Good morning, and welcome to the FY24 Nick Scali Results Presentation. So turning to page two of our slide, the highlights for the year. ANZ written sales orders of AUD 447 million, up 2.4% on FY23. The gross margin, ANZ gross margin, 66%, up 2.5% on FY23. Group underlying profit after tax, that's obviously excluding the acquisition costs, that was AUD 82.1 million. The UK acquisition of Fabb Furniture completed 8th of May. The group results include Fabb results from acquisition. Cash and bank deposits, AUD 111.3 million, as at the 13th of June. Final dividend of AUD 0.33 per share, fully franked, bringing full year dividends to AUD 0.68 per share, fully franked. We turn to page three.
We can see group revenue was AUD 468 million, down 7.8% on FY 2023. The UK revenue of AUD 8.3 million was included from the 8th of May. The ANZ FY 2024 revenue, AUD 459.9 million, is consistent with written sales order levels and typical delivery lead times. The ANZ FY 2023 revenue of AUD 507 million benefited from the increased deliveries as at the June 2022 order bank, which, as lead times reduced, we gained the benefit of additional deliveries. The group written sales orders, AUD 454.2 million, that's +3.9% above FY 2023. As mentioned, the UK written sales order, AUD 8.1 million included in the group from 8th of May.
The ANZ quarter four written sales orders of AUD 121.2 million, up 4.8% in the prior corresponding year. The quarter four written sales order benefit from 5 weekends in June, compared to 4 in the prior year. 65%-70% of our sales orders occur on weekends. The ANZ written sales for FY24, as mentioned, was +2.4% up on FY23, and the like-for-like written orders was at +1%. I'll now hand over to Sheila, our CFO, to take you through the next three slides.
Thank you, Anthony. On the left-hand side of slide four, what we've provided is the group underlying, including the UK, for FY24. There's one adjustment from statutory to underlying, and that is to exclude the AUD 1.5 million non-recurring acquisition cost of Fabb Furniture. There were no adjustments in the prior year. We've then provided you the impact of the UK on the group results on the 8th of May, and then the underlying ANZ results. The prior year group was just ANZ, so those are comparable. I'm moving to the right-hand side of the slide. As Anthony mentioned, ANZ gross margin of 66 cents was up 2.5% on the prior year. UK revenue is reported net of interest-free subsidy costs, and this reduces gross margin for the UK in FY24, circa 4%.
Interest-free financing isn't offered the same way in ANZ. Moving to underlying operating expenses. ANZ underlying FY24 operating expenses increased AUD 3.1 million compared to the prior year, with marketing, property and other expenses increased and logistics and employment expenses decreased. In the prior year, we had incurred additional logistics expenses related to those higher deliveries Anthony had mentioned. In the UK acquisition, added AUD 3.3 million for group operating expenses in the second half of FY24. Due to changes in leases, including timing of renewals and higher notional interest rates, the impact of AASB 16 was to increase - sorry, decrease, ANZ NPAT by AUD 1.5 million compared to a point... Sorry, expenses compared to a AUD 0.2 million reduction in FY23.
We have provided in Appendix C, a full reconciliation of AASB 16 expense elements, to help the investors look through that, but it certainly has been a negative on the statutory results this year compared to prior year. Looking at FY24 profits, it is lower than the prior year, primarily due to the FY23 benefiting from the increased delivery revenue that Anthony mentioned, that we achieved in the prior year due to those delivery delays resolving. Moving to slide 5 on group cash flow. Property and other capital investments were higher this year at AUD 28.1 million, and that was driven by the AUD 16.6 million construction and fit-out costs for the new Queensland Distribution Center, with other capital expenditure remaining reasonably consistent to the prior year.
