusion Champion Award Winner This accolade acknowledges the leading organisation in the Australian IT sector that promotes diversity and inclusivity throughout its operations, including its employees, customers, and other significant parties. To receive this award, the Company must have surpassed a superficial pledge by implementing policies and initiatives that effectively accomplish D&I objectives, as demonstrated by focused efforts, effective leadership, and well-defined outcomes. Our people from across Australia celebrating 2022 at our staff Christmas Party 18 19 OUR PEOPLE Workforce Representation Our commitment to gender parity across our organisation continued in FY22, with most notable progress made in our Senior Management division. This team is now 52% male and 48% female (5% more gender diverse than FY21), with 40% of the team coming from diverse nationalities. Our workforce is comprised of people with varying tenures and experience. Our longest serving employee has been with the Company for 32 years and we’re proud to have over 50 staff with tenures of 15 years or more. The Company’s ability to not only attract, but also retain high-performing people has provided the business with an unmatched level of continuity. The gender diversity of our Board places the Company as one of the best performing ASX300 companies and our Senior Management gender diversity is also industry leading. Furthermore, our Senior Management team of 20 people across ANZ is comprised of 9 different ethnicities (+50% on FY21). Our gender diversity took a backwards step in FY22 as a result of the Company’s acquisition of the Hills Security and IT division. The acquired business was comprised of over 110 employees, 78% of whom are male, 21% female and 1% intersex. We are taking steps to promote more female participation in the access and surveillance industry through proactive engagement with industry bodies, as well as exploring ways of recognising female contribution to the access and surveillance industry through dedicated awards. Dicker Data takes its diversity leadership position seriously and is invested in helping the broader IT ecosystem realise the benefits a diverse workforce can bring. Employee Engagement Annual Staff Survey - Each year we conduct an internal staff survey that provides our people with the opportunity to directly respond to questions covering various areas of our business and to provide feedback directly to the Executive Management team. In the 2022 staff survey, we saw an increase of the % of staff who indicated they’re proud to work for Dicker Data: 87% (+3% on FY21). We’re proud to see our inclusive culture thriving with over 87% of respondents indicating that staff treat each other with respect at Dicker Data, a 4.4% increase on FY21. We remain committed to listening to our people, adjusting our policies to reflect their needs and to create 87% respondents indicating that staff treat each other with respect at Dicker Data Up 4.8% Data Bites Dicker Data launched an internal lunch and learn series in 2022, aptly named Data Bites. These sessions invited external subject matter experts in to educate our staff on managing their finances, mental health and many other topics. Interest in the program has been so strong that the Company has even had its own staff presenting on topics they’re passionate about, such as men’s health on International Men’s Day. a positive working environment, whilst balancing the needs of our shareholders. Employee Development We support our people to continue their education and skill development as they seek to further their careers, diversify their skillsets and improve the way they perform their role. In December 2022 we launched a new learning and development platform, ELMO Learning, which offers staff access to over 400 courses covering a broad range of topics. New and updated courses are released monthly, in addition to updates to keep the courses current with legislative changes, ensuring ongoing compliance. In addition, we sponsor courses for our staff with nationally accredited and recognised providers for specific areas of improvement, such as management, public speaking and more. Caring for our People The health and well-being of our people is central to our success. The Company’s concern for the health and well-being of its people is reflected in free of-charge services that promote healthier lifestyles, such as daily lunch, an onsite gym at the Kurnell headquarters, biweekly yoga and pilates sessions that are available onsite and via broadcast links, weekly lunch and learn sessions with external experts on important topics such as managing personal finances and access to an Employee Assistance Program (EAP) that provides our people with access to three Company-funded confidential sessions with a counsellor to assist with any mental health concerns. We have also offered our staff 10 days of domestic and family violence funded leave for many years, well ahead of the government mandate which came into effect on 1 February 2023. We also provide employees that are leveraging this type of leave with a support toolkit that was developed in conjunction with Banksia Women and Challenge DV to help them cope and manage their unique situations. In addition to the extra annual leave provided for victims of domestic and family violence, we also provide Organisations and Initiatives supported in FY22: • Breast Cancer Network Australia • Cancer Council 7 Bridges Walk • International Men’s Day • IT for a Cause • Lifeline • Movember • R U OK? • STEPtember • Team Lopez Foundation • The Pyjama Foundation • Trees that Count • Work Ventures 10 days paid Domestic leave for perpetrators of domestic and family violence who are able to demonstrate that they are seeking rehabilitation. Our People and the Causes Close to their Heart With the help of our teams across Australia and New Zealand, we supported a number of initiatives and organisations throughout 2022. From hosting The Biggest Morning Tea to Movember, R U OK day and many more, Dicker Data’s teams raised awareness for these organisations as well as collecting donations and actively participating in the initiatives. Furthermore, Dicker Data launched an internal lunch and learn series in 2022, aptly named Data Bites. These sessions invited external subject matter experts in to educate our staff on managing their finances, mental health and many other topics. Interest in the program has been so strong that the Company has even had its own staff presenting on topics they’re passionate about, such as men’s health on International Men’s Day. Movember Our team rallied behind Movember in 2022, raising funds and awareness for men’s mental health. Many of our team members grew moustaches and leveraged their networks to raise funds for the cause, but we also leveraged our inventory holdings for the cause, offering to donate $5 per eligible device our partners purchased. We collectively raised NZD $8,500 for the cause and in the process built stronger links amongst our team members and used the initiative as cause to celebrate with our ecosystem. 20 21 OUR FACILITIES Founders David Dicker and Fiona Brown officially opening the walking track with NSW Minister for the Environment and Heritage, The Hon. James Griffin and NSW Attorney General and Local Member for Cronulla, The Hon. Mark Speakman. The creation of our facility was an opportunity to make a positive impact on the local environment and to create a bustling hub that blended with the natural beauty that surrounds the site. Two years since moving into our new custom- designed and built headquarters located in Kurnell, NSW, Dicker Data has continued to invest in sustainable initiatives to minimise the Company’s impact on the surrounding environment and overall environmental footprint. 56% of the power consumed by our facility was produced by solar or supplied by the batteries onsite in FY22 (-6% on FY21). To counter the increase in power sourced from the grid, the number of solar panels used by the Company is being expanded by almost 1,000 additional panels (a 150% increase) as a part of the warehouse extension that is due for completion in the first half of 2023. The increase in solar capturing capacity is expected to enable Dicker Data to run off-grid during a wider variety of weather conditions, will assist with powering an expanded network of electric vehicle chargers that could be installed at a future date and will support the power needs of the business as it continues to grow. The purpose-built water retention basins that surround our facility captured rainwater and stormwater runoff in 2022. This water was quality tested and once it met the required standards, was pumped back out to the local Botany Bay precinct to enrich the local marine ecology and to support the biodiversity of the surrounding areas. The Company plans to expand its water collection methods as part of the stage two warehouse build which is expected to be completed in the first half of 2023. 56% SUSTAINABLY SOURCED The majority of the power consumed at our Kurnell headquarters was generated by solar energy or provided by the onsite batteries in FY22. Nearly 1,000 more solar panels will be added as a part of the warehouse extension. Recycled concrete storage containers found during site development, now repurposed as a part of the landscape design. Opening of the Dicker Data Walking Track at Kurnell Headquarters by the NSW Minister for the Environment and Heritage and NSW Attorney General In December 2022, the NSW Minister for the Environment and Heritage, the Hon. James Griffin MP, and NSW Attorney General and Local Member for Cronulla, the Hon. Mark Speakman MP officially opened the 1.6km walking track that surrounds our facility in Kurnell. Designed to give our people an opportunity to take a break, reconnect with nature and to promote healthier lifestyles, the Dicker Data walking track has also become host to a surge in local wildlife that now frequent the site and enjoy the benefits of the native surrounds. Mr Speakman said the initiative provided “a peaceful surround for an otherwise bustling hub”. Mr Griffin, said, “It is important to acknowledge the role businesses play in conservation and the environment. Organisations like Dicker Data come to the fore and operate outside the ordinary to take care of the environment today for future generations”. 22 23 OUR FACILITIES Staff celebrate the opening of the Dicker Data New Zealand office in FY22. New Office in Parnell, Auckland Dicker Data opened its new Auckland headquarters in 2022, featuring a modern fit-out that supports collaboration and hybrid working. Located centrally in Parnell, the new office provides our staff with the opportunity to connect with one another as well as host vendors and customers. Complete with height- adjustable workstations, acoustic ceilings and dedicated training rooms, our new office was created with the future needs of our business in mind and to act as an anchor in our talent attraction and retention strategy. Our new facility features Solar power onsite to power facility and top-up the grid Electric vehicle charging stations All plastic packaging replaces with cardBoard and unneeded packaging recycled prior to shipping All ewaste recycled in a sustainable manner and separate our Bio-waste to avoid landfill 24 25 50% of all shipments use recycled boxes and unneeded packing is recycled prior to shipping All ewaste recycled in a sustainable manner and separate our Bio- waste to avoid landfill We’ve replaced void fill with recycled materials Dicker Data Services team performing their roles at our Kurnell headquarters OUR OPERATIONS As the size and scale of our operations continues to grow, we remain conscious of the environmental impact our business is having. We proactively bring a sustainability lens to our decision-making processes and are working to engrain sustainability at the core of our operations. We are transitioning towards more sustainable solutions for our distribution centre and working with our people who are passionate on the topic to improve workflows and our processes with sustainability front of mind. We proactively bring a sustainability lens to our decision- making processes and are working to engrain sustainability at the core of our operations. With a significant number of shipments leaving our warehouses across Australia and New Zealand each year, the Company is committed to playing a proactive role in reducing the environmental impact of its operations. As a proud member of the Australian Packaging Covenant Organisation (APCO), the Company has made steps towards developing a circular economy for packaging in Australia. For example, in FY22 the Company transitioned from using brand new boxes for 100% of outbound shipments to approximately only 50% of new boxes being used for outbound shipments. We are committed to playing our part in assisting APCO to reach its 2025 goal of 100% of packaging to be reusable, recyclable or compostable and ensuring we recycle every eligible waste material handled by our business. In alignment with this objective, we have significantly reduced the amount of single-use plastics in our business and we have moved to using substantially more recycled materials as void fill in our shipments. The 2022 Schneider Electric Sustainability Index uncovered that 40% of Australian and New Zealand technology partners expect to generate revenue from sustainable solutions in the coming years. This, coupled with the fact that 65% of end-customers state that their ESG strategies now influence, highlights how well Dicker Data is positioned to capitalise on the business opportunities that sustainability is creating. Furthermore, 76% of end-customers believe that sustainable transformation creates a competitive edge and 79% of end-customer believe digital plays a key role in achieving sustainability goals. The importance of Dicker Data’s role as a provider of sustainable technology will increase in coming years, as will the reliance of our partners to help them learn, design solutions and navigate the complexities of sustainable technologies. PROUD MEMBER OF: 26 27 AUSTRALIANPACKAGINGCOVENANTORGANISATIONOUR TECHNOLOGY The technology we distribute has always been at the forefront of innovation and we are pleased to report on the level of sustainability-related innovation we are seeing from our network of the world’s leading vendors. Dicker Data Financial Services team at TechX New Zealand As more organisations, governments and communities are making their technology decisions with environmental and sustainability factors in mind, we are pleased to be offering our IT partners and their end-customers new technology solutions that meet those needs. From laptops that have components made from recycled ocean plastic to selling refreshed