NCK
Nick Scali Limited
ASX
Entry into UK Market, Acquisition and Equity Raising
Sentiment:
Acquisition Announcement
23 April 2024 7:16 PM
Nick Scali Limited announces its entry into the UK market through the acquisition of Fabb Furniture, funded by an equity raising.
Capital raise
Nick Scali will raise A$46.0 million through an underwritten institutional placement.
Eligible existing shareholders will be offered the ability to participate in a non-underwritten SPP to raise up to A$10.0 million.
Summary
- Nick Scali Limited has announced its acquisition of Anglia Home Furnishings Limited (trading as Fabb Furniture) for a consideration of A$3.82 million and the assumption of A$6.7 million in secured debt.
- Nick Scali plans to invest an additional A$1.0 million to exit an existing distribution center arrangement and inject up to A$11.5 million in net working capital.
- The company intends to further invest in the Fabb Furniture network to establish the Nick Scali brand in the UK, including store refurbishments, rebranding, a new distribution center, and new store openings.
- The acquisition and additional investment will be funded by a A$46.0 million underwritten institutional placement and a A$10.0 million non-underwritten Share Purchase Plan (SPP).
- The placement will be conducted at A$13.25 per new share, representing a 5.8% discount to the last traded price on April 23, 2024.
- The acquisition is subject to customary conditions and is expected to be completed in mid-May.
- Fabb Furniture operates a 21-store network across the UK, located in out-of-town retail parks.
- Fabb Furniture's gross margin is estimated to be approximately 10 percentage points lower than larger UK competitors on a like-for-like basis.
Sentiment
Score: 7
Explanation: The announcement is generally positive, outlining a strategic acquisition and expansion into a new market. While there are risks associated with the integration and competition, the company expresses confidence in its ability to improve Fabb Furniture's performance and establish its brand in the UK.
Positives
- Nick Scali gains immediate entry into the large UK furniture market with a 21-store network.
- The acquisition provides a unique opportunity to establish the Nick Scali brand at scale in the UK at a relatively low cost.
- There is a significant opportunity to drive profitable growth in the medium term.
- Nick Scali can leverage its buying power and supply chain to improve Fabb Furniture's gross margin.
- The company has a committed and long-tenured local management team to support the UK growth strategy.
Negatives
- Fabb Furniture's gross margin is approximately 10 percentage points lower than larger UK competitors.
- The company needs to invest significantly in store refurbishments and rebranding.
- The company needs to establish a new distribution center in the UK.
Risks
- The acquisition is subject to customary conditions, which may delay or prevent completion.
- The success of the UK growth strategy depends on effective store refurbishments and rebranding.
- The company faces risks associated with establishing a new distribution center in the UK.
- The company faces risks associated with integrating Fabb Furniture into its existing business.
- The company faces risks associated with operating in a new market.
Future Outlook
Nick Scali intends to invest further in the existing Fabb Furniture network to establish the Nick Scali brand in the UK, including store refurbishments and re-branding, establishment of a new distribution centre and new store openings. The re-branded and re-furbished store network will transition to the Nick Scali product range, and leverage Nick Scali's buying power and supply chain.
Management Comments
- Mr Scali stated that Fabb Furniture's gross margin is estimated to be approximately 10 percentage points lower than larger UK competitors on a like for like basis.
- Mr Scali believes they can leverage Nick Scali's buying power, combined with their supply chain and logistics capabilities, to deliver significant gross margin uplift for the UK business.
Industry Context
This announcement reflects a trend of Australian retailers expanding into international markets to diversify their revenue streams and capitalize on growth opportunities. The UK furniture market is a large and attractive market, but it is also highly competitive. Nick Scali will need to differentiate itself from existing players to succeed.
Comparison to Industry Standards
- Fabb Furniture's gross margin is estimated to be approximately 10 percentage points lower than larger UK competitors on a like-for-like basis, suggesting there is room for improvement to reach industry standards.
- Comparable UK furniture retailers include DFS Furniture, SCS, and Furniture Village, which have established brand recognition and extensive store networks.
- Nick Scali's success will depend on its ability to leverage its buying power and supply chain to improve Fabb Furniture's profitability and compete effectively with these established players.
Stakeholder Impact
- Shareholders will be impacted by the equity raising and the potential for future growth in the UK market.
- Employees of Fabb Furniture will be impacted by the change in ownership and the potential for new investment and growth.
- Customers of Fabb Furniture may see changes in product offerings and store experiences as the brand transitions to Nick Scali.
- Suppliers of Fabb Furniture may see changes in procurement practices as Nick Scali leverages its buying power.
- Creditors of Fabb Furniture will be impacted by the assumption of secured debt by Nick Scali.
Next Steps
- Completion of the acquisition, expected in mid-May.
- Integration of Fabb Furniture into Nick Scali's existing business.
- Store refurbishments and rebranding of Fabb Furniture stores.
- Establishment of a new distribution center in the UK.
- Transition of the store network to the Nick Scali product range.
- Seeking Nick Scali shareholder approval at the Company's AGM expected to be in October 2024 for the Conditional Placement.
Key Dates
- Tuesday, 23 April 2024: Record date for participation in the SPP (7:00pm Sydney time)
- Wednesday, 24 April 2024: Trading halt and announcement of Acquisition, Placement and SPP; Institutional Placement bookbuild
- Friday, 26 April 2024: Announcement of outcome of Institutional Placement; Trading halt lifted trading resumes on the ASX
- Tuesday, 30 April 2024: Settlement of Institutional Placement shares
- Wednesday, 1 May 2024: Allotment and normal trading of Institutional Placement shares
- Thursday, 2 May 2024: SPP offer opens and SPP offer booklet dispatched
- Mid-May: Expected completion of the Acquisition
- Wednesday, 22 May 2024: SPP offer closes (5.00pm Sydney time)
- Wednesday, 29 May 2024: Announcement of results of SPP; SPP allotment date
- Thursday, 30 May 2024: Normal trading of SPP shares and dispatch of holding statements
- October 2024: Company's AGM expected to be held
Keywords
NCK
Nick Scali Limited
ASX
Sector: Consumer Discretionary Distribution & Retail
Filings with Classifications
Better than expected
6 February 2025 4:18 PM
Results Presentation
- ANZ Group's underlying profit after tax of $36.0 million surpassed the October 2024 AGM guidance of $30-33 million.
Delay expected
6 February 2025 4:18 PM
Results Announcement
- Further stores expected to open 2H FY25 will be delayed to FY26.
Delay expected
6 February 2025 4:18 PM
Half-Year Report
- Some stores that were expected to open in the second half have been delayed to FY26.
Delay expected
6 February 2025 4:18 PM
Results Presentation
- Some stores that were expected to open 2H FY25 have been delayed to FY26.
Worse than expected
19 November 2024 4:12 PM
Operational Update
- The delays and unexpected costs associated with the freight forwarder's liquidation put Nick Scali's ability to meet its previously stated NPAT guidance at risk.
Delay expected
19 November 2024 4:12 PM
Operational Update
- Significant delays in the delivery of Nick Scali's products are occurring due to the liquidation of one of its freight forwarders and customs agents, resulting in containers being held at ports.
Capital raise
21 October 2024 12:37 AM
Annual General Meeting Results
- A capital raising through a share issue to Scali Consolidated Pty Limited was approved with 99.66% of votes in favor.
Worse than expected
20 October 2024 5:20 PM
Annual Report
- While the Australian and New Zealand business performed well, the UK acquisition is expected to result in losses during the first half of FY25, indicating worse than expected results in that segment.
Worse than expected
18 September 2024 7:07 PM
Annual Report
- The 7.8% decrease in revenue compared to the previous year indicates worse than expected results, despite the company's efforts to improve gross margins and expand into new markets.
Capital raise
18 September 2024 7:07 PM
Annual Report
- The company undertook an equity raise to fund the UK acquisition, raising $54.8 million (net of costs).
- A further $4 million equity raise is proposed, subject to shareholder approval at the October 2024 AGM.
Capital raise
18 September 2024 7:03 PM
Notice of Annual General Meeting
- The company is proposing to issue 299,999 shares to Scali Consolidated Pty Limited at $13.25 per share, raising AUD 4 million.
- The funds will be used to support the company's UK growth strategy.
Capital raise
25 April 2024 6:52 PM
Capital Raising Announcement
- Nick Scali has completed a A$46 million institutional placement.
- A A$4.0 million conditional placement to Anthony Scali is planned, subject to shareholder approval.
- A Share Purchase Plan (SPP) is being offered to eligible shareholders.
Capital raise
23 April 2024 7:16 PM
Investor Presentation
- A$46.0 million will be raised through a fully underwritten institutional placement.
- A$4.0 million will be raised through a conditional placement to Anthony Scali, subject to shareholder approval.
- Eligible shareholders will be offered a non-underwritten SPP to raise up to A$10.0 million.
Capital raise
23 April 2024 7:16 PM
Acquisition Announcement
- Nick Scali will raise A$46.0 million through an underwritten institutional placement.
- Eligible existing shareholders will be offered the ability to participate in a non-underwritten SPP to raise up to A$10.0 million.
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