Good morning and welcome to the Nick Skali FY 2021 results presentation. Running through our FY 2021 highlights, sales revenue was 373,000,000 dollars 42 percent up on the prior year. Gross margin 63.5 percent, up from 62.7 percent in FY 2020. Underlying NPAT net profit after tax of 84 $200,000 100 percent up on FY 2020. Operating cash flow was $137,900,000 compared to $76,500,000 in FY 2020.
Total dividend for the year was $0.65 Our store network is currently 61 showrooms, 57 in Australia sorry, currently is incorrect as at June FY 2021 was 61 showrooms, Australia 57 New Zealand pool. There's one additional showroom that has opened in July in New Zealand. As mentioned, revenue was up 42% with comparable store sales growth of 34%. We split the growth the $110,000,000 growth in revenue was made up of $87,000,000 from comparable stores, approximately $1,900,000 from new stores over 2019 2020, dollars 5,100,000 from stores over the FY 2021 and $14,400,000 online and $1,400,000 from the clearance stores. The new stores opened in FY 2021, their revenue contribution based on the fact they were open at different times in the year were all the 3 new stores with an average of 2.5 months contribution only.
So we look forward next year to a full 12 month contribution from those 3 stores. Sales orders, total written sales orders was $401,000,000 representing growth of 37% in FY 2020. The written sales orders for New Zealand were 95% up on FY 2020. Total written sales order for Niksali online were $18,300,000 up $15,300,000 on the previous year. 3 year showrooms that were open throughout the year have performed strongly and they contributed $10,700,000 in sales orders.
So that have been averaging at 5.5 months. Closing order bank is up 35% on June 2020, which does reflect the continued strength of our trading throughout FY 2021. When we look at the financial performance, underlying profit of $84,200,000 as mentioned is 100% on the prior year. Clearly, the result was driven by the sales growth. Operating expenses were up, but the majority of those expenses were from new store of $2,600,000 and commission and bonus is at elevated levels given the result of $4,100,000 offset by savings in marketing.
In respect to cash flow and the balance sheet, I'll let our CFO, Maly, run through this.
Thank you, Anthony. The strong trading has resulted in a strong operating cash flow result. There were no significant or unexpected cash items during the year. Our operating cash flow was $11,000,000 more than our EBITDA due to working capital improvements, a $12,000,000 increase in customer deposits on the back of our increased order bank, which was offset by increased inventory holdings in our distribution centers and showrooms. We used around $15,500,000 of the generated cash on CapEx projects, primarily the purchase of the Adelaide flagship showroom in Keswick, South Australia, new store fit outs and store refurbishments.
After tax interest and dividend payments, the net cash inflow was $44,000,000 for the year. Moving on to the balance sheet. Our cash balance increased by $44,000,000 as just mentioned. And our interest inventories increased in total by around $10,500,000 $4,000,000 of the inventory increase relates to in transit inventories, which is a result of the elevated level of trading and is offset by the increase in the payables balance on the 30th June. Aside from the in transit inventory, the increase in the inventory has been driven in the DCs insurance, with a $5,000,000 increase in the inventory supporting additional $110,000,000 of revenue, which reflects the efficiency across our DC and store network.
Our property balance increased due to the purchase of the Keswick showroom, which is our 9th property. It was fully paid in cash, and there was no change to the overall level of borrowings, which remained at €33,700,000 which are all secured against our existing property portfolio. With that, I'll hand back to Anthony now to talk about our New Zealand business.
So our New Zealand business continues to perform very well. And we have starting to grow the network of stores, which will continue. And we can see that the total growth in terms of written orders for the year was 95% on the prior year, which comparable store growth of 40%. We opened a new showroom in November in Wairu Valley, which is doing very well, impacted our number one store. And we will realize the full benefit of that store in terms of sales revenue during FY 2022.
