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Highlights
- Stock Surge: Nick Scali jumps 12% to $18.30, marking a 52-week high.
- Financial Performance: Group revenue rises 10.8% to $251.1 million, but net profit declines 22.8% to $33.2 million.
- Dividend & Outlook: Interim dividend down 14.3% to 30 cents per share; company flags ongoing volatility, especially in the UK market.
Nick Scali Limited (ASX:NCK) shares soared 12% on Friday morning following the release of its half-year financial results, reaching a new 52-week high of $18.30. The furniture retailer delivered a mixed but better-than-expected performance, with solid revenue growth despite profitability challenges.
For the six months ending December 31, 2024, group revenue increased 10.8% to $251.1 million, driven by the company’s expansion into the UK market. However, underlying net profit fell 22.8% to $33.2 million, while statutory net profit declined 30.2% to $30 million, weighed down by freight disruptions and higher costs.
ANZ Segment Shows Resilience
The Australia and New Zealand (ANZ) segment reported a slight revenue dip of 1.8% to $222.5 million, as written sales orders fell 2.2% to $208.1 million. However, when adjusted for calendar variations, orders actually grew 1.3% from June to December, suggesting underlying demand remains stable.
Online sales were a bright spot, rising 17% to $18.6 million. Gross margins in the ANZ segment, however, contracted by 120 basis points to 64.4%, largely due to increased freight costs. Higher employment expenses also pushed operating costs up by $5.1 million.
Despite these pressures, underlying net profit after tax for ANZ came in at $36 million, surpassing earlier guidance of $30 million to $33 million. However, statutory net profit was slightly lower at $34.1 million, impacted by a one-off $2.8 million freight disruption cost.
UK Expansion Faces Initial Challenges
Nick Scali’s newly acquired UK business posted an underlying net loss after tax of $2.8 million, though this was an improvement on the forecasted $3.3 million to $3.8 million loss.
The UK operations faced disruptions due to store rebranding and inventory clearance, with written sales orders totaling $19.4 million. On a positive note, gross margins improved to 45.1% from 41% pre-acquisition, and restructuring efforts have resulted in $2 million in annualized cost savings.
Dividend & Market Outlook
The board declared a fully franked interim dividend of 30 cents per share, reflecting a payout ratio of 75% of ANZ earnings per share and 86% of total group earnings per share. The dividend will be distributed on March 26, 2025.
Looking ahead, Nick Scali expects volatile trading conditions to persist. ANZ January sales orders were down 8.5%, though the final week of the month showed a 5% uptick. The company plans to open one new Plush store in Melton, Victoria, in H2 FY2025, but additional store openings have been pushed into FY2026.
In the UK, operating losses are expected to rise before conditions improve, as the company completes the rebranding of eight more stores in the second half of the year.
Despite short-term challenges, investor confidence remains strong, with Nick Scali shares up 23% over the past 12 months.
