Thank you for standing by, and welcome to the Dicker Data Limited half-year results presentation. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you would like to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. I'd now like to hand the conference over to Mr. David Dicker, Chairman and CEO. Please go ahead. Yeah. Hi, everyone. Thanks for coming on to the call. My name is David Dicker. I'm the CEO, founder, and chairman of Dicker Data, and we're going to give you an update on the H1 for 2023. It's been a pretty good result, really. Obviously, the industry and sector numbers are probably not as great as people would like them to be, but we performed pretty well. Gross sales at AUD 1.6 billion, up 9.4%, half-on-half. The EBIT's at AUD 70.6, up 15%, and the net profit before tax is AUD 54.9, up 6%. I think when you look at the conditions, the market sector and competitive conditions, these are pretty good results. We're pretty happy with these. So do it in much greater detail. I'm just going to hand over now to Mary to give you an in-depth rundown on the results. Thanks very much for being on the call. Hi, all. Good morning, and thank you for joining the call and the results update. This is going through the financial results for the half year 2023. David has covered the points in our highlight screen. As David has stated, and as we've provided in our market update a few weeks ago, gross sales finished at AUD 1.6 billion, up 9.4%. However, you will notice slightly different reporting in this half year with references to statutory revenue, which we are showing at AUD 1.1 billion. I'll explain in further detail what has changed in terms of revenue recognition shortly, and it's around how we recognize our software and virtual services revenue after a review of those revenue segments. But by and large, there was, you know, very positive results overall in terms of, growth, top line, and bottom line. Net operating profit before tax up 6%, our net statutory profit up over 7%. This was reflected by, you know, supported by strong, growth margins, and that's, reflected in the increase in our EBITDA, up by over 15%, at AUD 70.6 million. Also, in terms of sort of high-level highlights for the half year is our increase in active partners. You will note that last year we reported, about 10,200 transacting partners. That was over 12 months. These numbers are representative for the first 6 months. We do expect, that to be, you know, over 10,200 partners by the end of the year. And again, it shows the strategies we've put in place around new partner acquisitions, particularly as a result of the business acquisitions we've made over the last few years. Another key highlight for the year, again, which we're very proud of, is the recognition of our diversity and inclusion program. Again, being recognized by our industry peers in terms of the practices that the company's put in place and being awarded Diversity and Inclusion Champion and Hardware Distributor of the Year, again, through our network. If we go to the next slide in terms of financial trends, we're showing this slide on half year on half year, and reflecting the gross sales in this scenario as we've previously reported, and the gross profit margins and net profit margins are, in this slide, calculated on the basis of gross sales, rather than net revenue, which I will explain a little bit further. Highlights of the year is that the growth half-on-half was delivered, despite being in an environment where there were a lot of challenges around different segments in our market, and Vlad will provide a little bit more color and in-depth discussion around what we saw in different segments. But I don't think it's any secret around a PC decline coming off the back of very strong growth in the years prior. We did experience a decline, probably more steep than what we were anticipating, but the beauty of the diversified business was that we had some strong results in other categories, and we've worked really hard to make sure that we are participating in all segments of the technology sphere so that our you know mitigating the risks of different demand cycles within the different segments. Also, very positively was the ability to retain our growth margin. This was supported by the fact that the growth came from the segments around our networking servers storage, which are more value-added type sales, being able to command stronger margins in in that category. Also supported by the, you know, coming off some very large growth numbers in some segments. Some of our targets with our vendors were recalibrated, so the opportunity to actually achieve target metrics to earn some margin was supported in this half year. But in terms of profitability, strong outcome as well, considering the environment around interest rates and other inflationary pressures. If we go to the next slide, I'll just talk a little bit more in terms of what's changed in our recognition of revenue and how we are presenting our revenue going forward. We’ve, with so many new software vendors and software agreements and different ways of procuring our software licensing programs over time, the company undertook a detailed review of these new agreements, plus updated agreements with our software vendors, to determine if the company is acting as principal agent in the resale of these software licensing and maintenance products. This was something that we reviewed a few years ago, and on the basis of the agreements at the time and the way we were transacting software at that time, it was determined that we were acting as principal, and therefore we’re reflecting the revenue on a gross basis. As the programs have evolved and as we've added new software vendors to our portfolio, we've had a closer look at what the agreement specifically say in terms of what our role is around how we are selling our software programs. The key differentiator is around inventory risk and performance obligations that come with these agreements. After that detailed assessment, in conjunction with our new auditors, it was determined that the company is acting as an agent in respect of the sales, and as a result, we've revised our presentation of revenue. So what essentially this means is that where previously cost of goods relating to software and virtual services were represented as cost of goods and the customer was our reseller. Under this model, cost of goods that relate to the purchasing of, software and licensing products, now is netted off against the revenue number. Effectively, it's reflected on a net basis, so, it's referred to as the agency fee. Another way to look at it is its cost of goods are now mapped against revenue. What that has resulted in is total statutory revenue for the half year was AUD 1.1 billion, up 5.3%. So we have restated our June comparative 2022 numbers on the same basis. There's actually no change to gross profit dollars. That's exactly the same on both revenue presentation models. What does change, though, is the gross profit percentages. For the purpose of parts of our presentation and the fact that we've reflected previous comparatives on the basis of gross sales, we have continued to provide that throughout our update, and we will be referring to it as gross sales in terms of the full value of the transaction when we're doing on a like-for-like comparative basis. So the outcome of that means that whilst gross profit dollars were exactly the same and increased by 17.7%, our