We repaid AUD 20 million in August off the corporate acquisition debt we took out to partially fund Plush.... and the current outstanding balance is now AUD 28 million. In the second half, we raised AUD 54.8 million, net of AUD 1.2 million of equity raise costs. Anthony has committed, at the time of that raise, to also contribute to that placement pro rata to his holding, and that is subject to shareholder approval at the October 2024 AGM. If approved, the net total net proceeds from the equity raise will be AUD 58.8 million. As at June, we had expended AUD 14.2 million in total of the AUD 1.5 million transaction costs, the acquisition payments for Fabb Furniture, the option to exit that distribution center, and the initial working capital injection.
Those amount is the total amount that we have paid in relation to UK at the 30th of June. AUD 56.7 million was returned to shareholders in dividend payments in the year, and closing cash and bank deposits at June is AUD 111.3 million, and net cash is AUD 39.6 million. Moving to the balance sheet on slide 6. The main changes are the completion of the Queensland Distribution Center into property, the addition of the intangible goodwill for Fabb Furniture of AUD 27 million, the increase in leases liabilities and assets for the acquired leases with Fabb Furniture as we applied AASB 16, and the borrowing reduction on the corporate acquisition debt. Payables on the balance sheet at June this year include AUD 16.9 million for the UK compared to the prior year. I'll hand back now to Anthony.
So turning to page 7 of the presentation, the Nick Scali online brand. You can see the written sales orders were AUD 34.8 million, up almost 18%, with the enhancements in the e-commerce user experience continuing to drive growth, and particularly in the fact that we're selling sofas, where people generally like to sit in, this has been a good result. We turn to page 8, UK growth strategy. I'm not gonna read every point there. I'll give you a summary. The first point is that we have appointed Rodney Orrick, who was previously the CEO of Best & Less and ran Domain for a number of years, will relocate to the UK to help execute the strategy.
In the UK, the first point that is important to understand is that the stores all need to be refurbished to enable us to present the brand as we do in Australia. That's followed by then the product, the Nick Scali product range into the stores, the rebadging to Nick Scali, and then marketing. So if we turn to page 9, the store network. The store growth has been slow. This is a little bit, particularly for Nick Scali stores. We're finding the opportunities, given that are less, given there haven't been many new bulky goods centers built, since pre-COVID, and being the size of 2,000 meters, there's been less available space.
Whereas on Plush, we're seeing a lot more opportunity because of the smaller store size, and which we'll talk about further with the number of stores we expect over next year. Page 10, the property. The change there is the new Brisbane Distribution Center, that is now operating. That was built and owned and funded by cash. Then we turn to page 11, the outlook. If we look at the ANZ outlook, mostly, June, as mentioned, June 2024 benefited from 5 weekends of trading, where July was disadvantaged by 1 less weekend when compared to the 2023 calendar year. Written sales growth for June and combined was -1.2% compared to the prior year. We continue to expand the store network and expect to open 2 Nick Scali stores and 3-5 Plush stores in FY25. We turn to the UK.
Written sales orders are affected by a combination, at the moment, of tough market conditions, long lead times due to supply chain disruptions, and the commencement of store refurbishments. Trading in the short term is expected to deteriorate further in the first half of FY24 as disruption increases due to store refurbishments and the change in the product range. That concludes our presentation, and we'll now take... We're happy to receive questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Peter Marks with Barrenjoey. Please go ahead.
Good morning, Anthony and Sheila. My first question is just on the ANZ gross margins. Obviously, they were very strong in the second half of 2024. Could you just talk us through what the drivers were there? And then as you look into FY25, how are you, how are you currently thinking about the impact of shipping costs on ANZ gross margins? And are there any other offsets that might come through to offset some of the shipping pressures that look like they're going to impact you?
Yeah, no, I think the gross margin improvement has certainly been through the help of larger volumes through the Plush acquisition, through our factories. I think we're getting better value, and much more efficiency for the factories means that they're providing better value and, supporting us, wanting to support. The other addition is. The other issue, sorry, the other benefit, rather, has been a lot of our China factories, volumes have dropped, so there's a lot of capacity there. So, that helps in getting better value also. Look, when we talk about the shipping, yes, at the moment, shipping costs in Australia have been going up. They've been going up globally, in fact.
