Good morning, everyone. Welcome to the Nick Scali results presentation.

The FY 2026 summary is: group net profit after tax of $75.7 million, up 22% on FY 2025 underlying NPAT, and up 31% on statutory. Revenue was $516.7 million, up 4.3%.

Gross margin was 65.6%, up 210 basis points. Cash on hand $106.6 million.

Final dividend 39 cents per share fully franked. For the ANZ group, written orders are up 2.7%, reflecting a challenging second half.

Net profit after tax was $80.5 million, up 10% on FY 2025 underlying, and 13% up on statutory NPAT. Revenue in the ANZ was $476.7 million, up 5% on prior year.

Turning to the UK, written orders for FY 2026 were $45 million. The second half orders $23 million, up 50%.

Clearly, the year before, many stores were closed for refurbishment and rebranding. Nick Scali-branded stores, like-for-like were up 19% in the second half.

Revenue was $40 million, $1.8 million less than last year with the interrupted trading in first half for store closures due to the rebranding program. Gross profit margin for FY 2026 was 60.3% compared to 47.1% in FY 2025.

16 stores refurbished and rebranded to Nick Scali by December 2025. Net loss after tax of $4.8 million with second half statutory profit of $800,000.

As mentioned, on page three of our results presentation, group written sales orders were up 4.7%. ANZ was 2.7%.

As pointing out, in the second half, written sales orders were down 3.6%. This is compared to a prior year second half where like-for-like growth was 7.3%.

The UK written orders up 31%, a lot of this of course the base of stores being closed, but pleasing to see that the brand stores like-for-like was up 19% in the second half. Revenue, as mentioned, was 4.3% up.

ANZ was up 5%. UK was down 4% due to the store closures.

We can note that written sales orders exceeded sales revenue in the UK by $5 million. For the group financial performance, the ANZ margin was 66% versus 65% in FY 2025.

The operating expenses increased by $5 million compared to the prior year. This is mainly in the first half, and that was attributable to employment and bonuses, and there were additional advertising.

Second half was flat, including startup costs of $600,000 for four new stores. Just to note, the impact of AASB 16 was $1.7 million after tax, compared to nil previous year.

The UK gross margin has continued to improve, which is 60.3% versus FY 20%. Other income included interest earned, lower than the estimate final acquisition payment, and early surrender of onerous leases on stores, which included trading losses during these negotiations to exit the stores.

I'll now hand it over to Keith.

Thanks, Anthony. On slide five, the group generated operating cash flow of $117.9 million, up from $89.6 million last year.

In the UK, operating cash flows reduced significantly to $2.1 million compared to $10.2 million last year, reflecting improved sale activity, improved margins, and lower refurbishing spend as that major refurbishment program completed. The group invested $23 million in property and other capital investments during the year, including the Campbelltown property acquisition, land for the South Australia distribution centre, and showroom upgrades across both the ANZ and the UK.

We will also complete the purchase of the Richmond showroom property in August, continuing the strategy of selectively investing in strategic freehold locations. Following $61.6 million of dividend payments and the capital investments during the year, the group closed with cash of $106.6 million, up from $101 million in the prior year.

With debt unchanged, net cash closed at $34.9 million. We now move to slide six and the balance sheet.

The group's balance sheet remains very strong with net assets increasing to $279.8 million from $266 million a year ago. Inventory on hand reduced to $41.6 million from $44.6 million, reflecting the continued discipline around inventory management.

Property at book increased to $131 million, primarily due to the Campbelltown acquisition and the land purchase for the South Australian distribution centre. Borrowings remained unchanged at $71.7 million, comprising the $43.7 million of property debt secured at a less than 22% LVR, together with $28 million of corporate acquisition debt.

Overall, the group finished with increased cash, higher net assets, and conservative level of debt while continuing to invest in property, providing flexibility as we enter '27. Thank you.

Thanks, Keith. Just on the UK summary, as mentioned, the gross margin was 60.3%, and to note the second half margin actually improved to 61.2%.

Up to recently, in terms of distribution, we've been using a third party. We've now leased our own warehouse, brand-new building that allows us a lot of capacity for growth.

In terms of our leadership in the UK, the focus remains on retail teams in stores and looking for new store opportunities. In terms of product, the best sellers in the UK are in line with best sellers in Australia.

The introduction of new product is first tested in Australia, which is been an advantage and been successful to date, that strategy. We expect now to open one new store in October, and we have a number of other locations under negotiations.