gross margins vary, although the result is the same in that both have increased half-on-half. Again, as a result of what I've said earlier around the segments of the market we're selling into and the ability to recalibrate some of our targets, that came off some very high growth periods. If we go to the next slide, if we have a closer look at the profitability outcome for the group. So whilst, you know, revenue's up, we've also had... And EBITDA was up. We've experienced increase in operating costs. They were up by 23.3% for the half year. This was predominantly increase in salary and wages costs as we took on the full value of the Hills acquisition in the first half, whereas in the comparative period, the acquisition was from first of May. We did take on over 100 people that came with that business. In this first half 2023, we've got the full six months of costs that relate to that, plus the branch networks that came with it. Also, increases in our depreciation and amortization costs, up by over 20%, some of it driven by the fact that we acquired some plant and equipment and other depreciable assets from recent acquisitions. It also includes AUD 2.3 million for amortization of identifiable intangibles. This was the customer contracts acquired with Exeed, and prior to that, Express Data, being amortized. I suppose the most sort of significant impact to profit before tax was the significant increase in our finance costs. The business is funded. The working capital is funded by a debt facility. It's a floating facility, and we've been exposed to the recent interest rate increases that have occurred over the last 12 months. It was in the comparative period, it was probably the onset of the rises. So, there was a significant increase in costs, I think over AUD 5 million, in terms of incremental funding costs on the comparative period. So to be able to deliver a profit growth, on the basis of these incremental costs that we've had to incur, we feel was a phenomenal result, and being able to continue to grow our gross margin and contain costs where we could, and put in strategies around that to make sure that the business can deliver profit growth. If we look at net profit after tax up, you know, equal to the growth in gross sales at 9.4%. If we go to the next slide and have a closer look at the balance sheet and see what was sort of driving some of these elements, we've been able to maintain our working capital dollars slightly up on last year, up minus the inventory in the last balance date. This was as a result of, you know, reducing inventory. Total inventory hold was down just under AUD 10 million. We've been driving a lot of disciplines internally to be able to bring our inventory levels down. Our supply chain has normalized. If we also look at the trade and other receivables, almost AUD 20 million down as well on the last comparative period with improvement in collection days. But both of those releases in working capital were offset by a reduction in trade and other payables, where some of that working capital release was put to early settlement programs, and some of new vendors coming on board, some investments around that, as well. While total borrowings have increased, net debt has remained relatively flat on last balance date. The increase in the borrowings was supported by an increase in our working capital facility limit from AUD 220 million to AUD 270 million in Australia, and that's put in place to support the longer term growth for the next 12 months. Or the facility is up for renewal in May, which we're actively looking at refinancing, but from now till then, and support our growth for the second half. Based on net debt outcome, debt-to-equity ratio at 1.26 times. So overall, very, you know, quite stable in terms of balance sheet performance. There's also an increase in our property, plant and equipment. We've made an investment in our warehouse extension. So if we look at the next slide, there's an update in terms of where we're at with our investment in expanding our distribution center. We did start construction on that extension in December last year, with the view to having it completed by June this year. The construction is largely completed. What's left to do is, fit out the warehouse with racking and, that's scheduled to happen in the next few weeks. Depending on how long that takes, whilst we would have liked to have utilization of that warehouse, about now, that looks like it'll be pushed out for about 4-6 weeks, before we'll be able to utilize it. In terms of space, it gives us, you know, the combined space across the existing and the extension will have close to 40,000 square meter capacity, to, you know, support the growth in terms of the new vendor acquisitions we've been making and, the other growth aspirations in terms of, the, you know, the segments of the market we are looking to, capitalize on, as reflected by the acquisitions and the segments we, entered. The cost of the construction, was, circa AUD 15 million. Most of it has been already reflected within the cash flow. There's a couple of AUD 2 million left to go on the fit-out side. And we are expanding our green energy footprint with extra solar panels to be added, so we'll be able to support our business, with our own-... Energy generation. And, that's already been reflected in our costs with the current capacity that we have, you know, been able to maintain a lid on our energy costs as we've expanded the business. That's a summary from me in terms of the financial update. I'll hand it over to Vlad now to provide a business update. Thank you, Mary, and thank you, David. Good morning, everyone on the call. I'm going to give you a market update on what we've been seeing, the trends in the last six months. I'm going to also try to look at the next six months, how I see the market evolving, and what challenges is gonna continue to bring and what opportunities is going to come. And then I'm also going to look a little bit more at 2024. So like David said and Mary said, I believe, given the circumstances and the increased cost of financing our business, delivering a growth in top line and bottom line has been a very, very, very encouraging outcome for us. We are a very growth-minded organization. And it goes throughout the culture of the organization. It goes from the founders and the executives board. But not only we, we're very focused on growing, but we focus on growing profitably. And everything we do, all the investments we put, all the strategies we pursue, is to continue to grow. Distribution space is a very unique space in a channel ecosystem. And I'll explain why. When things are good, things are good for everyone. But when things are not so good and market is tough, a lot of suppliers and vendors, a lot of partners, actually accelerate their reliance on distributors and accelerate their dependence on distributors. And we've seen that happening in the last six months. Markets got really tough, inflation gone up, small businesses, you know, started to slow down a little bit. What it does, it gets a lot of large vendors to cut some of their costs and put more reliability and more functions towards distributors. And we've seen it. We've seen how all my vendors came in saying, "We need you to do more. We want to perform more." So we're getting a great opportunity in a tough market to actually perform and do more, and that's what we really reflected in the first half. But going a little bit more in