Nick Scali Limited · ASX:NCK
Nick Scali — Investor Presentation (April 2024)
42 slides from Nick Scali's investor presentation, Apr 24, 2024
Slide 1: UK market entry and acquisition of Fabb Furniture
Not for distribution to US newswire services or distribution in the United States UK market entry and acquisition of Fabb Furniture 24/04/2024 1
Slide 2: Important Notices
Important Notices This investor presentation is dated Wednesday, 24 April 2024 and has been prepared by Nick Scali Limited (ACN 000 403 896) (Nick Scali or the Company). By attending an investor presentation or briefing, or accepting, accessing or reviewing this presentation, you acknowledge and agr
Slide 3: Important Notices
Important Notices International restrictions The distribution of this presentation in jurisdictions outside Australia may be restricted by law and you must observe any such restrictions. Failure to comply with these restrictions may constitute a violation of applicable securities laws (see Appendix
Slide 4: Important Notices
Important Notices Future performance and forward-looking statements This presentation contains certain forward-looking statements, which include, but are not limited to, words such as “expect”, “anticipate”, “estimate”, “intend”, “believe”, “guidance”, “should”, “could”, “may”, “will”, “predict”, “p
Slide 5: Disclaimer
Disclaimer Macquarie Capital (Australia) Limited (ABN 79 123 199 548) (Lead Manager) is acting as sole lead manager, bookrunner and underwriter to the Institutional Placement. A summary of the key terms of the underwriting agreement between Nick Scali and the Lead Manager in relation to the Institut
Slide 6: Disclaimer (cont.)
Disclaimer (cont.) Further, the Lead Manager Parties do not accept any fiduciary obligations to or relationship with you, any investor or potential investor in connection with the Equity Raising or otherwise. The Lead Manager Parties make no recommendation as to whether any person should participate
Slide 7: Transaction overview
Transaction overview • Acquisition of specialist UK home furniture retailer, Anglia Home Furnishings Limited (AHFL) (trading as Fabb Furniture) (Fabb Furniture) (Acquisition) • Nick Scali will acquire Fabb Furniture for a consideration of £2.00 (A$3.82) and acquire all of the secured debt1 owed by F
Slide 8: Transaction overview (cont.)
Transaction overview (cont.) • Following the Acquisition, Nick Scali intends to deliver a growth strategy which will initially include: • Refurbishment and re-branding of existing Fabb Furniture stores to Nick Scali brand • Re-setting existing offering to Nick Scali product lounge and dining offerin
Slide 9: Acquisition structure
Acquisition structure Acquisition overview Additional conditions • Acquisition of Fabb Furniture comprising of: • Nick Scali has an option to exit Fabb Furniture’s existing distribution centre for a fee of £0.5m (A$1.0m)2 • Nominal equity value of £2.00 (A$3.82) • the existing distribution centre is
Slide 10: Overview of Fabb Furniture
Overview of Fabb Furniture Overview of Fabb Furniture Store network Location Retail space (m2) Canterbury 2,179 • Specialist UK-based furniture retailer, established in 1979 Cheltenham 1,579 Store count 21 stores • Offers a full range of furniture (sofas, dining, beds and bedroom) Colchester 2,027 •
Slide 11: UK growth strategy
UK growth strategy Plan to establish Nick Scali in the UK Key objectives Time frame • Support management through any disruption due to integration Grow sales by improving the customer in-store Culture and re-branding Within 6 months experience and introducing the differentiated Nick Scali • Continue
Slide 12: Large and attractive UK furniture market
Large and attractive UK furniture market Furniture market size (A$bn)1 Population (millions)2 Number of households (millions)3 67.6 24.3 28.2 12.4 26.8 10.8 Australia UK Australia UK Australia UK Note: Assumes GBP: AUD exchange rate of 1.91. 1. Australia furniture market size based on Furniture Reta
Slide 13: Strategic rationale
