Nick Scali Limited – Additional Figures and Ratios
2017
2018
2019
Market price per share (financial year end)
$6.09
$6.73
$6.26
Average settlement period for debtors (days)
0.31
0.42
0.45
EPS
$0.460
$0.506
$0.520
Acid-test ratio (times)
0.89
0.58
0.62
Dividends per share (interim + final)
$0.340
$0.400
$0.450
Gross profit margin
62.50%
62.69%
62.92%
P/E ratio (times)
13.24
13.30
12.04
Sales revenue to capital employed (times)
2.66
2.55
2.50
Return on capital employed
61.57%
60.89%
56.72%
Average settlement period for creditors (days)
28.94
37.41
41.82
Source: Market price per share from Morningstar DatAnalysis database; EPS from Nick Scali Limited 2019 and 2017 Annual Reports: Consolidated Statements of Profit and Loss; all other figures based on author calculations using data from Nick Scali Limited 2019 and 2017 Annual Reports, Financial Statements and Notes.
Annual Report 2019
Padrone queen bed, bedside table
and dresser in solid Australian oak.
Annual Report 2019 | Nick Scali Limited2
Solene 3 seater with chaise lounge in 100% leather.
Ines table nest. Daddy Long Leg floor lamp. Aromer floor rug.
Annual Report 2019 | Nick Scali Limited 3
Page
Chairman and Managing Director’s Review 5
Directors’ Report 6
Auditor’s Independence Declaration 16
Consolidated Statement of comprehensive income 18
Consolidated Statement of financial position 19
Consolidated Statement of changes in equity 20
Consolidated Statement of cash flows 21
Directors’ Declaration 43
Independent Auditor’s Report 44
Shareholder Information 48
Corporate Information 51
Page
Notes to the consolidated financial statements
Note 1. Basis of preparation 22
Note 2. Segment information 24
Note 3. Revenue 24
Note 4. Expenses 24
Note 5. Income tax expense 25
Note 6. Earnings per share 26
Note 7. Equity – Dividends 26
Note 8. Reconciliation of profit after income tax
to net cash from operating activities 27
Note 9. Cu
ent assets – Cash and cash equivalents 27
Note 10. Cu
ent assets – Receivables 28
Note 11. Cu
ent assets – Inventories 28
Note 12. Cu
ent assets – Other financial assets 28
Note 13. Non-cu
ent assets – Property, plant
and equipment 29
Note 14. Non-cu
ent assets – Intangibles assets 30
Note 15. Cu
ent liabilities – Bo
owings 31
Note 16. Cu
ent liabilities – Payables 31
Note 17. Cu
ent liabilities – Defe
ed revenue 31
Note 18. Cu
ent liabilities – Provisions 32
Note 19. Non-cu
ent liabilities – Bo
owings 32
Note 20. Non-cu
ent liabilities – Defe
ed revenue 32
Note 21. Non-cu
ent liabilities – Provisions 33
Note 22. Equity – Issued capital 33
Note 23. Equity – Reserves 34
Note 24. Financing facilities 35
Note 25. Financial instruments 35
Note 26. Fair value measurement 37
Note 27. Key management personnel 38
Note 28. Remuneration of auditors 38
Note 29. Contingent liabilities 38
Note 30. Commitments 38
Note 31. Related party transactions 39
Note 32. Events after the reporting period 39
Note 33. Share-based payments 39
Note 34. Controlled entities 40
Note 35. Parent entity information 40
Note 36. Summary of significant accounting policies 41
Contents
Annual Report 2019 | Nick Scali Limited4
Historical Performance
Sales Nick Scali Furniture Stores
Net profit after tax Dividends
Annual Report 2019 | Nick Scali Limited 5
Operating Performance
We are pleased to report that Nick Scali Limited has had
another successful year, delivering a seventh successive
year of revenue and profit growth, with earnings per share
increasing 2.8% to 52.0 cents per share. In an environment in
which same store sales growth has been depressed, earnings
growth has been driven by the continuation of our disciplined
store rollout program and further improvements in gross
margin.
Sales revenue increased by 6.9% to $268 million. A full year
of revenue contribution from the six stores opened in the year
ended 30 June 2018 and a part year contribution from the six
stores opened during the year ended 30 June 2019, off-set a
slight decline in same store sales.
Despite the decline in the value of the Australian Dollar, gross
margin increased by 20 basis points to 62.9%, driven by new
product initiatives.
Operating expenses increased to $106 million, which
epresents 39% of sales revenue, up from 38% in the
previous financial year. Costs remain tightly controlled, and
this increase in operating expenses as a percentage of sales
was due mainly to increased costs associated with new store
openings, discretionary marketing investments and non-
ecu
ing expenditure, such as the relocation of the Victorian
distribution centre, as well as the decline in same store sales.