We just opened our 5th showroom in Hastings in July, which is in obviously this one issue and that has also performed well year to date. Nick's got the online had reported written sales orders of $18,300,000 which was the 1st full year of operations and obviously a 6 fold increase in FY 2020. The NYX Carly online written sales orders of $5,500,000 in the quarter 4 of FY 2021 was an increase of 84% from the same quarter the prior year. The full year revenue was $15,300,000 with an EBIT contribution of $8,800,000 The lounge visualization tool was launched in July and certainly we've seen an improvement in lounge sales online and the e commerce will be launched in August across both Australia and New Zealand. Looking at our store network, we have 61 stores, 57 or at June we had 57 stores, 4 stores in New Zealand, we have a total of 61.
The target for Australia is 73, New Zealand is 13, bringing a total target of 86 stores. As Chris talked about in our property was an additional property that was purchased in South Australia. With the photo, we now have 9 showrooms properties that we own. And that's a strategy that company will continue to expand the number of stores
we own.
In terms of the outlook, our growth is primarily driven by the continuation of our new store rollout and increasing our online penetration. And trading during July was impacted by the government lockdowns in Greater Sydney, Victoria and South Australia with written sales orders down 27% compared to July 2020, but up 24% in July 2019 despite Greater Sydney being locked down for the whole month. Victoria and South Australia traded exceptionally well since coming out of lockdown towards the end of the month. New Zealand continues to perform well with written sales orders up 91% in July, whilst online growth continued with written sales orders up 80% compared to July 2020. Despite the buying trading condition, there is a high degree of uncertainty in the current retail environment due to potential future lockdowns, supply chain challenges caused by lockdowns in sourcing countries and the continuing escalation of global shipping costs.
Given the uncertainty, it is not possible at this point to provide profit guidance for the company for the first half of FY twenty twenty two. I'm happy now that's the end of our presentation. We're open to any questions.
Thank Your first question comes from Mark Waid from CLSA. Please go ahead.
Good morning, team. Thanks for taking my question.
Look, I guess the last
12, 18 months has been a real roller coaster ride for you guys in the entire retail sector. I mean, what do you think is going through the heads of your the typical mix scaly customer at the moment?
That's a lot of customers. Yes, I think my view is I think there's still look, having looked at what's happened recently with Melbourne and Adelaide coming out of lockdown, it's certainly they came out strongly with people buying. My expectation, the customers are still wanting to worry about the lounge they sit in and the dining they have and the propensity to spend, particularly given you're in lockdown. And that's what I think how the customer's psyche continues to be and particularly while we can't travel.
Okay. Sure. And looking ahead, I mean, is your sense that these lockdowns are just simply postponing purchases, yes? You're not seeing any kind of demand that's been crimped permanently,
yes? Sorry, I didn't understand. Can you repeat that? Yes,
I'll just try to elaborate on your point around the lockdowns. And I guess the question investors are probably asking is, is it just a matter of the customers just postponing their purchases when you're coming out of the lockdown? Or do you think there's been some demand erosion?
Yes. Look, that's difficult. Yes, there is probably there was, yes. There are people during maybe this period, Sydney has been locked down, but they wanted they were intending to come and buy a lounge because they finished the renovation or just moving house. And yes, obviously, you get the uptick reopened.
But the elevated levels can seem to continue throughout this period whilst we're in this COVID situation where we can't travel.
Okay. I'll leave it there. Thanks a lot.
Thank you. Your next question comes from Marni Leisert from Macquarie. Please go ahead.
Good morning. Thanks for taking my questions. I just have a question around your strategy. You said here your future growth will primarily be driven by the continuation of store rollout and increasing online penetration. Can you talk to maybe the your scope to potentially acquire another business and how we should be thinking about that at the current juncture?
Yes. Look, we're always open to acquisitions if it works, if it makes sense for our business. And as you know, we made an announcement on the 19th of July about that we are currently in due diligence for another business, but Howard is not certainly that will occur. There may be other opportunities if it doesn't proceed. But irrespective of acquisitions, we're very motivated to continue our store rollout and really grow our online.
