Anthony Scali, Managing Director of Nick Scali Limited (ASX: NCK), has increased his personal stake in the furniture retail business as part of a shareholding restructure.
Since the company listed its shares on the ASX, the Scali family has held a 50% stake in the business, whereby Anthony and his two siblings each held a 16.7% economic interest via Scali Consolidated. As part of a family sell-down however, Anthony has increased his own stake in the business to 27.3% while 18.4 million shares (or 23% of the total shares outstanding) have been sold to institutional investors.
There are two positive takeaways from this move:
Firstly, although the family will no longer have as much skin in the game, the MD himself has increased his own personal stake. There are any number of reasons why a company's executive may want to sell his or her shares, but only one reason they want to buy – because they think they will be worth more in the future.
In a statement to the ASX this morning, Anthony Scali said: "Whilst the Scali Family Stake will reduce following completion of the Sell Down, I remain fully committed to NSL and believe that the new ownership structure results in a strong personal alignment of economic interests between myself and all other NSL shareholders."
The second key takeaway is that the stock should become somewhat more liquid, which will be of benefit to shareholders. After all, there have been some days recently where less than 11,000 shares (less than $50,000 worth) have changed hands per day. This makes it difficult to buy or sell shares without moving the price too much.
Reaffirmed Guidance
Nick Scali also took the opportunity to reaffirm its full-year earnings guidance. It noted expectations of continued sales growth in the second-half (which is certainly encouraging, given that we're nearly half-way through that period already), whilst saying it expects net profit after tax (NPAT) to be between $22 million and $24 million. The mid-point of that range would represent earnings growth of more than 34% compared to the 2015 financial year.
While there are certainly positive signs for the business, there are a number of factors investors do need to be aware of.
To begin with, given the nature of the group's products, Nick Scali's sales are largely aligned with the health of the housing sector. This has provided great tailwinds in recent years, but if there is a dip in demand for houses, then it could have a negative impact on Nick Scali's results as well.
Investors also need to consider that Nick Scali is not immune from competition, with companies such as Harvey Norman Holdings Limited (ASX: HVN) also pushing for growth in the market. Of course, that isn't to say that you should avoid buying Nick Scali shares, but it is certainly something to consider before you do.
