The Nick Scali Limited (ASX: NCK) share price is under the spotlight after the company announced its FY24 first-half result.
Nick Scali is a furniture retailer that owns the Nick Scali and Plush-Think Sofas businesses.
HY24 result
Here are some of the highlights from the six months to 31 December 2023:
- Revenue fell 20.2% to $226.6 million
- Gross profit margin improved 360 basis points (3.60%) to 65.6%
- EBITDA (EBITDA explained) fell 19% to $89.9 million
- EBIT fell 25% to $67.7 million
- Net profit after tax (NPAT) fell 29% to $43 million
- Profit / earnings per share (EPS) sank 29% to $0.531
- Interim dividend of $0.35 per share
That profit generation of $43 million was above the company’s guidance of between $40 million to $42 million.
Interestingly, group written sales orders for the period were $212.7 million, up 1.1% year on year, and the FY24 second quarter sales orders were 8.2% higher year on year. Revenue in HY23 benefited from increased deliveries as the elevated June 2022 order book reduced, with lead times returning to pre-COVID levels over HY23.
Nick Scali brand online written sales orders were $14.7 million in Hy24, up 22.5% year on year.
During the half, it opened a new and larger Nick Scali store in Payneham (South Australia), with the existing store being converted to a clearance store. Two new Plush stores were opened, one in Helensvale (Queensland) and Payneham (South Australia). One Plush store was closed.
Use of capital
One of the major focuses of the business is its new Queensland distribution centre, with $8.5 million of construction costs in the period – it’s expected to be completed in the FY24 third quarter. The total construction cost is expected to be $16.2 million, as well as $7.8 million for the purchase of the land in FY23.
Nick Scali said it repaid $20 million of corporate debt in the half-year period, which was used to buy Plush in 2021. The debt has been reduced to $28 million.
As mentioned, Nick Scali is going to pay an annual dividend per share of $0.35, representing a dividend payout ratio of 66%.
It finished the period with cash of $68.3 million.
Trading update
Nick Scali revealed that January 2024 written sales orders amounted to $58.9 million, up 3.6% year on year.
Final thoughts on the Nick Scali share price
The company has a long-term target of 86 Nick Scali stores and between 90 to 100 Plush stores, which gives the company plenty of room to grow. The growth of its online sales is also a good bonus.
Nick Scali is proving to be one of the best retailers in Australia and it’s more resilient than some investors may have thought. I think it’s a good business to buy when conditions are difficult, but it has already recovered significantly, so I’d be willing to be patient from here for a better price.