Strategic rationale ✓ Entry into the large and attractive UK furniture market with an immediate 21 store network ✓ Unique opportunity to establish the Nick Scali brand at scale at a relatively low cost in the UK ✓ Opportunity to provide the UK market with a Nick Scali quality / value product offer ✓
Slide 14: Comparison to Nick Scali
Comparison to Nick Scali Revenue (A$m) ~A$508m1,2 ~A$65m3 Gross profit margin ~63.5%1 ~41.5% % revenue from lounge / ~70% from lounge4 ~65% from upholstery5 upholstery 107 (64 Nick Scali, 43 Store count 21 (in England) Plush)1 Revenue per store (A$m) ~A$4.7m1 ~A$3.1m3 Av. retail space per store ~1,6
Slide 15: Use of proceeds and transaction completion
Use of proceeds and transaction completion Sources A$m • Acquisition of Fabb Furniture comprising of: Proceeds from Institutional Placement A$46.0m • Nominal equity value of £2.00 (A$3.82) Proceeds from Conditional Placement A$4.0m • Purchase of all existing secured debt1 of £3.5m (A$6.7m)2 Acquisit
Slide 16: Institutional Placement and SPP
Institutional Placement and SPP • Nick Scali is today announcing a placement to sophisticated and professional and other institutional investors to raise A$50.0m, comprising: • Fully underwritten institutional placement (Institutional Placement) to raise A$46.0m, and • A$4.0m conditional placement t
Slide 17: Institutional Placement and SPP timetable
Institutional Placement and SPP timetable Milestone Date1 Record date for participation in the SPP 7:00pm (Sydney time), Tuesday, 23 April 2024 Trading halt and announcement of Acquisition, Placement and SPP Wednesday, 24 April 2024 Institutional Placement bookbuild Wednesday, 24 April 2024 Announce
Slide 18: Trading update
Trading update • Written sales orders of A$326.2m for the nine months ended 31 March 2024, up 1.2% on the prior corresponding period • Operating conditions broadly consistent with update provided at 1H result: • Positive trading momentum in January • Slowdown in written sales orders in February prim
Slide 19: Appendix A
Appendix A Supporting information 24/04/2024 Acquisition of Fabb Furniture and Equity Raising 19
Slide 20: Fabb Furniture management team
Fabb Furniture management team Matt Hesketh Tracey Jackson Keith Carl Laura Chiddey Chief Executive Officer Finance Director Sales Director Commercial Director • Matt has been driving force of • Tracey has worked for Fabb • Keith is responsible for leading • Laura has proven experience as change wit
Slide 21: Appendix B
Appendix B Key risks 24/04/2024 Acquisition of Fabb Furniture and Equity Raising 21
Slide 22: Overview of key risks
Overview of key risks This section summarises some of the key risks that may affect the future performance of an investment in Nick Scali. This is not an exhaustive list of all risks that Nick Scali and its investors may be exposed to in the future. If any of the following risks materialise, Nick Sc
Slide 23: Nick Scali business risks
Nick Scali business risks • Nick Scali's operational and financial performance is sensitive to consumer sentiment. Key factors that may adversely affect demand for Nick Scali's products include further increases in interest rates, economic shocks, increased unemployment and decreases in the asset va
Slide 24: Nick Scali business risks (cont.)
Nick Scali business risks (cont.) Heavy price • Nick Scali operates in a highly competitive industry. If competitors were to heavily discount their products, Nick Scali’s customers may be motivated to purchase from those discounting by competitors. Nick Scali may apply discounts to its own products
Slide 25: Nick Scali business risks (cont.)
Nick Scali business risks (cont.) • Nick Scali relies on the services provided by third party banking and payment providers such as credit card companies. It also relies on the services of third party logistic providers to deliver ordered products to customers. Nick Scali has limited influence over
Slide 26: Nick Scali business risks (cont.)
Nick Scali business risks (cont.) • Nick Scali may fail to accurately forecast or manage its inventory levels. This may result in Nick Scali incurring additional costs and/or losing revenue. If Nick Scali purchases levels Failure to effectively of product that it cannot sell in a timely manner, this
Slide 27: Nick Scali business risks (cont.)
