Nick Scali Limited

ASX:NCK

Nick Scali Limited

ASX:NCK
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$14.77 (-3.1%)
Last close price
#108
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8
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Reports (5) My Report Forum Investors
Forum Topics NCK NCK Freight Delays

Pinned straw:
Rick
Last edited a month ago

Nick Scali said they might struggle to meet 1HFY25 guidance of $30 million - $33 million due to additional costs and delays as a result of one of their freight forwarders and customs agents going under administration. This isn’t a structural problem but the share price is likely to take a hit.

FREIGHT AND CUSTOMS AGENT OPERATIONAL ISSUES

Nick Scali Limited (the Company) advises that one of its freight forwarders and customs agents has experienced operational issues and is now under the administration of a liquidator. This has resulted in a significant number of the Company's containers being delayed at the ports causing challenges to the delivery of its products in Australia.

To resolve the issue the Company made an application to the Federal Court of Australia to seek orders for the shipping lines to release the Company's containers through the giving of certain undertakings. With the Court orders now granted, the Company is working to have these containers delivered to its Distribution Centres to allow delivery of the goods to its customers as soon as practicable.

Due to the delays, the Company now expects to incur unexpected additional storage and detention costs for the containers which cannot be quantified at this time.

These unexpected delays and costs are adding significant additional risks to the Company's ability to achieve its prior guidance of NPAT for Australia and New Zealand in the first half FY25 (a range of $30-33 million).

As further details of the financial impact of these events are known, additional guidance on the financial impacts will be provided.
PortfolioPlus
Added a month ago

NCK have long had a reputation of being slow in product delivery, so I can imagine the customer angst must be at boiling point.

This issue is both a curse and a blessing (sorry about the non delivery, but not our fault) but the key will be how they handle the matter.

Handled well and you can turn an irate customer into an advocate…handled badly and you’ve lost a customer for life and the knock damage which their horror stories might kill potential future sales.

That said, it’s not only extra storage costs to contend with, what about cancelled orders, extra freebies and compensatory discounts to appease the disgruntled.

Whilst this is bad, it is transitory (provided they have identified a better supplier) it’s not their biggest concern - the UK is.

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Karmast
Added 4 weeks ago

In my view the multiple had run up too much after the UK acquisition announcement. It was as high as 17 times trailing earnings a couple of months ago and that is as high a band as it has traded in over the past 10 years.

Once Anthony shared a couple of months ago that he thought costs would be up and in turn gross margin would be down things looked a little riskier. Add a short term but significant whack to earnings and customer experience due to container shipping problems in FY25. Then consider that unless things go faster and better in the UK over the next year than expected (which is less than 50:50 odds I think), earnings could end up being down a lot at both the half and full year in FY25...

Sentiment could turn down pretty quickly as it did a couple of years ago, so I am watching closely for a chance to buy back in when Mr Market offers up a single digit multiple and a much more asymmetric bet than we presently see in November 2024.

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