As we can see from the store network, whilst we did close two stores, one was in Brisbane Airport, it will no longer be large format retail, we had to exit that, and another one was in Toowoomba, but in replace of that, we've opened three new Plush showrooms and a new Nick Scali store in Ballarat, and two Nick Scali stores that were due to open in the prior year in FY 2026 opened in July in Bendigo and Bunbury. The UK Lincoln store closed in October, Nottingham in April, as these were shared concessionary stores with another retailer, and they did not suit our long-term strategy.

As mentioned, the new store in the UK is expected to open October, and a number of store locations under review. If we look at our property, which is growing, and obviously the portfolio of property, most of these are retail stores, it's part of our long-term strategy.

Historical costs is $145 million. Current book value, which is obviously acquisition costs less depreciations, $130 million, but based on independent valuation, that property value sits at $208 million.

As mentioned, during the last year, we bought the Campbelltown property. We've also bought land and we're currently building a new distribution centre in South Australia.

We've exchanged contracts on a Richmond property that will be refurbished and won't be operated for approximately 18 months as we're waiting for the current tenant lease to end. The outlook: for the first five weeks of trading, written sales orders were flat when compared to the same period the previous year, cycling off high single-digit growth.

The group opened four new stores during FY 2026 and a further two in July, which are expected to contribute positively to FY 2027 earnings. A further four stores are expected to be opened during FY 2027, supporting the group's continued growth strategy.

In the UK, the positive momentum in UK continued with written sales orders for the first five weeks up 35% on the prior period, but taking into account a number of stores were closed for refurb last year. The group, as expected, expects to open a new store in October and other stores.

I think that completes our presentation, and we're happy now to take questions.

Hi, thanks for taking my question. Gross margin was obviously very solid in the UK and ANZ.

Just wanted to understand how we should think about it going forward, given there's been a bit of movement in FX and freight in the second half, and in the context that you might have some hedging arrangements in place that might roll off. Maybe on the UK, how much higher can that margin go, given it's a very solid outcome in the second half?

Thank you.

To answer your question, I think the UK margin is probably where it will sit at, where it is, in somewhere between 60 and 61%. When we look at ANZ, yes, we're rolling off our hedges that were at lower rates, lower dollar rates, and we got a bit of the benefit coming through now, but that's getting offset by at the moment freight is up because of the oil issue, particularly with the increase in the BAF.

ANZ margin was very high. I'm not committing that that's always going to be at that level, but somewhere in the range of 65, 66% is where I think it can remain.

Thank you. Maybe just on like-for-like written order sales trends, it looks like from the second half into FY 2027, you'll have opened these stores in the second half and then in July.

It looks like it might have improved slightly from down mid-single-digit in Feb to June to maybe down low-single-digits in that first five weeks. Does that sound about right?

Maybe if you can give some color on how bad the macro is, post Yep.

The macro is not good at all. No, this is one of the worst macros for furniture, for sure.

We've got house prices going down, there's a negative wealth effect. We've had interest rate increases.

We've got inflation. We've got cost of living.

Housing transactions have been slow for six months. It's a tough macro, very tough.

The quarter four was volatile, some months up, some months down, but we're off high comps the prior year. In fairness, yeah, the first five weeks doesn't mean it's going to be that for sure.

It's just very difficult to predict. You've got a battered consumer, I think, at the moment.

Hopefully, my hope obviously that if the wars stop and the oil comes back down and maybe inflation's controlled, but it would certainly be helpful if interest rates started dropping.

Thanks so much.

Hi, guys. Thanks for taking my questions.

Just a couple from me. Just to clarify there on Naveed's question around written sales orders on a like-for-like basis, were right to still be thinking that over the trading update, when adjusted for those new stores, we were sort of modestly down negative single-digit declines?

Is that right?

Very marginal, very marginal. It might be almost negligible, to be honest with you, on a like-for-like,

Right. 'cause

we actually have two stores that we closed, and then the new stores that were opened.

Broadly flat then even on a like-for-like basis, maybe modest.

Yes. That's only the first five weeks, we've got a long way to go.

It looks like in the second half, in terms of advertising spend, it was sort of roughly flat after a bit of a bump in the first half. Obviously given the weaker consumer in Australia, can you talk to us maybe about how you're thinking in terms of the marketing and advertising piece over FY 2027?

Will there be any change in how you promote, or

No, I think we're sticking to the strategy, which is we're not doing anything different. Main thing is we're trying to have our dollar go further, 'cause it's a tough market for the media, we're just trying to get better value is how we're looking at it.

Right. Just one final one from me.

We would have just had the UK bank holiday weekend over these first five weeks. Can you talk to us a little bit about how

No, the bank holiday's in August. There was one in Wales and Scotland.

Scotland and Wales had the bank holiday, not the UK.

Not England, then. Yep.

Yeah. The bank holiday is at the end of August in the UK.