Just a question on the outlook comment. You said here online has been up 88%. Is that for the group or New Zealand?
Correct.
That's the whole group. That's the whole group.
Yes. That's clear. Well, those are all my questions for now. Thanks for us for answering them.
Thank you.
Thank you. Your next question comes from Sam Tighe from Citi. Please go ahead.
Hi, Anthony. Good morning. Good morning, Sam. Just wanting to elaborate on that recent announcement for Plush. Can you confirm, are you still in the due diligence process?
Yes, we are.
And is Plush the only business that you're involved in non exclusive discussions with? Are you considering other targets?
Not at this point.
Got it. All right. And
how many stores There are opportunities. There's lots of opportunities there. We're looking at, we're looking at, but not in due diligence.
Okay, great. And how many stores are you planning to open in FY 2022? And can you just provide a bit of color in terms of that how many are going to be first half or second half and the split between Australia and New Zealand?
Yes. So we've already so we look, our plan is open, excuse me, 3 to 4 stores at the minimum. 3 to 4, you said? Yes. In FY 'twenty two.
That's what we would target. We've opened already 1 in New Zealand and hopefully the balance will be across New Zealand and Australia. There's a number of opportunities we're looking at now. There's some we're very close to executing
soon.
Right. So you've done one so far. All the other 2 to 3 that you're going to do, is that going to be first half or second half?
Sorry, yes. I think hopefully at least 2% to 3% will be first half, about second half. It depends that there are a few balls in the air yet on the new stores. It's always not easy to predict when it can happen. The other issue is about the lead times on our furnitures.
So we basically specifically always order from our suppliers new stock for the showrooms and the lead times a bit longer. So we've got to deal with that as well in terms of respect to the openings. So that's why it's a bit of a moving target.
Got it. All right. Cool. And what's driven the lowest second half gross margins compared to the first half?
I think the first half was just exceptionally high. It's just the movement in the right bit of freight in the second half, a little bit higher freight content.
All right. Cool. All right. Thanks, Anthony.
Thank you. Your next question comes from John Hein from Wilsons. Please go ahead.
Good morning, Anthony and Chris. Thanks for your presentation and congratulations on such a strong result. If we could I've got a couple of questions. If you could start with New Zealand, obviously a really strong result. Could you perhaps give us a reminder of the strategy there and 40% sales growth, is that or like for like sales growth, is that I think evidence of the strategy taking place?
And how do you think about the profile for that region going forward?
Yes. Look, I think the brand awareness is building in New Zealand. And when we opened with 1 and 2 stores and 3 stores and obviously our marketing spend has to be proportion and controlled to our sales revenue. So as the store network has grown, we've been able to spend more on marketing and therefore the brand awareness is improving and that's helping. Obviously, there's the COVID impact helping with the like for like.
The stores that I opened have been very performed really well. So the brand uptake is really good and we're very happy with the result.
To the stores forgive me, I haven't had a chance to do the back of the envelope math, but do the stores typically trade in line with Australian store? Like, I mean, the rule of thumb for you guys is sort of 4.5 mil of revenue per store annually and you're at a 25% sort of type margin. Is that how you think about New Zealand?
Yes. Look, New Zealand probably performing a tick up on that, to be honest with you. But they're doing well, yes. But yes, more or less, yes.
Okay.
And what about the like early on, it was different and retail was very strong and housing was very strong in New Zealand at the beginning when you started rolling out in New Zealand. Given you sort of, I guess, clipping off more stores at a faster rate now, has that changed? Is it easier to find the right sites? Or have you changed strategy? Or have you got a good partner now?
Yes. No. Well, I think the answer is no. It's not that easy to get good stores because our template is 2,000 to 2,500 meters, so that's not easy to get paid. Size that size, that really always limits our store availability because of the store because of the size and we've pinpointed locations where you want to go to the areas, but we always look at the position.
We're careful about the position in those areas we want to open stores. So that's why it takes a little bit longer than we like sometimes. I just wanted to no, it's not about partnering with anyone. It's just about having access to sites. And we've always got the ability also to buy sites as you know and develop our own stores if we have to or at least we can either we've got either way of direction to go there.
But yes, it's more allowed the limitation on the speed of getting new stores is always basically because of the size of our stores. So it's a strong discipline we have to ensure that we don't compromise on that.
Okay, great. That makes sense. And just while we're on stores, I'm still a touch confused about the rollout profile. So you talked about 3 to 4 stores for 2022 to 3 in the first half. Does that include the one already opened in New Zealand?
So essentially a further 2 probably in the first half and one in the second?
No. For the year, it's 3 to 4. We've already opened 1, so there's another 3. So we might we hope to open the 2nd or 3rd in the first half. That's what we would like to do.
Got it. Okay. And finally, from me, online, obviously, still doing well. I'm just interested in just, I guess, optically about the split you've got. So if your original orders were up 18.1% and then revenue is 15%.
Percent. I understood that majority of the volume coming through the online was more of your flat pack type offering. I'm just surprised in the sort of delay there given I think you did bring in a lot of inventory pre COVID. Is that a profile we can expect to remain with that online business? Or is it just a timing and digestion issue as you get more familiar with how the business works?
Yes. I think well, firstly, the written orders were more than the revenue because a portion of our online orders are lounges and they have to be delivered, right? So there's always that lead time.
June? And also June.
Yes, correct. In the June period, yes. But irrespective of that, the I think in Trump, what you're asking is that what we've seen, why the volume growth up is we've learned a lot about different marketing initiatives that are working that we've been put it. It. We introduced the lounge visualization tool, which has brought us better penetration in lounges.
It's always been challenging to sell lounge above $2,000 online without someone having gone and sat on it. So I think there's all that and we've just got better execution. Average unit sales $1900 and we see growth by just executing better, bringing more categories. We've got a launch of a new e commerce tool that will be launched in August. And so we're very confident with
the growth.
Great. I heard Chris whispering June in the background there. Was June strong? And what was your sort of monthly run rate then versus what the print is on an average basis for the year?
Yes. June is always a bigger month and it's a bigger month for online too. So we get those sales aren't delivered yet.
I think Chris is trying to explain why the orders are a lot more than the revenue as they end the June. June is an elevated month in terms of orders traditionally. It's a seasonal month for us.
Okay, cool. And so you were happy with how you exited FY 2021 with online?
Yes.
Great. Thanks guys. I'll go back in the queue.
Thank you. Your next question comes from Ian Nourize from Barrene Jellie. Please go ahead.
Hi, Sam. Hope you're well. First one for me. Just trying to be trading update and just how you're seeing the consumer. I mean, if you look at it ex sort of the lockdown states, are you noticing a big impact in terms of confidence or visitation?
Yes. Sorry, it wasn't clear. I couldn't understand clearly your question, but there's a bit of interference. Could you repeat it, sorry?
Yes.
Is that better?
Can you
hear me better?
Yes, that's better.
Yes. So first one, just in terms of states that are not in lockdown at the moment, are you noticing any sort of material change in terms of their purchasing pattern or foot fall in your stores?
No. It's and as mentioned, it's pretty elevated. The foot traffic is up. And so there's no difference in patterns. It's very similar to what happens continually when you come out of lockdown in the video pent up demand, sales are elevated and then it lowers down, but still at elevated levels.
Yes, perfect. And just in terms of the gross margin, can you explore that a bit more? I mean, it was down about 25 basis points in the second half and it was 180 in the first half. I know you mentioned there's a bit of normalization in freight. How do you think about the impact from rising freight in fiscal 2022?
And how do you think about managing that as well from a pricing perspective?
Yes. That's it's a very it's a challenge. I think we've got traditionally October, December is a peak season for freight normally. And freight traditionally goes up this period. So it's about there will be further impact on freight.
