Nick Scali was the first company I follow to issue a half year report today. Revenue was down on the last half but up 5.4% on pcp. It included two months contribution from the Plush acquisition but trading capacity in Nick Scali stores was down 55% on pcp (due to COVID) so it's a pretty good result all things considered. Written sales orders were up and the order bank is up significantly (and from the investor call has since grown further in January).

I'm getting a bit jack of hearing about how Nick Scali has been a COVID beneficiary as consumers spend more time at home and have less to spend discretionary funds on, and how this will reverse. High quality management find ways to keep delivering and I think this is high quality management. Anthony Scali is very pragmatic and understated - he and David Dicker remind me of the two old muppets in the balcony.

The Plush acquisition was well timed in terms of delivering a boost to top line numbers if any weakness in the existing business did eventuate, but their disclosures between the new and existing are very transparent. One thing on the Plush acquisition Anthony highlighted on the call was the opportunity to improve Plush's gross margin from mid-50s to closer to Nick Scali's mid-60s.

Supply chain timelines are back to normal but shipping costs and container availability remain unknowns. Overall I don't really have a variant perception with NCK, it's trading around fair value and is covered by a number of analysts (which I try to avoid) - so I don't currently own it but I don't think you would go too far wrong if you did.

[Not held]

FY results and the Annual Report were released today.  Some highlights included:

- FY21 revenue up 42% to $373m

- EBITDA up 93% to $126.6m

- NPAT up 100% to $84.2 (zero dilution so EPS up by the same amount)

- ROE is now to an astonishingly (and unsustainably) high 74% - but even at the 50% plus they’ve averaging for the past few years now it’s pretty remarkable

- Order bank is 35% higher YoY

- Impressive online growth

What are the yellow flags for me:

-          The final dividend of 25 cents is down on the interim of 40 cents and the payout ratio is down on FY20.  That either suggests they’re keeping their powder dry for an acquisition (they have disclosed they in negotiations for purchase of Plush) or they are nervous about COVID lockdowns/the bring forward of COVID demand rolling off.  On the results call they flagged nervousness about COVID.

-          Although the order bank is 35% higher YoY it is down from $191m at the half year to $111m at 30 June.  It does appear to be seasonal though so I’m more alert than alarmed by this.

-          No forward guidance but given the state of lockdowns around the country - and NSW in particular – you can’t really knock them for this.  Commentary about performance of Vic and SA as they came out of lockdown suggests there is still pent up demand out there.

I wouldn’t mind lightening up on my retail exposure and this is pretty close to FV for me but it’s a properly quality well-run business and it’s not yet giving me an excuse to bail out.

@Anni8 – you beat me to this one.  I think you’ll find the final divi is only 25cps though.

[Held]