Annual Report 2024
Los Angeles 6 seat corner terminal in Quanta fabric, turtledove colour.
Annual Report 2024 | Nick Scali Limited
2
Traver dining table. FSC certified whitewashed oak with marble top wrapped in travertine film.
Annual Report 2024 | Nick Scali Limited
3
Page
Chairman and Managing Director’s Review
5
Directors’ Report
6
Auditor’s Independence Declaration
18
Consolidated statement of comprehensive income
22
Consolidated statement of financial position
23
Consolidated statement of changes in equity
24
Consolidated statement of cash flows
25
Consolidated entity disclosure statement
50
Directors’ Declaration
51
Independent Auditor’s Report
52
Shareholder Information
56
Corporate Directory
58
Page
Notes to the consolidated financial statements
26
Note 1. Basis of preparation
26
Note 2. Segment information
27
Note 3. Revenue and other income
27
Note 4. Expenses
28
Note 5. Current and deferred tax
28
Note 6. Earnings per share
29
Note 7. Dividends
30
Note 8. Reconciliation of profit after income tax to
net cash from operating activities
30
Note 9. Cash and bank deposits
31
Note 10. Receivables
31
Note 11. Inventories
31
Note 12. Other financial assets
32
Note 13. Property, plant and equipment
32
Note 14. Leases
33
Note 15. Intangibles
34
Note 16. Borrowings
36
Note 17. Payables
36
Note 18. Deferred revenue
37
Note 19. Provisions
37
Note 20. Issued capital
38
Note 21. Reserves
38
Note 22. Financing facilities
39
Note 23. Financial instruments
39
Note 24. Contingent liabilities
42
Note 25. Commitments
42
Note 26. Employees
42
Note 27. Key management personnel
42
Note 28. Related party transactions
42
Note 29. Share-based payments
43
Note 30. Parent entity information
43
Note 31. Controlled entities
44
Note 32. Business combinations
46
Note 33. Significant events after the reporting period
48
Note 34. Remuneration of auditors
48
Note 35. Summary of other significant accounting policies
48
Contents
Annual Report 2024 | Nick Scali Limited
4
Historical Performance
58
61
2020
2021
2022
2023
2024
2020
2021
2022
2023
2024
42.1
84.2
262.5
373.0
2020
2021
2022
2023
2024
2020
2021
2022
2023
2024
47.5
65.0
108
107
128
441.0
507.7
468.2
70.0
70.0
75.0
74.9
80.6
101.1
Revenue ($m)
Net profit after tax ($m)
Showrooms
Dividends paid (cents per share)
Annual Report 2024 | Nick Scali Limited
5
Overview
We are pleased to report that Nick Scali Limited performed strongly in the
year, with revenue and gross profit stabilising post covid at a improved
gross margin. During the year, the Company completed a United Kingdom
acquisition of Anglia Home Furnishings Limited trading as Fabb Furniture
(“Fabb Furniture”) which will allow it to expand the brand globally.
Operating Performance
During the year, sales revenue decreased by 7.8% to $468.2m, with the
Company benefiting in FY23 from increased deliveries as the June 2022
order bank reduced with lead times returning to pre Covid levels.
The gross margin for Australia and New Zealand (“ANZ”) increased by 250
basis points to 66.0%, due to stable freight costs and the strong execution
of purchasing from suppliers.
The Company incurred one off non-recurring transaction costs of $1.5m to
complete the UK acquisition.
Underlying ANZ operating expenses, excluding acquisition transaction
costs, in the current year increased $3.1m. Generally operating expenses
increase with inflation and due to growth in the store network. In FY24
inflation increases affected property and wages costs.
Net profit after tax for the year was $80.6m.
The Company generated cash of $87.1m from operating activities, net of
lease liabilities repayments and lease interest payments.
In August 2023 a further $20m was repaid on the corporate acquisition
debt taken out to acquire Plush. The remaining corporate acquisition debt
is $28m. In addition the Company has $43.7m of debt secured on owned
property.
Expenditure on property included $16.6m to build and $2.4m to fitout the
new distribution centre in Queensland on land purchased in FY23 for
$7.8m. Other capital expenditure, which includes store refurbishment and
new store fit outs, was $9.1m in the year.
$56.7m was returned to shareholders during the year by way of payment of
the final FY23 and interim FY24 dividends.
The Company undertook its first equity raise since listing in 2004 to fund
the UK acquisition. Proceeds of $54.8m, net of $1.2m of equity raise
transaction costs, were received from the equity raise. Anthony Scali,
Chief Executive Officer and Managing Director of Nick Scali Limited has
committed to subscribe for a further $4m of equity at the placement price
subject to shareholder approval at the October 2024 AGM. If approved,
total net proceeds from the equity raise will be $58.8m.
Cash and bank deposits at the end of the year were $111.3m, increasing
$22m from the end of the prior year. In addition the Company has $43.7m
of debt secured on owned property.
Fabb Furniture Acquisition
On 8 May 2024, the Company acquired Fabb Furniture.
Fabb Furniture operates a 20-store network across the UK, all located
in out-of-town retail parks and predominantly in large-scale format. The
acquisition of Fabb Furniture is complementary to Nick Scali’s existing
business and provides a compelling opportunity for Nick Scali to enter the
large and attractive UK furniture sector.
The UK acquisition growth strategy is to transition the stores to carry Nick
Scali lounge and dining ranges improving gross margin and providing
a differentiated and competitive product offer, to refurbish stores and
rebrand as Nick Scali.
The Company acquired Fabb Furniture for $6.5m and injected a further
combined $6.2m for working capital and to purchase an option for early
exit of the Fabb Furniture distribution centre lease. Including the $1.5m
in acquisition transactions costs, at 30 June 2024 $14.2m has been
expended on the UK expansion.
Store network
During the year, three new Plush showrooms were added in Payneham,
South Australia, Helensvale, Queensland and Campbelltown, New South
Wales. Nick Scali Furniture relocated a showroom to a larger format
location in Payneham, South Australia expanding the product offering in
this location.
As part of the on-going optimisation of the acquired Plush store network,
two showrooms were closed during the year where the store size or
location were below our targets for a Plush showroom.
The acquisition of Fabb Furniture added 20 showrooms in the United
Kingdom.
The Company had a combined store network of 128 stores at the end of
June 2024.
In addition to its significant lease portfolio, the Company currently has
eleven owned properties in Australia, with nine Nick Scali showrooms
operating out of owned property.
Alongside the store networks, the Company has continued to enhance
the eCommerce experience in Nick Scali online. Nick Scali online written
sales orders for the year were up 17.8% with higher sales of custom
lounges following the improvement of the user experience on the website.
Outlook
In Australia and New Zealand we expect to open two Nick Scali stores and
three to five Plush stores in the financial year to 30 June 2025.
In the UK trading is expected to deteriorate in the first half of the financial
year to 30 June 2025 due to disruption resulting from the implementation of
the acquisition strategy of store refurbishment and changed product range.
Dividends
On 9 August 2024, the Directors declared a fully franked final dividend of
33.0 cents per share, bringing the total dividend for the year to 68.0 cents
per share. This represents a payout ratio of 69%.
The final dividend has a record date of 26 September 2024 and will be paid
on 17 October 2024.
The Board recognises that the success of Nick Scali Limited is the result
of the dedication of our many employees and associates across Australia
and New Zealand, and now the United Kingdom. We would like to take
this opportunity to thank them for their hard work and commitment to the
Company.
Furthermore, the Board also takes this opportunity to thank our customers,
suppliers, and shareholders whose continuing support underpins the
performance of the Company.
Chairman and Managing
Director’s Review
6
Annual Report 2024 | Nick Scali Limited
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Group’) consisting of Nick Scali
Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2024.
Directors
The names and details of the Company’s directors (referred to hereafter as the ‘Board’) in office at any time during the financial year or until the date of this report
are as follows. Directors were in office for this entire year unless otherwise stated.
John Ingram
Stephen Goddard (retired 31 December 2023)
Kathy Parsons
Carole Molyneux
William Koeck
Anthony Scali
Principal activities
The principal activities of the Group during the year were the sourcing and retailing of household furniture and related accessories. No significant change in the
nature of these activities occurred during the year.
Dividends
Dividends paid during the year were as follows:
2024
2023
$’000
$’000
Final franked dividend for 30 June 2023: 35.0 cents (2022: 35.0 cents)
28,350
28,350
Interim franked dividend for 30 June 2024: 35.0 cents (2023: 40.0 cents)
28,350
32,400
56,700
60,750
In addition to the above dividend, since the end of the financial year directors have declared a fully franked final dividend of 33 cents per fully paid ordinary share
to be paid on 17 October 2024 out of retained profits at 30 June 2024.
Operating and financial review
Nick Scali Limited is a furniture retailer operating in Australia, New Zealand and the United Kingdom.
Group operating results
2024
2023
% Change
$’000
$’000
Revenue
468,189
507,723
-7.8%
Gross Margin %
65.5
63.5
Net profit after tax (NPAT)
80,612
101,082
-20.3%
Earnings per share (EPS)(cents)
98.7
124.8
-20.9%
The Group’s net profit after tax included one off acquisition costs incurred in relation to the purchase of Anglia Home Furnishings Limited totalling $1,500,000.
On an underlying basis, excluding one-offs, net profit after tax was down 18.8% to $82,112,000.
Reconciliation of underlying net profit after tax
Reported
Acquisition Costs
Underlying
$’000
$’000
$’000
Net profit after tax
80,612
1,500
82,112
Directors’ Report
Revenue
The Group records revenue on delivery of furniture to the customer.
Revenue for the current year includes $8.3m in revenue for Anglia Home
Furnishings Limited trading as Fabb Furniture (“Fabb Furniture”), a UK
furniture retailer acquired 8 May 2024. Australian and New Zealand (“ANZ”)
FY24 revenue of $459.9m is consistent with written sales order levels and
typical delivery times. ANZ revenue for the prior year of $507.7m benefited
from increased deliveries as the June 2022 order bank reduced with lead
times returning to pre Covid levels.
Gross margin
Group gross margin of 65.5% for FY24 improved 2.0% compared to FY23.
Excluding Fabb Furniture, ANZ gross margin was 66.0% up 2.5% compared
to FY23
Operating expenses
Group operating expenses include one-off acquisition costs for Fabb
Furniture of $1.5m.
Excluding acquisition costs, on an underlying basis Group operating costs
increased $6.4m compared to FY23. Of this $6.4m, 3.3m related to Fabb
Furniture. Underlying Australia and New Zealand (ANZ) operating costs
increased $3.1m, compared to the prior year;
• Marketing, property, and other expenses increased.
• Logistics and employment expenses decreased.
7
Annual Report 2024 | Nick Scali Limited
Directors’ Report (continued)
Note 2 in the Financial Statements provides the separate segment results for
ANZ for FY24 and the UK from 8 May acquisition date.
Excluding the Fabb Furniture acquisition transaction costs of $1.5m, ANZ
underlying net profit after tax was $84m compared to $101m in the prior year
with the reduction primarily driven by the increased deliveries as the prior year
order bank reduced.
Cashflow and capital management
The Group maintained a strong working capital position throughout the year
with closing cash and bank deposits at 30 June 2024 of $111.3m and net cash
and bank deposits of $39.6m.
Property and other capital investments in the current year includes $16.6m
construction and $2.4m fit out costs for the new Queensland Distribution centre
and other plant, equipment, intangible assets and leasehold improvements
of $9.1m.
In the current year $20m was repaid on the corporate acquisition debt taken
out in 2021 to partially fund the Plush-Think Sofas Pty Ltd (“Plush”) acquisition,
reducing the outstanding balance to $28m. Borrowings against property were
unchanged at $43.7m and are secured at less than 50% loan to value.
To fund the Fabb Furniture acquisition the group raised equity in the current
year, receiving $54.8m in proceeds (net of equity raise costs of $1.2m).
At June 2024 $14.2m in total had been expended for transaction costs for
acquisition of Fabb Furniture, an option for early exit of the current distribution
centre, and initial working capital injection.
In the current year $56.7m was returned to shareholders in dividend payments.
Showroom network
ANZ
UK
Group
Nick Scali Furniture (No.)
64
–
64
Plush (No.)
44
–
44
Fabb Furniture (No.)
–
20
20
Total (No.)
108
20
128
During the year, the Group opened three new Plush-Think Sofas showrooms
in Helensvale, Queensland, Payneham South Australia and Campbelltown,
New South Wales. Nick Scali Payneham, South Australia also moved to a
new larger format store. As part of the optimisation of the acquired Plush-
Think Sofas store network, two showrooms closed during the period at
Myaree, Western Australia and Richmond, Victoria.
People
The Group has a strong focus on attracting, engaging, developing, and
retaining top talent to ensure it remains a desirable employer and maximises
its potential to deliver growth. Investment in training and leadership
development ensures employees are equipped to deliver in their varied
roles, and best practice short and long-term incentives are in place to reward
exceptional performance.
To deliver maximum shareholder value, and to maintain investor and consumer
confidence, the Group is committed to achieving high levels of integrity and
ethical standards across all areas of the business. The Group has a Code of
Conduct which sets out the requirement for honesty, care, fair dealing, and
integrity in the conduct of all business activities.
The Group promotes workplace diversity and has zero tolerance for
discrimination and harassment and ensures that Workplace Health and Safety
is a priority for all employees, along with that of customers and suppliers.
Business Risk
The business, assets and operations of the group are subject to certain risk factors that have the potential to influence future operating and financial performance.
The Group maintains a Risk Management Framework to support the identification, assessment, management, monitoring and reporting of such risks. Set out below
are the key risks to future operating and financial performance the Group has identified together with the Group’s risk management approach for these risks. This is
not an exhaustive list of all actual or potential risks which may affect the Group.
External economic conditions
A downturn in economic conditions may affect consumer
demand for our products as our products are frequently
discretionary purchase items for consumers.
Acquisitions and integration
Acquisitions may not deliver projected benefits or value, and
integrations may not be successful, resulting in interruptions to
the achievement of business strategy.
Cyber Security
External cyber security threats to the group’s IT systems and
data (including personal information) could result in system
suspension, loss of control or failure, the potential loss of
intellectual property or a personal information data breach,
which may result in significant reputational, financial, and
regulatory implications for the Group.
The group maintains a strong balance sheet and significant available liquidity to navigate
economic demand cycles. Marketing activity and management of retail team performance
can partially mitigate.
Where possible the cost base to support reduced volumes is adjusted.
Additional opportunities may arise in an economic downturn to secure store locations on
acceptable lease terms.
The Group identifies and actively manages integration risks, including where appropriate
appointing additional leadership resources to assist with the management and delivery of the
acquisition business case and delivery of integration programmes.