specifics. Data center, infrastructure, and networking did exceptionally well. I'll go through the actual numbers in a second, but double-digit growth in both sectors, exactly as we've predicted, getting out of COVID, all the digital data, digital transformational projects came back. But what's really good about this segment of the market, not only we invoicing and deploying a lot of, a lot of tech into the data centers, but also, we actually receiving a lot of great bookings, and the new orders are coming in. So it gives me a great deal of confidence that that boom for digital transformation and willingness to continue to, to drive that transformation is still very, very strong. It's gonna continue going strongly. Our PC market was soft as predicted, as called out, a little bit more than I thought originally. But the COVID during the COVID days, the PC market was very, very strong. We had a big uplift. Now it's kind of cooling it down. So we're getting closer to sort of 2019, early 2020 numbers. And again, there is a really good optimism around this. I'm gonna talk in a second about the actual numbers, but our PC device market number dropped about 24% year-on-year in the first half. Now, when I talk to all my leading PC manufacturers, they all, as one, and, you know, saying that 2024 is going to be when the market is coming back and coming back really strongly. So Microsoft is going to end their Windows 10 and below support. So, there is more than 4 million devices in Australia and New Zealand that are still sitting on, not on Windows 11 latest update devices. So that's going to be a phenomenal refresh cycle, and that has to happen between 2024 and mid-2025 because the support will be ended in May 2025. Also, we're seeing a rise of artificial intelligence. I don't think there is anyone on the call or anyone who hasn't tried to use AI support systems, whether it's with a Copilot through the Microsoft Office or through various different tools that's currently available. AI is here. It's revolutionary. It's a game changer. Now, in order to take full advantage of this, you need a PCs that can support those AI functions. None of the current fleets can actually take full advantage of this. So everyone calling two major points of why they believe-... 2024 and 2025 is going to drive the biggest PC refresh cycle that we've seen in the history. One, is Microsoft stopping supporting their Windows 10 and below, and two, utilization of AI. And I'm very, very optimistic about these predictions. So having that business declining throughout 2023, going into 2024, that's where a lot of our growth is going to come back, come back in. Looking at data center infrastructure and networking, that's booming, and is going to continue to drive really good growth. I actually feel that enterprise networking is going to continue double-digit growth well into the 2024 and beyond. Our software business is doing incredibly well. That's gonna continue to do well. So it gives me lots of good optimism. Just to finish with that slide, we have an incredibly diverse range of technology. Our aim is to mitigate the risk and open up new markets to drive more growth. Remember that growth mindset is incredibly passionate and strong within the organization. Hence, obviously, I'll talk about how we actually continue to diversify our technology. So if we go into the next slide, and we look at DAS acquisitions. We've acquired that company to open up new markets. We acquired Hills Security IT division in May 2022. We've had a very transformational 4 quarters in this business, and the last quarter we performed incredibly well with that business, delivering a very good, not only growth, but also a net profit contribution into the company. So we are super happy with this turnaround. In fact, we've delivered AUD 73 million in first half. If you look at the year before, that's what we did in the first 12 months of the acquisition of Hills. So we're perfectly online on our projected AUD 160 million revenue out of this business. At substantially higher gross margins as well. That's why we love the business. But the key note in this, we open up new markets. We open up and unlocked over 2,000 new partners, both Australia and New Zealand. So we're going to continue to do this. We do believe in market convergence, we do believe in diversification, and being a diverse platform, giving us that good business resilience. If one sector is slightly soft, the other sector picks it up, and now we at the point of our evolution, where a lot of partners actually have a strong expectation for us to deliver those various solution stacks and services. So going into the next slide, we've acquired a similar type of Hills, but in New Zealand, to add to our Dicker Data Access and Surveillance family. Again, opening up new markets. Over 500 new customers came on board. Small but very solid business. Since then, we added another couple of very good vendors there, Halo and Ajax. We're continuing adding vendors. You will see in the next 6 months, we're gonna add about half a dozen new vendors, both Australia and New Zealand, into our DAS portfolio. So the growth that DAS represents is significant, it's phenomenal, and most importantly, it went into a good, profitable area, which is absolutely great to see. Next slide is our new vendors. We continue adding new vendors to the portfolio. You could see a lot of smaller complementary vendors on your right. I've pointed out three transformational new vendors that we've added. Cloudflare is a software-defined networking platform, we are actually using ourselves here at Dicker Data. And it's currently taking the world by the storm. We have an exclusive relationship with them, love their technology, and is one to look out for the next five years. NetApp is one of the leading enterprise storage vendors in the market. Probably the only remaining gap we've had. We now have the biggest and the widest range of the enterprise storage vendors, including Pure Storage, NetApp, Hewlett Packard Enterprise, Dell Tech, Lenovo Data Center Group, and a few smaller ones. So we have... we've really completed that range. NetApp has, you know, established very, very well in Australia and New Zealand. Now, both contracts are Australia and New Zealand. And Ajax, it's to complement our already existing, very strong security and intrusion portfolio. Ajax is the fastest growing European security and intrusion brand, so we're super happy to sign a contract with them just very, very recently, a couple of weeks ago. Again, it's Australia and New Zealand contract. So that work is continuing to happen. We are talking to a lot more software vendors, hardware vendors. This real good opportunity and a real good feel for all these vendors to continue to work with Dicker Data. Next slide just represents our entire vendor portfolio. Like I've always said, there's no right or wrong answer on number of vendors we, as an organization, represent. However, as we become such a leading force in the tech industry in Australia and New Zealand, there is a very strong expectations by a lot of our partners. When they deal with Dicker Data, they want to have access to all their technology vendors of choice. And obviously, we feel that pressure. We want to assist and help. It's not an easy process, but we've been—we're doing really, really well in terms of giving them that platform to access all the leading, leading technology vendors. But as we know, tech is probably