Half-year financial year 2022 results presentation. The highlights for the half were sales revenue AUD 180.3 million, up 5.4% from the previous half. The acquisition of Plush completed in November 2021 for AUD 101.4 million. We have an outstanding written sales order bank at the end of the half of AUD 174.7 million. Underlying net profit after tax of AUD 35.6 million. Interim dividend of AUD 0.35 with a payout ratio of 84.5%. The store network with the combination of both brands being Plush and Nick Scali is 108 showrooms. 62 for Nick Scali and 46 for Plush. Despite the elevated opening sales order bank at July 1, 2021, Nick Scali revenue was down, particularly due to the COVID disruptions to three areas.
First was the temporary store closures between July and November. The second one, importantly, was the lockdowns in countries where we have our suppliers, in particular Vietnam, where 40% of our product we source from was closed for three months. Lastly, was the shipping container availability. There was a revenue of AUD 21.7 million delivered from Plush, from their order bank that we acquired on the first of November. The revenue was really down in respect of store closures, where orders were lower, and in particular the Vietnam lockdown, which certainly impacted a lot of our lounge orders not being able to be delivered within a normal time period and hence the revenue was down. Without the Vietnam lockdown, we believe revenue still would've been up despite the store lockdowns.
When we look at trading and sales orders, total written sales orders for the half is AUD 203 million, representing growth of 6.4% on the previous half corresponding period. In respect to Nick Scali, in quarter one, our trading capacity was reduced by 55%, whereby 55% of our stores were closed in New South Wales, Victoria and New Zealand. Total Nick Scali written orders were AUD 171.8 million. That's down 10% compared to the prior year due to the closures over that three-month period. Underlying like-for-like written sales orders actually grew by 4.9%. Total written sales orders for Nick Scali online totals AUD 16.6 million, up 88.6%. Plush, the written sales orders for Plush total AUD 35 million.
That's for the two months since acquisition, which was November and December, up approximately 15% on the prior year for that corresponding period. At the end of December, the order bank was up at, with both brands, 174 million, which is up 70% on the prior year. The Nick Scali order bank closed at 123 million compared to 103 million, significantly also up on the prior year. Obviously since December, when we look at the end of January, again, the order bank has increased to record levels. The order bank for Plush at the end of December was 51 million, with similar aging profile and days outstanding to Nick Scali. When we look at the financial performance, the underlying profit after tax was AUD 35.6 million, down from AUD 38.1 million the prior year.
Clearly that was due to the closures and supply problems with lockdowns in other countries and hence the growing order bank. Underlying EBITDA was actually up slightly to AUD 73 million and EBIT down approximately AUD 2 million. I'll hand over to cash flow and balance sheet to our CFO, Chris Malley, who will now take you through it.
Thank you, Anthony. Just talking briefly through the cash flow. Operating results delivered a net cash inflow of around AUD 24 million net of tax and lease payments. As already mentioned, we acquired Plush in November for just over AUD 100 million, and this was funded through existing cash reserves and a AUD 65 million corporate debt facility. We were able to repay AUD 10 million of the facility before the end of December, so we have an outstanding facility now of AUD 55 million. In addition to this loan, we also took out a further AUD 7.5 million property loan to fund the purchase of a new DC and showroom in North Queensland for AUD 8.5 million. Other CapEx in the ordinary course of business was in line with our usual spend around AUD 2-2.5 million.
After paying dividends of AUD 20 million, we finished with a cash balance at the 31st of December of AUD 16.6 million. Moving on to the balance sheet. Most balances in the balance sheet naturally were significantly impacted by the Plush acquisition. Just looking at inventories, we obviously had an increase in inventory in transit of around AUD 6 million. Our on-hand inventory increased by just over AUD 7.5 million. This was all primarily in the Plush showroom inventory, and our DC inventory remained similar to the level at the end of June. Intangible balances increased through the acquisition through the addition of a brand of AUD 38 million and goodwill of AUD 80 million.
On the liability side, the deferred revenue increased with the inclusion of the Plush customer deposits that form part of the deferred revenue. As already mentioned, our borrowings increased, and we have AUD 62.5 million more borrowings on the balance sheet at December 31 compared to the prior period. You know, let's do this. Balance sheet, I'll come back to that. Anthony.