The way I think in the currency has been helping us because we've come off our lower hedges and onto higher currency for a while. So that will offset that first half. And then I think the freight situation slowly will stabilize and I think the rates are at peak rates now. It's unsustainable, I think. And I don't think those shipping lines are going to be able to keep at this level in the long term.
But yes, it's a difficult area to manage at the moment.
You manage it through pricing, because I think the last time you put prices up within March, April 2020. So have you put any price increases through yet? And is that something you'll be thinking about doing?
Correct. That's at the end of the day, if the freight continues to this level, prices have to go up.
And just next one, just in terms of the dividend, I think that was a bit below sort of what others were expecting. Is that just sort of giving yourself a bit more wiggle room around M and A?
Look, I think it's more around just the degree of uncertainty in the moment in terms of lockdowns, particularly we've got lockdowns from countries where we source from. Vietnam at the moment is completely locked down. Malaysia is completely locked down. China is continuing. So there's just this uncertainty and concern about supply chain.
We thought it's a good we can always address the dividend in the next year, the next financial year or this year FY 2022 if things stabilize.
Yes. And just last one, I mean just thinking sort of medium to longer term, how is COVID if it has at all changed the way you're thinking about your cost base? Is there any line items within the cost base that you're sort of structurally lowering as a result of COVID and you sort of see yourself as a higher sort of margin business exiting COVID?
Yes. I think what we've certainly learned the capacity we've got in our distribution network, which has been very pleasing. The distribution network and the management of our distribution network have done an exceptional job. Basically delivered the sales revenue growth, extra $100,000,000 without incurring additional costs, just pure leverage and learned a lot about how to manage higher volumes in a very, very efficient way. And we've had some incredible initiatives we've implemented, which we'll continue to improve on.
So and the other thing is I think we've learned a little bit on the marketing side, how true initiatives and savings on that part. So there's a big two lessons for us have been marketing and distribution.
Okay. Just last one, just in terms of your comparable written sales orders and apologies if I missed this, but I don't think you guys called that out in the press. I mean you said it was up 50% in the first half. What was the comparable written order growth in fiscal 2021, please?
Sorry, what is? What was the second time?
It's just Yes.
We didn't mention that in the presentation. The revenue growth was 34%.
Okay. Cool. Thank you. Thanks, guys.
Thank you. Your next question comes from Kegan Bisson from Jarden. Please go ahead.
Good morning, Anthony and team. First one for me. I'm just going to see how you've if you've seen anything change from a promotional intensity standpoint. You can see some of the discretionary categories out there having promotions return pretty quickly, just if you've seen any of that in your category?
No, not really. No.
Okay. And then maybe just following up from that, just trying to pick up on your gross margin a little bit more. Is it still the case that the online growth should be gross margin accretive just given the mix online there?
Yes, you're right. That's correct. Because not in the majority, it's different to our stores. In our stores, it's more or less 68% lounges balance case goods and it's almost the reverse online. Having said that though, the lounge penetration is better now online.
So that it is starting to move down a bit in terms of case goods to a larger percentage. But yes, if you talk about last financial year, the margin was helped by online because 68% was case goods, which is at a high margin.
And then maybe just given online has been successful since you've launched it, is the team thinking of introducing any other sort of adjacent categories? And if so, can you talk us through any of that makes sense for the brand? And I guess, what categories would be easy from a supply chain perspective as well?
Yes. Look, we are looking at the other categories and we well, there's 2 things. Firstly, it's about giving more debt to your existing ranges, meaning you can for an example, in a range where we sell a dining buffet, coffee table, lamp table, we can introduce a lot more choice in those ranges, smaller buffets, big buffets, bigger, smaller tables. So we can broaden the depth of that range, I think, through online. And secondly, yes, the other categories that we've still look without we've identified those and we're yet to execute.
And then maybe just last one for me. Just looking from sort of a CapEx investment perspective from supply chain side, do you suspect that given you're adding more categories on or do you think that there's need to be a step up in CapEx outside of what you're spending in stores or maybe from a data or online capability standpoint?
