Nick Scali Limited (ASX: NCK) shares are on the move on Friday morning.
At the time of writing, the furniture retailer's shares are up 12% to a 52-week high of $18.30.
This follows the release of the company's half year results before the market open.
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Nick Scali shares jump on half year results
- Group revenue up 10.8% to $251.1 million
- ANZ revenue down 1.8% to $222.5 million
- UK revenue of $28.6 million
- Underlying group net profit down 22.8% to $33.2 million
- Statutory net profit down 30.2% to $30 million
- Interim dividend down 14.3% to 30 cents per share
What happened during the half?
For the six months ended 31 December, Nick Scali revealed a stronger-than-expected performance from its Australia and New Zealand (ANZ) segment.
Revenue for the ANZ segment declined slightly to $222.5 million, down 1.8% on the prior corresponding period.
While written sales orders were also lower, slipping 2.2% to $208.1 million, management notes that adjusted for calendar variations, orders grew by 1.3% from June to December. Online sales were a bright spot, rising 17% to $18.6 million.
Gross margin for the ANZ business contracted 120 basis points to 64.4%, impacted by higher freight costs. Meanwhile, operating expenses increased by $5.1 million, driven largely by higher employment costs.
This led to the ANZ segment reporting an underlying net profit after tax of $36 million. Although this is down 16.3% on the prior corresponding period, it exceeds the company's October annual general meeting guidance of $30 million to $33 million.
ANZ statutory net profit after tax came in slightly lower at $34.1 million after the company incurred a one-off $2.8 million expense due to freight disruptions caused by the liquidation of a key freight forwarder.
UK losses
Over in the UK, Nick Scali's newly acquired business posted an underlying net loss after tax of $2.8 million. This was better than the company's guidance range of $3.3 million to $3.8 million.
Sales in the UK were significantly affected by ongoing disruptions. Written sales orders came in at $19.4 million as the company rebranded and refurbished Fabb stores while clearing out old inventory.
The silver lining was a notable improvement in gross margins, which increased to 45.1% from 41% pre-acquisition. Management also flagged that post-acquisition restructuring has already led to annualised cost savings of approximately $2 million.
Dividend
The Nick Scali board declared a fully franked interim dividend of 30 cents per share. This represents a payout ratio of 75% of ANZ earnings per share and 86% of total group earnings per share. It will be paid on 26 March 2025.
Outlook
Looking ahead, management acknowledged ongoing volatility in trading conditions.
January sales orders in the ANZ segment were down 8.5% for the month, though the final week of the January sales period saw a 5% uptick.
The company plans to open one new Plush store in Melton, Victoria, in the second half, though additional store openings have been pushed into FY 2026.
In the UK, the company expects further disruptions as it pushes ahead with rebranding efforts. With four stores already rebranded and another eight set for the second half, management anticipates that UK operating losses will increase before improvements materialise.
Nick Scali shares are now up 23% over the past 12 months.
