We recently interviewed Mary Stojcevski, CFO of Dicker Data Limited (ASX:DDR). Based in Australia, Dicker Data engages in the wholesale distribution of computer hardware, software, and related products in Australia and New Zealand. Ms. Stojcevski has been with the company for around 20 years. We appreciate the time taken by her to answer our questions and would like to thank her for sharing her thoughts.
Simply Wall St: Your company doesn’t pay any compensation to the CEO, who only gets paid through dividends (like the company’s shareholders). What’s the rationale behind this?
Mary Stojcevski: David’s rationale is that a CEO is most effective when they have a significant shareholding in the company. If they are effective, the company is successful and the reward is the share of profits. The interests of the CEO are aligned with all shareholders.
SWS: Seems like most of the time when the business has to invest for growth (acquisition of Express Data in 2014, purchase of a new warehouse in 2019, warehouse expansion more recently ) it has to either borrow, issue new shares, or sell an existing asset. Has the business ever considered retaining more of its earnings and using that for growth? Why or why not?
MS: The company’s dividend policy is to pay out 100% of the after-tax profits. This has been the company’s strategy for a very long time – even well before being a public company. The rationale stems from David’s strong belief that conceptually it is better to borrow to grow, and in recent years with the low interest rate environment, it is even more compelling to fund growth with debt. With all growth strategies, once they are successful, and the strategy results in accretive growth, the debt can be subsequently retired via equity. This results in the highest level of financial efficiency.
SWS: What are your future growth plans looking like? What markets or industries do you find most attractive? Why?
MS: We will be moving into new premises towards the end of the year resulting in increased capacity. We will be moving from a 15,000 sqm facility to a purpose-built distribution centre that is 29,000 sqm. With the increased capacity comes the ability to proactively target vendor agreements for products that we previously did not have the space to distribute. This includes increasing our Audio Visual (AV) representation for such products as digital displays and possibly even print hardware and consumable. Also of interest is industries that converge with IT such as electrical and physical security. In addition to having the increased capacity to grow hardware sales, we would also be looking to growing our software vendors particularly in software security, data analytics, and data management.
SWS: How challenging (or not) would it be to secure vendors if you were to expand outside Australia?
MS: To grow organically outside of Australia would be challenging. Securing vendor relationships outside of our current ANZ region, although not impossible, it would be difficult. If we were to look at overseas markets entry via acquisition may be more feasible.
SWS: Are you seeing major slowdowns in customer orders? For example, are retailers pushing back some orders or holding off?
MS: We have not experienced any major slowdowns in customer orders to date although it is hard to say what the impact will be on the economy moving to post COVID-19 environment. We don’t deal with retail products and don’t distribute to large retailers so we are not impacted so much by changes in consumer spending. Our core competency is servicing commercial customers in the mid-market and SMB (small and midsize) space. Whilst we saw an increase in orders and spending during the last few months with the increased digitisation of businesses, as they migrated to their workforces to work from home, we did see some large infrastructure projects be put on hold, but are starting to see this pick up again.
SWS: David Dicker seems like an interesting person. What’s it like working with him?
MS: I feel very privileged for the opportunities afforded to me by David and Fiona as well over my time working at Dicker Data. I have worked with David for the last 20 years and it has certainly been an interesting journey being part of the Company as it has grown from doing under $100m when I started and now we are close to $2b in revenue. What has made it particularly enjoyable is that there isn’t the standard corporate hierarchy within the organisation. David’s philosophy is to maintain as flat a structure as possible, with each of his direct reports representing key areas of the business also being offered seats on the board. That way management’s objectives are aligned with shareholder objectives. David sets out the strategy and we are all very clear on what we need to achieve, but then we are given a lot of autonomy to get there. His philosophy that you need to do things differently to get an edge has meant that we have not necessarily adopted standard conventional ways of doing things. A lot of the strategies he has driven, when looking back in hindsight, were very forward-thinking and ahead of the time. Examples include running the company with all women, mostly returning-to-work mums, working flexible hours, ensuring a gender diverse board from inception, compliance listing only setting up the company to access capital without diluting personal interest, using that platform to engineer debt only acquisition. To be involved in each of these and trusted with the execution has meant a massive learning curve for myself which has allowed me to grow professionally and I am grateful for the mentorship David has provided over the years.
SWS: Thank you for your time, it was great to hear your thoughts about your industry & work, and we’re sure our readers will appreciate it, too.
Our team here at SWS had a great time putting together these questions. Readers who would like to know more about the company can visit ASX:DDR.
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At the time of writing, the author has no position in any company mentioned. Our interview was conducted via email on July 9, 2020. Minor grammatical corrections have been made to the text. Simply Wall St was not compensated for the production of this interview and has no financial interest in any company mentioned. Company representatives are responsible for the answers provided to our questions.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation.