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FY20 report: Nick Scali (ASX:NCK) share price is going nuts

The Nick Scali Limited (ASX: NCK) share price is going nuts, it’s up 18% after the company reported its FY20 result.

Nick Scali is one of Australia’s largest retailers of higher-end furniture.

FY20 result

Nick Scali announced that its sales revenue fell by 2.1% to $262.5 million. Same store sales decreased by 6.7%, however written orders grew 9% and same store sales orders rose 4%. May and June sales orders grew by 72% year on year. The company opened one new store in FY20 – a store in Auckland.

The online store was launched for all categories and achieved sales of $3 million for the last quarter.

The gross margin fell by 20 basis point (0.20%) to 62.7%.

EBITDA (click here to learn what EBITDA means) increased by 2.5% to $65.7 million and EBIT rose by 1.7% to $60.8 million. The EBIT margin improved by 90 basis points (0.90%) to 23.2%.

The revenue decline and EBIT growth led to net profit after tax (NPAT) being flat at $42.1 million. Earnings/profit per share (EPS) was also flat at 52 cents.

However, operating cash flow before interest and tax rose by 22.6% to $75.4 million.

Nick Scali dividend

The directors declared a final dividend of 22.5 cents per share, which is an increased of 12.5%. That brings the full year dividend to 47.5 cents per share.

Outlook

Nick Scali said that trading during July has been “extremely buoyant” with written sales orders growing by 70%.

Based on the large increase in written sales orders over the past three months, FY21 first half revenue is expected to be substantially higher. FY21 first half profit is expected to be up by at least 50% to 60% – assuming no further extensions of restrictions in Melbourne or closures across the country.

Summary

Nick Scali impressed during good times and it has impressed during a global pandemic. I’m not sure if it’s a buy now, it’s now priced higher than it was before COVID-19 came along. But I wouldn’t bet against it either, it’s surprisingly resilient. It could be one to watch, as well as some of these other ASX growth shares and ASX dividend shares. The dividend income alone could make good returns.

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