Our online business performed strongly during the half. Written sales orders of AUD 16.6 million, up 88.6% compared to the prior year. This was supplemented by the online written sales orders of AUD 2.4 million from Plush post-acquisition for the two months. The revenue was lower, but still significantly up on the prior year of AUD 13.7 million, and an EBIT contribution incremental of AUD 8 million. Plush online revenue was AUD 1.8 million for the two months post-acquisition. The Nick Scali e-commerce offering was launched in New Zealand in October and will follow in Australia. Now we just move on to the Plush acquisition, which was completed on the first of November for AUD 101.4 million, on an adjusted cash-free, debt-free basis.
This was funded through debt, AUD 65 million, and existing cash reserves, with AUD 10 million of the debt repaid in December. It has a network of 46 showrooms across mainland Australia and over 280 employees. On acquisition, we acquired an order bank of AUD 42.1 million. Since acquisition in November and December, it wrote sales orders of AUD 31.5 million in the two months post-acquisition. The contribution of AUD 1.8 million to net profit before tax was recognized in the half. The opportunities for Plush are significant, in particular supply chain synergies and consolidation of suppliers, the optimization of shipping and inbound logistics, utilizing the existing Nick Scali distribution facilities, expected improvement in margin over a period, and certainly a significant store rollout to be executed.
At the moment, store network consists of 62 Nick Scali stores, of which five are in New Zealand, and 46 Plush stores providing a 108 total. Certainly the long-term target for Plush is 90-100 stores, up to Nick Scali, approximately 86 stores, bringing a total between 176-186. A significant rollout still ongoing. We're starting to build a significant property portfolio, mainly consisting of retail stores, which acts as a hedge for long-term rent inflation. It now sits at a historical cost of AUD 98.5 million, and a net book value of AUD 91.2 million. These are at historical cost and have not been revalued since at any point in time.
When we look toward the outlook, January trading certainly provided us a strong foundation for revenue growth. January is our biggest month of the year, and we've significantly outpaced last year. In addition to that, we now have the Plush written orders to deliver in the second half. Trading during January in Nick Scali was down approximately 6%. There was a 25% decline in store traffic as there were difficulties caused by the Omicron variant. Really the sales started off quite well. The middle of January really fell off as I think people got very concerned about the rapid increase in Omicron's impacting people. We didn't lose a lot of our sales people during those periods who either were close contact or actually got the Omicron.
However, we did see a remarkable improvement towards the end of the year, end of the month as people became less concerned. Plush delivered the sales orders in line with the previous year, which is a great result given the circumstances. Overall, the outstanding order bank at the end of January is 70% higher than the previous year, which we expect to convert to revenue in the second half. Our suppliers have reinstated normal lead times, and this should facilitate revenue growth over the coming months. However, we've got shipping costs and availability of containers remain uncertain and could be an obstacle to delivering our outstanding order bank. Still unknown, though, at this point. Plus, we expect, you know, the revenue to increase materially during the half.
The cost of shipping could impact part of our profitability during the period. That ends our presentation, and I'm 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 Mark Wade from CLSA.
Good morning, team. The past twelve months has seen a lot of ups and downs. As it relates to consumer confidence and spending, Anthony, how do you think consumers will act as, you know, 2022 rolls on? And then, hence, how are you positioning the business to make the most of that?
Yeah, look, I think, in our industry, I feel it's remained pretty consistent. Once we're open, of course, when stores are open, the business is at elevated levels. I think that will remain, you know, the confidence will remain if interest rates don't go up, if house prices don't fall too much and people don't travel. I think we'll enjoy the elevated sales we've been experiencing the last 18 months to two years. Sure, Omicron outbreak damps that confidence for a while. People tend not to. Our store traffic was down, but people coming were buyers. The conversions were a lot higher. Yeah, so that's, look, it's hard to read exactly, but it just.
All I can tell you up to now, week by week, it's still fairly buoyant.
Excellent. Can we just revisit the original attraction or business case on Plush and contrast that three months on with your current observations?
Sorry, what was the beginning of the question?
Oh, just looking at Plush and just trying to marry up, you know, what you thought you were gonna get into three months ago and how things are panning out.
Yeah, no, I think things are panning out really well. It's exactly what we expected it to be. We're, I mean, we're in the industry, so we pretty much understand it closely. Look, I think what we know for sure, there's a lot of opportunities for us to improve the business in terms of sales and in respect of margins.
Thanks so much.
All good so far.
All right. Good to hear. Well, thanks, Anthony. Thanks, Chris.
Thank you. Your next question comes from Sam Teeger from Citi. Please go ahead.
Good morning, Anthony.
Morning, Sam.