Nick Scali business risks (cont.) Change in laws / • Future changes in laws and regulations may make it more cumbersome for Nick Scali to dispose and recycle household furniture. More time and effort dedicated to disposing and regulations around recycling furniture may incur additional capital and o
Slide 28: Nick Scali business risks (cont.)
Nick Scali business risks (cont.) • There are a number of factors which may impact Nick Scali's ability to secure new, or renew its current, debt facilities, some of which are outside of the control of Nick Scali, its directors and its employees. While Nick Scali believes that its debt facilities wi
Slide 29: Nick Scali acquisition-specific risks
Nick Scali acquisition-specific risks • The acquisition of AHFL is conditional upon certain limited customary conditions. If the conditions are not satisfied or waived (as applicable) or take longer than anticipated to satisfy, the completion of the acquisition may be deferred, delayed or may not oc
Slide 30: Nick Scali acquisition-specific risks (cont.)
Nick Scali acquisition-specific risks (cont.) • Nick Scali has undertaken financial and business analysis of AHFL in order to determine its attractiveness to Nick Scali in determining whether to pursue the acquisition. AHFL's future earnings may not be as • It is possible that such analysis, and the
Slide 31: Nick Scali acquisition-specific risks (cont.)
Nick Scali acquisition-specific risks (cont.) • If the acquisition of AHFL completes, the success of Nick Scali's expansion into the UK through AHFL cannot be assured, and the timing and cost of product launch, integration and operational efficiencies into the UK is difficult to forecast due to fact
Slide 32: Nick Scali general risks
Nick Scali general risks • Share market conditions may affect the value of Nick Scali's quoted securities regardless of its operating performance. Share market conditions are affected by many factors such as: – general economic outlook; – changes in Australian and foreign government regulation and f
Slide 33: Nick Scali general risks (cont.)
Nick Scali general risks (cont.) • Future changes in taxation laws in jurisdictions in which Nick Scali operates, including changes in interpretation or application of the law by the courts or taxation authorities, may affect the taxation treatment of an investment in Nick Scali shares or the holdin
Slide 34: Nick Scali equity raising risks
Nick Scali equity raising risks • The Placement Agreement entered into by Nick Scali with the Underwriter requires the Underwriter to fully underwrite the Institutional Placement. The Underwriter's obligation to underwrite the Institutional Placement is subject to certain customary terms and conditi
Slide 35: Appendix C
Appendix C Foreign selling restrictions 24/04/2024 Acquisition of Fabb Furniture and Equity Raising 35
Slide 36: Foreign selling restrictions
Foreign selling restrictions This presentation does not constitute an offer of New Shares in any jurisdiction in which it would be unlawful. In particular, this presentation may not be distributed to any person, and the New Shares may not be offered or sold, in any country outside Australia except t
Slide 37: Foreign selling restrictions (cont.)
Foreign selling restrictions (cont.) This presentation has not been, and will not be, registered with or approved by any securities regulator in the European Union. Accordingly, this presentation may not be made available, nor may the New Shares be offered for sale, in the European Union except in c
Slide 38: Foreign selling restrictions (cont.)
Foreign selling restrictions (cont.) This presentation and any other materials relating to the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this presentation and any other document or materials in
Slide 39: Foreign selling restrictions (cont.)
Foreign selling restrictions (cont.) Neither this presentation nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as
Slide 40: Appendix D
Appendix D Summary of Underwriting Agreement 24/04/2024 Acquisition of Fabb Furniture and Equity Raising 40
Slide 41: Summary of Underwriting Agreement
Summary of Underwriting Agreement The Company has entered into a placement agreement with the Lead Manager in respect of the Institutional Placement (Underwriting Agreement) in which the Lead Manager will be acting as sole lead manager, bookrunner and underwriter to the Institutional Placement. Purs
Slide 42: Summary of Underwriting Agreement (cont.)
Summary of Underwriting Agreement (cont.) (j) a member of the Company group that is material in the context of the group's business is or becomes insolvent or there is an act or omission which is likely to result in AHFL or such group member becoming insolvent; (k) a director of the Company is, amon