Okay. All right.

Can you just talk to us, though, a little bit about how sort of promotional activity amongst the competitors was in the UK then?

Look, the UK has got tougher because, as the DFS Furniture, which is more than 25% of the market, reported -4% written sales order growth. It's a tough environment.

Traffic's down, but our conversion has improved a lot. The UK is not easy at the moment as well

Right.

on the macro.

Okay.

morning, Anthony. I've just got a couple on the UK.

That 35% increase in July, I think you're saying that that was affected by some closures or some remodeling. Should we expect 35% you can do that for the rest of the year, or is that kind of inflated?

No, that's what I'm qualifying. It's better to look at the like-for-like.

The stores that were open the prior year is a better indication. No, don't expect that.

Okay. I think before you've said $51 million Aussie is the kind of breakeven point for the UK?

I think you did 40 in the year just gone. How confident are you getting to that 51 in '27 or is it maybe going to be breakeven in '28, not '27?

I think we're lowering the breakeven at the moment. We think it's going to be lower than 51.

Yes, look, I'm becoming more confident, but and the sales teams are definitely better. They're converting better.

It's going to depend a bit about the macro there, I think. Product's doing well, and we keep introducing proven winners in Australia that seem to be working, and the range is just improving as well.

Yeah.

Okay.

I'm feeling confident in our strategy and what we're offering the customer. The thing holding it back is not enough stores and not enough brand awareness.

Yeah. Sorry, last one.

I think you've got two Fabb stores, Fabb-branded stores still operating there. What's the kind of plan for them?

I assume they're not going to get converted, but will they close? I'm just trying to work out the modeling, I suppose, behind that.

Look, okay, one of them is in a place, Canterbury. We inherited the store, and it's in an industrial area.

It's not even in a retail park. We're just running the lease out there 'cause it's not very high rent, but it hardly makes any sales, we're always going to quit that.

The other one is a smaller store that we're using as a clearance outlet, and we'll continue to do that.

Got it. Thank you.

We have clearance outlets in Australia. Yep, make sense.

Oh, hi, Anthony. Good morning.

Sorry to dwell on it, but there's a couple of questions I'm getting from clients on it. Just wanted to confirm the earlier questions around like-for-likes in the Australian trading update.

You mentioned it was broadly flat because you closed two stores, but the only closures I can see in the pack are in the UK, Lincoln and Nottingham. Which closures were you referring to?

In Australia,

yes.

Toowoomba and Brisbane Airport.

Great. Thanks very much.

Then

is it reasonable to conclude that the stronger-than-expected final dividend is a function of M&A being less likely over the next six months or so? Remember, at the February results, the company seemed pretty keen to buy something in Australia, but the drums don't seem to be beating as loud on this topic anymore.

No, we've got stronger balance sheet than we've ever had and a lot of cash, no, that's not going to impact that at all.

Great.

That has no relation to M&A. As you can see, even our properties now that it's $200 million and we've got property debt of $43 million, there's a lot of capacity in our balance sheet, a lot of capacity.

Are there things you're looking at right now in ANZ?

Repeat that.

Are there potential acquisition targets you are looking at right now in ANZ?

We're always looking. We're always looking.

Okay. Then last question.

At what point do you expect to see the post-budget deterioration in the housing market really start to show up in the company sales, I guess given we have to take into account the time it takes for property contracts to settle and then the time it takes for people to move in and furnish their new dwellings?

I think that's happened. I think we've already seen that.

That started happening back in February, traffic's down. The traffic is down in stores a lot.

Sorry.

I'd say

Post the federal budget in May.

I think where

things really deteriorated.

It has deteriorated further, yes, I agree, but yeah, I don't know. Then interest rates might drop sometime later.

I don't know. I really don't know at the moment.

We can only look recently.

All right. Yeah.

Great. Thank you, Anthony.

Thanks.

Morning, Anthony, Keith. Thanks for your time.

Morning, James.

First questions on the UK, so that operating costs were pretty similar in the second half to what they were in the first. Looking forward and maybe excluding new stores, how does the new warehouse impact that line?

How do you see marketing costs ramping up in that line in the year ahead?

First, we've moved from a third party to a new warehouse. We're going to have a larger property cost, but a lower logistics cost.

Overall, it will be marginally higher the cost maybe, because we've got a warehouse with capacity. Marginally higher, if you like.

There was a benefit from the third party, the savings there, but then we've got the property costs. It's small number, but it's higher overall.

That cost.

Yep. Marketing, you talked a bit about the macro and the conversion improving from your sales team, you sort of sound like you feel like the business is more reliant on more foot traffic coming in the top of the funnel, and therefore, how quickly are you going to ramp that marketing expense line through FY 2027?