one of the most vibrant industries in the world. New innovations happening all the time. New startups and new vendors and new technologies are coming every quarter. We're keeping our eye on it, and again, as we already represent so many leading brands, it's getting slightly easier for us to tap in into the new technology stacks, which we're taking the full advantage and full opportunity of. The next slide is our industry recognitions. I mean, we know we're doing really well. We have firm stats, we have numbers, we have statistics, we know how our competitors are doing, but it's always an incredibly enjoyable and satisfying to receive industry recognitions as well. So like Mary was saying, 10-year in a row, we've been voted as a hardware distributor of the year. Not many people are aware of this, and we need to do, I think, much better job in promoting this, but we are actually the largest software vendor in Australia and New Zealand as well. We're getting very, very close to AUD 900 million of gross software sales. The CRN editors voted Dicker Data as the best performing large distributor of the year, a couple of weeks ago in their summit, and Channel Choice gave us Best Distributor of the Year as well. We have numerous recognitions. Yesterday, I was part of the Dell Technologies Partner Summit, and we won Distributor of the Year for the seventh year in a row, which is just like just incredible accomplishment, given that we've only had Dell Technologies for about 10 years in our partnership. So wonderful, wonderful recognitions. So next slide, it actually show how we're doing against our competitors. We're doing really, really well. Really well. So, we continue grabbing market share. So yes, we're growing, but organically, we're adding new vendors, we're adding, and we're adding more market share. So in Australia, we now looking at corporate, commercial, and enterprise business. We well over third of the business, 35%, continue dominating, continue leading, leading, leading the stack. We do have now a very small, consumer retail business in Australia that came by acquisition of Exeed Group last year. It's growing as well, which is fantastic. We had 10% growth in this year. But it's not what we've known a traditional fulfillment business. So we've removed that platform, that complete segment when we compared ourselves to Ingram, Ingram Micro and Synnex, for example, because we are not interested in that low-margin, fulfillment type of, scenario retail business. However, when it comes to the good value offering and the good end-to-end, value servicing, then we are interested, and we are growing it. So, so this is... hence, the numbers is we're positioning that way, just, just so it reflect more apples to apples. When we look at the New Zealand market, we do have a substantial Apple fulfillment business into Noel Leeming, their largest retailer, hence, I've left the entire distribution landscape for New Zealand. We are at 29% market share in New Zealand. Ingram Micro is still a little bit bigger, but we're definitely closing the gap. And the growth we're currently experiencing, I think we're moving perfectly in the right direction in this business. New Zealand business is now fully integrated, fully functional. We had a really good quarter, sorry, half, you know, first half 2023 with New Zealand, and that business is going from strength to strength for us, which is awesome, awesome to see. If we look at the next slide and look at the revenue category and what the splits are. So, currently, software is still around 27%-28% of our business. I wanted to move it more and more towards, you know, over 30%. The growth in the software business was phenomenal, 21% year-on-year, AUD 443 million. We're tracking towards sort of that AUD 900 million mark. My absolute strongest ambition is to get to AUD 1 billion. That would be such a good result. I think we have the basis, we have the vendors. We're talking to some new, you know, vendors who we're looking to bring on board by end of the year. That would give us that, hopefully that push and hopefully to the next 2024-2025. Our subscription and revenue base is growing as well, with 21% up there as well. So, over AUD 400 million is now coming. It did came in the first half out of subscription and renewables revenue stack. When we look at the hardware business, despite 24% decline in the PC business, despite 17% decline in our print business, because it's kind of sort of print and PCs affiliated very closely together. Despite about 30% decline in our peripheral business, and peripheral is more like monitors, docking stations, and other accessories, then again, closely associating with PCs. So as soon as PCs go back into the growth, all these categories is gonna go into the growth as well. So despite all these challenges and the toughness in the market, we still produced 5% growth in our hardware business, largely driven by server and storage, enterprise networking, and AV/ UC. You'll probably notice that our AV/U C business, which is digital signage, smart offices, those sort of categories, the growth have slowed down as well. And it is a lot to do with some of the factors that a lot of, a lot of, people have deployed a lot of, of this technology, and now they're assessing whether, you know, obviously, the inflation and interest rate is getting them to think whether they need to upgrade or refresh. I feel that category has continued to grow. We're doing really, really well there, and as soon as the PC category storms back into the growth in the next year, we will see an uplift of AV and UC business as well. So that's doing really well. Access and surveillance, DAS, DAS business, 300% growth year-on-year. Phenomenal results, continue to grow and heading towards that sort of AUD 150 million projection mark. So good, healthy business overall. Good, good balance. As soon as we see our PC category, I mean, it's a very big business for us. If you look at overall, out of AUD 1.6 billion, over AUD 300 million, PCs represents well over AUD 300 million. And if you look at the 24% decline, it was a bit of a hit. So given the circumstances, I think, I think a very, very, very solid result. Next slide is continue to showing our diversification strategy. We're pushing really hard there. Nothing really new compared to the last couple of years. Top five represents just under 50%, perfectly balanced positions. Our top five is Microsoft at AUD 200 million, Cisco at AUD 150 million, HP at just AUD 140 million, Lenovo at AUD 113 million, and Dell about AUD 100 million. So this is our AUD 100 million plus vendors, beautifully positioned, big practices, strong, strong presence in the market. We are a leading distributor for all top five, and that's never gonna change. We're gonna continue to drive those very specialized and focused practices with those top five vendors. Adding the new vendors is continued to diversify the risk. Microsoft, given over AUD 200 million in revenue for Australia and New Zealand in the first half, it's still around 12% of our revenue. So again, that this risk is very balanced and mitigated. So now if we look at the strategy and outlook, so why are we getting so excited? Why do we believe we're gonna continue to grow, which we've always said we will, and we are, whether the market is good or not so good? So what's hot in the market? So I've mentioned artificial intelligence and how it goes, and I think it's big and revolutionary, so that's going