technology that has been refurbished by our vendor partners to give their physical components a longer lifespan, Dicker Data is committed to providing its partner network with more sustainable choices. Our role as a distributor has long been to help our partners build the right solutions that meet the challenges faced by their end-customers. We are committed to helping our partners make more environmentally friendly choices by clearly identifying the products that meet globally recognised standards, such as the Electronic Product Environmental Assessment Tool (EPEAT) and Energy Star, on our website and on our quotes. We consistently reinforce that the technology choices our partners make today have a significant impact when that technology reaches the end of its useable life. We are working with our vendors to increase access to total cost of ownership (TCO) calculators, so our partners understand the full impact of their choices in advance and we are working with our partner ecosystem to demonstrate the commercial viability of sustainable technology. Our vendor community’s transparency on sustainability is improving, which is enabling us to provide more insights to our partners, in turn enabling them to make more informed technology decisions. Some vendors are now providing pre-purchase environmental impact reports on the technology a partner procures from Dicker Data, with some vendors also offering end-of- life reporting to demonstrate the environmental impact of a particular technology over its lifespan. These reports also include details on how the technology will be recycled to minimise its end of use impact on the planet, or to provide information on how the technology can be given a new life. We remain committed to sharing information on the sustainability of the products we distribute with our partners and we are working to improve the visibility and accessibility of sustainable solutions via the various ways our partners interact with our business. Dicker Data remains at the centre of Australia’s digital transformation and with sustainability quickly becoming a key requirement of the next wave of digital transformation, the Company is well-positioned to support and enable its partner community to capitalise on the business opportunities this transition is creating. We are also proactively offering information sessions for our partners on sustainable technology. These sessions help our partners understand how to monetise sustainable solutions as well as helping them to understand how to position them and use sustainability as a competitive differentiator. Sales team training with vendor representatives in Kurnell. Cybersecurity As the cyberthreat landscape continues to evolve and the attacks on Governments, businesses and communities increases, we are taking proactive steps to protect both the Company and our employees from falling victim to cybercriminals. Our multi-layered approach that encompasses everything from the firewall to the frontline worker has so far prevented successful intrusion attempts and resulted in no notifiable data breaches in the FY22 period. Despite this, we remain extremely vigilant and steadfastly committed to our cybersecurity obligations and managing the associated risks. As part of our ongoing cybersecurity risk assessment, staff training and threat mitigation processes, our staff are all required to undergo cybersecurity training as a part of their employment with the Company. In addition, we Staff configuring a customer order prior to dispatch run simulated phishing and other attacks on a regular basis which exposes our staff and systems to the types of threats they can expect to face, albeit in a controlled environment. In FY22 all staff were tested, with 2.8% of employees falling victim to the simulated attacks. Additional training and support have subsequently been provided to these staff to help them improve their awareness of attacks which will not only improve the Company’s protection, but also the security of the individual when they interact with other systems outside of the corporate environment. We plan to introduce more robust security measures for our staff in FY23 that will further harden the Company against cyberthreats. 28 29 OUR WIDER IMPACT Our success in business has provided our business with a platform to extend support to a number of initiatives that improve the state of the environment, the health of others and more. In addition to the charitable initiatives driven by our various teams, the Company has increased its direct investment into existing partners and established new relationships to further its impact. We worked with the following partners in 2022: Ocean Impact Organisation Dicker Data extended its partnership with the Ocean Impact Organisation’s Pitchfest in 2022, renewing sponsorship of the Ocean Monitoring and Spotlight Award for 2022 and 2023 and committing time of senior management personnel to provide mentoring and support to a range of start-ups from around the world that are focused on improving ocean health. Dicker Data’s involvement with Ocean Impact Organisation has enabled their ecosystem to accelerate their impact, further their research and has helped further educate young entrepreneurs. Foundation for National Parks and Wildlife Launched in December 2020, Dicker Data’s partnership with FNPW enables the Company’s reseller partners to donate towards protecting the environment for the future and enabling land acquisition to grow the footprint of our National Parks. Donations made by our reseller partners are matched by the Company. We work closely with both our partners and vendors to support the not-for-profit community in Australia and New Zealand. By providing presales and technical support to the partners and not-for-profits they’re servicing, we’re proactively removing barriers to accessing new technologies and we work hand-in-hand with our vendors to ensure every incentive is utilised to maximise the not-for-profit’s investments. Modern Slavery We reviewed our supply chain in 2022 with a Modern Slavery audit and action plan. We have been continually encouraged by the results of our Modern Slavery audits and are committed to continuing to review our supply chain to ensure compliance with Modern Slavery standards, in turn building the confidence of our investors and stakeholders in our ethical practices. Dicker Data staff raising funds for Breast Cancer Network Australia at our Kurnell headquarters. TechX During the New Zealand portion of our TechX roadshow, we provided our attendees with tokens that they could use to make a $10 donation to one of four charities on the night. As a result, we donated NZD $15,000 across four deserving charities which included: KidsCan KidsCan is Aotearoa New Zealand’s leading charity dedicated to helping Kiwi kids affected by poverty. They help tamariki experiencing hardship by providing food, jackets, shoes and health products to schools and early childhood centres across New Zealand. Starship Children’s Hospital Starship are the leading provider of paediatric health care in New Zealand and the South Pacific, delivering family centred care to infants, children, young people and their whānau in hospital and in the community. Trees that Count Trees that Count are a conservation charity bringing together business, community and everyday Kiwis, with the vision of helping plant millions of native trees across the country. St Johns (NZ Ambulance Service) St John’s provides ambulance services throughout New Zealand and is playing an increasing role in various communities to help people develop personal strength and care for others. 30 31 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 2022. 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 J Dicker • Fiona T Brown • Mary Stojcevski • Vladimir Mitnovetski • Ian Welch • Leanne Ralph • Kim Stewart-Smith 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 15-Feb-22 01-Mar-22 17-May-22 01-Jun-22 17-Aug-22 01-Sep-22 13-Nov-22 01-Dec-22 Total Dividend /Share (in Cents) 15.00 13.00 13.00 13.00 54.00 Amount (in 000’s) Type FY Amount Franked $25,933 Final 2021 $22,484 Interim 2022 $22,491 Interim 2022 $23,403 Interim 2022 100% 100% 100% 100% $94,311 The total dividends declared and paid during the financial year were 54.0 cents per share or a total of $94.3m, fully franked. (2021: 37.5 cents per share, $64.7m), representing an increase of 44.0% 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 has been retained for the 2022 year. Of the $94.3m dividends paid, $91.3m were paid as cash dividends and $3.0m participated in the DRP. A final dividend for FY22 of 2.5 cents per share was declared on 8 February 2023 with a record date of 14 February 2023 and a payment date of 1 March 2023. With the three interim dividends paid during FY22, this will bring total dividends paid for the FY22 year to 41.5 cents per share. The FY22 dividend paid represents a decrease of 1.2%, down from 42.0 cents paid for FY21. Type FY Payment Date Interim 2022 01-Jun-22 Interim 2022 01-Sep-22 Interim 2022 01-Dec-22 Final 2022 01-Mar-23 TOTAL 2022 Dividend /Share (in Cents) 13.00 13.00 13.00 2.50 41.50 FY Payment Date 01-Jun-21 01-Sep-21 01-Dec-21 01-Mar-22 2021 2021 2021 2021 2021 Dividend /Share (in Cents) 9.00 9.00 9.00 15.00 42.00 32 33 Operating and Financial Review A snapshot of the operations of the consolidated entity for the full year and the results of those operations are as follows: Dec-22 ($ 000’s) Dec-21 ($ 000’s) Change $ ($ 000’s) Change % Total Revenue Gross Profit 3,104,408 2,484,459 619,949 283,659 230,336 53,323 Net operating profit before tax 106,977 * 106,075 ** Net statutory profit before tax 104,853 105,097 Net profit after tax attributable to members 73,047 73,562 902 -244 -515 25.0% 23.2% 0.9% -0.2% -0.7% * Excludes one off integration and restructure costs of $2.1m ** Excludes one off acquisition costs of $978k Revenue The revenue for the consolidated entity for the 12 months to 31 December 2022 was $3,104.4m (2021: $2,484.5m), up by $619.9m (+25.0%). At a country level, Australia grew $397.3m (+18.4%) and New Zealand grew $222.6m (+68.1%). Total revenue from sales of goods and services, excluding other revenue, was $3,103.7m (2021: $2,479.4m), up by $624.2m, representing an increase of 25.2%. At a sector level, the Company maintained strong growth across all product related business units, with hardware and support sales up $404.7m (+21.6%) and software sales up $218.7m (+36.7%), and Dicker Data Services business expanding by $0.9m (+8.3%). Within our software business the strongest growth came from our recurring revenue products increasing to $743.9m (+42.5%). In May 2022, Dicker Data acquired IT and Security Division of Hills Limited and formed a new business unit Dicker Access and Surveillance (DAS). This new business unit contributed revenue of $73.3m in the 8 months since acquisition. Gross Profit Gross profit for the reporting period was up 23.2% at $283.7m (2021: $230.3m). Gross profit margins abated in the FY22 year at 9.1% (2021: 9.3%), but finalising within expectation. The decrease in profit margins is largely driven by lower than expected margins in the New Zealand business finishing at 6.5% (2021: 7.6%). Australia’s gross profit margin finished higher at 9.7% (2021: 9.5%). Expenses Operating Expenses Operating costs, excluding one-off costs were $154.0m (2021: $116.3m), up by 32.4%, also increasing as a proportion to revenue at 5.0% (2021: 4.7%), as the Company continues to invest in servicing the customer and vendor relationships it has added as a result of the acquisition of the Exeed and Hills businesses. The increase in costs is attributed primarily to an increase in salary related expenses. Salary costs were $130.6m (2021: $101.0m) an increase of $29.6m (+29.3%), and increasing as a proportion of revenue to 4.2% (2021: 4.1%). The increase in salary and headcount is attributed mainly to the full year impact of the Exeed acquisition and 8 months impact of the addition of the Hills business, adding over 110 people. The Company continues to maintain strong performance based remuneration packages and the increase in salary costs is also driven by the increase in revenue and achievement of key performance metrics. Headcount across the group finished at 859 (2021: 694), an increase of 23.8%. Other operating expenses, excluding one-off costs increased by $8.1m to $23.4m, increasing as a proportion of sales to 0.8% (2021: 0.6%). Depreciation, Amortisation and Interest Depreciation and amortisation for the reporting period was $12.3m (2021: $9.1m), an increase of $3.2m. Included in this number is $4.5m for amortisation of identifiable intangibles, of which $1.9m related to New Zealand and $2.6m to Australia. There were also some increases in plant and equipment associated with the Exeed acquisition and depreciation with additional PP&E purchases in line with increase of additional headcount in the financial year. Depreciation on the Right of Use Assets (ROUA) for capitalised leases amounted to $3.1m. Finance costs in the reporting period were $11.1m, up by $7.2m from the prior year (2021: $3.9m), attributed to the full year effect of incremental debt associated with the Exeed acquisition and its ongoing working capital requirements as well as the acquisition of the Hills IT and Security business, predominantly attributed to working capital. Recent interest rate rises are also significantly increasing the Company’s cost of debt. Net Profit Operating profit before tax finalised at $107.0m (2021: $106.1m) up by 0.9%, after adding back one off costs of $2.1m related to integration and restructure costs associated with the acquisition of the Exeed and Hills businesses. Of the $2.1m, $1.2m related to Hills integration costs with the balance being restructure costs. Statutory profit before tax finalised at $104.9m (2021: $105.1m) down by 0.2%. Net profit after tax decreased to $73.0m (2021: $73.6m), down by 0.7%. Weighted average earnings per share decreased to 41.80 cents per share (2021: 42.63 cents), down by 1.9%. Statement of Financial Position Total assets as at 31 December 2022 increased to $1,066.8m (2021: $854.1m). The statement of financial position reflects a substantial increase in working capital investment, mainly driven by the incremental working capital attached to the Exeed and DAS businesses, however the existing business has also made strategic increases in working capital to facilitate ongoing growth and to maintain supply in a sometimes disjointed supply chain. Total investment in net working capital was $359.1m up by $100.6m from previous year (2021: $258.6m). Cash finalised at $12.3m, up by $4.9m (2021: $7.4m). Trade and other receivables were up from the previous year to $581.8m (2021: $455.5m), an increase of $126.3m. The Company also continued to invest in inventory with inventories finishing at $261.7m (2021: $201.3m), up by $60.4m. Inventory days increased to 33.8 days (2021: 32.6 days). Trade and other payables finalised at $484.4m (2021: $398.2m). Property, plant and equipment increased to $87.6m during the period (2021: $82.3m) an increase of $5.3m with the Company beginning works on the expansion of the warehouse, as well as bringing on the assets to support the DAS business unit. Total liabilities as at 31 December 2022 were $836.6m, up from the prior period (2021: $675.8m). Current borrowings comprising the drawn amount on the receivables purchase facility with Westpac was at $185.0m as at 31 December 2022, $45m higher than the prior year (2021: $140.0m). A $60.0m acquisition facility remains for the Exeed acquisition of which $10.0m is current and $50m non-current. The balance of drawn debt of $46.7m relates to a Bank of New Zealand (BNZ) cash advance facility, which replaced the Exeed BNZ invoice finance facility in New Zealand. Overall borrowings are $291.7m, up $61.5m (2021: $230.2m). Equity has increased to $230.1m during the year (2021: $178.3m) due to the impact of Capital Raising and Share Purchase Plan activities during 2022 contributing $70.2m and the contribution from the Dividend Reinvestment Plan (DRP) adding $3.0m, offset by timing differences in dividends paid. 34 35 Equity Movement Equity 31 Dec 2021 Comprehensive Income for FY22 Share Issue – Capital Raising Share Issue – DRP Dividends Paid Equity 31 Dec 2022 $'000 178,297 72,944 70,228 2,987 (94,311) 230,145 Significant changes in the state of affairs Hills Acquisition On 2 May 2022 the Company announced the completion of the acquisition of the Hills (ASX: HIL) Security and IT (SIT) division, providing access to a new market segment in access control and surveillance, tapping into the physical security market. The purchase price, based on a premium to the net assets was estimated at $19.4m, with a final adjustment for net assets acquired settled on 20 June 2022 resulting in additional payment of $1.9m bringing the final purchase price to $21.3m. Of the $21.3m purchase price $19.7m related to net assets acquired, predominantly being inventory, with balance of $1.6m being for goodwill. From this date, Dicker Data transitioned more than 110 of the Hills team members and novated over 50 vendor contracts. Capital Raising The Company successfully completed a $50.0m fully underwritten placement on 31 August 2022. Total new shares issued under the placement were 4,854,369 at an issue price of $10.30 each. This was followed by the successful completion of a share purchase plan on 23 September 2022, raising a further $21.7m. Total shares issued under the share purchase plan were 2,103,724. Total capital raised net of costs during the year was $70.2m Warehouse Expansion Update Following the Capital Raising in the second half of 2022, the expansion of the Company’s warehouse is now underway. Breaking ground in December 2022, the addition of a further 16,636m2 is expected to be completed by June 2023. The expansion will deliver a 70% increase in warehouse capacity that will support the growth needs of the Company and provide ample space to deliver incremental value-added services to support the Company’s extensive partner network. The completion of the warehouse expansion is also expected to assist with cost rationalisation as various distribution centres that have been accreted as a result of various acquisitions are consolidated. The warehouse expansion is expected to be completed on time and on budget, with construction costs expected to finalise at approximately $12.0m, with a further $3.0m anticipated to complete the fit-out and procure operational equipment to maximise the efficiency of the newly expanded warehouse facility. The opportunity to achieve efficiency gains in the existing warehouse is also being capitalised on, with the fit-out process taking a holistic view of the operation and being designed based on the future needs of the business. BNZ NZ Facility In June 2022 Dicker Data NZ Ltd entered into a new cash advance facility with Bank of New Zealand. This facility replaced the Exeed Ltd invoice finance and cash advance facilities assumed on the acquisition of Exeed Ltd. The new cash advance facility has a limit of $50.0m NZD and was fully drawn in June 2022. The facility also includes a stand-by letter of credit facility for approximately $21.1m NZD to support supplier trade credit arrangements. This facility will help support the ongoing growth and working capital requirements of our growing New Zealand business. Supply Chain Disruption The global chip shortages that have plagued technology and electronics manufacturers in recent years is expected to subside in 2023 as the production capacity of many vendors is forecasted to exceed market demand for the first time since the pandemic began. The significant increase in demand that was driven 36 by digital transformation and the hybrid work movement will be fulfilled in FY23, resulting in the clearing of significant order backlogs that have hampered the Company’s ability to reach its full potential in previous years. Demand for both digital transformation and hybrid work solutions remains strong as the reliance on technology as competitive advantage and differentiator in business deepens. There were no other significant changes in the in the state of affairs of the consolidated entity during the year ended 31 December 2022. Matters subsequent to the end of the financial year Acquisition of Connect Security Products Ltd in NZ On 9th February 2023 the Company entered into a binding Sale and Purchase Agreement (SPA) to acquire the business of Connect Security Products Limited (CSP), New Zealand’s leading distributor of access control, surveillance and fire products. CSP represents a highly strategic acquisition and a valuable addition to the Dicker Access and Surveillance (DAS) platform as it will accelerate the launch of the DAS business in the New Zealand market with key brands Bosch, Sony, Assa Abloy, HID, Motorola and more. The combination of Dicker Data and CSP is expected to deliver compelling growth opportunities for both businesses through the combined Trans-Tasman network and expanded capabilities. Similar to DAS in Australia, CSP will run in parallel to Dicker Data’s existing New Zealand operation and will leverage shared services such as finance, warehousing, logistics and marketing, with the product and sales functions operating independently. CSP’s majority shareholder and Founder, Jason Mackie, will continue leading the business post-acquisition, including managing a team of 10 Auckland-based staff, 2 Christchurch-based staff and 2 Wellington-based staff, in addition to the three branch locations located throughout New Zealand. For its financial year ending 31 March 2023, CSP is on track to generate revenue in excess of NZD $8.0m and deliver normalised EBITDA of approximately NZD $780,000. The acquisition is a net asset purchase and the purchase price of NZD$5.0m is comprised of $3.5m for goodwill with balance for net business assets of $1.5m being predominantly for inventory. The SPA is subject to the satisfaction of a number of conditions, however the transaction is expected to complete 1st March 2023. Dicker Data is constantly examining adjacent sectors to identify the next opportunity for growth and market share. This addition to Dicker Data’s portfolio is in line with the Company’s commitment to offer its partners access to a complete security solution from a range of market leading vendors. Convergence of physical and digital security is a natural progression to protecting the entire business value chain to ensure a stronger security posture. Extension of Bank of New Zealand Facility The $50.0m NZD facility established with Bank of New Zealand in June 2022, was further increased by $8.0m NZD in January 2023 to provide further funding flexibility. There were no other significant matters subsequent to the end of the financial year. Likely Developments And Expected Results Of Operations The changing nature of the IT industry is nothing new to our business, however, the disruption experienced over the last three years has significantly changed the landscape in which our business operates. From surges in demand as the pandemic took hold, to significant backlogs of orders that were unable to be fulfilled as chip shortages strangled supply chains, the IT sector has faced its share of challenges. With these headwinds almost behind the Company, 2023 is set to be another prosperous year, but will also not be without its own unique challenges. The surge in demand and chip shortages of 2020, 2021 and 2022 will finally subside in late 2023 as the production capabilities of the Company’s vendors reaches the capacity to service market demand. As in many sectors, demand can increase, or decrease, very quickly, but the supply-side cannot adapt at the same pace due to the complexity of what is required to manufacture many of the products the Company distributes. As a result, buying power will shift back into the end-customer’s hands in 2023 as order backlogs are fulfilled and vendors manufacture new inventory in line with the dynamics of the previous years, with supply expected to outstrip demand. End-customers will have the ability to choose the technology they want, which is in stark contrast to previous years where many end-customers were forced to take whichever products were available at the time to meet their technology needs. 37 Interest rate increases in FY22 had a material impact on the Company’s profitability. The trend for increasing interest rates is expected to continue in FY23 requiring a more disciplined approach to capital management and more strategic inventory investments. The Company is increasing its focus on its weeks of inventory holdings and general business hygiene as the cost of capital continues to increase. Managing access to capital, inventory holdings and customer credit is part of the Company’s core competencies, and we expect to gain operational efficiencies in these areas as we place increase focus on them, particularly within the businesses that have been recently acquired. The Company undertook a level of organisational introspection in late FY22 to identify areas for improvement and rationalisation. The recently acquired businesses across Australia and New Zealand that were fully integrated in FY22 will be accelerated in FY23 to align the metrics of those businesses to those of the Company’s proven, long-term operating model. Furthermore, we expect to realise the benefits of shared operational functions across the group in FY23 as the focus shifts from integrating businesses to extracting the maximum value from them whilst closely managing the associated costs. The launch of the Company’s access and surveillance, or DAS, business, in FY22 unlocked new revenue streams and new customers. In the 8 months of trading to 31 December 2022, the Company returned the acquired business to growth, with the operational focus of the DAS business now shifting towards accelerating the business and delivering on its full profit potential. The Company is tracking ahead of schedule with its strategy for DAS, having initially allowed for 12 months to deliver on what has been achieved in 8 months. On 9th February 2023, the Company entered into a binding Sale and Purchase Agreement (SPA) to acquire the business of Connect Security Products Limited (CSP) in New Zealand for a purchase price of NZD $5.0m. This acquisition marks the entry of the Company’s DAS business in New Zealand, which brings with it a number of synergies that will be leveraged across both countries to further grow the DAS business. The convergence of the IT and access and surveillance markets is expected to accelerate in FY23. With over 600 of Dicker Data’s IT partners transacting with DAS in FY22, the foundations are now in place to capitalise on the market convergence and to use the learnings and data from these engagements to drive further cross- over between the two markets. The velocity of the DAS business reached a material point by Q422, with revenue growing by 16% on the previous year. The DAS business across Australia and New Zealand is expected to operate at gross margins double that of the IT business in FY23 as its growth is accelerated, the operation is refined and as the division capitalises on shared services. Market demand for some technologies, such as devices, is expected to soften in FY23. The disruption caused by the pandemic, the thirst for digital transformation and the need to support hybrid workforces spurred an unnatural level of demand that has remained constant. This demand is expected to continue in 2023 despite the market dynamics settling and become more predictable. Technology refresh cycles are expected to return to pre-pandemic intervals and we expect enterprise and government to drive market demand in 2023 as they embark on the next phases of their digital transformation, while SMB spending is expected to abate. These dynamics create a unique opportunity for the Company. We have been the demand stimulation and generation engine for our vendors for many years, particularly in the SMB and mid-market segments, and their reliance on our Company to perform this function will be at its highest during FY23 as they seek to improve on their FY22 results by leveraging the strengths of our Company. As a hybrid distribution business focused on value-added services and stock holding, the Company is well- positioned to navigate the challenging market dynamics with its extensive mix of public cloud, security, data management, hybrid and on premise solutions; segments in which the Company’s portfolio is unmatched and our internal skillsets are far superior in comparison to the rest of the market. Environmental Regulation The consolidated entity is subject to the requirements of the National Television and Computer Recycling Scheme covered by the Recycling and Waste Reduction Act 2020. There have been no instances of non- compliance throughout the year. 38 INFORMATION ON DIRECTORS DAVID DICKER Chief Executive Officer (CEO) and Chairman David is the co-founder of the Company and has been a Director of the Company since its inception. David’s role as CEO requires focus on Dicker Data’s business strategy and decision making and under David’s strategic guidance the Company has enjoyed material growth, establishing Dicker Data as one of the leading Australia-based distributors of IT products. Interest in Equities: 10,000,000 Ordinary shares in Dicker Data Limited 48,000,000 Ordinary shares held by Rodin Ventures Limited 10,000 Ordinary shares held by his wife Interest in Contracts: Nil Special Responsibilities: Chairman and responsible for the overall business management and strategy as Chief Executive Officer. 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: 25,741,673 Ordinary shares in Dicker Data Ltd 21,800,000 Ordinary shares held by BTR No 2 Pty Ltd 5,117,172 Ordinary shares held by Fi Brown Family Trust No1 2,988,598 Ordinary shares held by BTR Investments No1 Pty Ltd 105,818 Ordinary shares held by South Coast Developments Pty Ltd as trustee for the Brown Family Superfund Interest in Contracts: Nil Special Responsibilities: Member of the Audit and Risk Management Committee Member of the Nomination and Remuneration Committee Other Current Listed Company Directorships: None Other Current Listed Company Directorships held in Previous 3 Years: None 39 VLADIMIR MITNOVETSKI Executive Director and Chief Operating Officer 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 18 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 masters 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 Equities: 767,912 Ordinary shares in Dicker Data Limited 48,184 Ordinary shares held by Mitnovetski Pty Ltd as Trustee for Mitnovetski Superannuation Fund 20,627 Ordinary shares held by his wife Interest in Contracts: Nil Special Responsibilities: Responsible for the sales, vendor alliances and operations of the consolidated entity. 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 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 15 years’ experience in accounting and taxation. Mary holds a Bachelor of Commerce Degree with a major in Accounting from the University of New South Wales. Mary is also an Executive Director of the Company and has been a Director since 31 August 2010. Interest in Equities: 69,335 Ordinary shares in Dicker Data Limited 238,166 Ordinary shares held by Stojen Pty Ltd as trustee for Stojinvest Superannuation Fund 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 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, with role expanding to Director of Operations in 2020 taking on responsibility for overall warehouse logistics and business operations. 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: 68,000 Ordinary shares in Dicker Data Limited 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 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. Interest in Equities: 3,386 Ordinary shares in Dicker Data Limited 6,885 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 40 41 KIM STEWART-SMITH Non-Executive Director Kim was appointed as an independent Non-Executive Director on 29 March 2021. Prior to her appointment Kim spent 20 years in senior roles in Professional Services Firms and is currently running her own Business Advisory and Chartered Accounting firm. She was also founder and Director of business advisory at chartered accounting firm Altus Financial. Kim has also spent 3 years as Oceania Corporate Services Leader for Ernst and Young. In this role she oversaw a team of 65 both within Oceania and Manilla delivering outsourced virtual CFO, finance, accounting and Company secretarial services to clients of Ernst and Young. Kim has extensive experience in senior commercial finance roles. She was CEO of an international technology Company that explored a strategic sale, and she spent 8 years as CFO and Company Secretary for Austereo and Mojo Publicis Advertising. Kim holds a Senior Executive MBA from Melbourne Business School, a Bachelor of Business with majors in Accounting and Finance, and she holds a Public Practice Certificate from the Institute of Chartered Accountants Australia and New Zealand. Interest in Equities: 4,941 Ordinary shares held by Stewart & Smith Pty Ltd as Trustee for Stewart-Smith Superannuation Fund Interest in Contracts: Nil Special Responsibilities: Chair of the Audit and Risk Management Committee Member of the Nomination and Remuneration Committee Other Current Listed Company Directorships: None ERIN MCMULLEN Company Secretary Erin McMullen was appointed to the position of Company Secretary on 6th November 2018. Erin has over 11 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. 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: Board Audit & Risk Committee Nomination & Remuneration Committee Meetings eligible to attend Meetings attended Meetings eligible to attend Meetings attended Meetings eligible to attend Meetings attended 11 11 11 11 11 11 11 11 11 11 11 11 10 10 - 3 - - - 3 3 - 3 - - - 3 2 - 2 - - - 2 2 - 2 - - - 2 2 Directors Mr David Dicker Ms Fiona Brown Mr Vladimir Mitnovetski Ms Mary Stojcevski Mr Ian Welch Ms Leanne Ralph Ms Kim Stewart-Smith 42 REMUNERATION REPORT (AUDITED) Introduction from the Chair of the Nomination & Remuneration Committee Dear Shareholders, On behalf of Dicker Data’s Nomination & Remuneration Committee, I am pleased to present our Remuneration Report for the year ended 31 December 2022. At our annual general meeting in May 2022, the Company received its second strike against its Remuneration Report despite significant effort to explain and describe the linkage between our strategy, remuneration principles and remuneration framework and how these have been driving the significant shareholder returns Dicker Data has achieved. This report will again focus on the rationale of our remuneration practices and how these practices drive the returns enjoyed by shareholders over the past ten years. It will also outline the consideration given to the strike against our remuneration report. In a highly competitive industry that does not provide for the development or maintenance of any economic moats, annual profit growth and, as a consequence, our dividends, is the primary driver of value. The primary driver of market value is also the primary determinant of Executive remuneration. Incentives make up greater than 84% of Executive remuneration. The determinants of incentive payments are margin and profit. This ensures alignment with shareholder interests. It varies Executive pay levels with profit levels and the Company’s capacity to pay. It is also transparent, audited, simple to understand, and straightforward to administer. The short-term profit focus (fed primarily by winning new business) feeds into long term wealth, since new business turns into annual recurring revenue, contributing to profits in future years. This is evident from the table below. Dicker Data Growth Sale Revenue Net Operating Profit Before Tax EPS Dividends per Share TSR 10yr 581.7% 772.2% 541.7% 1507.1% 2983.7% 5yr 137.7% 166.1% 149.9% 350.0% 331.5% 1yr 25.2% 0.9% -1.9% 44.0% -28.2% FY22 Outcomes FY22 has seen companies classified as technology stocks fall in value across the board. This has been the market’s response to changes in the economic cycle and the rising cost of capital, in the way it values technology companies. The fundamentals of Dicker Data vary markedly from most others classified as technology companies due to our business model’s revenue and profit sustainability. So, while the market’s revised valuation basis has had a negative impact on Dicker Data’s share price, it has been far less pronounced than most others in its sector. Moreover, on a forward looking basis the Company’s fundamentals are sound. We are capital light, focussed on business to business sales rather than to end consumers, have a loyal 43 and sticky customer base, tried and tested customer solutions, and have a small share of a very large and fragmented small medium enterprise market for technology equipment and support. Despite predictable headwinds arising from higher customer capital constraints, and less predictable but significant headwinds arising from supply constraints, the Dicker Data Executive Team has again grown both Revenue and Net Operating Profit Before Tax. Our strategy reflects our shareholder base, primarily containing retail shareholders as opposed to Institutional investors. Due to the consistent profit in this year and the growth in profit in prior years., we have been able to increase our dividends per share by 44.0%. Consistent years of high profit and performance have allowed us to reward shareholders. Incentives and realisable remuneration (base pay plus incentives) were again highly correlated with profit and dividends realised by shareholders, consistent with prior years. Our Executive pay alignment with our fundamental driver of value is a key advantage of the Dicker Data framework. As FY22 Net Profit Before Tax has been sustained from the prior year the pay of the Executive KMPs whose incentives are expressed as a direct percentage of this profit has remained in line with the prior year. Response to Second Strike At our 2021 AGM, 66.7% of the votes received supported the remuneration report for the financial year ended 31 December 2021. Votes cast against the FY21 Remuneration Report were 33.3%. At our 2021 AGM 28.9% of votes cast were against the FY20 Remuneration report, which constitutes a ‘second strike’ under the Corporations Act 2001 (Cth). This triggered a vote to spill the Board, requiring all Directors excluding the Managing Director to be subject to an election at a General Meeting held within 90 days. The spill resolution was rejected by 87.9% to 12.1%. Proxy advisors and shareholder feedback on our last two remuneration reports indicated concern with the uncapped nature of the profit share plan, the absence of a long-term incentive plan and the lack of equity payments and/or deferral on the profit share plan. This feedback may not reflect the views of all our shareholders. Nevertheless, we do not agree with placing a cap on how much incentive an Executive can earn providing it can be funded and is proportional to profit, as this would be a misalignment with the interests of shareholders, and act as a disincentive for better performance. We do agree that reward in all or part as deferred equity in lieu of cash would provide better alignment with shareholder interests. However, the need for this is offset by the fact that our Executives already hold stock that greatly exceeds normative standards within the ASX 200. The remuneration report vote outcome was disappointing. It reflected the views of shareholders who held 10.3% of our shares, so that the strike was, in effect, an outcome of votes from 3.4% of shares held. Even if shares held by related parties are excluded, the proportion of shares voting against was just 10.2%. The votes were from mainly institutional shareholders, the majority of whom receive proxy advice derived in most cases from a standardised set of guidelines applicable to all issuers irrespective of the nature and type of Company, and its business strategy. The Board seriously considered their feedback, and considered whether it was a valid reflection of most shareholders views, rather than just 10.2% of shares held. However, there is insufficient evidence either way that this was a valid reflection of shareholder views more broadly. We also considered the extent that the framework is in the best interests of our shareholders. On balance, we decided that it was, purely because it has been successful in attracting and retaining the best Executives in the industry, based upon the level of sustained performance delivered over the tenure of their employment to date. Lastly, we reviewed the extent to which we could change Executive incentive frameworks if we decided a change was necessary. Again, we can be definitive. Executives have their percentage of profit share clearly and irrevocable defined in their contracts. Hence we cannot unilaterally amend any aspect of remuneration without consent. Rationally, the only responsible recommendation that the Independent Directors can make to the full Board can responsibly take is that no changes be made to the remuneration framework because: • no changes can be legally made; and • the existing arrangement continues to operate in favour of delivering the best result for shareholders, despite calls for deferred equity that is subject to a holding lock. FY23 remuneration No increase to base pay or incentive opportunity is planned in FY23. We completed a Non-Executive Director (NED) fee review in 2022. This determined that our NED fees were below market. As such NED fees will be increased in FY23. The new fees, along with a fee pool increase, will be disclosed in the Notice of Meeting. Concluding comments No other ASX300 Company has remuneration as directly linked to performance as Dicker Data. It is the most transparent and simple Executive remuneration structure among listed peers. Our policy whereby almost all Executive remuneration is tied to our profitability sets us apart from competitors, and ensures we attract, retain and focus the industry’s best talent on the key driver of shareholder returns and sustainable value. Moreover, unlike peers, it has a symmetry in that it can decline as easily as it can increase. Dicker Data remains focused on delivering growth. We believe that our remuneration structure combined with Executives who have significant “skin in the game” positions us well to continue providing our shareholders with strong returns, ensures Executive pay varies with performance, and exposes and aligns Executives personal asset holdings with the long term interests of shareholders. The fact that all Executive KMP (excluding the founder, David Dicker), purchased more shares in FY22, stresses the confidence of our Executive Team in our strategy and value. Notwithstanding our legal constrains, we remain open to remuneration frameworks that are simpler, transparent and aligned. To that end we will continue to have ongoing dialogue with proxy advisers, our shareholders and our staff to ensure our framework continues to deliver on that promise. Leanne Ralph Chair of the Nomination & Remuneration Committee 27 February 2023 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. Consideration of FY21 strike feedback b. Key management personnel c. Principles used to determine the nature and amount of remuneration d. Details of remuneration e. Service agreements f. Share-based compensation g. Additional disclosures relating to key management personnel (a) Consideration of FY21 Strike feedback At our annual general meeting in May 2022, the Company received its second strike against its Remuneration Report despite significant effort to explain and describe the linkage between our strategy, remuneration principles and remuneration framework and how these have been driving the significant shareholder returns Dicker Data has achieved. 44 45 The following table summarises the issues raised by our shareholders and their proxy advisors in connection with the FY21 Remuneration Report resolution. Our assessment and consideration of these concerns are also in the table below. Issue raised Consideration by Company No proportion of Executive remuneration is deferred/ delivered in equity If Executives did not own Dicker Data shares, or were not actively acquiring our shares to meet ownership expectations, the absence of equity as part of remuneration would be a valid concern. However, Dicker Data executives already have accumulated our shares with after tax proceeds from their incentive payments. Their personal exposure to total shareholder returns, and hence alignment with shareholder interests, is significant. Their “skin in the game” is considerably higher than Executives in peer companies. In FY22 all Executives excluding the CEO/founder have purchased shares. This shows the Executives have confidence in our Company’s underlying value and or business strategy. The following table breaks down the current shareholding levels as a proportion of base pay for each Executive: KMP Vladimir Mitnovetski Mary Stojcevski Ian Welch Shareholding as at 31 Dec 22 ($) Shareholding as a multiple of Base Pay (%) 8,526,207 3,133,435 692,920 14.2 12.5 2.7 There is an argument that remuneration deferral with equity would assist in Executive retention. In considering this we note that each member of the Dicker Data Executive Team has been at the Company for over 8 years, exceeding the current average ASX300 Company Executive tenure by about 3 years. This suggests that the current policy has been effective at retention of talented Executives that deliver performance. Therefore deferral would serve no further purpose given their levels of ownership and exposure, while detracting from the simplicity and attractiveness of our incentive plans for talented Executives who get results. In FY22 a formal mandatory shareholding requirement was introduced for Executives to have shareholdings equal to 300% of base pay to ensure all current and future Executives achieve and maintain significant shareholdings will be introduced. Although our Executives have binding employment agreements currently in force, they have nevertheless fully endorsed this change. All have voluntarily agreed with this requirement. These requirements are matched only by very few of the larger ASX300 companies. We have deliberately configured our business to be agile, with limited long term risk exposure. That is, we are asset light. Most capital deployment is in inventory, which we turn over quickly to further reduce capital risk from obsolescence and write downs. This permits us to focus primarily on sales and service, agilely responding to our customers’ needs. Unlike competitors, we do not want to be weighed down by legacy systems in a fast moving world of technology. Vendors that we stock invest the capital, so we do not have to. The spread of vendors and their products permits us to always have solutions for our customers, providing we are agile enough to identify new technology opportunities to configure to their needs. This pressure to respond in the short term is the reason we have maintained consistently high levels of profit growth since we have listed. Our incentive plan is essential to this strategy, while Executive share ownership has ensured good levels of alignment. No LTI plan Executives are entitled to a percentage of net operating income before tax without a limit on outperformance The Executive Team has low levels of base pay in comparison to market practice. A larger proportion of Executives’ realised remuneration is at risk relative to market practice. In the event that the gateway (a net profit margin of 2.5%) is not achieved no profit share incentive will be earned. Based on the feedback, it appeared that the uncapped profit share was an issue for some proxy advisors and investors because it can result in very high remuneration relative to similarly sized companies. This appeared to outweigh, for the few that noted it, the very low remuneration relative to others that could equally result if performance was poor. It also appeared to ignore Issue raised Consideration by Company Executives are entitled to a percentage of net operating income before tax without a limit on outperformance performance relative to other companies. Dicker Data values remuneration and performance symmetry. It does not subscribe to the view that Executive pay can go up but not down. Hence our philosophy more equitably shares the risk between Executives and shareholders. In FY22 our net operating income before tax was approximately the same as FY21 and as such our Executives’ remuneration was effectively unchanged. To cap the Executive pay upside, we would have to increase the floor on the Executive pay downside. We do not want to condemn shareholders with mediocrity by in effect saying to Executives we do not want them to outperform. We do. Introducing a cap on outperformance of Executives would be demotivating, reduce Executive retention, require Dicker Data to raise base pay and undermine the model that has increased shareholder wealth so significantly since listing as a public Company. Only one performance measure Some proxy advisors and investors were concerned that there was a singular focus on one measure. To some investors this would increase risk that other important aspects would be disregarded, resulting in loss of value. We have considered this within the context of the nature of the Company and Executive shareholdings. We are reasonably satisfied from this review that the primary driver of value is profit. Since 2018, the net operating profit before tax has grown at an average rate of 22.3%. Shareholder wealth has increased at an average rate of 47.1% per annum over this period. For the FY22 financial year, earnings per share remained relatively constant whilst dividends per share increased by 44.0%. While there are other important performance factors, they are primarily hygiene measures. That is, they are necessary as leading indicators of ongoing organisational health. While they are not primary value drivers, failure to attend to these can be risky, and consequently impact share price and dividends. Hence as a Board we do set standards for our Executives, and measure and monitor these. Rather than signalling any of these out, assigning a weight, and varying pay according to a formula, we believe the impact of these is best managed through requiring high levels of Executive share ownership. This has now been formalised with the Mandatory Shareholding Requirement (MSR). (b) Key management personnel Key management personnel (KMP) covered in this report are detailed below: Name Position Held David Dicker Chief Executive Officer Vladimir Mitnovetski Chief Operating Officer Mary Stojcevski Chief Financial Officer Tenure Full Year Full Year Full Year Ian Welch Chief Information Officer and Director of Operations Full Year Fiona Brown Non-Executive Director Leanne Ralph Independent Non-Executive Director Kim Stewart-Smith Independent Non-Executive Director Full Year Full Year Full Year e v i t u c e x E s r o t c e r i D e v i t u c e x E - n o N s r o t c e r i D 46 47 (c) Principles used to determine the nature and amount of remuneration 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. The Executives’ cash incentive entitlements are assessed and paid either monthly or quarterly based on the actual performance against the relevant monthly or quarterly profit with reconciliation at the end of the financial year against the audited full-year actual profit. The performance-related award is uncapped after the threshold performance metric has been achieved. The chairman and CEO is responsible for assessing whether an individual’s targets have been met. These key principles are: The performance-related cash incentives align with Dicker Data’s strategy by: • • • • 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 personnel. 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 arrangements are specified in each Executive’s employment agreement. Any changes to remuneration can only be legally amended with the consent of the Executives. Remuneration is intended to attract and retain Executives capable of managing the Company’s operations, achieving the Company’s strategic objectives, and increasing shareholder wealth. Executives Remuneration Framework The Executive pay and reward framework includes the following components: • Base pay and benefits • Performance-related cash incentives • Other statutory-based remuneration components 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. The following table summarises the Executives’ base pay in FY22 as well as FY21: • Focussing Executives on the key value driver for share price and dividends. • • Varying remuneration directly with the performance of the Company and its capacity to pay. Establishing a performance gateway requiring a minimum margin to be achieved before any payment is made. Lower risk through having relatively low fixed remuneration cost. Providing for zero incentives in the event of poor performance. Being simple to understand, monitor and audit. Providing remuneration that is highly competitive, but only for Executives who perform. Aligning Executive prosperity with shareholders via a high shareholding requirement. • • • • • 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. Kim Stewart- Smith was appointed to the Board as a non-Executive independent Director in March 2021. Fiona Brown is also Non-Executive Director, but is also a major shareholder, and therefore not considered independent. The following table summarises the Non-Executive Director fees in FY22 as well as FY21: Name Non-Executive Director Fees Committee Chair Fees FY22 $60,000 $5,000 FY21 $60,000 $5,000 We completed a NED fee review in 2022. This determined that our NED fees were below market. As such NED fees will be increased in FY23. The new fees, along with a fee pool increase, will be disclosed in the Notice of Meeting. FY22 Base Pay FY21 Base Pay (d) Details of remuneration Name David Dicker Vladimir Mitnovetski* Mary Stojcevski Ian Welch - $600,000 $250,000 $250,000 - $600,000 $250,000 $250,000 * 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 incentive is subject to the Company achieving a net profit margin of 2.5% in a calendar quarter. Performance-related incentives Performance-related cash incentive entitlements are contingent on Net Profit Before Tax, but only if a minimum margin gateway has been achieved. Non-financial objectives are also assessed in rating Executive performance in meeting the Company’s business objectives which include costs control, revenue per head metrics and developing new business by growing vendor and customer base.. Using profit ensures variable reward is only available when value has been created for shareholders. Incentives vary with the Company’s capacity to pay incentives. 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. During the tenure of the current Executive Team, financial performance has improved significantly. The Executive Team increased the net operating profit on an average over the last 5 years by 22.3%. As a large proportion of the Executive’s remuneration package is based on net operating profit outcomes Executive remuneration has also increased over this time, although remaining relatively flat for FY22 against prior year. Shareholder wealth has increased at an average rate of 47.7% per annum over this 5 year period. However, share price declined by 31.3% over the financial year, which may be attributable to a change in how investors are valuing technology Company fundamentals. For the financial year, earnings per share remained relatively constant whilst dividends per share increased by 44.0% Dicker Data’s total shareholder return (TSR) was impacted in the past year by the general market downturn and the re-rating of technology industry stock price fundamentals. Given the strength of Dicker Data’s financial performance and high dividends we expect market performance to return to the fundamentals after the correction has run its course. 48 49 The following table summarises net operating profit before tax and TSR over the past ten years: x a t e r o f e b t i f o r p g n i t a r e p o t e N $120m $100m $80m $60m $40m $20m $0m 4500% 4000% 3500% 3000% 2500% 2000% 1500% 1000% 500% 0% R S T 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Net operating profit before tax TSR (since 1 Jan 2013) David Dicker does not participate in the profit share based incentive plan. The following table summarises FY22 incentive pay outcomes for the KMP Executives who are eligible: Net Profit Margin Threshold Net Profit Margin Achieved Net Profit Before Tax Profit Share % Profit Share $ Name Vladimir Mitnovetski Mary Stojcevski 2.5% 3.4% $104.8m Ian Welch 4.0% 1.5% 1.5% $4,191,992 $1,572,000 $1,572,000 As the net profit margin percentage performance gateway was achieved for FY22, each Executive received their incentive based on Net Profit Before Tax. The following graphs compare each Executive’s performance to Company outcomes over the last five years. These graphs display how the performance of the current Executive Team has driven growth over the past five years and how the Executives have been paid for their performance. 600% 500% 400% R S T 300% 200% 100% 0% $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 ) $ ( e r a h S t i f o r P 2018 2019 2020 2021 2022 TSR (since 1 Jan 2018) Vladimir Mitnovetski Mary Stojcevski Ian Welch Total Remuneration Compensation paid to Key Management personnel is set out below. Key Management personnel include all Directors of the Company and Executives who, in the opinion of the Board and CEO, have authority and responsibility for planning, directing and controlling the activities of the group directly or indirectly. Short Term Short Term Long Term Share Based Payments Incentive Cash Bonus Super Non-Cash Annual Leave Long Service Shares Options Total Cash Salary & Fees $ - - - - FY Dec-22 Dec-21 Dec-22 Dec-21 $ - - $ - - 4,191,992 440,159 4,203,891 399,370 Dec-22 250,000 1,572,000 191,310 Dec-21 250,000 1,576,459 173,514 Dec-22 250,000 1,572,000 191,310 Dec-21 250,000 1,576,459 173,514 Executive Directors David Dicker Chief Executive Officer Vladimir Mitnovetski Chief Operating Officer Mary Stojcevski Chief Financial Officer Ian Welch Chief Information Officer Non-Executive Directors Fiona Brown Leanne Ralph Kim Stewart-Smith Dec-22 54,422 Dec-21 54,289 Dec-22 58,957 Dec-21 58,382 Dec-22 58,957 Dec-21 45,031 - - - - - - 5,578 5,294 6,043 5,694 6,043 4,426 TOTAL Dec-22 672,336 7,335,992 840,443 Dec-21 657,703 7,356,809 761,810 FBT Reportable $ Leave $ Leave $ $ $ - - - - - - - - - - - - - - - - - - - - 36,740 16,220 32,314 10,003 421 7,051 15,877 14,143 11,284 6,120 13,778 4,234 - - - - - - - - - - - - 48,445 29,391 61,969 28,380 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Proportion of remuneration that is performance based % % of value of remuneration that consists of share Based Payments % $ - - - - 4,685,111 100.00% 4,645,577 100.00% 2,020,782 85.18% 2,029,993 85.04% 2,030,714 84.77% 2,017,985 85.54% 60,000 59,583 65,000 64,076 65,000 49,456 8,926,607 8,866,671 - - - - - - - - - - - - - - - - - - - - - - - - * 100% of short-term incentive cash have vested (e) Service agreements Terms of employment for the Executive Directors and other key management personnel are by way of Consultancy Agreement or an Executive Service Agreement (ESA). The contract details the base salary and performance-related incentives. 