Look. Unfortunately, the UK, it's a big population.

Advertising on what we traditionally do on TVs is very, very expensive, and we did experiment with it, and the fact is we don't have enough stores to justify a spend that would be meaningful, that would work at the moment, we just saw not advertising, we were getting good results anyway, because we are in retail parks, after all, and we're marks there, and we're paying a lot of rent to be in a retail park for a good reason. We will do promotions from time to time, but very controlled, very controlled.

Yeah. Okay.

Interesting. Just related to that then, ballpark, what revenue line you think the UK needs to give you the scale and the confidence to spend on marketing equivalent to what a normal business would?

You look at the percentage. We need at least another 10 stores to really be able to promote as we would like to promote with a decent schedule, and that costs money, but that's what I think we need.

Yeah. Okay.

Last question from me. Just your earlier comment around the macro in the ANZ market being one of the worst environments, I get that.

That's nothing sort of surprising about your description there, but in the context of the Nick Scali business having a really long track record of navigating consumer cycles successfully, I'm interested in what observations you've seen from a conversion or maybe average transaction value perspective. I get that foot traffic's down as a consequence of that macro, but what differences are you seeing in conversion and transaction values?

Correct. Yeah.

The transaction values are holding, the average is. Conversions are up.

They have to be, because traffic is down. Traffic can be down at times, 10 to 15%, there's a lot of focus on conversion.

Look, I've been in the stores talking to the sales people, and what they're saying is that the people coming are really buyers. We're fortunate that we've held the average transaction value, because that was my concern, and our focus is on conversion.

Look, it's a tough environment. It's a really tough environment.

Understood. That's helpful, Anthony.

Thank you.

Hey, Anthony. Thank you for taking my question.

Maybe just one on costs in ANZ. It looks to me like they are pretty well managed in the second half.

How are you thinking about the award wage increases into next year and how are we managing costs into next year and what sort of rationalization we can achieve?

Yes, that's challenging. Fortunately, our people are above award, quite a bit above the award, so that won't have an impact, but I think there's wage inflation just natural by particularly if you want good sales people.

It's about being more efficient and rostering and managing numbers carefully, and having effective people. We don't have a lot of fat in our employment that can be trimmed.

Right. Maybe to ask it slightly differently, against that 4.75%, appreciate your employees aren't on award wages, how should we think about that growth rate into next year?

Is that a reasonable starting point, or do you think you can run a bit leaner than that? I'd

hopefully run it leaner than that.

Yeah. Thank you.

Good morning, Anthony and team. Thanks for taking my questions.

I think, firstly, just on the UK, within the second half, in terms of profitability, can you give us a sense of if all of the economies of scale are annualized, and how sort of the flow-through to FY 2027 in terms of incremental profitability would look like, given that you've also brought down the bar of breakeven with better expectations there?

Yeah. Can you repeat that?

Could you repeat it? We missed a bit of that.

Bad connection.

Yes. Just want to understand UK profitability,

looking at

the second half. Do we have quite a bit of economies of scale annualized, and is there anything more to sort of play out, again some of those logistics costs going up?

Like-for-likes are looking quite good, too. How are you thinking about sort of any guide that you can give on incremental FY 2027 profitability for the UK?

Look, overall, we're hoping to hold costs pretty flat. In certain areas, we think there's potential savings on costs, but small, there's lots of small, yeah.

Overall, there's nothing materially on the cost side.

Perfect. Thank you.

Then on ANZ, written order sales outcomes, we've seen it despite gross margins at a very strong level. Is there any element of probably balancing of those gross margins versus traffic and conversion, or would you predominantly put it down to basically the traffic issue at the moment or macro?

You're saying our margin's higher?

Margins have been strong, like-for-likes have, yeah, come in at these levels. Is there any element of balancing gross margins versus sustaining like-for-likes or

Oh, yes. There's always that balance.

Of course, we watch that carefully. You're right, and that's something we manage it all every day.

Yes. You're correct.

Look, overall, 66% is a very high number, and I'm not saying that will be sustained, but you could bank on somewhere between 65 and 66% is how I'd answer this.

Great. Thank you so much.

I think, obviously quite a few tough conditions ahead, or already playing out, macro is tough, you sort of talked through everything, but maybe bottom-up, where you're optimistic on within the business, more thinking bottom-up?

Can you clarify what you mean bottom-up?

Just for the business versus what's playing out there in the macro setup. Where are you most optimistic on?

No. I don't think so.

None at all?

I think maybe rostering practices across the group. Certainly in the UK.

Yeah.

Perfect. Thank you.

Okay.