Just wondering, given the lead times that customers have been waiting, what are you seeing in terms of cancellation rates or people not paying the rest of, the balance due? Just trying to get a sense of how much revenue is just being deferred into the second half or potentially lost altogether.
Cancellation rates are very, very minimal, so people are waiting. Look, the lead times have improved now. We're quoting shorter lead times. Let's go back to when we reopened in October, November. I mean, we were quoting lead times 4-5 weeks longer than we are now, and people were still buying up, you know, in quarter two, which we trade, which was, you know, amazing. I think the issue is, no matter where you go, if you want a specially made lounge, you're gonna wait. You have to wait. People are accepting that. Whether you buy a car, boats or furniture, anything specially made, there's shortages of everything everywhere. I think the consumer is understanding of that. We've had very, very minor cancellations.
Right. That's good to hear. Do you think furniture retailers who manufacture domestically have taken share in the current environment? I guess given the lessons people learned from COVID, is there any appetite now to start some local manufacturing presence to reduce sourcing risks over the long term?
The local manufacturing presence here is, are very, very small factories that themselves cannot supply quick of time. Actually, they're having issues because a local manufacturer has to either import the fabric or import the leather or buy it from, say, the Warwick Fabrics, and their lead time's as long as the overseas. So, I don't think they've taken any market share at all. The other problem is the value proposition's not there for local manufacturing.
All right. Okay. How many stores are you planning to open in the second half, and just the mix between Scali and Plush?
Well, it's hard to put exact number. We're still in negotiations. We're hoping to open a minimum of 2. Certainly towards the next financial year, there'll be quite a few, a lot more rollout, in particular, Plush. The Plush opportunities are easier to buy in because of the smaller footprint of the size of the store.
For 2023, when you're saying a lot more, how many should we be thinking of approximately?
Oh, look, I don't wanna give you a number, but, you know, historically the most we've opened 6 or 7 in a year sometimes. I would expect that at least.
All right. I just wanna unpack some of it. Did you talk about what was the like-for-like sales growth in the Scali over that first half?
If you did, what's that number?
4.9.
The sales orders you've got underlying.
Are we talking about written sales orders?
No, not written sales orders. Actual like-for-like sales growth.
We didn't. It's just too difficult. Yeah. It's not relevant because revenue was delayed because of factory closure for three months. So it just doesn't mean anything. It's more what the trading is, what really we think is relevant.
Right. Okay. Thank you.
Thank you. Your next question comes from Keegan Booysen from Jarden. Please go ahead.
Good morning, team. Just a couple questions from me. Firstly, on Plush's gross margin, you said it's about 54.8%. I was just curious to know if there's anything over November, December that would sort of skew that number from what an underlying margin for the group would be. Sort of, in other words, you know, should we be expecting 54.8% as sort of the run rate gross margin, ex movements in sort of shipping costs?
Look, in the short term, yes, expect 54.8%. In the long term, no, we expect to elevate that margin in Plush up towards Nick Scali's margin.
Are you saying that you expect the Plush margin to get to equal Nick Scali's margin or to get sort of trend towards it?
Yeah, close to it, yeah, but not till probably next financial year.
Yeah. Okay. That probably leads into the second question, just around the synergy profile. You've talked about a couple different buckets of opportunities around corporate costs and supply chain. I was hoping you'd probably give us some color around what you're exactly expecting the synergy amount to be in those buckets and, if you can sort of just give us some color on sort of where the main buckets are gonna be.
Yeah. Look, at this point, I'm not gonna call out the numbers of the synergies, but you can. If you look at it, they're certainly gonna be there in the future on margin. They're gonna be on distribution. There's gonna be synergies, as you said, at corporate level. We don't want to call it out till we've completely completed our integration and make sure we certainly have a plan of where we think it is. We would rather be conservative at the moment and not actually call that number.
No, that's fair. Maybe just lastly on that, if you think about sort of where the synergies should start coming in first, it sounds like you're expecting gross margin to sort of take the most synergies in the near term. Is that sort of fair to say?
Correct. Correct.
Oh, fantastic. Thanks.
Thank you. Your next question comes from Tim Lawson from Macquarie. Please go ahead.
Hi, gentlemen. Thanks for taking my question. Just really around the order bank, and you've obviously got some comments around there on the manufacturing side. There are obviously containers that are an issue. Do you expect that we'll get a normalization of the order bank at June? Or we still think that might be elevated due to logistics type issues at that point?
