Nick Scali Aktie

Thank you for standing by, and welcome to the Nick Scali Limited FY '26 Results. [Operator Instructions] I would now like to hand the conference over to Mr. Anthony Scali, Managing Director. Please go ahead.

Good morning, everyone. Welcome to the Nick Scali results presentation. The FY '26 summary is -- group net profit after tax was $75.7 million, up 22% on FY '25 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, $0.39 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 '25 underlying and 13% up on the statutory NPAT. Revenue in the ANZ was $476.7 million, up 5% on prior year.

Turning to the U.K. Written orders for FY '26 were $45 million, with second half orders of $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 with store closures due to the rebranding program. Gross profit margin for FY '26 was 60.3% compared to 47.1% in FY '25. 16 stores refurbished and rebranded 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 3 of our results presentation, group written sales orders were up 4.7%. ANZ was 2.7%. And we can -- 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 U.K. written orders, up 31%. A lot of this, of course, is based on 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%. U.K. was down 4% due to the store closures. And then we can note that written sales orders exceeded sales revenue in the U.K. by $5 million. For the group financial performance, the ANZ margin was 66% versus 65% in FY '25.

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 the additional advertising. Second half was flat, including start-up costs of $600,000 for four new stores. Just to note, the impact of AASB16 was $1.7 million after tax compared to the previous year.

The U.K. gross margin has continued to improve, which is 60.3%, [ FY '26 ]. Other income included interest earned lower than the estimated final acquisition payment and early surrender of leases on stores, which included trading losses during the negotiation stage of the stores.

I'll turn now -- hand it over to Keith.

Thanks, Anthony. So on Page -- Slide 5, the group generated operating cash flow of $117.9 million, up from $89.6 million last year. In the U.K., operating cash flows reduced significantly to $2.1 million compared to $10.2 million last year, reflecting improved sale activity, improved margins and lower refurbishment 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 Australian distribution center and showroom upgrades across both the ANZ and the U.K. 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 6 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 book increased to $131 million, primarily due to the Campbelltown acquisition and the land purchase for the South Australian distribution center.

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 and providing flexibility as we enter '27.

Thanks, Keith. Okay. Just on the U.K. summary, as mentioned, the gross margin was 60.3%. And to note, the second half margin actually improved to 61.2%. We -- up to recently, we've been -- in terms of distribution, we've been using a third party. We've now leased our own warehouse, a brand-new building that allows us a lot of capacity for growth.

In terms of our leadership in the U.K., the focus remains on retail teams in stores and looking for new store opportunities. In terms of product, the best sellers in the U.K. are in line with best sellers in Australia, that we -- introduction of a new product is first tested in Australia, which has been an advantage and being 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. We can see from the store network, whilst we did close two stores, one was in Brisbane Airport, which is the landlords now -- it will no longer be large-format retail. So 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 '26, opened in July in Bendigo and Bunbury. The U.K. Lincoln store closed in October and 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 U.K. is expected to open in October, and a number of store locations under review.

We're looking at our property, which is growing and obviously, the portfolio of property, which are most of these retail stores as part of our long-term strategy. The historical cost is $145 million. Current book value, which is, obviously, acquisition costs less depreciation, is $130 million. But based on independent valuation, that property value sits at $208 million.

As mentioned, we -- during the last year, we bought the Campbelltown property. We've also bought land and we're currently building a new distribution center in South Australia. And we've exchanged contracts on a new -- 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 5 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 '26 and a further two in July, which are expected to contribute positively to FY '27 earnings. A further four stores are expected to be opened during FY '27, supporting the group's continued growth strategy.

In the U.K., the positive momentum in the U.K. continued. We've written sales orders for the first 5 weeks, up 35% on the prior period, but taking into account a number of stores were closed for refurb last year. The group expects to have a new store in October and other stores.

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

[Operator Instructions] Your first question comes from Naveed Fazal Bawa with Jefferies.

Gross margin was obviously very solid in the U.K. 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? And maybe on the U.K., how much higher can that margin go, given it's a very solid outcome in the second half?

To answer your question, I think the U.K. 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 hedges that were at lower rates, lower dollar rates. And we've got a bit of the benefit coming through now, but that's getting offset by, at the moment, freight. It is up because of the oil issue, with an increase in the bunker, the BAF. So my view -- the Australian 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.

And maybe just on like-for-like written order sales trends. It looks like from the second half into FY '27, you all have opened new stores in the second half. And 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 the first 5 weeks. Does that sound about right? And maybe if you can give some color on how bad the macro is post...

Yes. Well, the macro is not good at all. No, this is one of the worst macro for furniture for sure. We've got house prices going down. So there's a negative wealth effect. We've had interest rate increases. We've got inflation. We've got cost of living. It's -- and transaction -- housing transactions have been slow for 6 months. So it's a tough macro, very tough. And it's been a very volatile -- the quarter 4 was volatile, some months up, some months down, but we were off high comps of prior year, in fairness, yes.

So the first 5 weeks doesn't mean it's going to be that for sure. It's just very difficult to predict. You've got a bad consumer, I think, at the moment. So hopefully, my hope, obviously, that the -- if the war stops and oil comes back down and maybe inflation is controlled, but it would certainly be helpful if interest rates are dropping.

Your next question comes from James Wilson with Macquarie.

Just a couple from me. So just to clarify there on Naveed's question around written sales orders on a like-for-like basis. We're 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?

Well, very marginal, very marginal. