Dicker Data Financial Services
Yesterday, IT distributor Dicker Data Ltd (ASX:DDR) announced it is going to start providing financing. My initial reaction was negative.
- They are changing what has been a very successful strategy
- The company already uses debt to fund inventory and the new financing business will stretch the balance sheet further
- Return on capital and cash flow will deteriorate
- Dicker Data does not have skills and experience in this area
After thinking it through further I am now more positive about the move.
- The entire industry is transitioning from a capex to opex model so Dicker Data must adapt
- Dicker Data will be unique in providing direct financing and so unlike peers has the potential to deepen customer relationships
- Company management has a large collective shareholding and terrific track record
- The existing business is humming and the financial services division is likely to remain a small part of operations for some time
I decided to keep hold of my shares.