to... But AI, AI is going to drive existing technical, tech layers and platforms. We're not going to necessarily see a huge deal of, you know, how do you monetize AI as such. I mean, Microsoft probably will. We will monetize it via. I mean, we have an exclusive relationship with NVIDIA. NVIDIA is a very strong vendor for us. We're seeing a very good potential with the GPUs and graphic cards, deployments from a lot of data centers. So we're seeing. So indirectly, we will start to see some really good uplift in demands. Cybersecurity, very topical. We have a great number of vendors in cybersecurity, but we can do better, and that I see as an opportunity. And hence, obviously, putting a lot of focus talking to the new cybersecurity vendors, new technological stacks, so that we can bring on board. Hybrid IT, multi-cloud, we've talked about it before. Again, growing really well. Access and surveillance, we've touched base on this as well. 5G. I personally thought 5G is going to grow a lot faster and accelerated growth in Australia and New Zealand area. I think it's doing really well elsewhere in Europe and in America. I think we're yet to see the uplift in opportunities for us. But now, as all data center infrastructure equipment is getting refreshed, as the enterprise networking refreshment cycle happening, hopefully we'll start to see a lot of 5G opportunities also coming in play. Yeah, you could, you know, you could see on your slide, all these areas is strong, it's double-digit growth. We're very well positioned to take a really good advantage of those. So yeah, continue to put a lot of investments in there. So what's the focus for us as a Dicker Data? So where are we putting all our energy? Where do I put all the energy? So New Zealand. New Zealand is doing a lot better. New warehouse, new company, fully integrated, great talent. You know, we're absolutely on track to do AUD 600 million in New Zealand. All the big tick boxes. But can we do better? Can we get New Zealand into the profitability levels that Australia is reporting? Can we actually accelerate the growth? Absolutely, we can. So a lot of focus on accelerating the growth and improving the profit margins in the New Zealand business. It's going in the right direction. We want to accelerate it. So a lot of focus on doing, doing, doing a lot of things in there. Dicker Data Access and Surveillance, it's opened up a new market. We're taking it by storm. We know we need-- Like, our market share in this particular division is still around 10%, maybe a little bit more. So the opportunity to grab another 10% of the market share is absolutely visible, it's real, it will be done in the next couple of years. So we're definitely incredibly excited about this business, and especially we're excited because it's giving us double, double gross margin opportunity on this business. So it's something we can feel, we can see, we're already doing it, we're turning around, getting us really excited. So it was fantastic acquisition. Next one is cybersecurity. I've mentioned it before. I mean, it's growing over 100% year-on-year for us. So that segment is absolutely critical. Not only and cybersecurity is such a big spectrum of work that we can do. Our aim as a Dicker Data, my personal ambition is not only to be a largest software distributor in the channel in Australia and New Zealand, but also to be known as the cybersecurity hub, cybersecurity distributor, Australia and New Zealand. And I know it's a lot of work required, but I see a great deal of opportunity there. I don't think the opportunity in the cybersecurity space is going to go down. I think, if anything, in the next couple of years, we'll see more and more interest in cybersecurity. It become a lot more compliant. We're leading a lot of sales with a cybersecurity conversation. So it's a big topic of conversation. And the market convergence. I've always been big on believing in this as it is happening, maybe not as fast as I wanted it personally, but ultimately, IT drives and becoming an anchor and a platform for all market convergence. Whether it's the physical security, electric market, operational technology market, software, cloud, data center, everything cycles around the IT platforms. IT engineers and specialists can do all of that and simplify the entire infrastructure. Electricians cannot do IT. Physical security licensed guys, they cannot do IT. So that's why I feel Dicker Data has such a strong platform. At the moment, a lot of those markets are still operating a little bit separately, but we can start seeing good signs of that convergence. And when it does happen, I think we will see a revolutionary kind of change in the way we're doing the business and revolutionary way that customers consuming the technology. So definitely looking forward, putting ourselves in a great position. Okay, well, that's my last slide, giving you a bit of an insight in what's happening. I think. Okay, so just a couple of quick remarks on H2. H2 last year is where we started to see a little bit of a decline in the PC market. So when we look at the H2 2023, while we still see a decline, when we look at the percentage decline, I don't think it's going to be 24%. I'm looking at July, August, I can already see that. So we're gonna still gonna decline, but that percentage decline is not going to be as big. Our H2 in the last couple of years been overperforming H1. There's a couple of reasons that's giving me confidence that that perhaps is going to be the case again. So I'm very optimistic about it. So currently tracking perfectly to our own internal projections and guidance, so we're quite comfortable with entire annual 2023 number. Going into 2024, I share a huge degree of optimism when the PC market is gonna come back and the refresh cycle happens, and I'm gonna go back into the double-digit growth in the PC market. I'm going to hope for really good growth in our software division with a cybersecurity push, and the data center infrastructure and enterprise networking gonna continue to drive that accelerated growth. I think we're potentially looking at a very good next year. So currently incredibly optimistic, looking at the different. And we're gonna continue to diversify. We're gonna continue to open up new markets, and we're gonna continue to bring new partners on board. So yeah, I think we're in a really, really good position right now. Okay, that would be it from me. And yes, I just wanted to thank you. Thank you for being with us and listening to our results. Yeah, just opening up for questions. Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two. ... If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Bob Chen from JPMorgan. Please go ahead. Hey, good morning, guys. Just a few questions for me. Just circling back on your H2 remarks, Vlad. I mean, given you have a bit of acquisition to benefit into the second half, there should be pretty limited risk, I'd say, of H2 being sort of worse than the first half? Exactly. Yeah, pretty limited. And plus, like I said, our second half 2022, that's when we started to see some softness in the existing business outside of the acquisition. So yeah, both acquisitions are going to keep growing. Softness started to see, so we'll see a that decline in PC, in PCs, actually not accelerating, but going the other way. So hopefully we'll see a really, really good result on H2. Okay, great. And then maybe just a question on the inventory balances, and obviously, that ties in with your working capital facilities as well. Like, do you guys expect to continue working on reducing that into the second half? Yes. I'll give you an answer how I see the second half, and I'm fairly confident on that. And then Mary can probably comment on existing industry levels. So what happened is our industry levels started to come down. They're a lot more balanced. The supply chain is pretty much back to normal. There's a couple single level lines of some of the enterprise networking vendors who are still have a very long lead times. But all in all, on average, we're pretty much back to where we were pre-COVID, which is really good. The biggest issue in the last couple of quarters, not being able to take our inventory even further down, was the decline in the PC market, an actual decline, what's happening with the sell-through, was not reflected in some of our vendors' target-based exercises towards all distributors. So our vendors did not expect such a decline. They've given us slightly bigger targets. All distributors had to continue to buy through it, hence we've seen a slightly elevated level of the PCs sitting in our warehouses. Now, the good news is, finally it happens. So in Q3, all vendors saying, "Yes, we're realizing the market is in decline. We have to, you know, give our distributors a bit of a breather." The targets came back. We're doing very limited new buying this quarter and still getting our profitability balanced with those vendors. So it gives us an opportunity to chew in through a lot of stock that we currently have. So my prediction, by end of the Q4, we're going to come back to a very normalized stock level. I don't see the targets going up. I think it's leveled nicely. I see the same behavior from all vendors, gives me a good optimism. It's not one-off, it's actually going to be a continued tendency. Yeah, and what I'll add to that, Bob, is that, and because of what Vlad described, we still are not experiencing linear deliveries. So there were some scenarios of sort of chunky deliveries, which where we close at the end of June, is probably a little bit more elevated than where we've been intra-month in the last few months prior to the end of the reporting period, and it's definitely come back over the last two months. But there was still a release working in stock holdings because of some disciplines we've put in place around that as well. Okay, great. And then just on the cost base of the business, I think OpEx is around that AUD 80 million level for the first half. Is that a reasonable base sort of going into second half, just maybe adjusting for some CPI? That's correct, because we're now reflecting sort of the full six months of extra costs through all the acquisitions. They were not in the comparative period, so yes. Great. Thanks, guys. Thank you. Your next question comes from Apoorv Sehgal, from UBS. Please go ahead. Morning, guys. Thanks for taking my questions. Firstly, just on gross margins. Second quarter is obviously a lot stronger than the first quarter. I think it was about, if you back it up, 9.7% in the second quarter. To what extent can we extrapolate that outcome into the second half of 2023, taking into consideration, I guess, product mix? You've touched on networking, the storage growing quite well. That's obviously higher margin. And any sort of comments on seasonality into the second half, please? Yeah, sure. There is a couple of factors here. Obviously, we're seeing a good growth in our DAS business, which affects our gross margins in a positive way. So that's going to continue to grow. I mean, H2 versus H2 is going to be really strong for DAS business. So you can extrapolate that. Our New Zealand business started to produce stronger gross margins as well, which is nowhere near where it needs to be, but it's accelerating and it's helping the overall gross margin mix as well. Enterprise networking, data center infrastructure, because we had such a phenomenal invoicing and hitting, you know, hitting the numbers and so forth, that gave us a really good back-end rebates, which translated in the gross margins as well. That's going to continue to happen... So none of that. So looking at July and August, we already started exceptionally, exceptionally strong in those particular segments, enterprise networking and data center infrastructure. So my view that we should be nicely retaining that, unless something goes really, really wrong, that at the moment, talking right now to you, I just cannot see happening. But so we- Yeah, I would- Yeah. Sorry, Vlad, I'll say in terms of moderating that around, sort of the inventory around the PCs and maybe sell-through. So I think it'll be balanced, the margin will be balanced that way. Just because we've had some large buy-ins, which, you know, the sell-through is happening in the next quarter. Hmm. Okay. Thank you. Thanks for the detail. That's clear. And just wanted to follow up on a question just before asked on the cost base. I think you're saying the AUD 80 million mark first half is kind of like a fair base going forward into the second half. If I'm right, I think, your second half sales should be more than your first half sales. Like, software itself should probably grow, grow a bit more in the second half. So would that imply that you're comfortable with the cost base as a percentage of sales in the second half, being a little bit lower than the first half? 'Cause your first half was about 5.0% of sales. But I guess if you're saying cost base kind of similar in the second half on probably bigger sales, that as a percentage of sales, it could, it could come down a little bit more? I'll probably just qualify that, too, because the largest part of our cost base is salary and wages, and a lot of our remuneration schemes are performance-based. So, whilst that, you know, if the company continues to deliver performance within the metrics of those remuneration schemes, then there could be a little bit of increase in that part of the cost base, as it is variable. But we should see leverage from the balance of the cost base. So you're correct in that statement. Is it fair to say the cost savings opportunity is now... Has that sort of played out now? 'Cause I guess if we compare back to first half 2022, your cost base was something like 4.7% of sales, and it stepped up to 5.2% in the second half because of the duplicate costs, and now you've obviously brought it back down to 5.0%. So you've realized some sort of cost out. Has that kind of played out now, or is there more to go? Not entirely. We are always sort of reviewing sort of our cost structure, particularly around team structures. And, you know, the one-off costs that we're reflecting are largely redundancies, and that work is still continuing in terms of streamlining the optimum team sizes. So no, no big restructures or anything like that, but you know, our focus is costs and efficiency. And that's an ongoing process, I would say, till the end of the year. As we bed down, you know, continue bedding down the integration of the acquisitions. But saying that, Bob, right now, we have a very strong, how I say, human platform. I don't even know how to describe it. We have a really good talent. We have a good teams in place, and we do believe that additional work that comes into us and additional roles that we're gonna perform would not require substantial cost additions. Well, we believe would not require substantial cost additions. So