Nick Scali Limited (ASX: NCK) is into the business of retail furniture with operations of retailing and importing furniture to its customers. The company operates through a brand name of Nick Scali, with more than fifty outlets in Australian and New Zealand. The company provides household furniture and related accessories which includes lounges, occasional furniture, coffee table, TV units, buffets and cabinets, and rugs.
On 6 February 2019, the company presented its 1H FY19 results. Among the key metrics. the sales increased by 10.3% to $141.1 million 1H FY19 compared to $128.0 million in 1H FY18; however, the like for like sales remained flat. The opening of new stores primarily drove the sales and net profit growth. The top-line was primarily driven by full year's contribution from 6 stores opened in FY18 and received a smaller contribution from four new stores opened in 1H FY19. The gross margin increased by 20 bps to 62.8% compared to 62.6% in 1HY18.
The EBITDA of the company were reported at $38.2 million up 7.5% for the half year. The net profit after tax increased by 8.0% to $25.4 million compared to $23.5m in 1H FY18. The operating expenses increased by 90 bps to 36.1% of sales as compared to 35.2% in 1H FY18, mainly driven by the timing of new store openings and inflationary cost increases in stores with flat sales growth. The Board of Directors declared fully franked interim dividend of 25.0 cps in 1HFY19, representing the pay-out ratio of 80%. It will be paid on 27 March 2019 with the record date of 6 March 2019.
The company has maintained a robust cash position. The net cash increased by $1.6 million to $4.5m as compared to $2.9m in FY18. The operating cash flow increased as a result of sales and profit increases with no major increase to working capital outflows. Total inventory was recorded at $37.1 million, up $0.9 million on the back of new store openings and a corresponding increase in stock in transit. The payables are down by $4.5 million compared to FY18; however, it is in line with HY18, due to customer deposits balance.
On the operational front, the company opened four new stores during the period. It launched bedroom and bedding category successfully during December 2018 in twenty-four stores, and it has a target to open two further stores during the second half of FY19. Further, it targets a long-term store network of over eighty stores across Australia and New Zealand.
Now let us quickly have a glance at Nick Scali Limited’s stock performance and the return it has posted over the last few months. The stock is currently trading at a price of $5.560 and significantly increased by almost 8.527% during the day’s trade, with a market capitalization of ~$417.96 million. The stock opened at $5.620 with a day’s low at $5.540 and a day’s high price of $5.965. The stock has generated a YTD return of 0.98% and posted returns of -14.57%, 1.98% and 1.18% over the last six months, three months and one-month period respectively. It has a 52-week high price of $7.340 and a 52-week low of $4.80. The stock is trading at a PE multiple of 10.20x.
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