No, look, the CapEx is immaterial. We don't need any CapEx in the distribution network. We thought CapEx is some towards online development tools and tools, but it's fairly material.
So it sounds then like the majority of the CapEx going forward is primarily just going to be within the store network, growing the store network and nothing on the back end side?
Correct.
Fantastic. Thanks guys.
Thank you. Your next question comes from Shane Bannon from PACT Partners. Please go ahead.
Good morning, Anthony. I was just wondering I want
to admit that elsewhere in the what you put out today, but just some commentary around the dividend, why it's bouncing around so much, the fact the payout ratio has dropped away as much as it has and yet the prognosis remains quite positive, particularly given the spread
of that balance sheet of yours? Well, the dividend is up. It's the payout ratio is lower. And then I think as I said before, we at the moment, we're a little bit concerned about the lockdowns of our supply of the countries where we source from and how that might potentially impact our cash flow. So we're just being conservative.
Irrespective, the dividend yield is about 5% and the payout ratio is still fairly high. Not as high as the tradition has been, but we just think it's prudent at this point in time to leave a little bit of additional cash.
Okay. Thank you. Sorry, just on that then, is there a through the cycle or through this little period when we come out of it, is there some sort of a payout ratio you are aiming to deliver over time given a rough band?
Yes. Look, that's a matter for the Board. I think if you I mean, if you look back at the history of our payout ratio, you can see it's been relatively high. So in normal circumstances, yes, I think it could stay could be higher than it is, but it's really ongoing capital management for us.
Okay. Thank you.
Thank you. Your next question comes from Peter Storey, shareholder. Please go ahead.
Hello, Anthony and Chris. Congratulations on a great year. Very happy shareholder here and very happy with that conservative approach that you just mentioned. My question relates to the online growth and the online penetration. Do you think the online is existing loyal customers who are confident enough to buy from MiX Skylee online?
Or to what extent do you think we're reaching new customers?
Yes. Look, I think the business as a whole is always reaching new customers because there are loyal customers, but people tend to buy furniture only once every 5 years or even up to 10 years. So we've always as the company has grown, we've obviously got new customers. So the majority of our sales are still new customers as we've grown and taken market share. Online, I think, yes, certainly, these are we've seen the demographic.
We've probably been able to attach a lot younger demographic online than we might have in the past due to that.
Great. Thank you.
Thank you. Your next question comes from Oliver Stevens, Private Investor. Please go ahead.
It's okay. My question has been answered. Thank you, guys.
Thank
you. Your next question comes from Tom Saylor from Family Wealth Management. Please go ahead.
Hi. My name is Tom. I just wanted to hear again your views on case goods and where do you see it the case goods heading in the next 12 months?
Case goods? Yes. Well, it continues to be a very important part of that business. And I think it's just as normal, we continue to improve our case goods range and the online has given us an opportunity to broaden that by adding more depth as I said to the ranges and also bringing additional categories that may not be able to be displayed in stores.
Thank you.
Thank you. Your next question comes from Ben Rodney from Morgan. Please go ahead.
Good morning, guys. Just a question on your supply chains. You called out that you do have concerns there. Do you think that you've reached peak leader delivery time for your key range? Or do you think that's going to blow out further?
And if you could dovetail into, I guess, your order bank at 97 days,
do you
see that normalizing back to historical norms? Or yes, if you could just give us a bit of color around that? And I guess also, does it start to affect consumer behavior when lead times go out as much as they have?
Yes. I mean the impact of the lead times is caused by the lockdowns in other countries that we saw strong. And unfortunately, we can't control that. For example, our customer made lounge orders and the lead times will are dependent upon that. Case goods, we have been increasing our stock levels.
I think we'll continue to do that because of the way the issue of lockdown. So you need to be overstocked, I think, at this point because of cut lockdowns. But typically, as I said before, it's about the landers, the customer made orders. And customers will probably, depending on lockdowns, may have to wait longer. If the lockdowns improve, the lead times will shorten, go back to as they were.
Great. Thanks.
Thank you.