Why the Nick Scali (ASX:NCK) share price is lifting today

The Nick Scali Limited (ASX: NCK) share price is up in early trade today following the release of its half-year results for 2021.

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The Nick Scali Limited (ASX: NCK) share price is climbing today following the release of its half-year results for 2021.

In opening trade, the furniture retailer’s shares are up 2.45% at $10.86.

What’s driving the Nick Scali share price?

The Nick Scali share price is climbing this morning after the company announced growth in all key metrics.

According to its release, Nick Scali delivered an exceptional six months of trading despite disruptive first-half trading conditions.

For the period ending 31 December, the company reported total sales revenue of $171.1 million. This reflected a record amount, and an increase of 24.4% on the previous $137.5 million attained in H1 FY20. Positive trading momentum continued across Australia and New Zealand complemented by growth in online shopping and new store openings.

Underlying net profit after tax (NPAT) came in at $40.5 million, up 89.9% on the prior corresponding period (pcp). This was in line with Nick Scali’s recent guidance announced on 5 January, 2021.

Earnings before interest, tax, depreciation and amortisation (EBITDA) soared to $60.2 million, reflecting a jump of 94.2% on the pcp.

Operating cash flow before interest and tax improved to $53.5 million due to a negative working capital model that led to larger profits. As a result, the company leaped over the same time last year metric which recorded $16.6 million, up 222.3%.

Underlying basic earnings per share (EPS) also rose to 50 cents against the comparable period which saw EPS at 25.1 cents.

The board declared a fully-franked interim dividend of 40 cents to be paid to eligible shareholders on 30 March, 2021. This accounts to a payout ratio of 80% compared H1 FY20’s payout ratio of 90% (25 cents paid to shareholders).

Nick Scali declared a healthy cash balance of $87.6 million on hand with minimal debt obligations.

Management commentary

Nick Scali managing director Anthony Scali welcomed the results, saying:

The first half of financial year 2021 had many challenges to navigate including government mandated store closures, supply chain issues and significant delays experienced with global shipping providers.

Despite these events, the team was able to capitalise on shifting consumer spending patterns and deliver a record result for the company.

Outlook

Looking ahead, Nick Scali expects its sales order growth to continue to run into the second half of FY21 period. In January alone, written sales orders increased by 47% on the pcp, representing the company’s largest trading month to date.

However, Nick Scali noted that extended lead times caused by delays in its supply chain process has been challenging. Furthermore, shipping constraints due to COVID-19 has made it difficult for the company to provide revenue guidance for H2 FY21.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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