I think that, just to answer your question, we will be very much focused on trying to continue optimizing it. Okay. Thanks, guys. Thanks for your time. Thank you. Your next question comes from Chris Gawler, from Goldman Sachs. Please go ahead. G'day, Vlad and Mary, can you hear me okay? Yeah, Chris. Yeah. Just wanted to ask a follow-up question on the PC demand. You mentioned that you expect in percentage year-on-year terms for that rate of decline to moderate in the second half of this year. Can you give us a sense of what you're seeing at the moment or what you're expecting in level terms, like in absolute sales terms? Is it still declining or is it, you know, basically hit a bottom in terms of dollar sales terms? I think... Okay, so it's interesting. A lot of people out there in the market saying it's absolutely peaked now, and from now on, it's going to start leveling up and going back. You know, I kind of feel it's the same within our business, and I kind of still a bit skeptical. So I'm probably gonna come out a little bit more pessimistic and skeptical to answer your question. So I will answer it. I think it's going to be about the same in absolute volumes decline in the next two quarters, and if it's not, it's going to be the bonus on the cake. But the way we see the market and the way we look at our second half is probably in absolute volumes going to continue to do very similar decline rates as it was in the first half. However, due to that softness and and sort of getting into a little bit more declining in PC markets and leveling out in the last second half of 2022, the percentage of decline is not going to be 24%. I'm thinking, I don't know, I'm just speculating here. I'm thinking maybe 15%-17%. So that's what I think. If we're gonna come to a single-digit decline in second half—fantastic! That's what, that, that's gonna be just, just really, really good. And that's gonna give me also, me and you, all of us, a really good optimism. We're gonna go back into the very strong growth for next year. Yep, that's very clear. And then I wanted to ask a question about the comment on back orders, that it's still well above AUD 200 million. How do you think about a typical level of back orders? And I suppose in your thinking, how much of the strength that you've seen in servers and networking has been running down some of these back orders? So the back orders predominantly, I mean, because the supply chain is pretty much normalized everywhere, like, just a slight but exceptions here and there. We actually do see elevated number of bookings, new orders through the enterprise networking and the infrastructure business. So that gives me the good optimism that we're gonna continue to turn around and continue to drive. So it can perhaps be a new norm. I mean, I would love that to be a new norm because it just gives me more optimism in driving more sales. So if I started to see decline in the back orders, then probably I would probably treat it more as a normalization. I don't see it right now. The bookings are very, very strong. We're at about 220 mark, AUD 220 million mark right now. And yeah, we're still getting new bookings for the next two quarters invoicing. So, it's pretty good space to be in. Then just a final question on the balance sheet. Just conscious of some of your comments before about inventory continuing to normalize into the second half, but at your last result, you were saying that, you're broadly expecting net debt to be roughly flat, at the end of December 2023 versus December 2022. Do you still expect that debt to be flat year-on-year? I would-- That's the expectation on the basis that we can continue to drive inventory levels down. We do feel they're still quite elevated, and with some large buy-ins that, you know, Vlad explained earlier around some of the target setting that was already in place, we'll hope to see that come down or relative to sort of the growth of the business. And, providing there's sort of no, you know, working capital movements that might explain an increase, that's what we're aiming for. Thank you. Your next question comes from Ed Woodgate, from Jarden. Please go ahead. Oh, hi, David and Mary. Great result. Just following some of the gross profit margins, so it was pleasing to see that kinda come through so strongly. Some investors were concerned, like, with your elevated inventory level, that you might have to discount through the half. So can you just talk about whether you got some support from vendors or whether you're just able to move the stock a bit more easier than you expected? We will not discount. We would have to discount only if the vendors would give us, again, high targets. And in order to bring us another big loads of inventory, we have to get rid of the existing one. But the market is not there. Demand is not there. So in order to go against the demand and stimulate demand and create the demand, we have to heavily discount. And even if we have to do this, we have to engage vendors and drive incremental funds from the vendors. Even in this case, we wouldn't have to. The good news is, all vendors, well, three top vendors, HP, Lenovo, and Dell, have reset their targets for Q3. So what it means, it means we will be doing very limited new buying in this quarter. It means very limited new stock going to hit us. So we're going to chew through the existing stock that we've landed in July, August. We already started to see the inventory levels started to slowly, slowly coming down. With the limited new buying, I have a very, very strong feeling by end of Q4, we're going to come to a very, very, very good levels of inventory. Yeah, sure. And look, I mean, I guess the progress you made with inventory during the half shows there's not really a problem there. But just to pivot to the change in, like, accounting with gross sales to net sales, are you gonna continue to provide the split, gross sales on an ongoing basis? And just, I guess, today, could you provide the split between Australian and New Zealand's gross sales? So the intention is to provide the gross sales number because a lot of our internal reporting is geared towards that as well. And it's also the number that was previously reported, so we will be reflecting the gross sales. And our segmentation in terms of the product categories is based on gross sales. The New Zealand split on the revenue recognition piece is in the segment note. But we will provide a more detailed New Zealand update in our full year results, and we'll take on board to reflect the gross sales in that update as well. Okay, thanks, Mary. And maybe just one more for me, because we're catching up. Just on the PC refresh cycle with non-Windows 11 devices, I mean, that sounds like it is a great opportunity. I think something talked about previously, but, the four million figure that you quoted, Vlad, is that. Can you just help us contextualize that? Is that, consumer devices as well, or is it just commercial. It's-- I think I believe it's all devices, but you know what? I've been asking different vendors, and different vendors giving me different numbers. Some saying it's 3.5 million, some 4 million, and some saying it's up to 8 million. So look, I actually don't know what the size of what actual opportunity is. All I know, it's significant. And that's just purely based on Windows, Windows 10 and, and below. You know, the funniest thing is, we still, believe it or not, we still ship some of the PCs with Windows 