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.