The Company maintained its effective working capital
management throughout the year and as a result, operating
cash flow (before tax and interest) was $63million, on the back
of EBITDA of $64 million. After allowing for tax and interest,
and with the Company requiring less than $5m for capital
projects, $40m was returned to shareholders in dividends
during the year. The Company expects to continue to deliver
a strong cash flow result, and with a stable, well-managed
alance sheet Nick Scali remains well placed to continue to
grow its existing business and to take advantage of any new
opportunities that may arise.
Following the opening of the first store in New Zealand in
December 2017, a second New Zealand store opened during
the year, with the New Zealand business delivering a positive
contribution to the Group for the 2019 financial year. This
provides a solid platform for the New Zealand business to
make a significant contribution to profit growth over the next
few years, as further stores are added to the network.
Other notable achievements during the year included the
elocation of our Victorian distribution centre to a new
purpose-built facility in Keysborough, the introduction of the
edroom and bedding category in 26 of our larger stores in
December 2018, and the relocation of stores at Bundall (Qld)
and Rutherford (NSW) into larger sites.
The Board recognises that the continued growth of Nick Scali
Limited is the result of the dedication of our many employees
and associates across Australia and New Zealand, and we
would like to thank them for their hard work and commitment
to the Company. The Board also takes this opportunity to
thank our shareholders, customers and suppliers, whose
continuing support underpins the success of the Company.
Store network
In addition to the new store in Hamilton, New Zealand, five new
Nick Scali Furniture stores were opened in Australia during
the year. These were in Morayfield, Mackay, Brisbane Airport,
Prospect and Craigieburn. These openings
ought the total
number of Nick Scali Furniture stores at 30 June 2019 to 57.
The Company plans to open four new stores in the year to
June 2020, including two further stores in New Zealand.
Alongside the Nick Scali Furniture stores, the Company
cu
ently operates five clearance stores, in a mixture of
permanent and temporary locations, which are selected
and managed to best minimise inventory holdings in our
distribution centres.
Dividends
The directors declared a fully franked final dividend of 20 cents
per share on 8th August 2019. The final dividend has a record
date of 8th October 2019 and will be paid on 29th October
2019. This
ings the total dividend for the year to 45 cents
per share, representing a payout ratio of 87%, which the
directors consider appropriately balances the distribution of
profit to shareholders with the need to reinvest earnings for
future growth.
Outlook
As a furniture retailer, Nick Scali Limited is very dependent on
housing sales and renovations, which have been in decline
in recent months. Trading conditions will likely only improve
when there is an uplift in housing sales and refu
ishments,
the timing of which is presently uncertain.
Although there is a potentially somewhat favourable economic
environment of very low interest rates and relatively low
unemployment, same store sales growth continues to be
challenging, and a continued period of negative same-store
sales growth presents the possibility that the profit benefit from
new stores will be offset by negative same-store trading in the
short-term.
Chairman and Managing
Director’s Review
Annual Report 2019 | Nick Scali Limited6
The directors present their report, together with the financial
statements, on the consolidated entity (refe
ed to hereafter
as the ‘Group’ or ‘consolidated entity’) consisting of Nick Scali
Limited (refe
ed to hereafter as the ‘Company’ or ‘parent
entity’) and the entities it controlled at the end of, or during,
the year ended 30 June 2019.
Directors
The names and details of the Company’s directors (refe
ed
to hereafter as the ‘Board’) in office at any time during
the financial year or until the date of this report are as
follows. Directors were in office for this entire year unless
otherwise stated.
John Ingram
Greg Laurie
Carole Molyneux
Stephen Goddard
Anthony Scali
Principal activities
The principal activities of the Group during the year were
the sourcing and retailing of household furniture and related
accessories.
No significant change in the nature of these activities occu
ed
during the year.
Dividends
Dividends paid during the year were as follows:
XXXXXXXXXX
$’000 $’000
Final franked dividend for 30 June 2018:
24.0 cents (2017: 20.0 cents) 19,440 16,200
Interim franked dividend for 30 June 2019:
25.0 cents (2018: 16.0 cents) 20,250 12,960
39,690 29,160
In addition to the above dividend, since the end of the financial
year directors have declared a fully franked final dividend
of 20.0 cents per fully paid ordinary share to be paid on 29
October 2019 out of retained profits at 30 June 2019.
Operating and financial review
Nick Scali Limited is a furniture retailer operating in Australia
and New Zealand. Following a strategic review of the business
during the previous year, the business operates under a single
and, Nick Scali Furniture.
Group Operating Results
XXXXXXXXXX % Change
$m $m
Revenue XXXXXXXXXX%
EBITDA XXXXXXXXXX%
EBIT XXXXXXXXXX%
NPAT XXXXXXXXXX%
EPS (cents XXXXXXXXXX%
DPS (cents XXXXXXXXXX
Net cash XXXXXXXXXX
For the financial year ended 30 June 2019 the Group reported
a record NPAT result of $42.1m, up 2.8% on the previous year.