The Nick Scali Limited (ASX: NCK) share price will be on watch this morning after reporting another record net profit.
Nick Scali is one of Australia’s largest retailers and importers of furniture. It was founded over 50 years ago and still has Scali family as management. Each year Nick Scali imports over 5,000 containers of furniture.
Nick Scali’s FY19 Result
Nick Scali said that its revenue increased by 6.9% with a lot of the new revenue coming from new stores in FY18 and the six stores opened in FY19. Same store sales were down around 1% for the year.
EBITDA rose by 2.1% to $64.1 million and EBIT increased by 1.5% to $59.9 million with its profit margins slightly falling.
Nick Scali’s net profit after tax (NPAT) grew by 2.8% to $42.1 million and earnings/profit per share (EPS) also increased by 2.8% to 52 cents. The operating cash flow before interest and tax improved by 6.2% to $63.3 million.
Management were also pleased to point out that despite currency headwinds, gross margins improved by 0.2% to 62.9% driven by new product initiatives. However, increases in wages and property costs outpaced revenue growth.
Nick Scali Dividend
The Nick Scali final dividend declared was 20 cents per share, bringing the total dividend for the year to 45 cents per share, which is a 12.5% increase on last year. This is a dividend payout ratio of 87%.
Nick Scali Management Comments
Nick Scali Managing Director Mr Anthony Scali said: “The result was satisfactory given that furniture purchases are highly discretionary and have a strong correlation with housing sales.
“In the past twelve months Australia has experienced a significant slowdown in dwelling sales and the consumer has seen the value of their homes fall with the negative wealth effect resulting in a very cautious consumer.”
Is Nick Scali A Buy?
Same store sales have remained negative in July 2019, although the New Zealand stores have been doing well and could contribute to profit growth significantly over the medium term.
However, the company warned that trading conditions are unlikely to materially improve until the housing market improves. But the company is financially in a good position.
I can see why the share price has risen almost 7%, but I’m not ultra confident that the good times will come back soon. I think the reliable shares in the free report below could be better.
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