Nick Scali enjoys record half-year profit

Furniture retailer Nick Scali has seen a record $25.4 million in net profit after tax for its half-year to 31 December 2018, an 8 per cent increase over the same period last year.

The result was driven by a sales revenue increase of 10.3 per cent to $141.1 million, compared to $128 million the year prior, as well as a gross margin growth of 20 bps to 62.8 per cent.

“By following our store rollout strategy, our team has delivered growth in top line sales and a corresponding record profit in a difficult retail environment,” Nick Scali managing director Anthony Scali said.

“The result demonstrates that even during periods of low, flat or marginally negative same store sales growth, our company is geared to deliver profit.”

Earnings per share grew 8 per cent, from 29 cents per share to 31.3 cents per share, while dividends per share jumped 56.3 per cent to 25 cents, compared to the 16 cent seen in HY18.

“Having achieved a 17 per cent increase in operating cash flow and with $38 million cash on hand that the period end, the Board has decided to increase the dividend payout ratio,” Scali said, noting the board intention to do the same at full year in order to deliver superior returns to shareholders.

The business’ store network expanded over the period, adding three new stores across Queensland, as well as a second store in New Zealand.

Projecting 57 stores in its network by June, the retailer expects to open a further two stores in the second half of the financial year, and hopes to achieve 80 stores across Australia and New Zealand long term.

However, looking at the remainder of the financial year, the business concedes that trading has been unpredictable, with same store sales positive in December yet negative in January.

As such, the retailer points out it is “difficult to provide further guidance around profitability for full year to 30 June 2019,” noting that total sales growth is likely to be underwritten by expansion of the store network.

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