NCK
Nick Scali Limited
ASX
Annual Report to shareholders
Sentiment:
Annual Report
18 September 2024 7:07 PM
Nick Scali Limited's FY24 annual report reveals a 7.8% decrease in revenue to $468.2 million, but a net profit after tax of $80.6 million, driven by a UK acquisition and improved gross margins.
Worse than expected
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
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.
Summary
- Nick Scali Limited's FY24 revenue decreased by 7.8% to $468.2 million, compared to $507.7 million in FY23.
- The decrease in revenue is attributed to the reduction in the June 2022 order bank and lead times returning to pre-COVID levels.
- The gross margin for Australia and New Zealand (ANZ) increased by 250 basis points to 66.0%, due to stable freight costs and strong supplier purchasing.
- The company incurred one-off non-recurring transaction costs of $1.5 million to complete the UK acquisition of Fabb Furniture.
- Underlying ANZ operating expenses increased by $3.1 million, primarily due to inflation affecting property and wages.
- Net profit after tax for the year was $80.6 million.
- The company generated $87.1 million in cash from operating activities.
- In August 2023, $20 million was repaid on the corporate acquisition debt for Plush, leaving $28 million outstanding.
- The company has $43.7 million of debt secured on owned property.
- Capital expenditure included $16.6 million to build and $2.4 million to fit out a new distribution center in Queensland, plus $9.1 million for store refurbishment and new store fit-outs.
- A total of $56.7 million was returned to shareholders through dividends.
- The company raised $54.8 million in equity (net of costs) to fund the UK acquisition, with a potential further $4 million pending shareholder approval.
- Cash and bank deposits at year-end were $111.3 million.
- The Fabb Furniture acquisition added 20 showrooms in the UK, bringing the total store network to 128.
- Nick Scali online written sales orders increased by 17.8%.
- The company plans to open two Nick Scali and three to five Plush stores in FY25 in Australia and New Zealand.
- UK trading is expected to deteriorate in the first half of FY25 due to acquisition integration.
- A fully franked final dividend of 33.0 cents per share was declared, bringing the total dividend for the year to 68.0 cents per share.
Sentiment
Score: 5
Explanation: The report shows mixed results. While the company successfully completed a UK acquisition and improved gross margins, overall revenue and net profit decreased compared to the previous year. The planned expansion and potential for further capital raise suggest a cautiously optimistic outlook.
Positives
- Improved ANZ gross margin of 66.0%, up 250 basis points.
- Strong cash generation of $87.1 million from operating activities.
- Successful equity raise of $54.8 million (net) to fund UK acquisition.
- Significant cash balance of $111.3 million at year-end.
- Expansion into the UK market through the Fabb Furniture acquisition.
- Increase in Nick Scali online sales orders by 17.8%.
Negatives
- 7.8% decrease in overall revenue to $468.2 million.
- 20.3% decrease in net profit after tax to $80.6 million.
- $1.5 million in one-off acquisition costs.
- $3.1 million increase in underlying ANZ operating expenses.
- Expected deterioration in UK trading during the first half of FY25.
Risks
- Economic downturn impacting consumer demand for discretionary purchases.
- Potential for acquisitions to not deliver projected benefits or successful integration.
- Cybersecurity threats to IT systems and data.
- Failure or disruption of information technology services.
- Inadequate management succession planning.
- Workplace health and safety risks.
Future Outlook
In Australia and New Zealand, the company expects to open two Nick Scali stores and three to five Plush stores in FY25. In the UK, trading is expected to deteriorate in the first half of FY25 due to the disruption from the acquisition strategy implementation.
Management Comments
- We are pleased to report that Nick Scali Limited performed strongly in the year, with revenue and gross profit stabilising post covid at a improved gross margin.
- The acquisition of Fabb Furniture is complementary to Nick Scalis existing business and provides a compelling opportunity for Nick Scali to enter the large and attractive UK furniture sector.
Industry Context
This announcement reflects the broader furniture retail industry's challenges in navigating post-pandemic economic conditions and supply chain disruptions. The UK acquisition positions Nick Scali for growth in a new market, while the company's focus on online sales demonstrates adaptation to evolving consumer preferences.
Next Steps
- Opening two Nick Scali stores and three to five Plush stores in Australia and New Zealand in FY25.
- Implementing the UK acquisition strategy, including store refurbishments and product range changes.
- Seeking shareholder approval for a further $4 million equity raise at the October 2024 AGM.
Key Dates
- 30 June 2023: End of the previous financial year
- 8 May 2024: Acquisition of Fabb Furniture
- 30 June 2024: End of the current financial year
- 9 August 2024: Final dividend declared
- 26 September 2024: Record date for final dividend
- 17 October 2024: Payment date for final dividend
- 21 October 2024: Annual General Meeting (AGM)
Keywords
Furniture, Retail, Acquisition, Annual Report, Nick Scali, Fabb Furniture, UK, Australia, New Zealand, Financial Results, Gross Margin, Revenue, Profit, Dividends, Equity Raise
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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