A lot of that is seen being caused by, we believe, by the tariffs coming on electric cars produced in China, where they're shipping a lot of cars before the tariffs to Europe and the U.S. in containers, before the tariff comes in, and that's absorbed a lot of the supply, and hence, we've got the pressure on rates at the moment. And we believe this is short term. There's obviously, once that additional supply at the moment is over, we expect the rates to settle a bit, come down. I've got to say, though, the freight rates to Europe and the U.K. are a lot higher and have increased substantially more than they have to the Australian market.
Okay, that's very helpful. And Anthony, while I've got you, just obviously early days still with the U.K. acquisition, but have there been any surprises for you or any changes to your thinking on that business so far?
No, I think nothing's changed. The strategy is the same. We know what we need to do. And just a matter of just executing what the plan is now.
Great. Thanks, Anthony. Thanks, Sheila.
Thank you. Your next question comes from Garth Francis with MST Marquee. Please go ahead.
Good day, guys. Congratulations on a great result. Just wanted to follow up just on that freight issue, and you mentioning the European leg being more impacted. Does that change how you would go to market in the UK? Are you gonna change your sourcing to accommodate for that, or do you expect the freight rates to do the work for you going forward?
Look, the freight rates at the moment mean, and they seem to the UK, means that if you look at the market, what's actually happening, I was there two weeks ago, you have to put prices up, and that's what the market is doing. Yeah, so, that-- Then, although there's a sense that those rates will, as I mentioned before in the previous question, that that will come off. But at the moment, our, our-- we think, everyone's got this, the freight issue, so it's just about adjusting prices. There's no other option, really.
Right. And then just in terms of the delays, do you see that as a risk to sales when you have competitors that have product in store? And are you planning on doing anything to accommodate for that, like maybe ordering some of your more popular SKUs and keeping those in stock?
Yes, I mean, correct. So as part of... Look, the main thing is, as I mentioned, to refurbish those stores and get our product range in the stores and rebadged. So, you're right. So better lead times, our product, once it's in stores, will produce better lead times than with their current suppliers, and that will be alleviated. It's already been alleviated, to be honest. We've managed to fix some of those issues. They were, you know, this was a business that wasn't paying suppliers, and obviously, shipments were getting delayed, so that's all being corrected.
Thank you. Your next question comes from Rachel Harwood with Macquarie. Please go ahead.
Yeah, good morning, Anthony and Sheila. Thanks for taking my questions. First of all, just on gross margins again, look, Fabb Furniture looks like it's increased a little bit since acquisition at 41.5%. Do you expect this to continue to increase into FY25, just as the Nick Scali product enters the stores?
I missed part of that question, Rachel, about my-
Regarding the trajectory of Fabb Furniture gross margin.
Yeah. Oh, well, I think the Fabb gross margin is 41%. When we talk about trajectory, I think Fabb will become Nick Scali, and we expect the margin over time to be not dissimilar to Australia, probably slightly less, given the interest free being included in the costs.
That's great. And just on the refurbishments of Fabb, any expectation how long the refurbishment of one store takes? And then any sense how many you can do in the first half 2025?
Yeah. Well, it takes about 3-4 weeks to refurbish a store. And we're trying, clearly, to refurbish as many stores as we can at once, rather than going from one to the other, and that's what we're working on right now. We've already commenced refurbishments in a few stores, and we're trying to accelerate it. It's hard to give you an exact timeframe on that, but our first, as mentioned in the deck, we're focusing on the stores on the London fringe, and refurbish all those, get the product in, the full product range in those, rebadge and start marketing those stores, and then move on to the other areas in the UK, where the current store network is.
Thank you. A reminder to please limit yourself to one question with one follow-up. Your next question comes from Sam Teeger with Citi. Please go ahead.