10, which would have to be refreshed by May 2025. So I don't know. So it's-- look, it's great. The opportunity is there. It will be very hard to quantify. One thing for sure, I know we will go back into the growth. That's, that's very... I'm very confident there. Okay, awesome. Thank you for taking the questions. Thank you. Your next question comes from Aryan Norozi from Barrenjoey. Please go ahead. Hi, guys. How you all? Just first one for me, around the AUD 5 million of other income in the first half of 2023 was about AUD 2 million last year. Could you please explain what that is and how we should be treating it for the next half, please? So, that's largely FX and mark-to-market unrealized FX movement. So, that accounted for somewhere around AUD 2.2 million of that increase. And there was also a settlement amount, which is probably more of a one-off, with a debtor, reflected as other income for about AUD 0.5 million. That's the largest part. Otherwise, the other categories of other income, being credit card fees and other sort of admin fees, are relatively similar but in the comparative period. Great. And just on the segment disclosure, so PCs and peripherals, sorry, PCs, I think you sort of, Vlad, you're sort of saying down 16%-17% year-on-year in the second half of 2023. Is that correct? Well, that's my just sort of a guesstimate. I don't think we were going to continue to decline in the second half at 24% mark. So I think we're going to go maybe, we'll see. I mean, 15%-17%, that's what my sort of prediction is. Hopefully, it's more than this. Yeah. What happened in the peripheral segment? Because, I mean, first half 2023, the peripherals were about AUD 59 million of revenue. It was about AUD 200 million in the second half of 2022. So how do we think about... I mean, it's lumpy because of the back orders coming through, but how do we think about how that plays out? Yeah. Yeah, yeah. We didn't have a lot of docks, then we had a huge demand for docks, and they all came. We had to ship them out. But now kind of supply chain is back to normal, very linear now, and then as PC is starting to decline. We're shipping a lot less docks. We're shipping a lot less, I don't know, accessories, bags and all, all the other things to come. And also monitors. So it's a very good, like, a very, very large degree of displays and monitors that ship with desktops and notebooks, and that's also softened up. So look at, look at, look at those two categories as, as very much linked to each other. So as soon as desktops and notebooks are going to go back into the growth, this area is going to go through the growth as well. Is the first half of 2023 AUD revenue for peripheral the right number for the second half as a base? There's no lumpiness or uneven change. It's pretty consistent. No. Yeah, yeah, yeah, good base. Absolutely. Yeah. Yeah. Okay. And then the on the growth margin, I mean, just the other question. So you mentioned that you're comfortable with it, but I think, Mary, you were talking about vendor targets being re-changed in the first half of 2023, and I think that—did that benefit you? And to what extent does that normalize in the second half? Basically, what I'm trying to get at is, do we assume the first, the sort of 9.7%, second quarter 2023 growth margin continues for the second half of 2023? So just to explain that, so in terms of the segments, you know, where there's growth around networking, service, storage, infrastructure, the access and surveillance, yes, margins will be maintained. My only comment around sort of being that elevated at 9.7 is they may come off with moving some of the PC inventories, where we've had some large buy-ins to meet, you know, the initial to, you know, before the targets were adjusted, the bigger buy-ins we've done, which is reflected in our inventory. So I know Vlad said no, necessarily no discounting, but it might be at lower margins than to balance it still, we would say, you know, somewhere between 9 and 9.5. Yeah, it's hard to say exactly if we'll be able to maintain the 9.7. Perfect. Thanks, guys. And then just so very quickly, the DAS business, PBT margins, you sort of mentioned it's profitable in the second quarter. Could you please quantify what the PBT margins were in the second quarter and maybe how you think about calendar, or sort of second half 2023, calendar year 2024 margins, please? PBT. ... so we're looking at PBT to sort of work within the same range that the company PBT is at, so that's between 3% and 4%. Okay, and that's. Yeah, okay. So the comment around, in the outlook being doubled, that's only for gross margin. So PBT, you're, you're looking to- We run branch networks and things like that, which is why, you know, the objective is to at least, you know, this year, where it's coming off not contributing to profit, to actually deliver at least the company net profit before tax margin. Obviously, we'd be looking to leverage the, you know, cost base and investments we've done and grow that in subsequent years, but that's the objective for this year. Sorry, so when you say this year, for calendar 2023, but calendar 2024, is that still the- No. To leverage that cost base? No, no. We're looking specifically- With that. Yeah, yeah. Okay. You go, Mary. No, no, you go. Okay, yeah, no. Like, we always... Like, even in the beginning of the year, we were guiding, we want DAS business to come to the NPBT of the company baseline of about 3%, you know, in between 3% and 3.5%. And I think we are on track to delivering that. Overall business of DAS business has to deliver more and more percentage of NPBT. Not sure if we're gonna deliver 7%, but we definitely have to be somewhere around 5, 5.5. That would be the expectation. This is the highly valued business. It's the growth opportunity business. We're providing a lot of value to this, so we are expecting a higher NPBT. But for that, we need to grow our top line aggressively, which we are currently doing. So everything we're doing is perfect. We just need to continue to accelerate growth, maintaining the costs, which we are, and we're gonna deliver, you know, way above 3.5 next year. But that's next year, not this year. Yeah. Perfect. Thank you. Thank you. Once again, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from James Lennon from Petra Capital. Please go ahead. Oh, good day, Vlad and Mary. Just a quick one. I think there was a couple of questions earlier about OpEx. Just wanted to clarify. I think in the past you've said what the sort of one-off, non-recurring costs would be relating to restructure and whatnot. Are you able to give the figure for what that was for the first half? Yeah, it was AUD 800,000, so AUD 0.8 million. And it was actually lower than the comparative period, which was, I think, about AUD 1.6 million. And the reason why the previous year half was higher is we had some significant one-off costs that related to the integration of Hills, which brought it to the AUD 1.6 million. So that's why our statutory profit growth was higher than our operating profit. Thank you. And just a comment around OpEx. I think a number got mentioned of AUD 80 million. I presume that's just what the employees and other costs, is that, is that what you're, you're sort of saying that's the baseline going forward? That's correct. Okay. All right. Thank you. Thank you. As there are no more questions, that does conclude our conference for today. Thank you for participating. You may now disconnect.