The Group regularly reports specific acquisition risks and the performance of the new
business compared to the acquisition strategy to the Board.
The group seeks to reduce the risk of a Cyber security event via a programme of security
initiatives which include but are not limited to: ongoing awareness training and phishing
testing, continuous upgrading of software and hardware to remove security risks, engaging
third parties to conduct penetration testing.
These initiatives are regularly reported to the Audit and Risk Committee of the Board.
Risk Description
Risk Management Approach
8
Annual Report 2024 | Nick Scali Limited
Climate change
The Company has assessed that climate related risks are not likely to have a significant impact on the business. The Group recognises the severity of the potential
global impacts of climate change and that expectations of customers, governments, employees, and other stakeholders regarding the Group’s ESG profile continue to
evolve. The Group will continue to develop policies and procedures reflecting these expectations.
Outlook
Australia and New Zealand
June 2024 benefited from 5 weekends of trading, whereas July 2024 was disadvantaged by one less weekend when compared to the 2023 calendar year. Written sales
order growth for June and July combined was -1.2% compared to the prior year.
We continue to expand the store network and expect to open two Nick Scali stores and three to five Plush stores in FY25.
UK
Written sales orders are affected by a combination of tough market conditions, long lead times due to supply chain disruptions, and commencement of store refurbishments.
Trading is expected to deteriorate further in the first half of FY25 as disruption increases due to store refurbishments and change in the product range.
Significant changes in the state of affairs
During the year the Company acquired Anglia Home Furnishings Limited, a furniture retailer in the UK. With this acquisition the Company entered the UK market,
in addition to existing furniture retailing operations in Australia and New Zealand. The Company intends to rebrand the UK acquisition Nick Scali (UK) Limited and
leverage synergies and the successful business model practices of the group. As part of the acquisition the Company raised funding by way of equity capital via an
institutional placement and a share purchase plan.
Matters subsequent to the end of the financial year
The Company declared a dividend on 9 August 2024. A conditional placement for 299,999 fully paid ordinary securities at $13.25 per share are proposed to be issued
to an entity associated with Anthony Scali subject to securityholder approval at the Annual General Meeting in October 2024. No other matter or circumstance has
arisen since 30 June 2024 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of
affairs in future financial years.
Likely developments and expected results of operations
Refer to the Operating and financial review on page 6.
Environmental regulation
The Company is not subject to any significant environmental regulation under Australian Commonwealth or State law. The Directors are not aware of any particular or
significant environmental issues which have been raised in relation to the Group’s operations during the financial year.
Technology, data availability, and integrity
A failure or disruption of information technology services
(including infrastructure, hardware, software, digital platforms)
and/or the availability and integrity of data could have a material
adverse impact on the Group’s reputation, operations, and
financial performance.
Management Succession
The group has executives considered key to the success of
the Group by its stakeholders. A failure to adequately plan for
their succession may adversely impact the groups financial and
operational performance.
Workplace Health and Safety
Work, health, and safety risks could result in physical injury to
employees or others, damage to property, damage to reputation
and involve regulatory breach.
The Group has experienced IT executive leadership. Where possible additional technical
resources are engaged to mitigate key person risk. Key operating systems have business
continuity restoration plans. The Group uses effective change control habits by evaluating,
approving, and documenting modifications to minimise risks and maintain system and
organisational stability.
The Audit and Risk Committee of the Board has ongoing oversight of technology risk.
Competitive remuneration strategies have been implemented and succession and retention
activities and outcomes are regularly reviewed by the Remuneration and Human Resources
Committee of the Board and the Board.
The group has an ongoing programme to embed a safety culture across the business,
including policies, procedures, reporting training and education. The Board receives regular
reports of any incident resulting in first aid or lost time to injury.
Directors’ Report (continued)
Risk Description
Risk Management Approach
9
Annual Report 2024 | Nick Scali Limited
Directors’ Report (continued)
Name:
Kathy Parsons
Title:
Independent Non-Executive Director
Qualifications:
BCom, CA
Experience and expertise:
Kathy was appointed to the Board on 1 January 2023 and brings a wealth of
experience in accounting, finance, governance and risk management. Formerly
she was an assurance partner at Ernst & Young with deep international experience
working in Australia, the USA and the UK in a broad range of industries including
retail and real estate. She was also part of the Oceania assurance leadership
team responsible for quality assurance and risk management. Kathy was the
signing partner on the audit of Nick Scali Limited from 2012 to 2018.
Other current directorships: Non-Executive Director and Chair of the Audit
Risk and Compliance Committee for McMillan Shakespeare Ltd (ASX: MMS).
Non-Executive Director and Chair of the Audit and Risk Committee for Shape
Australia Corp Ltd (ASX: SHA).
Former directorships (last three years): Non-Executive Director and Chair of
the Audit Committee for Tassal Group Limited (ASX: TGR).
Special responsibilities: Chair of the Audit and Risk Committee.
Member of the Remuneration and Human Resources Committee.
Interests in shares:
14,504.
Name:
Anthony Scali
Title:
Managing Director
Qualifications:
BCom
Experience and expertise:
Anthony is Managing Director of Nick Scali Limited. Anthony joined the
Company in 1982 after completing a Bachelor of Commerce degree at the
University of New South Wales and has almost 40 years’ experience in furniture
retailing.
Other current directorships: Nil.
Former directorships (last three years): Nil.
Special responsibilities: Nil.
Interests in shares:
6,439,474.
A conditional commitment to participate in the institutional placement, subject
to shareholder approval at the AGM on 21 October 2024, exists for the purchase
of a further 299,999.
Other current directorships included above are current directorships for listed
entities only and exclude directorships of all other types of entities, unless
otherwise stated.
Former directorships included above are directorships held in the last three
years for listed entities only and exclude directorships of all other types of
entities, unless otherwise stated.
At the date of this report, no Directors held options over ordinary shares in the
Company.
Company Secretary
The Company Secretary and Chief Financial Officer since 6 October 2022 is
Sheila Lines. Sheila is currently a fellow of the Institute of Chartered Accountants
in England and Wales and a member of the Chartered Accountant Australia &
New Zealand. Sheila has over 25 years of experience at an executive level,
most recently as Chief Financial Officer at oOh!media Limited.
Information on directors
Name:
John Ingram
Title:
Independent Non-Executive Chair
Qualifications:
AM, FAICD
Experience and expertise:
John was appointed to the Board as non-executive Chair in April 2004, and
was formerly Managing Director of Crane Group Limited.
Other current directorships: Non-executive Chair of Peter Warren Automotive
Holdings Limited (ASX: PWR).
Former directorships (last three years): Nil.
Special responsibilities: Member of the Audit and Risk Committee.
Member of the Remuneration and Human Resources Committee.
Interests in shares:
206,387.
Name:
Carole Molyneux
Title:
Independent Non-Executive Director
Qualifications:
BA (Hons)
Experience and expertise:
Carole was appointed to the Board in June 2014. Carole has extensive
experience in retail and was the Chief Executive Officer of Suzanne Grae,
(part of the Sussan Retail Group), for eighteen years until 2013.
Other current directorships: Nil.
Former directorships (last three years): Nil.
Special responsibilities: Chair of the Remuneration and Human Resources
Committee.
Member of the Audit and Risk Committee.
Interests in shares:
25,000.
Name:
William (Bill) Koeck
Title:
Independent Non-Executive Director
Qualifications:
LLB, LLM(Hons), Post Graduate Applied
Corporate Finance; admitted UK and Australia
Experience and expertise:
Bill was appointed to the Board in August 2020. Bill is an experienced legal
adviser with over 40 years of experience in mergers and acquisitions, equity
capital markets, private equity, restructuring and corporate governance. For
over 20 years, Bill has been a part time lecturer in corporate and securities law
in the Masters of Law course at the University of Sydney. Bill was a Member
of the Federal Governments Takeovers Panel until April 2024.
Other current directorships: Non-Executive Deputy Chair and lead
Independent Director, Member of Audit Risk and Governance Committee
and Chair of Compensation and Nomination Committee for Coronado Global
Resources Inc (ASX: CRN).
Non-Executive Director of Poulos Bros. Group.
Former directorships (last three years): Nil.
Special responsibilities: Member of the Remuneration and Human Resources
Committee.
Member of the Audit and Risk Committee.
Interests in shares:
17,511.
10
Annual Report 2024 | Nick Scali Limited
Directors’ Report (continued)
Meetings of directors
The numbers of meetings of the Board and of each Board sub-committee held during the year ended 30 June 2024, and the numbers of meetings attended
by each director or sub-committee member, were:
Directors’
Remuneration and Human
Audit and Risk
Meetings
Resources Committee Meetings
Committee Meetings
Held
Attended
Held
Attended
Held
Attended
John Ingram
10
10
2
2
4
3
Stephen Goddard2
5
5
1
1
2
2
William Koeck
10
10
2
2
4
4
Carole Molyneux
10
10
2
2
4
4
Kathy Parsons
10
10
2
2
4
4
Anthony Scali1
10
10
–
–
–
–
1 Anthony Scali is not a member of the sub-committees, but was invited to attend the meetings of the sub-committees and his attendance was recorded in
the minutes
2 Stephen Goddard retired 31 December 2023.
Remuneration Report – Audited
The remuneration report details the remuneration arrangements for the key management personnel of the Group, in accordance with the requirements of the
Corporations Act 2001 and its Regulations. For the purposes of the report, key management personnel are defined as those persons having authority and
responsibility for planning, directing and controlling the major activities of the business.
1. Details of key management personnel
For the year ended 30 June 2024 the key management personnel (KMPs) of the Group consisted of the following directors:
John Ingram
– Non-Executive Chair
Stephen Goddard
– Non-Executive Director (Retired 31 December 2023)
William Koeck
– Non-Executive Director
Carole Molyneux
– Non-Executive Director
Kathy Parsons
– Non-Executive Director
Anthony Scali
– Managing Director & Chief Executive Officer
And the following executives:
Sheila Lines – Chief Financial Officer & Company Secretary
2. Remuneration strategy
The quality of Nick Scali Limited’s directors and executives is a major factor in the overall performance of the Group. To this end, the Company believes that
an appropriately structured remuneration strategy underpins a performance-based culture which in turn drives shareholder returns. The Group’s remuneration
strategy is therefore designed to attract and retain high quality and committed non-executive directors and employees.
The executive remuneration and reward framework has two components:
• fixed remuneration comprising of salary and superannuation.
• variable incentives comprising short-term incentives (STIs) in the form of a cash-based reward and long-term incentives (LTIs) in the form of an equity
reward.
The variable incentives are designed to deliver value to executives for performance against a combination of Company profitability and achievement against
strategic goals. Short-term incentives motivate employees to achieve outstanding performance and are based on current year predetermined key performance
indicators (KPIs) such as profit after tax, and non-financial activities that achieve short to medium term objectives, while long-term incentives align employees
with shareholder interests and are based on maintaining long-term shareholder value using performance measures such as earnings per share (EPS).
11
Annual Report 2024 | Nick Scali Limited
Directors’ Report (continued)
Remuneration Report – Audited (continued)
3. Remuneration and Human Resources Committee
The Remuneration and Human Resources Committee currently consists of the non-executive Board members and is responsible for:
• reviewing remuneration arrangements and succession planning of senior management, including the Managing Director and engaging external
compensation consultants if necessary.
• reviewing and approving any discretionary component of short and long-term incentives for senior executives reporting to the Managing Directors & Chief
Executive Officer.
• recommending to the Board any discretionary component of short and long-term incentives for the Managing Director & Chief Executive Officer.
• the setting of overall guidelines for Human Resources policy, within which senior management determines specific policies.
• reviewing the performance of the Board and its sub-committees, with the advice of external parties if appropriate.
The Committee has met twice in the last twelve months. In addition, matters for consideration by the Committee have been dealt with during various Board
meetings, where all Remuneration and Human Resources Committee members were in attendance.
4. Remuneration structure
4.1 Non-executive directors’ remuneration
Non-executive directors are paid a fixed annual fee, which is periodically reviewed. Non-executive directors do not receive any variable remuneration and
they are not entitled to participate in the Executive Performance Rights Plan. Effective 1 January 2024 the base fee for Non-Executive Director increased to
$120,000 per annum.
Non-executive Chair and directors’ fees in place at 30 June 2024 and 30 June 2023 were as follows:
2024
2023
$
$
Base fee for Non-Executive Chair
200,000
200,000
Base fee for Non-Executive Director
120,000
100,000
Additional fee for Audit and Risk Committee Chair
20,000
20,000
Additional fee for Audit and Risk Committee Member
5,000
5,000
Additional fee for Remuneration and Human Resources Committee Chair
10,000
10,000
Additional fee for Remuneration and Human Resources Committee Member
3,000
3,000
The pool for non-executive directors’ fees is capped at $1,000,000 per year as approved by shareholders at the Company’s Annual General Meeting in
October 2021.
4.2 Executive remuneration
The Group provides appropriate rewards to attract and retain key personnel. Base salaries, STIs and LTIs are established by the Remuneration and Human
Resources Committee for each executive reporting to the Managing Director and Chief Executive Officer having regard to the nature of each role, the
experience of the individual employee and the performance of the individual. Remuneration for the Managing Director and Chief Executive Officer is approved
by the Board. External consultants are engaged as appropriate and market information is used to benchmark executive remuneration. During the year ended
30 June 2024 no remuneration recommendations (as defined in the Corporations Act 2001) (Cth) were received.
4.2.1 Service agreements
Details of the ongoing service agreements between the Company and executives considered KMPs, are as follows:
Name
Title
Commencement
date
Annual base
salary including
superannuation
Notice of termination
by Company
Notice of termination
by Employee
Anthony Scali
Managing Director & Chief
Executive Officer
7 April 2004
$750,000
12 months
6 months
Sheila Lines
Chief Financial Officer &
Company Secretary
6 October 2022
$550,000
6 months
6 months
4.2.2 Targeted remuneration mix
The targeted proportions of the total remuneration opportunity for the executives considered to be key management personnel (KMPs) for the 2024 financial
year were:
Fixed Remuneration
Variable Remuneration
Base Salary
Short-term Incentive
Long-term Incentive
Managing Director & Chief Executive Officer
50%
50%
–
Chief Financial Officer
50%
25%
25%
12
Annual Report 2024 | Nick Scali Limited
Remuneration Report – Audited (continued)
4.2.3 Fixed remuneration – Base Salary
Fixed compensation is set to provide a base level of compensation which is appropriate to the position and responsibility and is competitive in the market.
Fixed compensation is reviewed annually, by the Remuneration and Human Resources Committee with reference to the performance of both the business
and the individual, the individual’s skills and experience, comparative market compensation and where appropriate, external advice. The Board approves
changes to the fixed remuneration of the Managing Director and Chief Executive Officer.
