Nick Scali Ltd’s [ASX:NCK] shares are up today after releasing its half-year results.
Shares were down during early trade but have since recovered and at time of writing they’re trading at $14.58, up 1.3% from yesterday’s close.
For the half year ended on 31 December 2021, sales revenue came in at $180.3 million, up 5.4% when compared to the same period last year. Earnings before interest, tax, depreciation, and amortisation (EBITDA) was up 0.4% to $73 million.
Yet profits were down.
Net profit after tax (NPAT) came in at $35.6 million, a decrease of 6.6% from the same period last year.
It’s been a challenging time
While revenues were up, Nick Scali’s profits got hit after it had to close over half their stores. They also suffered production delays after Vietnam went into lockdown for three months.
During this period, they bought Plush-Think Sofas Pty Ltd for $101.4 million, which they funded through a mix of cash and debt. Plush has brought in $1.8 million in profits to the group since 1 November and added 46 showrooms to the network. With Nick Scali’s stores, this adds up to a total of 108 showrooms.
Managing Director Anthony Scali said:
‘Despite over half of our stores being closed between July and October, and the impact of international lockdowns on our key suppliers, we were still able to deliver strong earnings result, which was 75% up on H120. We are very excited about the recent Plush acquisition which is on track to provide significant sales and profit growth for the Company, as we expand the store network and benefit from the synergies of a fully integrated business.’
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What could happen next?
It’s been a slow start to the year. Nick Scali said store traffic in January was down 25% because of COVID and the Omicron variant, with revenues down 6%. Yet the group said they saw an improvement towards the end of the month on traffic and sales.
They’ve also warned that shipping costs could impact profits in the second half of the year.
Nick Scali declared a fully franked interim dividend of 35 cents per share to be paid on 28 March.
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Best,
Selva Freigedo,
For The Daily Reckoning Australia
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