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 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 50 51 in the quarter. Profit incentive 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 $250,000 per annum. Ms Stojcevski is also entitled to a performance incentive 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 for all purposes 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 incentive equal to 1.5% 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. Mandatory Shareholding Requirement The Company has a policy that requires Executive KMP and NEDs to have a minimum shareholding. Executive KMP are required to hold the equivalent to the 300% of base salary. This is expected to be met within 3 years of appointment or 3 years of the implementation of the policy. All Executives comply with the policy. Ian Welch’s current holdings remain below 300% of base pay, but he has 2 year remaining to fully comply. NEDs are required to hold the equivalent to the 100% of annual fees. This is expected to be met within 3 years of appointment or 3 years of the implementation of the policy. (f) Share-based compensation No shares, rights, or options were granted to Directors or key management personnel during the year ended 31 December 2022, no rights or options vested or lapsed during the year, and no rights or options were exercised during the year by Directors. (g) Additional disclosures relating to key management 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: December 2022 Ordinary Shares David Dicker Fiona Brown Vladimir Mitnovetski Mary Stojcevski Ian Welch Leanne Ralph Kim Stewart-Smith 52 Balance at the start of the year Additions Disposals Balance at the end of the year 58,010,000 55,722,836 774,004 266,264 64,528 7,210 1,500 - 30,425 62,719 41,237 3,472 3,061 3,441 114,846,342 144,355 - - - - - - - - 58,010,000 55,753,261 836,723 307,501 68,000 10,271 4,941 114,990,697 Balance at the start of the year Additions Disposals Balance at the end of the year December 2021 Ordinary Shares David Dicker Fiona Brown 60,750,000 55,169,743 Vladimir Mitnovetski 951,580 Mary Stojcevski Ian Welch Leanne Ralph 247,606 64,528 18,803 Kim Stewart-Smith - - (2,740,000) 553,093 84,032 18,658 - 3,175 1,500 - (261,608) - - (14,768) - 58,010,000 55,722,836 774,004 266,264 64,528 7,210 1,500 117,202,260 660,458 (3,016,376) 114,846,342 This concludes the remuneration report which has been audited. 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 sales of goods and services which are billed to Rodin Cars Ltd both in Australia and New Zealand. Total amount billed to Rodin Cars Ltd for FY22 was $113,894. 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 2021 was $403,283 which was fully repaid during the year and balance owing as at 31st December 2022 was nil. The principal amount financed was $2,566,340.72 In addition to these transactions there were also payments made on behalf of shareholders David Dicker and Rodin Ventures Ltd throughout the year that were subsequently reimbursed, or funds were deposited in advance to cover these expenses. As at 31 December 2022 there was $907,302 owed by David Dicker to the Company and $17,164,810 was owed by the Company to Rodin Ventures Ltd. 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. 53 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. 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 52. 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 27 FEBRUARY 2023 54 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 31 December 2022 Revenue Sales revenue Other revenue: Interest received Recoveries Other revenue Expenses Changes in inventories Purchases of inventories Employee benefits expense Depreciation and amortisation Finance 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 The statement of profit or loss and other comprehensive income is to be read in conjunction with the attached notes. Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 Note 3,103,666 2,479,423 553 137 52 326 - 4,710 4 3,104,408 2,484,459 5 5 60,428 88,029 (2,880,434) (2,337,117) (130,578) (100,993) (12,295) (11,129) (9,104) (3,875) (25,547) (16,302) (2,999,555) (2,379,362) 104,853 105,097 6 (31,806) (31,535) 73,047 73,047 73,562 73,562 (103) 72,944 72,944 Cents 41.80 41.80 62 73,624 73,624 Cents 42.63 42.63 32 32 55 STATEMENT OF FINANCIAL POSITION STATEMENT OF CHANGES IN EQUITY As at 31 December 2022 For the year ended 31 December 2022 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 Borrowings 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 Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 Note 10 11 12 15 13 14 8 16 15 17 7 18 17 15 9 18 19 20 12,263 581,780 261,703 7,413 455,467 201,276 855,746 664,156 19,748 87,623 95,968 7,664 2,709 82,287 98,630 6,341 211,003 189,967 1,066,749 854,123 484,370 398,179 2,794 2,715 241,681 170,169 1,867 21,849 11,216 17,294 752,561 599,573 50,000 60,000 16,401 13,738 3,904 84,043 439 13,698 2,116 76,253 836,604 675,826 230,145 178,297 212,742 139,527 229 332 17,174 38,439 230,145 178,297 Consolidated Balance at 1 January 2021 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 $’000 Retained Profits $’000 Reserves $’000 Total Equity $’000 Note 131,790 29,553 270 161,613 - - - 73,562 - 73,562 - 73,562 62 62 62 73,624 Share Issue (DRP) Dividends Paid 19 21 7,737 - - (64,676) - - 7,737 (64,676) Balance at 31 December 2021 139,527 38,439 332 178,297 Consolidated Balance at 1 January 2022 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) Share Issue (Capital Raise) Dividends Paid Issued Capital $’000 Retained Profits $’000 Reserves $’000 Total Equity $’000 Note 139,527 38,439 332 178,297 - - - 73,047 - 73,047 - (103) (103) 73,047 (103) 72,944 19 19 21 2,987 70,228 - - - - 2,987 70,228 - (94,311) - (94,311) Balance at 31 December 2022 212,742 17,174 229 230,145 The statement of changes in equity is to be read in conjunction with the attached notes. The statement of financial position is to be read in conjunction with the attached notes. 56 57 STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2022 For the year ended 31 December 2022 Note 31-Dec-22 $’000 31-Dec-21 $’000 Cash flows from operating activities Receipts from customers (inclusive of GST) 3,302,537 2,638,571 Payments to suppliers and employees (inclusive of GST) (3,249,242) (2,586,494) Interest received 4 553 326 Interest and other finance costs paid Income tax paid (10,272) (3,715) (42,438) (28,073) Net cash from operating activities 30 1,138 20,615 Cash flows from investing activities Payments for property, plant and equipment 13 (11,125) (7,077) Proceeds from sale of property plant and equipment Payments for intangibles Payment for purchase of business, net of cash acquired Net cash used in investing activities Cash Flows From Financing Activities Proceeds from share issue Drawdown of borrowings Principal paid on lease liabilities Interest paid on lease liabilities Payment of dividends Net cash from financing activities Net cash flows Cash and cash equivalents at the beginning of the period 14 28 15 15 373 (285) (1) (2) (21,267) (63,640) (32,304) (70,720) 70,228 (47) 61,512 86,826 (3,543) (2,576) (857) (160) (91,324) (56,893) 36,016 27,150 4,850 (22,955) 7,413 30,368 Cash and cash equivalents at the end of period 10 12,263 7,413 The statement of cash flows is to be read in conjunction with the attached notes. 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 2022, 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 2022 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 58 59 controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its 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. 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. 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. 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. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non- controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre- existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition- date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. 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 60 61 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. 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 Operating Segments. 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. Included in each of the operating segments is the respective revenue from the Exeed Australia and Exeed New Zealand businesses. Operating Segment Information Consolidated - December 2022 $'000 $'000 $'000 Australia New Zealand Eliminations/ Unallocated Revenue* Sale of goods Other revenue: Interest received Recoveries Other revenue Total Revenue EBITDA 2,553,606 550,060 338 137 599 215 - (547) 2,554,680 549,728 118,088 9,636 Depreciation & amortisation (7,862) (4,433) Interest received Finance costs Profit before income tax Income tax expense Profit after income tax expense 338 215 (8,307) (2,822) 102,257 (31,188) 71,069 2,596 (618) 1,978 The information reported to the CODM is on at least a monthly basis. Segment current assets 719,963 135,783 Intersegment Transactions During the year there was no dividend paid from Dicker Data NZ Ltd to Express Data Holdings Pty Ltd (2021: $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. Segment non current assets 144,953 66,050 Segment Assets Segment current liabilities 864,916 201,833 633,776 118,785 Segment non current liabilities 62,158 21,885 Segment Liabilities 695,934 140,670 *Revenue by product type and geographic location is disclosed at Note 4 TOTAL $'000 3,103,666 553 137 52 3,104,408 127,724 (12,295) 553 (11,129) 104,853 (31,806) 73,047 855,746 211,003 1,066,749 752,561 84,043 836,604 - - - - - - - - - - - - - - - - - - 62 63 Operating Segment Information Consolidated - December 2021 $'000 $'000 $'000 Australia New Zealand Eliminations/ Unallocated 2,152,620 326,803 260 - 4,475 66 - 235 2,157,355 327,104 - - - - - TOTAL $'000 2,479,423 326 - 4,710 2,484,459 Revenue Sale of goods* Other revenue: Interest received Recoveries Other revenue Total Revenue EBITDA 108,443 9,307 - 117,750 Depreciation & amortisation (7,226) (1,878) Interest received Finance costs Profit before income tax Income tax expense 260 (2,662) 98,815 66 (1,213) 6,282 (30,000) (1,535) Profit after income tax expense 68,815 4,747 - - - - - - (9,104) 326 (3,875) 105,097 (31,535) 73,562 Segment current assets Segment non current assets 625,334 137,683 53,293 52,284 (14,471) 664,156 - 189,967 Segment current liabilities 531,197 82,847 (14,471) 599,573 Segment non current liabilities 69,368 6,885 - 76,253 Segment Liabilities 600,565 89,732 (14,471) 675,826 *Revenue by product type and geographic location is disclosed at Note 4 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 2022 Product Type Infrastructure Description Hardware products Virtual Services Sales of 3rd party warranties and services Revenue recognition (PIT/OT) Point in time Agent/ Principal Principal AU 1,728,077 NZ 390,947 Consolidated $’000 2,119,024 Point in time Principal 145,678 13,308 158,986 Perpetual and subscription licensing including cloud products Point in time Principal 668,126 145,696 813,822 Dicker Data Services 3rd party logistics and configuration services Point in time Principal Partner Services Agent commission Point in time Agent 5,289 6,436 109 - 5,398 6,436 2,553,606 550,060 3,103,666 Segment Assets 763,017 105,577 (14,471) 854,123 Software Year to 31 December 2021 Product Type Infrastructure Description Hardware products Virtual Services Sales of 3rd party warranties and services Software Perpetual and subscription licensing including cloud products Dicker Data Services 3rd party logistics and configuration services Revenue recognition (PIT/OT) Point in time Agent/ Principal Principal AU 1,498,821 NZ 221,083 Consolidated $’000 1,719,904 Point in time Principal 143,448 9,980 153,428 Point in time Principal 499,521 95,648 595,169 Partner Services Agent commission Point in time Agent 6,068 Point in time Principal 4,762 92 - 4,854 6,068 64 2,152,620 326,803 2,479,423 65 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. Sales from contracts with customers: Sale of goods and services Other revenue: Interest Recoveries Other revenue Total Revenue Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 Note 3,103,666 2,479,423 553 137 52 326 - 4,710 3,104,408 2,484,459 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) or 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 interest on ROUA Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Operating leases For the current financial year 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). Amortisation of right-to-use assets is in line with AASB 16 and represents unwinding of the liability in principal on straight-line basis and interest component is expensed. Depreciation Building Plant and equipment Total depreciation Amortisation Software Right of Use Asset Customer Contracts, Brands, Non Compete Total amortisation Total deprecation and amortisation Finance costs Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 Note 2,139 2,593 4,732 9 3,103 4,451 7,563 12,295 1,851 2,185 4,036 15 2,387 2,666 5,068 9,104 Interest and finance charges paid / payable 11,129 3,875 Superannuation expense Defined contribution superannuation expense 9,578 6,816 6. Income Tax 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 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. 66 67 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. Dicker Data NZ Limited has now also formed a tax consolidated group in New Zealand effective for the FY22 year for New Zealand wholly owned subsidiaries. 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 33,527 32,565 Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 Over/(Under) provision in respect of prior years Deferred tax (expense/benefit) 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 3 33,530 (1,283) (441) (1,724) 31,806 (1,441) 40 118 (1,283) 86 32,651 (904) (212) (1,116) 31,535 188 (1,210) 118 (904) Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 (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% 31,440 31,529 Add tax effect of: Under provision for income tax in prior year Non-deductible expenses Less tax effect of: Differences in overseas tax rates Income tax expense attributable to entity 103 475 (127) 236 32,018 31,638 (212) 31,806 (103) 31,535 The applicable weighted average effective tax rates are as follows: 30.0% 30.0% 7. Current tax Current tax liability 8. Deferred Tax Asset Deferred tax asset comprises temporary differences attributable to: 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 1,867 11,216 196 5,490 632 1,402 526 550 4,030 460 1,408 265 (1,779) (1,054) 960 327 237 7,664 6,341 1,441 (118) 7,664 355 6,341 6,135 (57) 263 6,341 68 69 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 Credited / (charged) to equity Closing Balance Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 781 28 2,268 10,661 13,738 13,698 40 - 243 13 1,460 11,982 13,698 4,154 9,544 - 13,738 13,698 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. 