The Group provides superannuation contributions in line with statutory obligations with benefits being contributed to the employee’s chosen
superannuation fund.
4.2.4 Variable remuneration – Short-term incentive (STI)
The Company operates annual short-term incentive programs that reward KMPs and other senior executives on the achievement of predetermined KPIs
established each financial year, according to the accountabilities of their role and its impact on the Group’s performance. KPIs include profit targets and
personal performance criteria which are set to incentivise superior performance.
The maximum available STI for executives for the financial year is determined by financial targets established by the Board at the beginning of each financial
year. The financial target set in August 2023 for the year ended 30 June 2024 was Group profit before tax after excluding the impact of the application to
AASB16 and excluding the expense of the STI programme. This measure was chosen to link executive remuneration to the achievement of target financial
returns for shareholders before the non-cash application of AASB16. The financial target set in August 2023 did not include the impact of any possible
future acquisition. Therefore, the Board exercised its discretion to exclude the impact of the acquisition of Anglia Home Furnishings Limited (AFHL), the
transaction costs for the acquisition and the impact of the associated equity raising (“collectively the “AHFL Acquisition Impact”) from the measurement of the
achievement of the Group financial target for the year ended 30 June 2024. This rewards management for performance on the profit growth of the business
on a basis consistent with the assumptions when the financial target was set in August 2023. The net effect of excluding the AFHL Acquisition impact was
to increase Profit Before Tax, however it did not change STI outcomes as the actual result exceeded the maximum available STI at 110% of Financial Target
prior to the adjustment.
A sliding scale is applied pro rata from 40% of maximum available STI at 95% of financial target to 100% of maximum available STI at 110% of financial target.
Below 95% of financial target set by the Board no STI is awarded for the financial year.
Up to 100% of the maximum available STI determined for the financial year by application of the financial target set by the Board may also be subject to
achievement of individual non-financial KPIs. The Board at its discretion determines the weighting of non-financial KPIs for each financial year for the
Managing Director and Chief Executive Officer. The Remuneration and HR committee determines the weighting of non-financial KPIs for each year for
executives reporting to the Managing Director and Chief Executive Officer. There were no non-financial KPI’s for the Managing Director and Chief Executive
Officer or the Chief Financial Officer as the primary metric to align performance to shareholder return for the year ended 30 June 2024 was considered to be
financial performance.
The Managing Director may also recommend to the Remuneration and Human Resources Committee discretionary bonuses in exceptional circumstances to
reward contributions from high performing employees. The Remuneration and Human Resources Committee approved an additional discretionary bonus for
the Chief Financial Officer of $25,000 in recognition of the significant contribution to the UK acquisition completed in FY24.
STIs awarded are paid in the form of cash bonuses and the Remuneration and Human Resources Committee is responsible for assessing whether the KPIs
are met and the STIs are payable.
The following table shows the STI cash bonus target and the amount achieved for each KMP in the years ended 30 June 2024 and 30 June 2023:
Year ended 30 June 2024
Targeted STI Entitlement and KPIs
STI Achieved and KPIs
Financial
Non Financial
Financial
Non Financial
$
KPIs %
KPIs %
$
KPIs %
KPIs %
Anthony Scali
750,000
100%
–
750,000
100%
–
Sheila Lines1
275,000
100%
–
300,000
100%
–
1 STI achieved for 2024 includes an additional discretionary bonus of $25,000 in recognition of the significant contribution to the UK acquisition completed in FY24.
Year ended 30 June 2023
Targeted STI Entitlement and KPIs
STI Achieved and KPIs
Financial
Non Financial
Financial
Non Financial
$
KPIs %
KPIs %
$
KPIs %
KPIs %
Anthony Scali
750,000
100%
–
750,000
100%
–
Sheila Lines1
275,000
100%
–
202,671
100%
–
1 Target was pro-rated for 2023 year to period of service commencing 6 October 2022. Christopher Malley who resigned as Chief Financial Officer & Company Secretary on 5
October 2022 was not entitled to an STI for the year ended 30 June 2023.
Directors’ Report (continued)
13
Annual Report 2024 | Nick Scali Limited
Directors’ Report (continued)
Remuneration Report – Audited (continued)
4.2.5 Variable remuneration – Long-term incentive (LTI)
Long-term incentives, in the form of the share rights offered under the Executive Performance Rights Plan (EPRP), are provided to employees to align
remuneration with the creation of shareholder value over the long-term. The EPRP is only made available to executives and other employees who have been
employed for more than 12 months who are able to influence the generation of shareholder value and who have a direct impact on the Group performance
against relevant long-term performance targets.
The Board has determined earnings per share (EPS) growth to be the most appropriate measure of long-term performance. Under the EPRP, employees are
granted rights to ordinary shares that will vest after a period of three years subject to the achievement of specific levels of EPS growth. EPS is based on the
Group’s underlying profit after tax and before non-recurring items, as determined by the Board. The Board has the discretion to adjust the EPS base year to
reflect specific trading conditions which are not expected to re-occur in the measurement period. For performance rights issued in FY23 the EPS base year
was not adjusted. For performance rights issued in FY24, in recognition of the significant favourable impact on FY23 EPS due to the normalisation of delivery
lead times following global supply chains disruptions in late FY22 that is not expected to recur in the LTI measurement period, the Board adjusted the EPS
base year to 82 cents per share reflecting both the long-term target EPS growth from a pre COVID base and the Plush acquisition in FY22.
Under the EPRP the number of rights exercisable at the end of the vesting period is dependent on the level of EPS growth achieved by the Company, as
follows:
EPS growth (3 year CAGR)
Percentage of rights exercisable
Less than 5%
Nil
5%
50%
5% to 10%
Pro rata between 50% and 100%
More than 10%
100%
The number of rights granted is calculated by taking the relevant executive’s fixed annual remuneration and multiplying it by the relevant predetermined LTI
entitlement percentage of fixed remuneration and then dividing this by the Group’s volume weighted average share price for the four-week period prior to the
date of the release of the Group’s full year results.
The FY22/24 LTI grant vests August 2024. The vesting condition was a CAGR Earnings per share (EPS) growth for the 3-year period 1 July 2022 to 30 June
2024. The EPS is based on the statutory profit after tax of the Group. The Board exercised its discretion to alter performance targets during the performance
period to exclude the AFHL Acquisition Impact. This was considered appropriate as it rewards management for performance against the organic profit growth
of the business over the 3-year period. On this basis the FY22/24 LTI grant was measured at 95.4% vesting for participating employees. The net impact of
excluding the AFHL Acquisition Impact was to increase the FY24 LTI vesting outcome by 14.2%. No key management personnel are participating employees
for the FY22/24 LTI grant.
Rights to ordinary shares may also be granted in accordance with the EPRP as a retention award where the only performance condition is continued
employment with the Group at the vesting date. During the year ended 30 June 2023, 12,000 such rights were awarded to Sheila Lines on the commencement
of her employment.
If the minimum level of EPS growth is not met or if the participant ceases to be employed by the Group, any unvested rights will immediately lapse unless
otherwise determined by the Board.
There is no exercise price for shares granted under the EPRP and the employees are able to exercise their rights up to two years following the vesting date,
after which time the rights will lapse. In the event of a takeover offer for the Company, the rights may, at the discretion of the Board, vest in accordance with
an assessment of performance with the performance period pro-rated to the date of the takeover offer.
The performance rights entitlement of executives considered KMPs is calculated as a percentage of fixed annual remuneration for the years ended 30 June
2024 and 30 June 2023 as follows:
Year ended 30 June 2024
Years of Service
Targeted LTI Entitlement
LTI Issued
LTI Vested
Anthony Scali1
43
0%
0%
0%
Sheila Lines
2
50%
50%
0%
1 Anthony Scali is aligned to creation of shareholder value over the long term as the beneficial holder of 7.56% of the issued share capital in the Company. Anthony Scali is not
invited by the Board to participate in the EPRP.
Year ended 30 June 2023
Years of Service
Targeted LTI Entitlement
LTI Issued
LTI Vested
Anthony Scali
42
0%
0%
0%
Sheila Lines2
9 months
0%
0%
0%
2 Sheila Lines had not met the employment tenure criteria for EPRP participation in the year ended 30 June 2023.
Employees who have been granted rights are prohibited from entering transactions to limit the economic risk of such rights whether through a derivative,
hedge, or similar arrangement. In addition, employees are prohibited from entering margin lending arrangements in respect of shares in the Company where
those shares are offered as security for the lending arrangement.
14
Annual Report 2024 | Nick Scali Limited
Remuneration Report – Audited (continued)
4.2.6 Terms of performance and retention rights granted
The terms and conditions of each grant of rights to ordinary shares affecting the remuneration of employees in this financial year or future reporting years
are as follows:
Vesting and
Fair value per right
Grant reference
Grant date1
exercisable date
Expiry date
Exercise price ($)
at grant date ($)
FY24/26
31 Aug 2023
Aug 20262
30 June 2028
0.00
9.87
FY23/25
6 Oct 2022
Aug 20253
31 Aug 2027
0.00
7.73
FY23/25
14 Nov 2022
Aug 20252
30 June 2027
0.00
8.51
FY22/24
20 Sep 2021
Aug 20242
30 June 2026
0.00
9.87
1 The grant date is the date at which the performance rights are communicated to the employees. The effective date of the grant, from which the performance hurdles are measured,
is the first day of the financial year in which the grant is made.
2 The exact vesting and exercisable date for performance rights that have not yet vested is currently indeterminate and depends on the date of meeting at which the Board can
confirm the achievement of the long-term performance hurdles. This is typically four to eight weeks following the end of the financial year.
3 The vesting and exercisable date for retention rights issued to Sheila Lines is after completion of continuous service from 6 October 2022 to 31 August 2025.
4.2.7 Performance rights holding
The table below sets out the balance of performance rights held by executives considered KMPs. The vesting of these rights are subject to the achievement
of the 3 year EPS target. If the target is achieved the maximum value is determined by the share price at the time of vesting and the minimum value is nil.
Balance at
Vested and
Balance at
1 July 2023
Granted
exercised
Forfeited
30 June 2024
Anthony Scali
–
–
–
–
–
Sheila Lines
–
22,314
–
–
22,314
Balance at
Vested and
Balance at
1 July 2022
Granted
exercised
Forfeited
30 June 2023
Anthony Scali
–
–
–
–
–
Sheila Lines
–
–
–
–
–
Christopher Malley
58,377
–
23,810
29,093
5,474
4.2.8 Retention rights holding
The table below sets out the balance of retention rights held by executives considered KMPs. The vesting of these rights are subject to the completion of a
service condition only.
Balance at 1 July 2023
Granted
Vested and exercised
Forfeited
Balance at 30 June 2024
Anthony Scali
–
–
–
–
–
Sheila Lines
12,000
–
–
–
12,000
Balance at 1 July 2022
Granted
Vested and exercised
Forfeited
Balance at 30 June 2023
Anthony Scali
–
–
–
–
–
Sheila Lines
–
12,000
–
–
12,000
4.3 Group performance
The table below sets out the financial performance of the Group over the past five years:
2020
2021
2022
2023
2024
CAGR (%)
Revenue ($m)
262.5
373.0
441.0
507.7
468.2
15.6
Net profit after tax ($m)
42.1
84.2
74.9
101.1
80.6
17.6
Earnings per share (Cents)
51.9
104.0
92.5
124.8
98.7
17.4
Ordinary dividends paid per share (Cents)
47.5
65.0
60.0
75.0
70.0
10.2
Share price at 30 June ($)
6.48
11.72
8.26
9.11
13.81
20.8
Directors’ Report (continued)
15
Annual Report 2024 | Nick Scali Limited
Directors’ Report (continued)
Remuneration Report – Audited (continued)
4.4 Remuneration outcomes
4.4.1 Remuneration outcomes for non-executive directors
The tables below set out the remuneration outcomes for the non-executive directors for the years ended 30 June 2024 and 30 June 2023 respectively:
Short-term benefits
Post-employment benefits
Total
Fees
Superannuation
Year ended 30 June 2024
John Ingram
180,180
19,820
200,000
William Koeck
106,306
11,694
118,000
Carole Molyneux
112,613
12,387
125,000
Stephen Goddard1
55,405
6,095
61,500
Kathy Parsons
113,063
12,437
125,500
567,567
62,433
630,000
Year ended 30 June 2023
John Ingram
180,996
19,004
200,000
William Koeck
97,738
10,262
108,000
Carole Molyneux
104,072
10,928
115,000
Stephen Goddard
111,312
11,688
123,000
Kathy Parsons2
48,869
5,131
54,000
542,987
57,013
600,000
1 Stephen Goddard retired as a Non-executive Director on 31 December 2023
2 Kathy Parsons was appointed as a Non-executive Director on 1 January 2023
4.4.2 Remuneration outcomes for executive KMPs
The tables below set out the remuneration outcomes for the executive KMPs for the years ended 30 June 2024 and 30 June 2023 respectively:
Short-term benefits
Post-employment
Long-term
Share-based
benefits
benefits
payments
Total
Base Salary
Cash bonus (STI)
Superannuation
Employee entitlements
Shares rights (LTI)
$
$
$
$
$
$
Year ended 30 June 2024
Anthony Scali
724,708
750,000
25,292
9,794
–
1,509,794
Sheila Lines
506,423
300,000
27,500
–
106,416
940,339
1,231,131
1,050,000
52,792
9,794
106,416
2,450,133
Year ended 30 June 2023
Anthony Scali
726,427
750,000
23,567
12,083
–
1,512,077
Sheila Lines1
391,875
202,671
20,625
–
24,458
639,629
Christopher Malley1
84,525
–
7,782
–
(96,431)
(4,124)
1,202,827
952,671
51,974
12,083
(71,973)
2,147,582
1 Sheila Lines was appointed on 6 October 2022. Christopher Malley ceased to be a KMP on 5 October 2022. Amounts represent the payments to Christopher Malley relating to
the period in FY23 that he was KMP. Share based payment outcome for Christopher Malley includes reversal of prior period reported expense for performance rights forfeited on
resignation in the current year.
4.5 Additional disclosures relating to key management personnel
4.5.1 Interest in the Shares of the Company
The beneficial interest of each director in the contributed equity of the Company are as follows:
Balance at
Received as part
Balance at
1 July 2023
of remunerations
Purchases
Disposals
30 June 2024
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
John Ingram
385,000
–
6,387
185,000
206,387
William Koeck
16,300
–
1,211
–
17,511
Carole Molyneux
25,000
–
25,000
25,000
25,000
Kathy Parsons
13,500
–
1,004
–
14,504
Anthony Scali
11,039,474
–
–
4,600,000
6,439,474
11,479,274
–
33,602
4,810,000
6,702,876
This concludes the remuneration report, which has been audited.