Hi, Anthony and Sheila. Firstly, great result in a tough market. I wanted to talk a bit about the store rollout, in more detail. Probably hasn't come through as we expected in the second half. I know you talked about there hasn't been many new bulky good centers being built since pre-COVID, but just keen to explore what are the other drivers of the slower rollout. And I guess, in the past, you were buying and building your own stores, but, you know, given where interest rates are now and construction costs are, is this still a viable option? And then of the 25 rollout guidance you've given, how many of them would you be buying or building yourself?
Yeah, that's the answer to that is, if there's opportunities that the properties come to sale in the right locations and, you know, generally, they're standalone stores, so they've got to be in the right strip. So in terms of expanding the store network, you know, whilst that's, we've got that option, it's not always there. So the main issue for the Nick Scali store network has been the, because of the size of the stores, being more than 2,000 meters, and we need to stick to that model. We're starting to see a bit more freeing up of some space in certain areas that we think we've got opportunities.
Whereas we look at Plush, the, you know, being 1000-1300 meter, being the ultimate, the right store size, we're seeing more opportunity because that's driven by other retailers leaving those centers. And because typically, most of the large format stores are in the bigger places, they're around that 1000, 1200 meters. So there's gonna be, I think, more opportunity for the Plush store network to grow at a quicker pace than Nick Scali.
Yeah, but I guess if we rewind back to February, you were guiding to two Plush stores in the second half-
Yeah.
One Nick Scali store in the second half, and none of them have come through.
Yeah.
I'm just kind of keen to explore, like, you know, you know, what's changed in the last six months?
Well, the Plush stores did come through. Yeah. We shut a couple, so there's- Yeah, it was a net store. Yeah. So whilst we open new stores, we made decisions to optimize the networks and close those smaller stores that needed to be resized or relocated. And we have done some of that. So, on the Nick Scali side, yeah, the opportunities there have been delayed, really, on just tenants moving out. So we expected it to happen, and then it didn't happen, but it is happening. But yeah, it has been slow. I'm not admitting, not denying it. The store network, particularly on the Nick Scali side, has been slow of late.
Thank you. Your next question comes from Mark Wade, with CLSA. Please go ahead.
Good morning, all. Anthony, on the two brands, Plush and Scali, in Australia, New Zealand, how are they performing relative to each other? And, you know, is there much of a difference within the Plush network between the old and the new concept stores?
Yeah. Plush, Plush has been performing well. And yeah, look, the stores that are refurbished, we've seen uplift, in most cases. So we've been really happy with the Plush, performance so far. If we look across Australia, New Zealand, what's hurting us is New Zealand. In June and July, store traffic dropped 35%, so, was a significant decline recently in New Zealand, over June and July. But whereas Australia's been a lot more... Is obviously stable, fairly stable.
Okay. And so that, I was curious on that, on what really explains this kind of whipsawing we're seeing in order growth from quarter to quarter, and then that obviously fell away a bit in July.
Yeah.
It sounds like it's more economic conditions despite tax cuts in Oz, and is there anything I should be thinking about in terms of what you're doing on the ground specifically, that-
Could be trying to offset those movements?
Well, yeah.
What's driving that change?
Well, well, if we talk about July, there was one less weekend, and, you know, 70% of our business is in on weekends, so June did benefit from that. But yeah, if you combine them both together, it was negative 1.2%. But to be honest, Australia was flat. It was New Zealand, and that caused it because it was significantly down, it caused a negative. So it's, yeah, it's stable-ish. It's just hard to read from month to month. Yeah, it doesn't feel certainly not a buoyant market, but it is at least stable.
Thank you. Your next question comes from Ed Woodgate with Jarden. Please go ahead.
Oh, hi. Hi, Anthony. Hi, Sheila. Yeah, I think it's a really good result in a tough environment, as I was just said. Just wanted to talk about the June, July trading update. So I think it's caused a little bit of confusion. Can you just split out what the WSI was for June 2024 this year, this year, obviously, and July 2024, and then also in June 2023?
Yeah, look, I think we're basically, in a nutshell, June was positive sales growth, as was the whole quarter four. What helped that, clearly, was the additional weekend in June, as mentioned. In July, the change was really, we lost the whole weekend, which is basically lost 65% of a week's sales in July. So that's the take, and it's hard to extract that apart and take out weekends and really, you know, give you an indication of what it is, other than combining the two months together. And as I said, what really probably hurt the result, even though it's marginally down, the months combined, was New Zealand.
Yeah. Understood. And then just on GPs, so as has been mentioned, very strong in the second half. Can you just— You've talked in the past about them coming down in Australia over time. Can you just talk about how sustainable you think those are and how we should be thinking about that into 2025, just given the excess capacity in China and signs that freight might be peaking? And then also, given that you've got the product in store in the UK, a bit quicker than
Yeah
I think we expected, does that bring forward some synergies there?
Yeah, I think there's product synergy, but look, the margin is really extremely at its peak, you know, at 66. And I think I'd have to be honest with you, I think where we think probably more the market is somewhere between 64-65 is achievable. The UK will always be below by the interest, the cost of the interest-free in sales, and we don't know where that will land. It could be somewhere between 2%-4%. On the other... Yeah, and the margin in Australia, if we look at it, you know, unfortunately, it's with the freight contracts not being honored at different times, that can have a temporary impact on margin side, because that product's being sold, and now the freight contract hasn't been honored, so it's, there's a bit of loss there.
On the buying side, the UK, additional volumes with the Plush acquisition is certainly helping us get much better value out of our factories, and particularly given that they're got a lot of excess capacity.
Thank you. Your next question comes from Thomas Camilleri with Wilsons Advisory. Please go ahead.
Thanks, Anthony and Sheila, for letting me ask questions today. I just wanted to touch base on the momentum you've got in the online business, the online Nick Scali brand in Australia. How much of the gross margin gain was driven by a stronger online momentum? And can you remind us of where the gross margins sit for the online business at the moment, and also when you expect to have the Plush online business up and running as well?
Well, the gross margin is the same as the stores. You know, the mix is very similar. In the past, it might have been slightly higher because we're selling more case goods, which has got a bit better margin, but now the real growth has come in the lounge volumes, growing on the online, so that's slightly lower margin. So all in all, the gross profit margin on online is the same when you just strip out the sales and the cost of the goods.
Brilliant. And then expectations for the Plush online business?
Yeah, I think it's got a lot of potential there. And that will grow hopefully, I think, as the brand grows. And the brand recognition is getting better slowly, 'cause we're consistently marketing the brand. And as the store network grows, the brand gets stronger. And I think with that, obviously you get more traffic to your website, and then you've got the opportunity for the online sales.
Thank you. Your next question comes from Tony Mitchell with Shaw and Partners. Please go ahead.
Thank you. Very good result. Can you just... Given the much better performance of Australia compared to New Zealand in those months, how much can you attribute the improved performance in Australia to tax cuts and electricity rebates and so on?
Yeah, no, I'm not sure the tax cuts seem to have done a lot. I do think we've got a cautious consumer, 'cause I haven't seen any interest rate cuts yet, and, you know, there's even been talk about, although unjustified, that interest rates might go up, which is just being, you know, the media playing to that. And I don't think that's correct anyway, that's unlikely, I think. So yeah, that's how I see it at the moment.
Okay. Given, if we have rate cuts, let's say, first half of next year, would that be a net positive for Nick Scali?
Yeah, you would, you would like to think so. Yeah, I think so, unless there's other factors. You know, it's all about consumer sentiment. What, what drives a positive consumer sentiment? In the past, it's been, yeah, lower interest rates, feeling more the wealth effect, you know, 'cause the home's going up in value. That's helped us in the past. So yeah, it all plays into that, but you would think lower tax, lower interest rates would help consumer sentiment be a little bit more positive.
Thank you. That's all the time we have for our question and answer session, and that does conclude our conference for today. Thank you for participating. You may now disconnect.