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 a decrease in the provision in the profit and loss of $1.1m to $673k (2021: $1.8m) in respect of impairment of receivables for the year ended 31 December 2022. 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. Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 264,621 203,073 (2,918) (1,797) 261,703 201,276 Cash at bank 12,263 7,413 Finished Goods Less: Provision for Impairment 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. 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: Trade receivables Less: Provision for impairment of receivables Other receivables 521,976 418,063 (673) (1,809) 521,303 416,254 60,477 39,213 581,780 455,467 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. 70 71 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. Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: 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 Less accumulated depreciation 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 Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 18,435 18,435 59,123 (2,748) 56,375 74,810 7,661 (449) 7,212 12,157 (6,612) 5,545 312 (256) 56 12,813 87,623 55,912 (1,380) 54,532 72,967 6,267 (2,048) 4,219 13,465 (8,370) 5,095 252 (246) 6 9,320 82,287 Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Balance at 1 January 2021 18,435 53,360 2,606 Additions through business combinations Additions Depreciation expense Disposals Effect of movements in exchange rate - - - - - Freehold land $’000 Buildings $’000 Fitout Costs $’000 Plant and equipment $’000 Motor vehicles $’000 - - 2,552 2,087 3,615 1,268 2,438 8 - - (1,380) (471) (2,183) (2) (4,036) - - - (3) (38) (5) Total $’000 78,024 1,268 7,077 - - 6 (31) (8) 82,287 Balance at 31 December 2021 18,435 54,532 4,219 5,095 Additions Depreciation expense Disposals Effect of movements in exchange rate - - - - 3,211 3,737 4,071 (1,368) (771) (2,577) - - (6) 33 (1,027) (17) 106 (16) (40) - 11,125 (4,732) (1,073) 16 Balance at 31 December 2022 18,435 56,375 7,212 5,545 56 87,623 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. Additional indentifiable intangibles for customer contracts were added for the FY21 year as a result of the Exeed group acquisition and finite life of the new customer contracts varies between each country. Brand On the basis of Exeed’s reputation and position as New Zealand’s second largest distributor, its underlying business, relationships, capability, and experience in the New Zealand market, a value has been attributed to the Exeed brand. This was based on an independent purchase price valuation and determined using the income approach. 72 73 Non-compete Non-compete agreement in the sale and purchase agreement for the acquisition of the Exeed business included a three year restraint period in respect of some of the sellers. Value has been attributed as an identifiable intangible to the non-compete clause due to the restricted sellers having many years of industry experience and with the proceeds from the sale of the equity interest in the Exeed Group may have provided the ability for the restricted sellers to set up a competing business. 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. 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 Brand Less: Accumulated amortisation Non Compete Less: Accumulated amortisation Software - at cost Less: Accumulated amortisation Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 58,795 57,247 51,256 51,256 (16,904) (12,976) 2,323 (323) 1,006 (469) 309 (25) 2,323 (96) 1,006 (139) 25 (15) Total intangible assets 95,968 98,630 Balance at 1 January 2021 17,799 7,112 - - 22 24,933 Goodwill $’000 Customer Contracts $’000 Brands $’000 Non Compete $’000 Software $’000 Total $’000 Additions through business combinations 39,479 33,597 2,323 1,005 Additions Amortisation expense Disposal - - - Effect of movements in exchange rate (28) - - - - 2 76,404 2 (2,431) (96) (139) (15) (2,681) - - - - - - - - - (28) Balance at 31 December 2021 57,250 38,278 2,227 866 9 98,630 Additions through business combinations 1,567 Additions Amortisation expense Disposal - - - - - - - - - - 1,567 285 285 (3,902) (223) (326) (9) (4,460) - - - (4) - - - (54) Effect of movements in exchange rate (22) (24) (4) Balance at 31 December 2022 58,795 34,352 2,000 536 285 95,968 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 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 $23.7m and $29.8m, respectively. Included in the value of goodwill for each. The cash generating units is the goodwill acquired in the Express Data acquisition from 2014, the Exeed Group acquisition in 2021 and Hills Security and IT Business from 2022. As a result the assumptions used in the discounted cash flow model for each cash generating unit have been updated based on the assessment of each cash generating unit in its own right. The following key assumptions were used in the discounted cash flow model for each cash generating unit: a. Discount Rate: 11.31% (2021: 9.85%) for Australian CGU and 17.65% (2021: 15.28%) for New Zealand CGU post-tax discount rate; and b. Growth Rate: 2.5% (2021: 2.5%) for the Australian CGU and 12.5% (2021: 5.0%) for the New Zealand CGU in year 1 and 2.5% thereafter for Australian CGU and 12.5% for the New Zealand CGU (2021: 5.0%) per annum EBITDA growth rate. The discount rate 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. 74 75 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 72% to trigger impairment for the Australian CGU, and 36% for the New Zealand CGU, with all other assumptions remaining constant; b) The discount rate would be required to increase to 46.0% to trigger impairment for the Australian CGU, and 79% for the New Zealand CGU, with all other assumptions remaining constant. 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. 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 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 interest rate estimate 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 reasonably 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 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 14 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. Right-of-Use Asset Opening Balance Additions through business combinations Additions Amortisation Disposal Effect of modification to lease terms Variable lease payment adjustment Effect of movements in exchange rate Lease Liabilities Opening Balance Additions through business combinations Additions Interest Expense Disposal Effect of modification to lease terms Variable lease payment adjustment Lease payments Foreign exchange movements Maturity Analysis Less than 1 year Between 1 to 5 Years Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 2,709 2,235 19,007 (3,103) (1,466) - 5 361 19,748 3,154 2,235 18,114 857 (1,982) - 5 2,276 2,176 - (2,387) - 660 (1) (15) 2,709 2,757 2,334 - 160 - 660 (1) (3,543) (2,736) 355 19,195 (20) 3,154 2,794 16,401 19,195 2,715 439 3,154 76 77 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 Total trade and other payables Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 420,790 381,164 46,415 17,165 17,015 - 484,370 398,179 17. Borrowings 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. 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 Cash Advance Facility BNZ Facility Total current borrowings Non-Current Cash Advance Facility (a) Total current and non-current secured liabilities: Receivables Facility Cash Advance Facility BNZ Facility Total Borrowings (b) The receivables facility is secured by a fixed charge over all of the Australian trade receivables and cash advance facility is secured by a General Security Agreement over the assets of the Company. Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 185,000 140,000 10,000 46,681 10,000 20,169 241,681 170,169 50,000 60,000 185,000 140,000 60,000 46,681 70,000 20,169 291,681 230,169 (c) Receivables Facility limit* 220,000 180,000 Westpac Receivables Facility The Company operates a Westpac Receivables facility to fund working capital requirements. The Westpac receivables facility was renewed in February 2022 for a further period of 2 years with a review date of May 2024. The limit on this facility is $220m increasing from $180m, and is supported by the balance of Australian trade receivables. The renewal of this facility in February provides for the ongoing funding for the working capital investments required by the business. The facility was drawn to $185m as at end of December 2022. Westpac Cash Advance Facility A cash advance facility for $70m was entered into with Westpac in August 2021 to fund the acquisition of the Exeed group and corresponding transaction costs. The facility is for 3 years and includes annual amortisation amount of $10m per annum. With the repayment of $10m of this facility in FY22 the balance as at 31 December 2022 was $60m. Bank of New Zealand Facility In June 2022 Dicker Data NZ Ltd entered into a new cash advance facility with Bank of New Zealand (BNZ). This facility replaced the Exeed Ltd invoice finance and cash advance facilities assumed on the acquisition of Exeed Ltd. The new cash advance facility has a limit of $50m NZD and was fully drawn in June 2022. The facility also includes a stand-by letter of credit facility for approximately $21.1m NZD to support supplier trade credit arrangements. This facility supports the ongoing growth and working capital requirements of our growing New Zealand business. 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 Lease make-good provision Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 21,849 17,050 - 244 21,849 17,294 2,650 1,254 3,904 2,116 - 2,116 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 78 79 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: Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 Employee benefits obligation expected to be settled after 12 months 9,664 7,643 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 180,091,527 212,742 172,884,664 139,527 31-Dec-22 Shares 31-Dec-22 $’000 31-Dec-21 Shares 31-Dec-21 $’000 Movements in ordinary share capital Details Opening Balance Date Issue Price No of Shares 1-Jan-20 172,134,046 Late expensing of invoice for Jun20 Capital Raising & SPP 1-Mar-21 1-Jun-21 1-Sep-21 1-Dec-21 $11.826 56,235 $9.450 589,554 $14.356 53,628 $14.938 51,201 31-Dec-21 172,884,664 139,527 $’000 131,790 (47) 668 5,570 779 767 Issue of shares DRP Issue of shares DRP Issue of shares DRP Issue of shares DRP Balance 80 Details Issue of shares DRP Issue of shares DRP Issue of shares DRP Date Issue Price No of Shares $’000 01-Mar-22 $13.814 69,874 01-Jun-22 01-Sep-22 $12.525 53,263 $11.520 58,217 Issue of shares - Capital Raising 30-Sep-22 $10.300 4,854,369 Issue of shares - Share Purchase Plan (SPP) 30-Sep-22 $10.300 2,103,724 Issue of shares DRP Balance 01-Dec-22 $10.190 67,416 31-Dec-22 180,091,527 212,742 965 666 670 48,734 21,494 686 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. Share Buy-Back There is no current on-market share buy-back. 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 2021 Annual Report. 20. Reserves Capital Profits Reserve (Pre-CGT) Foreign currency reserve Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 369 (140) 229 369 (37) 332 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 332 (103) 229 270 62 332 81 21. Dividends Dividends declared or paid during the financial year 94,311 64,676 Type Final FY Payment Date 2021 01-Mar-22 Interim 2022 01-Jun-22 Interim 2022 01-Sep-22 Interim 2022 01-Dec-22 Dividend per share (in cents) 15.00 13.00 13.00 13.00 Amount (in 000’s) FY Payment Date Dividend per share (in cents) Amount (in 000’s) 25,933 2020 01-Mar-21 10.50 18,074 22,484 2021 01-Jun-21 22,491 2021 01-Sep-21 23,403 2021 01-Dec-21 9.00 9.00 9.00 15,497 15,550 15,555 54.00 94,311 37.50 64,676 The tax rate that dividends have been franked is 30% (2021: 30%) Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 Franking credit balance: Franking credits available for subsequent financial years based on a tax rate of 30% (2021: 30%) 9,451 13,360 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. 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. 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. 82 83 Financial Assets and Liabilities Financial Assets Cash and cash equivalents Loans and receivables Total Financial Assets Financial Liabilities Trade and other payables Borrowings Lease Liabilities Total Financial Liabilities Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 12,263 7,413 581,780 455,467 594,043 462,880 484,370 291,681 3,706 398,179 230,169 3,154 779,757 631,502 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 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 Total contractual outflows Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 484,370 398,179 - - - - - - 484,370 398,179 236,681 170,169 5,000 50,000 - - 60,000 - 291,681 230,169 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 17. 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. 