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Nick Scali brings forward dividend payment on strong sales

Image of woman lounging on sofa
Image of woman lounging on sofa
Source: Nick Scali website

National furniture chain Nick Scali says the easing of government restrictions in recent weeks has led to a significant rebound in customer activity, and it now expects orders for the months of May and June to be up 54 per cent on the prior corresponding period.

Given the nature of its business model, Nick Scali expects these orders to translate to a 30 per cent increase in revenue in the first quarter of FY21 and profit growth for the first half of FY21.

Off the back of this, the board has decided to bring forward the 25c interim dividend payment that it had previously deferred to October 2, 2020, to June 29, 2020.

Like many bricks-and-mortar retailers, Nick Scali was impacted by temporary store closures and weak consumer sentiment during the coronavirus outbreak in March and April.

The retailer temporarily closed all stores in Australia and New Zealand in March, and gradually reopened in Australia during April. Stores in New Zealand only recently reopened at the beginning of June.

Nick Scali says the closures meant it was unable to record approximately $9-11 million of sales in the current financial year, but that the implementation of cost-cutting measures across marketing, employment and property and government support have led to a 15-20 per cent increase in second-half profit in FY20 compared to FY19.

Written sales orders in the H2 period to June 14, 2020, grew by 7 per cent, according to a trading update released on Friday, and written sales orders in the Q4 period to June 14, 2020, grew by 20.4 per cent.

Still, revenue for FY20 overall is expected to be slightly down from FY19, at between $260-263 million, compared to $268 million. And underlying net profit after tax (NPAT) is expected be in the range of $39-40 million for FY20, slightly down from the $42 million recorded in FY19. This figure excludes the impact of the gain on sale of property and the adoption of AASB 16.

Notably, Nick Scali launched a digital sales channel while stores were closed and plans to invest in it further.

The retailer’s management and board thanked staff for their support and attributed the company’s strong performance to their hard work and commitment.

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