Yeah. Look, it's difficult to tell at the moment. The shipping lines, we're in the hands of the shipping lines at the moment and how rates end up, where rates end up, too. We certainly expect revenue to be up on the first half. In terms of Nick Scali, then they've got in addition to that, Plush. The problem is how much of that revenue. We've got a massive order bank at the end of January. It's bigger than December. It's now about how we ship. The supply lead times are back to normal, so that's helping a lot. Now lead times to customers are shorter.
We certainly expect revenue for the second half to be up on the first.
Yep. I mean, just with your existing order book, sort of how much allowance is there for the sort of additional cost through the system, thinking about sort of gross margin on that sort of order book? What are you building into new sales, in terms of costs, additional cost in the system from a margin point of view?
Yeah. Well, look, the order bank consists of orders written at a price. Now, the price over October, November, and even into January, the prices did go up. They've been elevated in both brands to allow for increase in shipping costs. The issue is contract rates have really come off now, and there's Chinese New Year that's traditionally a time when you enter into new contracts with shipping lines, and we don't know where they're gonna end up. There could be a situation, the risk could be that the rates are higher than what we might have allowed the written orders, which could impact the margin a little bit. We might have a situation where the revenue is significantly higher in the second half, the margin's lower, but still profit's up. We don't know.
Yep. You've got some allowance in there for higher costs. The costs aren't fixed, so you've got some variability going on.
Yeah. You've got a situation where there's a possible outcome at the second half. The revenue will be significantly up, but the margin will be down. You know, it could be 300 basis points, but it's still gonna be. The profit will still be up.
The revenue will outstrip that loss of margin. Now that's something that, you know, unfortunately we've never been in a situation where we don't have a pretty good idea where shipping rates are. Unfortunately, we're just in that position at the moment, as I think most importers are. We're on a cash and carry, unfortunately, so which is worse for us point in time.
Yep. The pricing you've been able to get through that is pretty consistent across the sector? You're seeing competitors doing similar things?
Yes, yes. Oh, definitely. The whole industry is up. The prices are up.
Yep. Okay. Thank you.
Thank you. Once again, if you'd like to register for a question, please press star one on your phone and wait for your name to be announced. Your next question comes from Aryan Norozi from Barrenjoey. Please go ahead.
Hey, guys. Just one on the pricing. Apologies if you mentioned this at the start of the call, but I missed it. Just in terms of can you quantify the mix of price versus volume, maybe descriptively what was the magnitude of price increases and just sticking out do you expect them to be, please?
Yeah. Look, I think average transaction value is probably up about 5%. Which I think is the result of pricing or the volume. Yeah. Look, it's marginal, the difference.
Perfect. Just can you give us some color around the online strategy, and your experience to date? You're obviously doing a good job in terms of growing and scaling that business and maybe what your experience has been in terms of sales mix and margin. Just any little snippets around the online business would be great, please.
Yeah, I'll let John talk to that.
I mean, the online business, we continue to see the mix consistent with what it has been, which is 70% of it relates to case goods, 30% on loungers. Depending on the campaign, that mix can shift slightly. I think since launching into New Zealand, not only have we seen kind of green shoots in the e-commerce side, but I think it's continued from that digital sales channel that we have as well. We think that they can work harmoniously. I think the other opportunity for us is as we get a better online presence is to drive more traffic back into the stores.
We think that with a true omni-channel offering, the power of it is to increase the overall customers that hit the top of the funnel, whatever channel they might come from. The online business we will never see as a standalone business. We'll always see as, you know, deeply integrated with our store network. I think what we've experienced over the last half is obviously lockdowns favorably impact online. Then there's typically a reset at a higher level following lockdowns as a result of consumer behavior. We saw that continue and we've been able to see that compared to Melbourne, which was locked down over the similar period last year.
Great. Thanks, guys.
There are no further questions at this time. I'll now hand back to Mr. Scali for closing remarks.
Yes. Look, I think in summary, the revenue was down, unfortunately, because of, in particular, supplier issues in Vietnam with the lockdown, where our largest lounge supplier is, and it certainly should have been a better result. We're coming into the second half with a huge order bank. We've got the Plush acquisition now, and we're very excited about that and the opportunities that presents to the business and the scale. I think, overall, considering the lockdowns in the end, the result was fairly good, just to be down, you know, approximately 6% on the previous year. I'd like to thank you for attending and sign off. Thanks. Thank you.
That does conclude our conference today. Thank you for participating. You may disconnect.