16
Annual Report 2024 | Nick Scali Limited
Directors’ Report (continued)
Indemnity and insurance of officers
The Company indemnifies all the directors and executive officers against certain liabilities incurred as such by a director or officer, while acting in their
respective capacity, and enters contracts insuring the directors and officers against liabilities of this nature. The premiums paid under the terms of these
contracts have not been determined on an individual director or officer basis, and the directors have not included details of the nature of the liabilities covered
or the amount of the premium paid in respect of the directors’ and officers’ liability insurance contracts, as such disclosure is prohibited under the terms of
the contract.
No other agreements to indemnify directors or officers have been entered into, nor have any payments in relation to indemnification been made, during or
since the end of the financial year, by the Company.
Indemnity and insurance of auditor
To the extent permitted by law, the Company has agreed to indemnify its auditors KPMG, as part of the terms of audit engagement agreement against claims
by third parties arising from the audit (for an unspecified amount) – except for any loss in respect of any matters which are finally determined to have resulted
from KPMG’s negligent, wrongful, or wilful acts or omissions. No payment has been made to indemnify KPMG during or since the financial year.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene
in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
Corporate Governance Statement
Nick Scali Limited’s Corporate Governance Statement discloses how the Company complies with the recommendations of the ASX Corporate Governance
Council (4th Edition) and sets out the Group’s main corporate governance practices. This statement has been approved by the Board and is current as
of 30 June 2024. The Corporate Governance Statement of Nick Scali Limited can be found on the Company’s website: www.nickscali.com.au/corporate-
governance.
Rounding of amounts
The Company is of a kind referred to in Class Order 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’.
Amounts in this report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
Non-audit services
The Company may decide to employ the Company’s auditor, or its network firms, for non-audit services where their skills and expertise are considered
relevant.
During the year ended 30 June 2024, KPMG Australia performed tax advisory services and provided tax compliance services. Details of the amount paid to
the auditor for non-audit services are set out below.
2024
$
Tax compliance services
45,795
Tax review services
12,859
58,654
17
Annual Report 2024 | Nick Scali Limited
Directors’ Report (continued)
Non-audit services (continued)
The directors are satisfied that the provisions of non-audit services are compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The nature and scope of all non-audit services provided was approved by the Audit and Risk Committee, and the directors are satisfied
that the services provided do not compromise the integrity and objectivity of the Company’s auditor for the following reasons:
• none of the services required the auditor to review or audit the auditor’s own work
• none of the services required the auditor to act in a management or decision-making capacity for the Company
• none of the services required the auditor to act as an advocate for the Company
• none of the services involved the auditor jointly sharing in the economic risks and rewards of the Company
• a declaration required by section 307C of the Corporations Act 2001 confirming their independence has been included on page 18 of this financial report
Auditor’s independence declaration
The directors received the declaration from the auditor of Nick Scali Limited and is included on page 18 of the Financial Statements.
Auditor
KPMG continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
John Ingram
Anthony Scali
Chair
Managing Director
9 August 2024
Sydney
Nora swivel armchair in Merino fabric, porcelain colour.
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Annual Report 2024 | Nick Scali Limited
Auditor’s Independence Declaration
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member
firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Nick Scali Limited,
I declare that, to the best of my knowledge and belief, in relation to the audit of Nick Scali Limited for
the financial year ended 30 June 2024 there have been:
i.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
KPM_INI_01
KPMG
Julie Cleary
Partner
Sydney
9 August 2024
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
Westminster queen bed frame in vintage leather, nude colour.
19
Annual Report 2024 | Nick Scali Limited
Norfolk modular lounge in New Georgia Performance leather, fawn colour.
20
Annual Report 2024 | Nick Scali Limited
21
Annual Report 2024 | Nick Scali Limited
22
Annual Report 2024 | Nick Scali Limited
2024
2023
Note
$’000
$’000
Revenue from contracts with customers
3
468,189
507,723
Cost of goods sold
(161,390)
(185,313)
Gross profit
306,799
322,410
Other income
3
5,474
4,661
Expenses
Marketing expenses
(26,168)
(24,125)
Employment expenses
(72,537)
(71,573)
General and administration expenses
(19,184)
(17,248)
Property expenses
(12,907)
(8,568)
Logistics expenses
(3,031)
(6,039)
Acquisition expenses
32
(1,500)
–
Depreciation and amortisation
(45,410)
(42,762)
Finance costs
(15,102)
(13,243)
Profit before income tax expense
116,434
143,513
Income tax expense
5
(35,822)
(42,431)
Profit after income tax expense for the year attributable to the owners of
Nick Scali Limited
80,612
101,082
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net change in the fair value of cash flow hedges taken to equity, net of tax
(413)
(1,252)
Exchange differences on translation of foreign operations
(144)
84
Other comprehensive income for the year, net of tax
(557)
(1,168)
Total comprehensive income for the year attributable to the owners of
Nick Scali Limited
80,055
99,914
Note
2024
2023
Cents
Cents
Basic earnings per share
6
98.7
124.8
Diluted earnings per share
6
98.7
124.8
Consolidated statement of comprehensive income
For the year ended 30 June 2024
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes
23
Annual Report 2024 | Nick Scali Limited
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
Consolidated statement of financial position
As at 30 June 2024
2024
2023
Note
$’000
$’000
Assets
Current assets
Cash and cash equivalents
9
81,331
89,251
Term deposits
9
30,000
–
Receivables
10
2,102
1,763
Inventories
11
58,046
54,555
Other financial assets
12
–
504
Prepayments
4,802
3,303
Total current assets
176,281
149,376
Non-current assets
Land and buildings
13
119,578
104,482
Plant and equipment
13
22,145
14,836
Right-of-use assets
14
223,526
203,680
Deferred tax
5
5,792
5,493
Intangibles
15
157,560
129,773
Total non-current assets
528,601
458,264
Total assets
704,882
607,640
Liabilities
Current liabilities
Borrowings
16
2,300
2,300
Payables
17
44,356
22,728
Lease liabilities
14
37,687
35,563
Deferred revenue
18
61,200
62,884
Current tax liabilities
2,418
5,560
Other financial liabilities
12
99
–
Provisions
19
5,971
5,325
Total current liabilities
154,031
134,360
Non-current liabilities
Borrowings
16
69,387
89,387
Lease liabilities
14
210,998
190,915
Deferred revenue
18
1,195
2,274
Deferred tax
5
9,918
9,165
Provisions
19
1,574
1,626
Total non-current liabilities
293,072
293,367
Total liabilities
447,103
427,727
Net assets
257,779
179,913
Equity
Issued capital
20
58,211
3,364
Reserves
21
(702)
191
Retained profits
200,270
176,358
Total equity
257,779
179,913
24
Annual Report 2024 | Nick Scali Limited
Equity
Capital
Cash flow
Foreign
Retained
Issued
benefits
profits
hedge
exchange
profits
Total
capital
reserve
reserve
reserve
reserve
reserve
equity
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2022
3,364
(93)
78
1,745
(192)
136,026
140,928
Profit after income tax for the year
–
–
–
–
–
101,082
101,082
Other comprehensive income for the year,
net of tax
–
–
–
(1,252)
84
–
(1,168)
Total comprehensive income for the year
–
–
–
(1,252)
84
101,082
99,914
Employee share rights recognised
under EPRP (Note 21)
–
(179)
–
–
–
–
(179)
Dividends paid during the year (Note 7)
–
–
–
–
–
(60,750)
(60,750)
Balance at 30 June 2023
3,364
(272)
78
493
(108)
176,358
179,913
Balance at 1 July 2023
3,364
(272)
78
493
(108)
176,358
179,913
Profit after income tax for the year
–
–
–
–
–
80,612
80,612
Other comprehensive income for the year,
net of tax
–
–
–
(413)
(144)
–
(557)
Total comprehensive income for the year
–
–
–
(413)
(144)
80,612
80,055
Employee share rights recognised
under EPRP (Note 21)
–
(336)
–
–
–
–
(336)
Dividends paid during the year (Note 7)
–
–
–
–
–
(56,700)
(56,700)
Contributions of equity, net of transaction costs
54,847
–
–
–
–
–
54,847
Balance at 30 June 2024
58,211
(608)
78
80
(252)
200,270
257,779
Consolidated statement of changes in equity
For the year ended 30 June 2024
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
25
Annual Report 2024 | Nick Scali Limited
Consolidated statement of cash flows
For the year ended 30 June 2024
2024
2023
Note
$’000
$’000
Cash flows from operating activities
Receipts from customers
508,992
539,733
Payments to suppliers and employees
(345,197)
(360,255)
163,795
179,478
Interest received
3,400
2,460
Income tax payments
(36,019)
(44,038)
Net cash from operating activities
8
131,176
137,900
Cash flows from investing activities
Investment of term deposits
(30,000)
–
Maturity of term deposits
–
40,000
Purchase of property, plant and equipment
(27,898)
(12,280)
Purchase of intangible assets
(557)
(608)
Acquisition of subsidiary, net of cash acquired
32
(6,455)
–
Net cash used in/from investing activities
(64,910)
27,112
Cash flows from financing activities
Payment of dividends on ordinary shares
7
(56,700)
(60,750)
Proceeds from issued capital
54,847
–
Proceeds from borrowings
–
7,025
Repayment of borrowings
(20,000)
(7,000)
Repayment of lease liabilities
(37,072)
(36,435)
Interest payments - lease liabilities
(10,816)
(9,242)
Interest payments - borrowings
(4,445)
(3,979)
Net cash used in financing activities
(74,186)
(110,381)
Net (decrease)/increase in cash and cash equivalents
(7,920)
54,631
Cash and cash equivalents at the beginning of the financial year
89,251
34,620
Cash and cash equivalents at the end of the financial year
9
81,331
89,251
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
26
Annual Report 2024 | Nick Scali Limited
Note 1. Basis of preparation
Corporate information
Nick Scali Limited (the Company or the parent) is a for profit company
limited by shares incorporated in Australia whose shares are publicly
traded on the Australian Stock Exchange.
Basis of preparation
These general-purpose financial statements have been prepared in
accordance with Australian Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board (‘AASB’) and the
Corporations Act 2001. These financial statements also comply with
International Financial Reporting Standards as issued by the International
Accounting Standards Board (‘IASB’). The financial statements have
been prepared under the historical cost convention, except for financial
instruments, which have been prepared at fair value. The financial report
was authorised for issue in accordance with a resolution of the directors
on 9 August 2024.
The consolidated financial statements have been prepared on a going
concern basis, which contemplates the continuity of normal business
activities and realisation of asset and settlement of liabilities in the
ordinary course of business.
Where necessary because of a change in the presentation of certain
expenses during the current year, comparative amounts in the statement
of comprehensive income have been reclassified for consistency with
presentation in the current year.
Basis of consolidation
The consolidated financial statements comprise the financial statements
of the Company and its subsidiaries as of and for the year ended
30 June 2024. A subsidiary is an entity that is controlled by the Company.
The Company controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and can affect those
returns through its power over the entity.
The financial statements of the subsidiaries are included in the
consolidated financial statements from the date on which control
commences until the date on which control ceases. Intercompany
transactions, balances, and unrealised gains on transactions between
the Company and its subsidiaries are eliminated. Accounting policies of
the subsidiaries are consistent with the policies adopted by the Company.
Changes in accounting policies, accounting standards and
interpretations
The Group adopted disclosure of Accounting Policies (Amendments
to IAS 1) from 1 July 2023. Although the amendments did not result in
any changes to the accounting policies themselves, they impacted the
accounting policy information disclosed in the financial statements.
The amendments require the disclosure of ‘material’, rather than
significant, accounting policies.
The Group also adopted Deferred Tax related to Assets and Liabilities
arising from a Single Transaction (Amendments to IAS 12) from 1 July
2023. The amendments narrow the scope of the initial recognition
exemption to exclude transactions that give rise to equal and offsetting
temporary differences – e.g., leases. The change does not result in any
change of disclosure within the financial statements as the Group already
presented the asset and liability separately within the deferred tax note.
Material accounting judgements, estimates and assumptions
In the process of applying the Company’s accounting policies,
management has made judgements, estimates and assumptions.
All judgements, estimates and assumptions made are believed to
be reasonable, based on the most current information available to
management. Actual results may differ from these judgements, estimates
and assumptions. Judgements, estimates and assumptions which have
the most significant effect on the amounts recognised in the financial
statements:
Impairment of goodwill and brands
The Company determines whether goodwill and brands are impaired on
an annual basis. This requires determination of CGU’s and estimation of
the recoverable amount of the cash-generating unit to which the goodwill
and brand is allocated. The assumptions used in this estimation of
recoverable amount and the carrying amount of goodwill and brands are
discussed at Note 15 in the financial report.
Provisional fair value of acquired assets and liabilities
The assets acquired and liabilities assumed have been measured on a
provisional basis. This is further discussed at Note 32.
Lease term of contracts with renewable options
The Company determines the lease term to be the non-cancellable term
of the lease, together with any periods covered by an option to extend
the lease if it is reasonably certain that the option will be exercised.
In assessing the likelihood of a lease option being exercised, the
Company considers the costs of termination, the extent of any leasehold
improvements, the strategic importance of the lease location and the
current market rent for the site.
Net realisable value of inventory
Net realisable value is the estimated selling price in the ordinary course
of business, less estimated costs necessary to make the sale. Judgment
is applied in assessing the net realisable value.
Notes to the consolidated financial statements
For year ended 30 June 2024
27
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 2. Segment information
The Company has identified the Managing Director & Chief Executive Officer and the Board of Directors as the chief operating decision makers (CODM).
The Company has two reportable segments being the retailing of furniture in Australia and New Zealand as well as the United Kingdom. The United
Kingdom segment was acquired 8 May 2024 and is expected on an annualised basis to contribute more than 10% of Company revenues. In the prior year
there was only one segment.
Operating segments are identified based upon internal reports to the CODM. Given discrete financial information is available management can assess each
segments performance and are able to allocate resources.
Year ended 30 June 2024
Australia and New Zealand
United Kingdom
Consolidated
$’000
$’000
$’000
Revenue from contracts with customers
459,856
8,333
468,189
Gross profit
303,297
3,502
306,799
Other Income
5,457
17
5,474
Operating expenses
(132,014)
(3,313)
(135,327)
Depreciation and amortisation
(44,090)
(1,320)
(45,410)
Finance costs
(14,784)
(318)
(15,102)
Profit (Loss) before income tax expense
117,866
(1,432)
116,434
Income tax expense
(35,822)
–
(35,822)
Profit (Loss) after tax expense
82,044
(1,432)
80,612
As at 30 June 2024
Total assets
637,886
66,995 704,881
Total liabilities
393,715
53,388
447,103
During the year the Company had additions to non-current assets of $41,614,000 to the Australia and New Zealand operating segment and $572,000 to the
United Kingdom operating segment.
