Forum Topics NCK NCK Nick Scali Ltd General Discussion
Solvetheriddle
6 months ago

Good interview with Anthony Scali, following on from my preso previously. A lot of good detail here if you are interested.

UK acquisition on the agenda!

obviously i wish id bothered to have a closer look at NCK years ago, ive said that a few times with various companies!

Livewire with Mathew Kidman


https://www.youtube.com/watch?v=ckawG_hg7Wk

14
Vandelay
one year ago

On Ausbiz's The Call today the guests seemed to insinuate they believed the sell off in share price was due to management's reluctance to give guidance. They went on to imply that not giving guidance is worrying. It really made me chuckle, that these experts expect a management team to know how many couches Australians will buy in the next 5 months...

24

mikebrisy
one year ago

100% agree. Just listening to the episode now. There is a lot of rubbish spouted on these shows - you really do have to exercise the grey matter to pick through it.

It would be a brave discretionary consumer CEO that gave guidance with rising interest rates and all the fixed term rates rolling over to variable. But that’s not the same as saying the sector is a sell.

Dics. Hold SUL and ADH in RL; ADH on SM

16

Vandelay
one year ago

Agreed. An easy narrative to put forward on a podcast. If only investing was that simple.

9

Vandelay
one year ago

Hi @CamSmedts34 yeh I am aware of how the company makes to order although I've never bought from there (too expensive for my cheap nature). Does the customer pay upfront or when they receive the couch? I thought they paid upfront, but I could be wrong. If you do then I don't see how the management team could know how many couches will be sold in the next few months. And even if it's paid on delivery, then the only possible guidance they could give with any accuracy would be 2months out right? I don't own stock or follow the company closely, so I don't have a hard view. Just don't think it's necessary for management to give guidance especially considering it would just be a guess (even an educated one). And further for investors to rely on that as a basis for holding or not holding the company unless you're a short term trader.

10

mikebrisy
one year ago

You pay up front. I purchased once. Saw a lovely office armchair for $2000 on 8 week delivery. Just about to buy. Then glanced around and saw an even nicer (more comfortable) on floor stock, discounted 50% to $950. Paid. Delivered to my office next day. Sweet.

Disc: Never held but on watch list.

14

Vandelay
one year ago

If you pay for an item, the company gets the cash, surely that counts as revenue. Even if it's upfront. Unsure what you mean here.

7

Noddy74
one year ago

Just to be clear if you pay for something with cash, that doesn't automatically count as revenue. I'm too lazy to get the exact wording from the accounting standard but effectively control of the asset needs to move from the seller to the buyer. In the case of Nick Scali's business model that is significant because they usually take an order before shipping it.

So what does that mean for Nick Scali? It means orders made not delivered are a significant as a future predictor of revenue. The initial entry is DR Cash CR Deferred revenue (on the Balance Sheet). It's not taken off the balance sheet until control gets transferred. The exact point at which control gets transferred is often a point of contention companies have with their auditors but in my experience it's never before the goods land in the country.

One thing to watch is Deferred Revenue (Cash taken, order not delivered) and it's a knock I have on the NCK result because it is so significantly down. Timing plays a role so I wouldn't wholly lean on it but it's worthy of consideration.

debd67643fb8de768506d28a80995081f9ffb5.png

[Not held]

27

Vandelay
one year ago

Thanks for the explanation Noddy! That's very interesting.

8

edgescape
one year ago

That concept is coming back from when I last learnt this 2 years ago in one of my accounting subjects. Basically the cash advance/deposit is like a liability for Nick Scali. So it can only be counted as revenue once the good is delivered to the customer and then the cash is added back to the balance sheet

13

Rick
one year ago

Every dog has its day, and then every day has its dog! What is rare is when both dogs are the same! Today I’m left scratching my head and wondering if I’ve learned anything about investing over the past 40 years! ;)

16

edgescape
one year ago

Also have to remember about companies selling gift vouchers.

Gift vouchers also count as unearned or deferred revenue, even if someone pays for them in cash.

I haven't seen any for Nick Scali but most likely they would exist.

And I believe one company got in trouble for booking vouchers as revenue. Can't remember who.

Another fun fact: Postage stamps is also deferred or unearned revenue. The large amount of deferred revenue from Auspost stamps is possibly one of the reasons why Auspost is underperforming financially at the moment as we don't know the full number of stamps minted. Even more disturbing is the number of collectors buying up sheets of postage stamps in the 80s and 90s not knowing about how much was actually printed and their children and relatives suddenly realising how hard it is to offload the collection.

12
Rick
2 years ago

Thanks @markeewanI appreciate you weighing in with your straw on the technical analysis for Nick Scali. Based on a pure valuation approach, I almost always seem to buy in too early. You are right, the chart looks horrible and there is likely to be more weakness in the share price…especially today! Too early once again! :)

7
Noddy74
3 years ago

4 May 2021

Trading Update & Profit Guidance

Nick Scali Limited (“NCK” or “the Company”) today wishes to issue the following trading update. As highlighted in the Company’s Announcement on 4 February 2021, total written sales orders for the group grew by 52% in H1 FY21. This positive trading momentum has been maintained with growth in total written sales orders of 50% through Q3 FY21, which includes same store written sales order growth of 41%. Written sales orders remained strong in April with growth of 242% compared to April 2020, which wassignificantly impacted by widespread store closures. Written sales orders for April 2021 were in line with March 2021 and up 37% compared to April 2019.

Notwithstanding container availability continuing to affect the Company’s supply chain, FY21 year-to-date sales revenue growth is approximately 44% to the end of April and is expected to continue through Q4 FY21. Consequently, EBITDA for the year ending 30 June 2021 is forecast to be approximately $120m (includes net repayment of JobKeepersubsidies received in H1 FY21) and resulting Net Profit After Tax for the year ending 30 June 2021 is expected to be in the range of $78m to $80m, an increase of approximately 85% to 90% on the previous financial year. This guidance remains subject to no further delays or adverse material impacts on container availability in the lead up to 30 June 2021. The order bank at the end of April continues to remain at elevated levels which provides a good foundation for revenue growth as the Company enters FY22.

***

Reaffirmation of Nick Scali's growth trajectory today.  The market is trying to decide whether or not it likes the result, after closing at $10.70 it initially fell below $10 at the open before rebounding to almost $11.  It's a super high quality business with steady consistent growth year after year since listing.  ROE is close to 50% in normal years.  The question mark is how much demand has been brought forward by COVID and given the nature of it's products it does seem suseptible to this.  A slight caution in what is otherwise a very positive announcement is the mention of orders at 'elevated levels' - at the half they quantified this so this announcement represents reduced transparency.  Given management's history I'll keep holding for now.  At some stage heat will temporarily come out of demand and the SP will suffer but it pays such a good dividend I suspect I'll still be ahead and holding a super business.

[Held]

 

10

Noddy74
3 years ago

Over the past 9ish months the conversation has been very macro in terms of retail - 'people are stuck at home, cashed up and "retail" has benefited'. It's very level 1 thinking. When we did go to the next level down it was only to differentiate into online, bricks and mortar and omnichannel. That worked fine because everyone was getting a lick of the ice cream. I suspect as we open up that level of thinking will hurt returns. For retail COVID=good, no COVID=bad is too macro. There may eventually be a hangover for all retail but I suspect it won't be on the same timeframe for all.  
Companies like James Hardie, CSR, Brickworks are smashing it right now and I think there are retail names -I'm hoping NCK might be one - whose cyclical cycle will follow a similar trajectory. 
Making money over the past 12 months has been Uber easy. It's about to get a lot tougher

6