There was an interesting devaluation taken on furniture retailer Nick Scali [ASX:NCK] earlier today, even after the homewares merchandiser reported that there had been an increase of 70% in its net profit after tax (NPAT) for the half year ending December 2022.
Not to mention deliveries hit a new record, and cost of doing business as a percentage of revenue also saw an improvement. The company’s group gross margin of 62.0% also improved 2.5% compared to 2H FY22.
And yet, NCK dropped 11% by early afternoon, taking it to a 25% fall in the past 12 months:
www.tradingview.com
Nick Scali delivers the goods
For the six-month period ending 31 December 2022, Nick Scali delivered high results all round with a cheerful return to bricks-and-mortar trade, increasing and improving business and financial metrics.
Underlying results for H1 FY23 included:
- Revenue for the group came to $283.9 million, an improvement of 57.4% on the same time last year, when the revenue total came to $180.3 million.
- NPAT was boosted 70.2%, totalling $60.6 million in the half year, up on the $35.6 million in the prior period.
- EBITDA (earnings before interest, tax, depreciation, and amortisation) likewise climbed 53.4%, with the total of $112.2 million much higher than the $73 million same time 2022.
- Taking depreciation and amortisation out of the mix, EBIT was 65.5% higher year-on-year, moving up from $55.1 million to $91.2 million.
- The gross margin fell 120 base points period-on-period, from 63.2% to 62%, however, it went up compared in 2H FY22 by 2.5%.
- CODB (cost of doing business) improved in the half year, with expenses dropping 290 base points from 35.2% to 32.3%.
- The group’s EBIT margin went up from 30.6% to 32.1%.
NCK managed a new record in deliveries thanks to its outstanding orders on 30 June 2022, contributing $283.9 million to revenue.
The group gross margin improved through the 2021-acquired Plush Sofas business, with synergies realised along with product sourcing, bringing the group gross margin from 59.5% in 2H FY22 to 62% in 1H FY23.
Nick Scali pushes on post-Plush
CODB managed to balance out with the total expenses of the Plush acquisition being realised, especially along with synergy savings of $20 million (annualised) compared to pre-acquisition costs.
The company reported that January is historically the best trading month for the group, and it still beat the company’s expectations.
A slowdown was anticipated compared to the COVID-19 boom, yet trading was and continues to be better than pre-COVID-19, despite rising interest rates.
Managing Director Anthony Scali said:
‘Record revenue in the half has been a tremendous achievement by our distribution teams which demonstrates the operational capacity in the business to support future volume growth. The integration of Plush is now complete with IT and distribution operations integrated during the half and we are well placed to grow our store network under both brands.
‘We are excited about the potential to improve foot traffic and conversion in the current Plush store network.’
NCK declared a fully franked interim dividend of 40 cents per share, representing a payout ratio of 53.5%.
The group expects to open four new stores in 2H FY23 and will wait for February–April trade before creating further guidance.
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