2024
2023
$’000
$’000
Note 3. Revenue and other income
Revenue
Revenue from contracts with customers
468,189
507,723
Other income
Rental income
967
1,029
Interest income
3,400
2,460
Net gain on disposal of right-of-use asset and remeasurement of lease liability
159
362
Sundry income
948
810
5,474
4,661
Recognition and measurement – Revenue
Revenue from contracts with customers is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange
for transferring goods or services to a customer. Contracts with customers provide for both the sale of goods and the provision of accidental damage
warranties, and the timing of the recognition of revenue of these separate components is as follows:
Sale of goods
When recognising revenue in relation to the sale of goods to customers, the key performance obligation of the Group is the delivery of the goods to the
customer, and revenue is recognised at the time of delivery of the goods to the customer.
Accidental damage warranties
When recognising revenue in relation to accidental damage warranties, the key performance obligation of the Group extends over the term of the warranty, and
consequently revenue is recognised over the term of warranty, weighted according to the expected occurrence of the performance obligations.
28
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
2024
2023
$’000
$’000
Note 4. Expenses
Profit before income tax includes the following specific expenses:
Included within employee expenses
Salaries, wages and fees
51,210
48,701
Superannuation contributions
5,635
4,716
Share-based payments
712
466
Included within property expenses
Short-term and low value lease payments
3,754
768
Rent concessions received as a consequence of Covid-19
–
(306)
Included within finance expenses
Interest expense related to lease liabilities
10,816
9,256
Interest expense related to bank loans
4,332
3,978
2024
2023
$’000
$’000
Note 5. Current and deferred tax
Amounts recognised in statement of comprehensive income
Income tax expense
Current income tax charge
35,137
41,643
Adjustments in respect of current income tax of previous years
499
200
Relating to origination and reversal of temporary differences
186
588
Income tax expense
35,822
42,431
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
116,434
143,513
Income tax at the statutory tax rate of 30%
34,930
43,054
Adjustments in respect of current income tax of previous years
499
200
Adjustment for difference in overseas tax rates
406
(40)
Adjustment for share rights exercised
(138)
(33)
Adjustment for non-assessable items
165
(574)
Other items
(40)
(176)
Income tax expense
35,822
42,431
Amounts recognised in equity
Share Based Payments
Before tax
433
(227)
Income tax
(130)
68
Net amount recognised in equity
303
(159)
29
Annual Report 2024 | Nick Scali Limited
2024
2023
$’000
$’000
Note 5. Current and deferred tax (continued)
Deferred tax recognised comprises temporary differences attributable to:
Right-of-use assets
(57,689)
(60,712)
Lease liabilities
65,056
67,534
Brands
(11,400)
(11,400)
Deferred capital gains
(1,612)
(1,612)
Property, plant and equipment
(2,046)
(1,428)
Employee entitlements
1,872
1,660
Cashflow hedge (Note 23)
30
(153)
Inventory provision
760
907
Other
903
1,532
(4,126)
(3,672)
Reflected in the statement of financial position as follows:
Deferred tax assets
5,792
5,493
Deferred tax liabilities
(9,918)
(9,165)
Deferred tax liabilities, net
(4,126)
(3,672)
Recognition and measurement – Income tax
Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities.
The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.
Recognition and measurement – Deferred tax
Deferred income tax is provided on all temporary differences at the reporting date, reflecting the difference between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes. Deferred income tax, assets and liabilities are measured at the tax rates that are expected to
apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities
are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to
the same taxable entity and the same taxation authority.
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
2024
2023
$’000
$’000
Note 6. Earnings per share
Profit after income tax attributable to the owners of Nick Scali Limited
80,612
101,082
Number
Number
Weighted average number of ordinary shares used in basic earnings per share
81,647,195
81,000,000
Weighted average number of ordinary shares used in diluted earnings per share
81,647,195
81,000,000
Cents
Cents
Basic earnings per share
98.7
124.8
Diluted earnings per share
98.7
124.8
Recognition and measurement – Earnings per share
Basic earnings per share
Basic earnings per share (EPS) is calculated as net profit attributable to members, divided by the weighted average number of ordinary shares.
Diluted earnings per share
Diluted EPS adjusts the basic EPS to take account of the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have
been recognised as expenses; and other costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to
have been issued for no consideration.
30
Annual Report 2024 | Nick Scali Limited
2024
2023
$’000
$’000
Note 8. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
80,612
101,082
Investing and financing items included in profit after income tax expense:
Net loss on disposal of property, plant and equipment
–
–
Interest expense
15,102
13,221
Net gain on disposal of right use asset
(159)
(362)
Non-cash items included in profit after income tax expense:
Depreciation and amortisation expense
45,410
42,762
Share-based payments expense
712
466
Cash items not included in profit after income tax expense:
Purchase of shares under EPRP
(1,178)
(577)
Changes in operating assets and liabilities:
Trade and other receivables
22
1,787
Inventories
1,037
15,970
Deferred tax
454
(201)
Prepayments
(1,024)
(263)
Other financial assets
187
2,587
Net fair value change on derivatives
(413)
(1,252)
Trade and other payables
5,673
(12,251)
Deferred revenue
(9,569)
(21,683)
Provision for income tax
(3,142)
(2,105)
Other provisions
(2,735)
(1,303)
Net foreign currency differences
187
22
Net cash from operating activities
131,176
137,900
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
2024
2023
$’000
$’000
Note 7. Dividends
Dividends
Dividends paid during the financial year were as follows:
Final fully franked dividend for 30 June 2023: 35.0 cents (2023: 35.0 cents)
28,350
28,350
Interim fully franked dividend for 30 June 2024: 35.0 cents (2023: 40.0 cents)
28,350
32,400
56,700
60,750
In addition to the above dividend, since the end of the financial year directors have declared a final fully franked dividend of 33 cents per fully paid ordinary
share to be paid on 17 October 2024 out of retained profits at 30 June 2024.
Franking credit
Franking credits are available to the Company as follows:
Franking credits available at the reporting date based on a tax rate of 30%
76,206
74,576
Franking credits that will arise from the payment of the amount of the provision
for income tax at the reporting date based on a tax rate of 30%
(678)
(2,419)
Franking credits available for subsequent financial years based on a tax rate of 30%
75,528
72,157
Impact on franking account of dividends proposed after the reporting date but not
recognised as a liability
(12,054)
(12,150)
Franking credits available for future reporting periods based on a tax rate of 30%
63,474
60,007
2024
2023
%
%
Tax rate at which paid dividends have been franked
30.0
30.0
Tax rate at which dividends declared and unpaid will be franked
30.0
30.0
31
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
2024
2023
$’000
$’000
Note 10. Receivables
Trade debtors
449
536
Other debtors
1,653
1,227
2,102
1,763
During the year ended 30 June 2024, $0 (2023: $287,000) was recognised as an expense for expected credit losses.
Recognition and measurement – Trade and other receivables
Trade and other debtors are initially recognised at fair value, less any allowance for expected credit losses. Trade debtors are generally due for settlement
within 30 days. Other debtors include receivables from suppliers and GST paid in advance. These are non-interest bearing and are due for settlement between
30 and 90 days.
2024
2023
$’000
$’000
Note 11. Inventories
Finished goods – at lower of cost or net realisable value
44,026
41,702
Stock in transit - at cost
14,020
12,853
58,046
54,555
During the year ended 30 June 2024, $610,000 was recorded as a decrease to the cost of goods sold due to changes in the net realisable value of finished
goods inventories (2023: $2,320,000 increase in cost of goods sold).
Recognition and measurement – Inventories
Inventories are valued at the lower of cost and net realisable value. Weighted average cost is used to value inventories. Costs incurred in bringing each
product to its present location and condition includes purchase price plus freight, cartage and import duties.
2024
2023
$’000
$’000
Note 9. Cash and cash equivalents and Term Deposits
Cash at bank and on hand
61,331
49,251
Short-term deposits
20,000
40,000
Cash and cash equivalents
81,331
89,251
Term Deposits (Maturity greater than 3 months)
30,000
–
Cash and Term Deposits
111,331
89,251
Recognition and measurement - Cash and cash equivalents and Term deposits
Cash and cash equivalents comprise cash at bank and on hand and short-term deposits with a maturity of three months or less. Deposits are made for
varying periods, depending on the immediate cash requirements of the Group.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above.
Term Deposits comprise any deposits which have a maturity of three months or more.
32
Annual Report 2024 | Nick Scali Limited
Note 13. Property, plant and equipment
Land &
Leasehold
Fixtures &
Motor
Office
buildings
improvements
fittings
vehicles
equipment
Total
$’000
$’000
$’000
$’000
$’000
$’000
Year ended 30 June 2024
At cost
129,966
31,234
3,316
921
19,693
185,130
Less, accumulated depreciation
(10,388)
(18,029)
(2,113)
(779)
(12,098)
(43,407)
119,578
13,205
1,203
142
7,595
141,723
Year ended 30 June 2023
At cost
113,345
24,927
2,300
921
15,888
157,381
Less, accumulated depreciation
(8,863)
(15,475)
(1,995)
(691)
(11,039)
(38,063)
104,482
9,452
305
230
4,849
119,318
Reconciliations
Reconciliation of the carrying amounts of property, plant and equipment at the beginning and end of the financial year:
Land &
Leasehold
Fixtures &
Motor
Office
buildings
improvements
fittings
vehicles
equipment
Total
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2022
97,385
9,036
385
337
5,382
112,525
Additions
8,521
2,575
15
–
1,169
12,280
Disposals
–
(18)
–
–
–
(18)
Foreign currency translation
–
47
(3)
–
14
58
Depreciation expense
(1,424)
(2,188)
(92)
(107)
(1,716)
(5,527)
Balance at 30 June 2023
104,482
9,452
305
230
4,849
119,318
Additions
16,621
6,393
650
–
4,234
27,898
Acquisitions (Note 32)
–
–
366
–
–
366
Disposals
–
(32)
–
–
(141)
(173)
Foreign currency translation
–
184
–
–
(3)
181
Depreciation expense
(1,525)
(2,792)
(118)
(88)
(1,344)
(5,867)
Balance at 30 June 2024
119,578
13,205
1,203
142
7,595
141,723
Land and buildings totalling $81.0m (2023: $80.3m) are used to secure bank loans relating to their purchase.
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
2024
2023
$’000
$’000
Note 12. Other financial assets
Derivative hedge receivable
–
504
–
504
Derivative hedge payable
99
–
99
–
Foreign exchange forward contracts
Foreign exchange forward contracts are held as hedging instruments against forecast purchases in USD. The notional amount of foreign exchange forward
contracts held on 30 June 2024 totalled $USD44,546,000 which covers between 50% and 100% of highly probably purchases for the six months to 31
December 2024 (30 June 2023: $USD44,848,000). The average rate of foreign exchange forward contracts held on 30 June 2024 was $USD0.66 (30 June
2023: $USD0.67).
Recognition and measurement – Other financial assets
Derivative hedge receivable
The Group uses derivative financial instruments, such as forward currency contracts, interest rate swaps and forward commodity contracts, to hedge its foreign
currency risks, interest rate risks and commodity price risks, respectively. Such derivative financial instruments are initially recognised at fair value on the date
on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is negative.
Where derivative financial instruments are deemed to be effective hedges against foreign currency, interest rate, or commodity price risks, the net gain or loss
on the fair value of the instrument is recognised as other comprehensive income. Where derivative financial instruments are deemed to be ineffective hedges,
the net gain or loss on the fair value of the instrument is recognised in profit or loss.
33
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 13. Property, plant and equipment continued
Recognition and measurement – Property, plant and equipment
All classes of property, plant and equipment are measured at cost, less accumulated depreciation and any impairment in value. Depreciation is provided on a
straight-line basis based on management’s estimate of both the residual value and the useful economic life of the asset. The depreciation methods, residual
values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
Management’s current estimates of useful economic lives are as follows:
Buildings: 20 to 40 years
Leasehold improvements: 5 to 15 years (leasehold improvements are depreciated at the shorter of the useful life or the term of the lease)
Furniture and fitting: 3 to 15 years
Motor vehicles: 6 years
Office equipment (including IT equipment): 3 to 12 years
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Company. Gains and losses
between the carrying amount and the disposal proceeds are taken to profit or loss.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may
not be recoverable. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit
to which it belongs. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units
are written down to their recoverable amount.
2024
2023
$’000
$’000
Note 14. Leases
Lease liabilities
Current lease liabilities
37,687
35,563
Non-current lease liabilities
210,998
190,915
248,685
226,478
Reconciliation of lease liabilities
Opening lease liabilities
226,478
237,936
Lease modifications agreed during the year
16,427
3,489
Additional leases entered during the year
14,070
26,988
Acquisitions (Note 32)
31,305
–
Interest accrued
10,816
9,242
Lease repayments
(47,889)
(45,677)
Disposal
(2,426)
(5,813)
Foreign currency translation
(96)
313
248,685
226,478
Right-of-use assets
223,526
203,680
Reconciliation of right-of-use assets
Opening right-of-use asset
203,680
215,362
Lease modifications agreed during the year
16,427
3,489
Additional right-of-use assets relating to leases entered during the year
13,731
26,988
Acquisitions (Note 32)
31,305
–
Disposal of right-of-use assets relating to leases terminated during the year
(2,267)
(5,450)
Make good asset movement during the year
(26)
(21)
Depreciation
(39,190)
(36,975)
Foreign currency translation
(134)
287
223,526
203,680
34
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 15. Intangibles
Goodwill
Brands
Website costs
Total
$’000
$’000
$’000
$’000
Year ended 30 June 2024
At cost
118,194
38,000
2,882
159,076
Less, accumulated amortisation and foreign exchange differences
(22)
–
(1,494)
(1,516)
118,172
38,000
1,388
157,560
Year ended 30 June 2023
At cost
90,589
38,000
2,325
130,914
Less, accumulated amortisation
–
–
(1,141)
(1,141)
90,589
38,000
1,184
129,773
Reconciliations
Reconciliation of the carrying amounts of intangibles at the beginning and end of the financial year:
Goodwill
Brands
Website costs
Total
$’000
$’000
$’000
$’000
Balance at 1 July 2022
90,589
38,000
836
129,425
Additions
–
–
608
608
Amortisation expense
–
–
(260)
(260)
Balance at 30 June 2023
90,589
38,000
1,184
129,773
Additions
–
–
557
557
Acquisitions (Note 32)
27,605
–
–
27,605
Foreign exchange
(22)
–
–
(22)
Amortisation expense
–
–
(353)
(353)
Balance at 30 June 2024
118,172
38,000
1,388
157,560
No impairment losses have been recognised in the year ended 30 June 2024 (2023: $Nil)
Note 14. Leases (continued)
Recognition and measurement – Leases
Lease liabilities
The Group enters non-cancellable leases for retail showrooms and warehouse facilities in Australia, New Zealand, and the UK. Leases are entered into for
varying terms and rent reviews are based on CPI increases or fixed increases. A lease liability is recognised at the commencement date of a lease at the
present value of the lease payments to be made over the term of the lease.
