Furniture retailer Nick Scali has boosted its interim dividend 50% to 40 cents a share after confirming earlier guidance of record sales and earnings for the six months to the end of December.
But the company again warned that its growth remains constrained by COVID-related supply issues which was why there would be no forecast for the June 30 half year.
The company told the ASX on Thursday that sales for the half had risen 24.4% to $171.1 million while underlying net profit surged 99.5% to $40.5 million.
Nick Scali pointed out that actual sales were half the 52% rise in the value of orders written by the company through its various sales channels.
This was primarily due to “the extended lead times caused by delays in raw materials to our suppliers and shipping issues which continue to be challenging”, the company said. And those delays related to the impact of COVID.
Thanks to the pandemic lockdowns (in Victoria especially) in the half, Nick Scali lifted online sales to $8.8 million and $3.5 million in earnings.
But a 1.8 percentage point lift in gross margin also helped boost earnings as the company reduced its price discounting on certain products “The Company was able to improve margins through reduced SKU (Stock keeping unit) discounting,“ Scali explained .
The 60% lift in dividend bonanza could be controversial given the company received COVID support payments of $3.9 million for the 2020 financial year and a further $3.8 million in support for the December half as it claimed JobKeeper payments and some New Zealand subsidies up until September.
Nick Scali said its total operating expenses fell 10.8% to $49.9 million in the latest half, thanks to rent cuts (as well as the job subsidies).
“Operating expenses were tightly managed across all areas of the business, with productivity initiatives, particularly in marketing, delivering significant savings.
“Furthermore, the Group benefitted from Covid-19 related wage subsidies and rent concessions totalling almost $4million, and in total these amounts far exceeded the additional costs of new store openings and incremental variable employee incentives, leading to an overall reduction in operating expenses of $5,557,000,” Nick Scali said in the ASX release.
There was no mention of returning these subsidies.
While the likes of footwear seller Accent Group and Premier Investments have kept their JobKeeper payments, others have returned then to the government.
Car seller Toyota returned $18 million, while Super Retail Group (Super Cheap Auto, Rebel, BCF) returned $1.7 million and Coca Cola Amatil sent back $6.7 million.
“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,” Mr Scali said.
“Despite these events, the team was able to capitalise on shifting consumer spending patterns and deliver a record result for the company”.
The booming sales have continued to flow into the second half. Sales orders hit a record in January, growing 47% for the month, however Nick Scali warned sales across the remainder of the half could continue to be affected by those supply chain issues.
“These supply chain delays make it difficult to accurately predict sales revenue growth for the second half,” it said.