84 85 Interest Rate Risk Floating rate instruments: Receivables Facility Cash Advance Facility BNZ Facility Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 185,000 140,000 60,000 46,681 70,000 20,169 291,681 230,169 Due to the current interest rate environment the Company has not entered into any interest rate swap at any 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 $2.0m lower/higher (2021: $1.7m 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 31-Dec-22 $’000 31-Dec-21 $’000 31-Dec-22 $’000 31-Dec-21 $’000 31-Dec-22 $’000 31-Dec-21 $’000 31-Dec-22 $’000 31-Dec-21 $’000 Buy US dollars Maturity: 0 - 3 months 48,150 20,805 0.7199 0.7233 4,078 3,140 0.5811 0.6873 3 - 6 months Buy AU dollars Maturity: 0 - 3 months 3 - 6 months - - - - - - - - - - - - - - - - 2,720 1,339 0.9362 0.9508 - - - - 86 The carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the reporting date was as follows: Cash at bank Trade receivables Trade payables Net statement of financial position exposure Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 425 14,324 3,581 66,423 (32,891) (61,334) (18,142) 8,670 Based on the financial instruments held at 31 December 2022, a strengthening/weakening of AU$ against US$ and NZ$ would have resulted in the following changes to the Groups reported profit and loss and/or equity. Sensitivity Analysis (Effects in Thousands) US$ (5% movement) NZ$ (5% movement) Equity Profit or Loss Strengthening Weakening Strengthening Weakening - (3,279) - 3,279 907 (433) (907) 433 24. Key Management Personnel Compensation Short-term benefits Long-term benefits Post employment benefits Total compensation 25. Remuneration of Auditors Consolidated 31-Dec-22 31-Dec-21 8,056,773 8,076,481 29,391 28,380 840,443 761,810 8,926,607 8,866,671 Consolidated 31-Dec-22 31-Dec-21 Audit services - BDO Auditing or reviewing the financial report 393,000 336,000 Other services - BDO Indirect Tax Services Tax and Corporate Services Other services - Other BDO Network Firms Indirect Tax Services Tax and Corporate Services 129,000 99,000 398,000 353,000 527,000 452,000 - 47,000 47,000 - 9,000 9,000 87 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: Acquisition of Hills Security and IT division Property, plant and equipment 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 Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 - 20,000 9,523 - Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 70,691 70,691 66,731 66,731 737,374 891,948 631,434 689,271 574,371 720,108 562,845 567,026 212,742 139,527 369 369 (10,434) 13,186 202,677 153,082 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. The parent entity has also provided a parent guarantee in respect of obligations of Dicker Data NZ Ltd, Exeed Australia Limited Partnership in favour of Bank of New Zealand. No deficiencies of assets exist in any of these subsidiaries. Capital Commitments 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. Business Combinations Acquisitions On 2 May 2022 the Company announced the completion of the acquisition of the Hills (ASX: HIL) Security and IT (SIT) division, providing access to a new market segment in access control and surveillance, tapping into the physical security market. The purchase price, based on a premium to the net assets was estimated at $19.4m, with a final adjustment for net assets acquired settled on 20 June 2022 resulting in additional payment of $1.9m bringing the final purchase price to $21.3m. From this date, Dicker Data transitioned more than 110 of the Hills team members and novated over 50 vendor contracts. Following the Company’s acquisition, the Hills SIT division is now recognised as Dicker Access and Surveillance, or DAS. The full year revenue contribution from the newly created DAS business accounted for $73m. Had the business been acquired for the full reporting period, assuming the average revenue contribution for the eight months of trading, the annual revenue contribution from this acquisition for the reporting period would be estimated at $110m. It is impracticable to disclose the profit and loss impact for the whole of the reporting period whilst the business is being integrated, due to the division acquired being an integrated business of Hills Limited and historical information on a stand-alone basis relating to the division being unavailable. Details of the net assets acquired, goodwill and purchase consideration are as follows: Prepayments Inventory Provision for Inventory Property Plant and Equipment Right of use asset Lease Liability Sundry Creditors Employee Provisions Other Provisions Net identifiable assets and liabilities Goodwill Net Assets Acquired Purchase Consideration Comprises: Cash Paid Fair Value Total $’000 2,858 20,764 (2,202) 614 2,235 (2,235) (79) (1,473) (782) 19,700 1,567 21,267 21,267 88 89 29. 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: 32. Earnings Per Share Express Data Holdings Pty Ltd Dicker Data Financial Services Pty Ltd Dicker Data GP Pty Ltd Dicker Data New Zealand Ltd Exeed Ltd Dicker Data Financial Services NZ Ltd (newly incorporated in the financial year) Principal place of business / country of incorporation Australia Australia Australia New Zealand New Zealand New Zealand Ownership Interest Ownership Interest 2022 % 100% 100% 100% 100% 100% 100% 2021 % 100% 100% 100% 100% 100% - 30. 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 Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 73,047 73,562 4,732 4,460 3,103 - 256 4,036 2,681 2,387 31 - (39,696) (72,947) (124,489) (90,925) (1,323) 40 86,725 3,632 (9,349) 1,138 (206) (912) 97,651 716 4,541 20,615 31. Non-Cash Investing and Financing Activities Shares issued under dividend reinvestments plan (DRP) 2,987 7,737 Consolidated 31-Dec-22 $’000 31-Dec-21 $’000 73,047 73,562 Profit after income tax 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 174,762,827 172,553,523 denominator in calculating basic earnings per share Weighted average number of ordinary shares and options 174,762,827 172,553,523 granted are used as the denominator in calculating diluted earnings per share Basic earnings per share (cents) Diluted earnings per share (cents) 33. Related Party Transactions Parent entity: Dicker Data Limited is the parent entity. Subsidiaries: Interests in subsidiaries are set out in note 29. Cents 41.80 41.80 Cents 42.63 42.63 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 sales of goods and services which are billed to Rodin Cars Ltd both in Australia and New Zealand. Total amount billed to Rodin Cars Ltd for FY22 was $113,894. 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 2021 was $403,283 which was fully repaid during the year and balance owing as at 31st December 2022 was nil. The principal amount financed was $2,566,340.72. In addition to these transactions there were also payments made on behalf of shareholders David Dicker and Rodin Ventures Ltd throughout the year that were subsequently reimbursed, or funds were deposited in advance to cover these expenses. As at 31 December 2022 there was $907,302 owed by David Dicker to the Company and $17,164,810 was owed by the Company to Rodin Ventures Ltd. 34. Subsequent Events Acquisition of Connect Security Products Ltd in NZ On 9th February 2023 the Company entered into a binding Sale and Purchase Agreement (SPA) to acquire the business of Connect Security Products Limited (CSP), New Zealand’s leading distributor of access control, surveillance and fire products. CSP represents a highly strategic acquisition and a valuable addition to Dicker Access and Surveillance (DAS) platform as it will accelerate the launch of the DAS business in the New 90 91 Zealand market with key brands Bosch, Sony, Assa Abloy, HID, Motorola and more. The combination of Dicker Data and CSP is expected to deliver compelling growth opportunities for both businesses through the combined Trans-Tasman network and expanded capabilities. Similar to DAS in Australia, CSP will run in parallel to Dicker Data’s existing New Zealand operation and will leverage shared services such as finance, warehousing, logistics and marketing, with the product and sales functions operating independently. CSP’s majority shareholder and Founder, Jason Mackie, will continue leading the business post-acquisition, including managing a team of 10 Auckland-based staff, 2 Christchurch-based staff and 2 Wellington-based staff, in addition to the three branch locations located throughout New Zealand. For its Financial Year ending 31 March 2023, CSP is on track to generate revenue in excess of NZD $8.0m and deliver normalised EBITDA of approximately NZD $780,000. The acquisition is a net asset purchase and the purchase price of NZD$5.0m is comprised of $3.5m for goodwill with balance for net business assets of $1.5m being predominantly for inventory. The SPA is subject to the satisfaction of a number of conditions, however the transaction is expected to complete by 1st March 2023. Dicker Data is constantly examining adjacent sectors to identify the next opportunity for growth and market share. This addition to Dicker Data’s portfolio is in line with the Company’s commitment to offer its partners access to a complete security solution from a range of market leading vendors. Convergence of physical and digital security is a natural progression to protecting the entire business value chain to ensure a stronger security posture. Extension of Bank of New Zealand Facility The $50m NZD facility established with Bank of New Zealand in June 2022, was further increased by $8m NZD in January 2023 to provide further funding flexibility. There were no other significant matters subsequent to the end of the financial year. DIRECTORS’ DECLARATION In the Directors’ opinion: • • • • the attached financial statements and notes thereto comply with the Corporations Act, 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 2022 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 The Directors have been given the declarations required by section 295A of the Corporations Act. Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act. On behalf of the Directors David Dicker CEO AND CHAIRMAN Sydney, 27 February 2023 92 93 AUDITOR’S DECLARATION OF INDEPENDENCE INDEPENDENT AUDITOR’S REPORT For the year ended 31 December 2022 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret Street Sydney NSW 2000 Australia Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret Street Sydney NSW 2000 Australia 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 2022, 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. BDO Audit Pty Ltd Tim Aman Director Sydney, 27 February 2023 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 2022, 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 2022 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. 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 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. 94 95 INDEPENDENT AUDITOR’S REPORT INDEPENDENT AUDITOR’S REPORT For the year ended 31 December 2022 For the year ended 31 December 2022 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. Accounting for the acquisition of Hills Ltd’ Security and IT (SIT) division Key audit matter How the matter was addressed in our audit As disclosed in Note 28 of the financial To determine whether these acquisitions where appropriately report, the Group acquired the Hills Limited accounted for and disclosed within the financial statements, we (ASX: HIL) Security and IT (SIT) division. performed, amongst others, the following audit procedures: The Group treated the transaction as a business combination in accordance with AASB 3 Business Combinations. Accounting for this transaction is complex and requires a number of estimates and judgements to be made by management in order to determine the appropriate accounting treatment. The estimates and judgements include whether the acquisition should be classed as a business combination or asset acquisition; and estimating the fair value of net assets acquired. Due to these factors and the overall significance of the acquisitions to the group, we consider this area to be a key audit matter. Other information • • • • • Reviewed share sale agreement to understand the key terms and conditions of the acquisition; Reviewed Management’s assessment of the acquisition and ensured it falls within the definition of AASB 3; Ensured that the resulting business combination has been accounted for and appropriately disclosed in accordance with AASB 3 as well as other applicable accounting standards; Assessed the fair value purchase price allocation of assets and liabilities including reviewing managements discounted cash flow forecast which includes auditing of the opening balances and where possible placing reliance on managements expert for the fair value of assets and liabilities; and Ensured adequate disclosure of the business combination is reflected in the financial statements. 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 2022 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 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 43 to 53 of the directors’ report for the year ended 31 December 2022. In our opinion, the Remuneration Report of Dicker Data Limited, for the year ended 31 December 2022, 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, 27 February 2023 96 97 2 3 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 2023. 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 47 752 960 4,059 8,302 14,120 143,708,176 16,432,788 7,149,480 9,752,334 3,048,749 180,091,527 79.80 9.12 3.97 5.42 1.69 100.0 Unquoted Options The Company had no unquoted options on issue as at 3 February 2023. Less than marketable parcels of ordinary shares There were 571 holders of less than a marketable parcel of ordinary shares. The number of shares in aggregate of these unmarketable parcels is 12,012. Substantial Holders The names of the Substantial Shareholders listed in the Company’s Register as at 3 February 2023: Twenty largest holders of quoted equity securities Size Of Holding Rodin Ventures Ltd Ms Fiona Tudor Brown BTR No 2 Pty Ltd Mr David John Dicker HSBC Custody Nominees (Australia) Ltd J P Morgan Nominees Australia Pty Ltd Fiona Brown Citicorp Nominees Pty Ltd BTR Investments No 1 Pty Ltd National Nominees Ltd Jeremy and Lynette King Superannuation Pty Ltd Certane Ct Pty Ltd Mr Vladimir Mitnovetski Sandhurst Trustees Ltd BNP PARIBAS NOMS PTY LTD Certane CT Pty Ltd Mr Hoang Luong Trinh Diales Pty Ltd BNP Paribas Nominees Pty Ltd Broadgate Investments Pty Ltd Total Balance of register GRAND TOTAL Number of Shareholders % of Issued Capital 48,000,000 25,702,069 21,800,000 10,000,000 7,989,204 5,522,422 5,109,572 4,641,511 2,988,598 2,083,795 1,220,000 844,520 767,912 594,413 521,548 446,068 300,000 300,000 297,750 260,128 26.65 14.27 12.10 5.55 4.44 3.07 2.84 2.58 1.66 1.16 0.68 0.47 0.43 0.33 0.29 0.25 0.17 0.17 0.17 0.14 139,632,020 40,459,507 180,091,527 77.53 22.47 100.00 Voting Rights 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. Size Of Holding Mr David John Dicker Ms Fiona Tudor Brown Number of Shares 58,000,000 55,753,261 % of Issued Capital 32.21% 30.96% On-Market Buy-Backs There is no current on-market buy-back in relation to the Company’s securities. 98 99 Dicker Data is the largest locally Dicker Data is the largest locally owned and operated ICT owned and operated ICT distributor in Australia and distributor in Australia and New Zealand. New Zealand. Dicker Data’s mission Dicker Data’s mission is to inspire, educate and is to inspire, educate and enable ICT resellers to enable ICT resellers to achieve their full potential achieve their full potential through the delivery of through the delivery of unparalleled service, unparalleled service, technology and technology and logistics. logistics. Dicker Data Limited ABN 95 000 969 362 Registered Office: 238 Captain Cook Drive Kurnell NSW 2231 1800 688 586 investors@dickerdata.com.au www.dickerdata.com.au 

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