Lease liabilities include known future payments for which the Group is contractually obliged under the terms of its non-cancellable leases. Estimated future
payments in respect of make-good clauses within non-cancellable leases are accounted for as provisions (Note 19).
A number of the leases contain options to renew in favour of the Group. These options are negotiated by management to provide flexibility in managing the
leased-asset portfolio and align with the Group’s business needs. Management exercises judgement in determining whether these extension options are
reasonably certain to be exercised. The present value of the lease payments to be made under options considered reasonably certain to be exercised have
been included in the lease liability balance at 30 June 2024. The undiscounted potential future payments under options that are not considered reasonably
certain to be exercised is $164,326,000 which includes those that have an exercise date within the next five years of $85,404,000.
Right-of-use assets
Right-of-use assets are measured at cost at commencement of the lease and depreciated on a straight-line basis over the effective life of the asset. The
right-of-use assets have an effective life of between two- and fifteen-years dependent on the term of the lease and the likelihood of the Company exercising
any lease extension options in its favour.
35
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Goodwill is allocated to CGUs as shown below:
Australia and New Zealand
United Kingdom
Total
$’000
$’000
$’000
Goodwill
90,589
27,583
118,172
Note 15. Intangibles (continued)
Recognition and measurement – Intangibles
Goodwill and brands
Goodwill on acquisition is initially measured at cost, being the excess of
the cost of the business combination over the Group’s interest in the net
fair value of the identifiable assets, liabilities, and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
Brand names acquired in a business combination are initially
measured at fair value using the relief from royalty method. Following
initial recognition, brands are measured at cost less any accumulated
impairment losses.
Goodwill and brands are reviewed for impairment annually, or more
frequently if events or changes in circumstances indicate that their
carrying value may be impaired. Impairment is determined by assessing
the recoverable amount of the cash generating unit (“CGU”), or group
of CGUs, to which the asset relates. The Group has determined that
its CGUs are the individual showrooms, being the smallest grouping of
assets that generate cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
Goodwill arising from business combination is allocated to the Group,
being the group of CGUs that are expected to benefit from the synergies
of combination. This is the lowest level at which goodwill is monitored for
internal management purposes.
The recoverable amount of the aggregation of all CGUs within the Nick
Scali Group is based on their value in use, determined by discounting the
future cash flows expected to be generated by their continued use. The
key assumptions, to which this determination is most sensitive, relate to
the following;
Australia and New Zealand – Goodwill & Brand
Sales revenue: Revenue for the next five years has been estimated with
reference to the Group’s budget for the year ending 30 June 2025 and
four-year forward-looking plans, adjusted for recent performance trends.
Consideration was given to expected retail trading conditions when
estimating future revenue.
Gross margin: Gross margins have been estimated with reference to
the Group’s budget for the year ending 30 June 2025, adjusted where
appropriate for expected future changes in the Group’s international
supply chain.
Terminal growth rate: Growth beyond the next five years has been
estimated with reference to the expected long-term average growth rate
and was determined to be 2.0% (2023: 2.0%).
Discount rate: The discount rate is based on the specific circumstances
of the Group and its CGUs and was derived from its weighted average
cost of capital. Consideration was given to the cost of both debt and
equity, and the Group’s weighted average cost of capital was determined
to be 11.3% (2023: 10.9%)
At 30 June 2024, the recoverable amount of the CGU exceeded its
carrying amount, and there are considered to be no reasonably possible
changes to any of the key assumptions that would cause the recoverable
amount of the CGU to be less than its carrying values.
United Kingdom - Goodwill
Sales Revenue: Revenue for the next five years has been estimated with
reference to the Group’s 2-year business case utilised for the acquisition
within the financial year and a rate of 2.5% growth for the years 3-5. This
resulted in a 5-year CAGR of 5%.
Gross margin: Gross margins have been estimated with reference to the
current performance of the CGU as well as targeted margin per business
case budget.
Terminal growth rate: Growth beyond the next five years has been
estimated with reference to the expected long-term average growth rate
was determined to be 2.0%.
Discount rate: The discount rate is based on the specific circumstances
of the Group and its CGUs and was derived from its weighted average
cost of capital. Consideration was given to the cost of both debt and
equity, and the Group’s weighted average cost of capital was determined
to be 9.7%
At 30 June 2024, the recoverable amount of the CGU exceeded its
carrying amount and no impairment has been recognised.
Sensitivity analysis undertaken on the UK goodwill assumptions
modelled and would result in impairment if there were a change in the
assumptions by the magnitudes indicated:
– 5-year revenue CAGR decreased to below 3.4% with a corresponding
40% decrease in modelled marketing expense from FY26 and all
other assumptions held constant
– If the gross margin FY26 to FY29 decreased to below 60.5% with a
0.3% increase in 5-year revenue CAGR
– If the discount rate increases 1% and all other assumptions held
constant.
Website costs
The direct costs of developing the Group’s websites are measured at
cost, less accumulated amortisation and any impairment in value.
The Group determines that the website will generate probable future
economic benefits and recognises both internal expenditure and external
expenditure on website content as an intangible. The website costs are
determined to have a finite life of between 3 and 5 years and amortisation
is provided on a straight-line basis over the useful life.
36
Annual Report 2024 | Nick Scali Limited
2024
2023
$’000
$’000
Note 16. Borrowings
Current bank loans
2,300
2,300
Non-current bank loans
69,387
89,387
71,687
91,687
Reconciliation of borrowings
Opening borrowings
91,687
91,662
Additional bank loans drawn during the year
–
7,025
Repayment of bank loans during the year
(20,000)
(7,000)
71,687
91,687
Currency
Interest rate including
Year of
Carrying amount $000
Carrying amount $000
commitment fee
maturity
30 June 2024
30 June 2023
Secured corporate bank loan
AUD
5.95%
2026
28,000
48,000
Secured property bank loan
AUD
5.51-5.54%
2026
25,262
25,262
Secured property bank loan
AUD
5.51-5.61%
2025
16,125
16,125
Secured property bank loan
AUD
5.45%
2024
2,300
2,300
Total
71,687
91,687
Recognition and measurement – Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial
recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Fees paid on the
establishment of loan facilities that are yield related are included as part of the carrying amount of the loans and borrowings. Borrowing costs are recognised
as an expense when incurred, unless they are directly attributable to the acquisition, construction, or production of a qualifying asset whereby they are
capitalised.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after
the reporting date.
2024
2023
$’000
$’000
Note 17. Payables
Trade creditors
26,396
10,132
Other creditors
17,960
12,596
44,356
22,728
Trade creditors
Trade creditors are non-interest-bearing financial instruments and are normally settled within 30 days.
Other creditors
Other creditors are non-interest-bearing financial instruments and are normally settled on 30- to 60-day terms.
Recognition and measurement – Payables
Trade and other payables are carried at amortised cost and due to their short-term nature they are not discounted. They represent liabilities for goods
and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future
payments in respect of goods and services received.
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
37
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
2024
2023
$’000
$’000
Note 18. Deferred revenue
Customer deposits
60,387
62,688
Current accidental damage warranties
813
196
Current deferred revenue
61,200
62,884
Non-current accidental damage warranties
1,195
2,274
Non-current deferred revenue
1,195
2,274
62,395
65,158
Recognition and measurement – Deferred revenue
Customer deposits
Customer deposits represent amounts received from customers for orders not yet completed. Deposits received from customers are recognised as revenue
at the point of delivery of the goods to the customer. Orders are typically completed within three months and deposits are therefore considered short-term in
nature and are not discounted.
Accidental damage warranties
Accidental damage warranties are purchased by customers in conjunction with the purchase of goods and are initially measured based on an allocation of the
purchase price between the fair value of the goods and the warranty. Amounts deferred are recognised as revenue over the term of the warranty. Accidental
damage warranties classified as current will be recognised as revenue within 12 months of the reporting date.
2024
2023
$’000
$’000
Note 19. Provisions
Current employee entitlements
5,771
5,010
Current lease make good
200
315
Current provisions
5,971
5,325
Non-current employee entitlements
477
530
Non-current lease make good
1,097
1,096
Non-current provisions
1,574
1,626
7,545
6,951
Recognition and measurement – Provisions
Employee entitlements
Liabilities for annual leave and long service leave expected to be settled within 12 months of the reporting date are measured as the amounts to be paid when
the liabilities are settled and are discounted to net present value.
Liabilities for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured as the present value
of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.
Consideration is given to the expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated
future cash outflows.
Lease make good
A provision has been made for the present value of anticipated costs of future restoration of leased properties. The provision includes future cost estimates
associated with restoring the premises to its condition at the time the Company initially leased the premises, subject to fair wear and tear.
38
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
2024
2023
2024
2023
No. of Shares
No. of Shares
$’000
$’000
Note 20. Issued capital
Authorised and fully paid ordinary shares
85,230,700
81,000,000
58,211
3,364
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts
paid on the shares held. All ordinary shares carry one vote per share without restriction.
In April 2024 to support the Groups expansion into the United Kingdom the company announced an equity raising. During the financial year an institutional
placement and share purchase plan were completed adding 4,230,700 ordinary shares. A conditional placement for 299,999 fully paid ordinary securities are
proposed to be issued to an entity associated with Anthony Scali subject to securityholder approval at the Annual General Meeting in October 2024.
There are no other classes of equity securities.
Recognition and measurement – Issued share capital
Ordinary share capital is recognised at the fair value of the consideration received by the Company.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received, net of tax.
2024
2023
$’000
$’000
Note 21. Reserves
Capital profits reserve
78
78
Cash flow hedge reserve
80
493
Foreign exchange reserve
(252)
(108)
Equity benefits reserve
(608)
(272)
(702)
191
Movements in reserves
Equity
Capital
Cash flow
Foreign
benefits
profits
hedge
exchange
reserve
reserve
reserve
reserve
Total
$’000
$’000
$’000
$’000
$’000
Balance at 1 July 2022
(93)
78
1,745
(192)
1,538
Amounts recognised for cash flow hedges
–
–
(1,252)
–
(1,252)
Income tax on items taken directly to or transferred from equity
(68)
–
–
–
(68)
Purchase of shares under EPRP
(577)
–
–
–
(577)
Share-based payments expense
466
–
–
–
466
Foreign currency translation differences
–
–
–
84
84
Balance at 30 June 2023
(272)
78
493
(108)
191
Amounts recognised for cash flow hedges
–
–
(413)
–
(413)
Income tax on items taken directly to or transferred from equity
130
–
–
–
130
Purchase of shares under EPRP
(1,178)
–
–
–
(1,178)
Share-based payments expense
712
–
–
–
712
Foreign currency translation differences
–
–
–
(144)
(144)
Balance at 30 June 2024
(608)
78
80
(252)
(702)
Equity benefits reserve
This reserve is used to record the value of share-based payments provided to employees as part of their remuneration. Refer to Note 29 for further details
of these plans.
Capital profits reserve
This reserve is comprised wholly of the surplus on the disposal of assets that were acquired prior to the introduction of Capital Gains Tax provisions.
Cash flow hedge reserve
This reserve is used to recognise the effective portion of the gain or loss on cash flow hedge instruments that are determined to be effective hedges.
Foreign exchange reserve
This reserve is used to recognise differences arising where assets and liabilities denominated in foreign currencies are translated at the functional currency
exchange rate prevailing at the reporting date.
39
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
2024
2023
$’000
$’000
Note 22. Financing facilities
Unrestricted access was available to the following credit facilities at the reporting date:
Total facilities
Bank loans expiring within 12 months
2,300
2,300
Bank loans expiring in greater than 12 months
69,387
89,387
Interchangeable facilities, including letters of credit and bank guarantees
–
–
Bank guarantee facilities
500
500
72,187
92,187
Facilities used at reporting date
Bank loans expiring within 12 months
2,300
2,300
Bank loans expiring in greater than 12 months
69,387
89,387
Bank guarantee facilities
295
380
71,982
92,067
Facilities unused at reporting date
Bank guarantee facilities
205
120
205
120
Note 23. Financial instruments
Financial risk management objectives
The Company has exposure to foreign exchange risk, interest rate risk, credit risk and liquidity risk.
The Company’s financial risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and
controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions
and the Company’s activities.
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board of Directors
has established an Audit and Risk Committee, which is responsible for developing and monitoring the Company’s risk management policies. The Committee
provides regular reports to the Board of Directors on its activities.
The Company’s principal financial instruments comprise bank loans, and cash and short-term deposits. The main purpose of these financial Instruments is
to raise finance for and fund the Company’s operations. The Company has various other financial instruments such as trade debtors and trade creditors,
which arise directly from its operations. It is, and has been throughout the year, the Company’s policy that no trading in financial instruments is undertaken.
Market risk
Market risk is the risk that changes in market prices such as foreign exchange rates and interest rates will affect the Company’s income or the value of
its holdings of financial instruments. The objective of market risk management is to manage and control exposure within acceptable parameters while
maximising return.
Foreign currency risk
All the Company’s sales are denominated in either Australian dollars or New Zealand dollars, whilst the majority of inventory purchases are denominated in
currencies other than Australian dollars, primarily US dollars. Where appropriate the Company uses forward currency contracts and options to manage its
currency exposures; and where the qualifying criteria are met, these are designated as hedging instruments for the purposes of hedge accounting.
As of 30 June 2024, the Company had trade payables of $3,552,000 (2023: $3,172,000) denominated in US dollars and stock in transit of $11,662,000 (2023:
$12,853,000) denominated in US dollars, all of which are covered by designated cash flow hedges. As a result, the sensitivity to a reasonably possible change
in the US dollar exchange rate is minimal. The cash flows relating to cash flow hedge positions held at year end are expected to occur in July 2024 through
to December 2024, and the profit and loss is expected to be affected through cost of sales as the hedged items (inventory) are sold to customers. All forecast
transactions subject to hedge accounting have occurred or are highly likely to occur.
The terms of the foreign currency forward contracts have been negotiated to match the terms of the forecasted transactions. Both parties of the contract have
fully cash collateralised the foreign currency forward contracts, and therefore, effectively eliminated any credit risk associated with the contracts (both the
counterparty’s and the Company’s own credit risk). Consequently, the hedges were assessed to be highly effective. As of 30 June 2024, an unrealised loss
of $413,000 (30 June 2023: an unrealised loss of $1,252,000) is recorded in other comprehensive income.
40
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
The fair value of the cash, deposits and bank loans shown below are based on the face value of those financial instruments
2024
2023
Weighted
Weighted
average
average
interest rate
Balance
interest rate
Balance
%
$’000
%
$’000
Assets less than three months - Cash
3.73
81,331
4.43
89,251
Assets between three months and 12 months - Deposits
5.08
30,000
–
–
Liabilities less than one year – Bank loans
5.45
(2,300)
4.87
(2,300)
Liabilities between one and five years – Bank loans
5.52
(69,387)
4.66
(89,387)
39,644
(2,436)
A reasonably possible decrease (or increase) in the interest rate of 50 basis points would result in a decrease (or increase) of profit of $198,000 (2023: $12,000
on 50 basis points movement).
Interest rate risk
Financial instruments utilised that are subject to interest, and therefore interest rate risk, are cash and commercial bills. Management continually monitor
the exposure to interest rate risk, and the following table sets out the carrying amount by maturity of the financial instruments exposed to interest rate risk
at reporting date. All financial instruments exposed to interest rate risk are exposed to a variable interest rate.
Note 23. Financial instruments (continued)
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company. In most cases, the
Company requires full and final payment either prior to, or upon delivery of the goods to the customer. In limited cases where credit is provided, the Company
trades on credit terms with recognised, creditworthy third parties. Customers who wish to trade on credit terms are subject to credit verification procedures.
In addition, receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to bad debts is not significant. There are no
significant concentrations of credit risk within the Company.
With respect to credit risk arising from financial assets of the Company, which comprise of cash and cash equivalents and receivables, the Company’s
maximum exposure to credit risk, excluding the value of any collateral or other security, at reporting date to recognised financial assets is in the carrying
amount, net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements. Cash and cash
equivalents are only invested with credit worthy counterparties that are large Australian banks.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions.
The Company manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast
cash flows and matching the maturity profiles of financial assets and liabilities.
The following tables detail the Company’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the
undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both
known interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the
statement of financial position. Lease liabilities only include remaining contractual terms and exclude lease options not yet exercised.
41
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Less than
3 to 12
1 to 5
Over 5
Remaining
3 months
months
years
years
maturities
$’000
$’000
$’000
$’000
$’000
Year ended 30 June 2024
Interest bearing
Bank loans
2,855
–
69,387
–
72,242
Lease liabilities
12,682
35,008
101,049
10,285
159,024
Non-interest bearing
Trade creditors
26,396
–
–
–
26,396
Other creditors
17,960
–
–
–
17,960
Current tax liabilities
2,418
–
–
–
2,418
61,311
35,008
170,436
10,285
278,040
Year ended 30 June 2023
Interest bearing
Bank loans
–
2,359
90,303
–
92,662
Lease liabilities
11,823
32,267
87,913
9,986
141,989
Non-interest bearing
Trade creditors
10,132
–
–
–
10,132
Other creditors
12,596
–
–
–
12,596
Current tax liabilities
5,560
–
–
–
5,560
40,111
34,626
178,216
9,986
262,939
Note 23. Financial instruments (continued)
Fair value hierarchy
All financial instruments for which fair value is recognised or disclosed are categorised with the fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a whole:
Level 1: Quoted market prices in an active market (that are unadjusted) for identical assets or liabilities
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
At the reporting date the fair value of derivative financial instruments represented a derivative hedge payable of $99,000 (2023: receivable of $504,000).
All foreign currency forward contracts were measured at fair value using the Level 2 method. Unless otherwise stated, the carrying amounts of financial
instruments reflect their fair value.
Recognition and measurement – Financial instruments
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each
reporting date. Recognition of the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and the nature of the item
being hedged. As appropriate, the Company designates derivatives as either hedges of the fair value of recognised assets or liabilities of firm commitments
(fair value hedges) or hedges of highly probable forecast transactions (cash flow hedges).
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in
making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the
lowest level of input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation
is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an
asset or liability from one year to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a
comparison, where applicable, with external sources of data.
42
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 24. Contingent liabilities
In the ordinary course of business, the Group are subject to various legal actions and inquiries or investigations from regulators and government bodies.
Consideration has been given to all such matters at 30 June 2024, and no contingent liabilities were identified at that date (30 June 2023: Nil).
2024
2023
$’000
$’000
Note 25. Commitments
Land and buildings
301
16,013
Leasehold improvements
170
531
Plant and equipment
58
100
Intangibles – Website costs
–
50
529
16,694
2024
2023
No.
No.
Note 26. Employees
The total number of employees at the reporting date was as follows:
Number of full-time and part-time employees at balance date
930
726
2024
2023
$
$
Note 27. Key management personnel
The aggregate compensation made to directors and other
key management personnel of the Company is set out below:
Short-term employee benefits
2,848,698
2,698,485
Long-term employee benefits
9,794
12,083
Post-employment benefits
115,225
108,987
Share-based payments
106,416
(71,973)
3,080,133
2,747,582
Note 28. Related party transactions
Related party transactions between the Company and the directors and personally related entities were made during the year in the ordinary course of
business on normal commercial terms and conditions. The nature of these dealings was primarily the reimbursement of personal expenses incurred on
Company paid credit cards and the purchase of products for their own use.
Receivables from and payables to related parties
There were no trade receivables from or trade payables to related parties on 30 June 2024 (2023: Nil).
Loans to or from related parties
There were no loans to or from related parties on 30 June 2024 (2023: Nil).
43
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 29. Share-based payments
The Company has an Executive Performance Rights Plan (EPRP) which is provided for executives and other employees. In accordance with the provisions
of the plan, executives and employees are awarded rights to ordinary shares that will vest after a period of three years subject to the achievement of specific
performance hurdles in relation to earnings per share (EPS) growth. There is no exercise price for the shares and the employees can exercise the right for up
to two years following vesting, after which time the rights lapse.
The financial target set in August 2023 did not include the impact of any possible future acquisition. Therefore, the Board exercised its right to exclude the
impact of the acquisition of Anglia Home Furnishings Limited (AFHL), the transaction costs for the acquisition and the impact of the associated equity raising
(“collectively the “AHFL Acquisition Impact”) from the measurement of the achievement of the Group financial target measurement for the year ended 30 June
2024. This rewards management for performance on the profit growth of the business on a basis consistent with the assumptions when the financial target
was set in August 2023. The net effect of excluding the AFHL Acquisition Impact is to increase Profit Before Tax, however it did not change STI outcomes as
the actual result exceeded the maximum available STI at 110% of Financial Target prior to the adjustment.
The following table reconciles the outstanding employee share rights under the EPRP at the beginning and end of the financial year:
2024
2023
Outstanding share rights at the start of the year
197,907
226,991
Share rights granted
51,797
49,516
Retention rights granted
–
12,000
Share rights vested and exercised
(100,146)
(61,508)
Share rights forfeited
–
(29,092)
Outstanding share rights at the end of the year
149,558
197,907
The expense recognised in relation to employee share rights during the year was $712,000 (2023: $466,000).
Recognition and measurement – Share-based payments
Share-based payments are measured at the fair value of the rights at grant date and are expensed on a straight-line basis over the vesting period, with a
corresponding increase in equity, based on the Company’s estimate of the number of shares that will eventually vest, considering the likelihood of employee
turnover and the likelihood of non-market performance conditions being met.
The fair value of rights at grant date is valued under risk neutral conditions. Under these conditions the value of the right is equivalent to the share price
reduced by the present value of dividends payable on the shares until vesting. The present value of the dividends is deducted from the share price because
the right holder is not entitled to dividends until the rights are exercised. The valuation assumes that the rights are exercised as they vest.
The key assumptions used for determining fair value at grant date are as follows:
2024
2023
Share price at grant date ($)
12.51
11.04
Share price at grant date retention rights ($)
–
10.23
Dividend yield (%)
5.8
6.3
Franking rate (%)
30.0
30.0
Implied pre-tax effective dividend yield (%)
8.2
9.0
2024
2023
$’000
$’000
Note 30. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of financial position
Current assets
275,358
239,336
Non current assets
269,863
255,298
Total assets
545,221
494,634
Current liabilities
96,132
94,211
Non current liabilities
194,868
220,813
Total liabilities
291,000
315,024
Net assets
254,221
179,610
44
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 30. Parent entity information (continued)
2024
2023
$’000
$’000
Equity
Issued capital
58,211
3,364
Capital profits reserve
78
78
Cash flow hedge reserve
(41)
372
Equity benefits reserve
(608)
(272)
Retained profits
196,581
176,068
Total equity
254,221
179,610
Statement of comprehensive income
Profit after income tax expense
61,536
74,447
Other comprehensive Income
(413)
(1,252)
Total comprehensive income for the year
61,123
73,195
Recognition and measurement – Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Nick Scali Limited (‘Company’ or ‘parent entity’) as of 30 June
2024 and the results of all subsidiaries for the year then ended. Nick Scali Limited and its subsidiaries together are referred to in these financial statements
as the Group.
Subsidiaries are all those entities over which the Company has control. The Company controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and can affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances, and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of the impairment of the asset transferred.
Note 31. Controlled entities
Subsidiaries
The consolidated financial statements incorporate the assets, liabilities, and results of the following subsidiaries in accordance with the accounting policy
described in this financial report.
Name of entity
Country of incorporation
Class of shares
2024
2023
%
%
Nick Scali (New Zealand) Limited
New Zealand
Ordinary
100.0
100.0
Nick Scali Employee Share Scheme Pty Limited
Australia
Ordinary
100.0
100.0
Plush-Think Sofas Pty Limited
Australia
Ordinary
100.0
100.0
Nora Holdco UK Limited
United Kingdom
Ordinary
100.0
–
Nora Opco UK Limited
United Kingdom
Ordinary
100.0
–
Nora Debtco UK Limited
United Kingdom
Ordinary
100.0
–
Anglia Home Furnishings Limited
United Kingdom
Ordinary
100.0
–
AHF Internet Limited
United Kingdom
Ordinary
100.0
–
Closed Group
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, Nick Scali Limited, Plush-Think Sofas Pty Limited and Nick Scali Employee
Share Scheme Pty Ltd (the “Closed Group”) entered into a deed of cross guarantee on 30 June 2022. The effect of the deed is that Nick Scali Limited has
guaranteed to pay any deficiency in the event of winding up of any controlled entity or if they do not meet their obligations under the terms of overdrafts,
loans, leases or other liabilities subject to the guarantee. The controlled entities within the Closed Group have also given a similar guarantee in the event that
Nick Scali Limited is wound up or if it does not meet its obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee.
45
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 31. Controlled entities (continued)
The consolidated statement of profit or loss, consolidated statement of comprehensive income, summary of movements in consolidated retained earnings and
consolidated statement of financial position of the entities that are members of the Closed Group are as follows:
Closed Group
Closed Group
2024
2023
$’000
$’000
Statement of profit or loss
Revenue from contracts with customers
437,565
486,056
Cost of goods sold
(148,728)
(177,330)
Other income
6,490
4,632
Operating expenses
(124,024)
(120,053)
Depreciation and amortisation
(40,190)
(39,021)
Finance costs
(14,351)
(12,745)
Profit before income tax expenses
116,762
141,539
Income tax expense
(35,482)
(41,875)
Profit for the year
81,280
99,664
Other comprehensive income
Net change in the fair value of cash flow hedges taken to equity, net of tax
(413)
(1,252)
Other comprehensive income for the year, net of tax
(413)
(1,252)
Total comprehensive income for the year, net of tax
80,867
98,412
Summary of movements in consolidated retained earnings
Retained earnings at the beginning of the year
172,187
133,273
Profit for the year
81,280
99,664
Dividends paid during the year
(56,700)
(60,750)
Retained earnings at the end of the year
196,767
172,187
Statement of financial position
Assets
Current assets
Cash and cash equivalents
75,616
86,890
Term deposits
30,000
–
Receivables
1,055
904
Inventories
48,690
50,612
Other financial assets
16,211
504
Prepayments
4,263
3,240
Total current assets
175,835
142,150
Non-current assets
Land and buildings
119,578
104,482
Plant and equipment
19,519
12,618
Right-of-use assets
181,443
188,790
Intangibles
129,977
129,773
Total non-current assets
450,517
435,663
Total assets
626,352
577,813
46
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 31. Controlled entities (continued)
Closed Group
Closed Group
2024
2023
$’000
$’000
Liabilities
Current liabilities
Borrowings
2,300
2,300
Payables
26,554
21,967
Lease liabilities
33,959
32,157
Deferred revenue
52,900
59,448
Current tax liabilities
2,641
5,458
Provisions
5,832
5,211
Total current liabilities
124,186
126,541
Non-current liabilities
Borrowings
69,387
89,387
Lease liabilities
171,157
178,270
Deferred revenue
1,137
2,200
Deferred tax
4,512
4,066
Provisions
1,445
1,500
Total non-current liabilities
247,638
275,423
Total liabilities
371,824
401,964
Net assets
254,528
175,849
Equity
Issued capital
58,211
3,364
Reserves
(450)
298
Retained profits
196,767
172,187
Total equity
254,528
175,849
Note 32. Business combinations
Acquisition of Anglia Home Furnishings Limited
Overview and strategic rationale
On 8 May 2024 the Company acquired 100% of the issued share capital of Anglia Home Furnishings Limited for $6,455,000. The principal activity of Anglia
Home Furnishings Limited is the sourcing and retailing of household furniture through retail showrooms in the United Kingdom. The acquisition will enable
the Group to expand its geographical network.
The cashflow on acquisition was as follows:
$’000
Net cash acquired with the subsidiary
807
Cash paid
(7,262)
Purchase consideration transferred
(6,455)
Identifiable assets and liabilities acquired
The Group measured the value of the identifiable assets and liabilities at the date of acquisition at fair value.
In determining the fair value of acquired lease liabilities and right of use assets within the business combination, the company determined the lease term to
be the earliest cancellable term of the lease, due to expected assessment and optimisation of the acquired Anglia Home Furnishings Limited store network.
In assessing the likelihood of a lease option being exercised, the Company considers the costs of termination, the extent of any leasehold improvements, the
strategic importance of the lease location and the current market rent for the site.
