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Nick Scali (ASX:NCK) HY21 result: Huge growth revealed

Nick Scali Limited (ASX: NCK) has just released its FY21 half year result which showed a huge amount of growth.

Nick Scali’s HY21 report

The furniture business reported in its FY21 half-year result that its sales revenue had gone up by 24.4% to $171.1 million. Written sales orders for the period was $191.1 million, representing growth of 52%.

During the period, two new stores were opened. It’s expecting to open two more in the second half of FY21. It’s targeting at least 85 stores across Australia and New Zealand.

For comparative purposes, Nick Scali reported its underlying profit results, which exclude the impact of changes in accounting for leases under AASB 16 and the one-off gain on the sale of properties in the FY20 first half result.

Underlying EBITDA (EBITDA explained) rose by 94.2% to $60.2 million and underlying EBIT grew by 100.3% to $57.7 million.

It made $8.8 million of online written sales orders and made $3.5 million of EBIT from online. It’s expecting to significantly exceed the $4 million contribution previously forecast.

Nick Scali’s impressive result was driven by a number of improved profit margins. The gross profit margin improved from 62.2% to 64%. The EBITDA margin increased from 22.5% to 35.2% and the EBIT margin increased from 20.9% to 33.6%.

The above growth helped the most important profitability metrics of the business. HY21 underlying net profit after tax grew 99.5% and operating cash flow before interest and tax rose by 222.3% to $53.5 million.

Nick Scali dividend

The board of Nick Scali decided to declare a dividend of 40 cents per share, an increase of 60%. That represented a dividend payout ratio of 80%, down from the payout ratio of 90% in the prior corresponding period.

Outlook

Sales order growth for the company in January 2021 was up 47% compared to the same period last year, representing the largest month of written sales orders in the company’s history. So it seems like the rest of FY21 will be another period of substantial growth.

Summary thoughts

Nick Scali is smashing it right now. To double profit in HY21, after many years of growth, is really impressive. If I could go back in time, then I’d definitely say that Nick Scali is one to own.

The question is – is this growth just a short-term boost? In 12 months will the strong demand be somewhat lower? It’s hard to say, these are really unprecedented times. Nick Scali does have a really big dividend right now though, at the pre-open share price Nick Scali’s yield is around 6%, fully franked.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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