47
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 32. Business combinations (continued)
The provisional fair values of the identifiable assets and liabilities of Anglia Home Furnishings Ltd at the date of acquisition were as follows:
Provisional Values
at Acquisition
$’000
Assets
Identifiable current assets
Cash and cash equivalents
807
Receivables
361
Inventories
4,528
Prepayments
474
Total identifiable current assets
6,170
Identifiable non-current assets
Plant and equipment
366
Right-of-use assets
31,305
Total identifiable non-current assets
31,671
Total identifiable assets
37,841
Liabilities
Identifiable current liabilities
Payables
15,955
Lease liabilities
6,614
Deferred revenue
6,806
Other financial liabilities
789
Accruals
3,329
Total identifiable current liabilities
33,493
Identifiable non-current liabilities
Lease liabilities
24,691
Total identifiable non-current liabilities
24,691
Total identifiable liabilities
58,184
Identifiable net liabilities
20,343
Cash paid
7,262
Identifiable net liabilities
20,343
Goodwill arising on acquisition
27,605
The goodwill recognised has been attributed to the expected synergies from combining the assets and activities of Anglia Home Furnishings Ltd with those
of the other companies in the Group.
There is a liability of $474,000 which is held as a warranty for future claims and payable one year after acquisition should no further claims arise.
Transaction costs
Transactions costs of $1,500,000 were expensed and are included as acquisition expenses in the consolidated statement of comprehensive income. These
costs were paid before 30 June 2024 and are part of operating cash flows in the consolidated statement of cash flows.
Reported impact of acquisition
AHFL contributed $8,333,000 of revenue for the period from 8 May 2024 to 30 June 2024. If the acquisition had taken place on 1 July 2023, revenue for the
Group would have increased by $52,087,000 to $520,276,000. The impact of the acquisition on profit after tax for the period from 8 May 2024 to 30 June 2024
was a loss of $1,432,000. If the acquisition had taken place on 1 July 2023, NPAT would have decreased by $7,479,000.
Recognition and Measurement – Business Combinations
Business combinations
Acquisitions of subsidiaries and other business combinations are accounted for using the acquisition method with the cost of acquisition allocated to the fair
value of the assets acquired and liabilities assumed at the acquisition date. Acquisition costs incurred are expensed during the financial year.
Business combination provisional accounting
The Group has 12 months from the acquisition date to finalise the accounting for any business combination. Provisional accounting is applied by the Group
for business combinations where the acquisition accounting is incomplete at the end of the reporting period.
48
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 33. Significant events after the reporting period
The Company declared a dividend on 9 August 2024 (see Note 7). A conditional placement for 299,999 fully paid ordinary securities are proposed to be
issued to an entity associated with Anthony Scali subject to security holder approval at the Annual General Meeting in October 2024. No other matter or
circumstance has arisen since 30 June 2024 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations,
or the Group’s state of affairs in future financial years.
2024
2023
$
$
Note 34. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided
by KPMG (Ernst & Young in 2023), the auditor of the Company, and its network firms:
Audit services
Auditing the statutory financial report of the Company and its controlled
entities and auditing the statutory financial reports of any controlled entities
308,000
345,300
Other services
Tax review
12,859
46,975
Tax compliance
45,795
56,689
366,654
448,964
Note 35. Summary of other material accounting policies
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for
the purpose of trading; it is expected to be realised within 12 months after the reporting year; or the asset is cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at least 12 months after the reporting year. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be
settled within 12 months after the reporting year; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting
year. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Other taxes
Revenues, expenses, and assets are recognised net of the amount of Goods and Services Tax (‘GST’) except:
•
when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part
of the cost of acquisition of the asset or as part of the expense item as applicable; and
•
receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial
position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing
activities, which is recoverable from, or payable to the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed
net of the amount of GST recoverable from, or payable to, the taxation authority.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Nick Scali Limited’s functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions or at the hedged rate if
qualifying financial instruments have been used to reduce exposure. Monetary assets and liabilities denominated in foreign currencies are retranslated at the
financial year-end exchange rates and recognised in profit or loss. All exchange differences are recognised in the statement of comprehensive income, except
when deferred in equity as qualifying cash flow hedges.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses
of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for
the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity.
49
Annual Report 2024 | Nick Scali Limited
Notes to the consolidated financial statements for year ended 30 June 2024 (continued)
Note 35. Summary of other material accounting policies (continued)
Derecognition of financial assets and financial liabilities
Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when either:
Financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when either:
• the rights to receive cash flows from the asset have expired; or
• the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third
party under a ‘pass-through’ arrangement; or
• the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the
asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset. Continuing
involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the
maximum amount of consideration received that the Company could be required to repay.
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled, or expires. When an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification
is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised
in profit or loss.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) because of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company
expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the
time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discounting is used,
the increase in the provision due to the passage of time is recognised as a borrowing cost.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.
Rounding of amounts
The Company is of a kind referred to in Class Order 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’.
Amounts in this report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
Aurelia 4.5 seat lounge in Opera fabric, mustard colour.
50
Annual Report 2024 | Nick Scali Limited
Consolidated entity disclosure statement
Set out below is relevant information relating to entities that are consolidated in the consolidated financial statements at the end of the financial year as required
by the Corporations Act 2001 (s.295(3A)(a)).
Entity Name
Body corporate
Place
% of share capital held
Australian
Jurisdiction
partnership
incorporated/
directly or indirectly by
or foreign
for foreign
or trust
formed
the company in the
tax resident
tax resident
body corporate
Nick Scali Limited (the Company)
Body Corporate
N/A
N/A
Australian
N/A
Nick Scali (New Zealand) Limited
Body Corporate
New Zealand
100%
Foreign
New Zealand
Nick Scali Employee Share Scheme Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Plush-Think Sofas Pty Limited
Body Corporate
Australia
100%
Australian
N/A
Nora Holdco UK Limited
Body Corporate
UK
100%
Foreign
UK
Nora Opco UK Limited
Body Corporate
UK
100%
Foreign
UK
Nora Debtco UK Limited
Body Corporate
UK
100%
Foreign
UK
Anglia Home Furnishings Limited
Body Corporate
UK
100%
Foreign
UK
AHF Internet Limited
Body Corporate
UK
100%
Foreign
UK
Key assumptions and judgements
Section 295 (3A) of the Corporation Act 2001 requires that the tax residency of each entity which is included in the Consolidated Entity Disclosure Statement
(CEDS) be disclosed. In the context of an entity which was an Australian resident, “Australian resident” has the meaning provided in the Income Tax Assessment
Act 1997. The determination of tax residency involves judgement as the determination of tax residency is highly fact dependent and there are currently several
different interpretations that could be adopted, and which could give rise to a different conclusion on residency.
In determining tax residency, the consolidated entity has applied the following interpretations:
Australian tax residency
The consolidated entity has applied current legislation and judicial precedent, including having regard to the Commission of Taxation’s public guidance in Tax
Ruling TR 2018/5.
Foreign Tax residency
The consolidated entity has applied current legislation and where available judicial precedent in the determination of foreign tax residency.
Montreale entertainment unit. FSC certified oak with a ceramic top.
51
Annual Report 2024 | Nick Scali Limited
In the Directors’ opinion:
• the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and
other mandatory professional reporting requirements;
• the consolidated entity disclosure statement as at 30 June 2024 set out on page 50 is true and correct; and
• the attached financial statements and notes comply with the International Financial Reporting Standards as issued by the International Accounting
Standards Board as described in Note 1 to the financial statements;
• the attached financial statements and notes give a true and fair view of the Company’s financial position as at 30 June 2024 and of its performance for
the financial year ended on that date; and
• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
• as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in Note 31 will be able to meet
any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
John Ingram
Anthony Scali
Chair
Managing Director
9 August 2024
Sydney
Directors’ Declaration
52
Annual Report 2024 | Nick Scali Limited
Independent Auditor’s Report
to the Members of Nick Scali Limited
Independent Auditor’s Report
To the members of Nick Scali Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Nick Scali Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company gives a true and fair
view, including of the Group’s financial
position as at 30 June 2024 and of its
financial performance for the year then
ended, in accordance with the Corporations
Act 2001, in compliance with Australian
Accounting Standards and the Corporations
Regulations 2001.
The Financial Report comprises:
•
Consolidated statement of financial position as at
30 June 2024;
•
Consolidated statement of comprehensive
income, Consolidated statement of changes in
equity, and Consolidated statement of cashflows
for the year then ended;
•
Consolidated entity disclosure statement and
accompanying basis of preparation as at 30 June
2024;
•
Notes, including material accounting policies; and
•
Directors’ Declaration.
The Group consists of the Company and the entities
it controlled at the year end or from time to time
during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that are relevant to our
audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in
accordance with these requirements.
53
Annual Report 2024 | Nick Scali Limited
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in
our audit of the Financial Report of the current period.
This matter was addressed in the context of our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on this matter.
Business Combination $27.6m
Refer to Note 32 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The Group’s acquisition of Anglia Home
Furnishings Limited in the current year for
consideration of $6.5m, resulting in the
recognition of goodwill of $27.6m, represents a
significant acquisition.
This was a key audit matter due to the:
•
Strategic and financial significance of the
acquisition; and
•
Significant judgement required by us in
assessing the Group’s determination of the
fair value of acquired assets and assumed
liabilities, in particular right-of-use assets,
lease liabilities, deferred revenue and
inventories resulting in a higher extent of
audit effort and senior team involvement.
Our procedures included:
•
We read the Business Acquisition Contracts
and associated transaction documents to:
•
Understand the key terms and
conditions of the acquisition; and
•
Evaluate the acquisition accounting by
the Group against requirements of
the accounting standards.
•
Evaluating the valuation methodology used by
the Group to determine the fair value of
assets and liabilities acquired, considering
accounting standard requirements and
observed industry practices.
•
We assessed the Group’s fair value of the
right-of-use asset and lease liability for the
acquired entity by comparing the Group’s
inputs used to calculate the right-of-use assets
and lease liabilities, such as key dates, rent
payments and termination options, for
consistency to relevant terms of a sample of
underlying source documents including signed
lease agreements.
•
We assessed the fair value of deferred
revenue acquired by testing a sample of
customer deposits. We did this by comparing
the obligation required to fulfil this sales order
to the value of the deferred revenue. This
included checking the cost to purchase the
inventory to underlying supplier invoices, and
the cost to fulfil the order.
Independent Auditor’s Report to the Members of Nick Scali Limited (continued)
54
Annual Report 2024 | Nick Scali Limited
Independent Auditor’s Report to the Members of Nick Scali Limited (continued)
•
We challenged the Group’s key assumptions
in the fair value of inventories acquired
particularly, recoverability and ageing, using
our understanding of the business, knowledge
of the market and board approved plans and
strategies for consistency.
•
We recalculated the goodwill balance against
the amount disclosed.
•
We assessed the adequacy of the Group’s
provisional disclosures in respect of business
combinations with reference to the
requirements of the accounting standards.
Other Information
Other Information is financial and non-financial information in Nick Scali Limited’s annual report which
is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible
for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
•
preparing the Financial Report in accordance with the Corporations Act 2001, including
giving a true and fair view of the financial position and performance of the Group, and in
compliance with Australian Accounting Standards and the Corporations Regulations 2001
•
implementing necessary internal control to enable the preparation of a Financial Report in
accordance with the Corporations Act 2001, including giving a true and fair view of the
financial position and performance of the Group, and that is free from material
misstatement, whether due to fraud or error
•
assessing the Group and Company’s ability to continue as a going concern and whether the
use of the going concern basis of accounting is appropriate. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group and Company or to cease operations, or
have no realistic alternative but to do so.
55
Annual Report 2024 | Nick Scali Limited
Independent Auditor’s Report to the Members of Nick Scali Limited (continued)
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
•
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
In our opinion, the Remuneration Report of
Nick Scali Limited for the year ended 30
June 2024, complies with Section 300A of
the Corporations Act 2001.
Directors’ responsibilities
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration
Report in accordance with Section 300A of the
Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
pages 10 to 15 of the Directors’ report for the year
ended 30 June 2024.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
KPMG
Julie Cleary
Partner
Sydney
9 August 2024
56
Annual Report 2024 | Nick Scali Limited
Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as follows. The information is current as at
16 July 2024.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
Holders of ordinary shares
Number
Shareholders Category
1 to 1,000
3,831
1,001 to 5,000
2,254
5,001 to 10,000
502
10,001 to 100,000
414
100,001 and over
31
Total
7,032
Equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
Number
% of total shares issued
HSBC Custody Nominees (Australia) Limited
18,388,622
21.58
Citicorp Nominees Pty Limited
16,393,547
19.23
J P Morgan Nominees Australia Pty Limited
11,344,118
13.31
Scali Consolidated Pty Limited
6,439,474
7.56
BNP Paribas Nominees Pty Ltd
2,947,848
3.46
National Nominees Limited
2,641,181
3.10
Molvest Pty Ltd
1,200,000
1.41
BNP Paribas Noms Pty Ltd
702,657
0.82
Citicorp Nominees Pty Limited
541,637
0.64
Grahger Investments Pty Ltd
493,279
0.58
Netwealth Investments Limited
400,484
0.47
BNP Paribas Nominees Pty Ltd
385,439
0.45
UBS Nominees Pty Ltd
379,564
0.45
HSBC Custody Nominees (Australia) Limited
255,902
0.30
BNP Paribas Nominees Pty Ltd
254,139
0.30
BNP Paribas Noms Pty Ltd
247,486
0.29
NCH Pty Ltd
218,907
0.26
Neweconomy Com AU Nominees Pty Limited
210,266
0.25
Anacacia Pty Ltd
192,000
0.23
Averone Pty Limited
189,264
0.22
63,825,814
74.91
Ordinary shares
Number
% of total shares issued
Substantial holders
Substantial holders in the Company are set out below:
Scali Consolidated Pty Limited
6,439,474
7.56
Magellan Financial Group Limited (Australia)
4,896,103
6.04
11,335,577
13.60
Shareholder Information
Hermosa 7 seat corner modular lounge (Plush) in Friday fabric, navy colour.
57
Annual Report 2024 | Nick Scali Limited
58
Annual Report 2023 | Nick Scali Limited
Nick Scali Limited
ABN 82 000 403 896
Directors
John Ingram
(Independent Non-Executive Chair)
Carole Molyneux
(Independent Non-Executive Director)
William Koeck
(Independent Non-Executive Director)
Kathy Parsons
(Independent Non-Executive Director)
Anthony Scali
(Managing Director & Chief Executive Officer)
Company Secretary
Sheila Lines
Corporate Directory
Registered Office
Level 7, Triniti II
39 Delhi Road
North Ryde NSW 2113
Telephone: 02 9748 4000
Share Register
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Telephone: 02 8280 7100
Auditor
KPMG
Tower Three International Towers,
Level 38
Sydney NSW 2000
Solicitors
Ashurst
Level 11, 5 Martin Place
Sydney NSW 2000
Stock Exchange Listing
Nick Scali Limited shares are listed
on the Australian Securities Exchange
(ASX code: NCK)
Website
www.nickscali.com.au
Levi 3 seat lounge in Natural Oslo leather, frost colour.
59
Annual Report 2024 | Nick Scali Limited
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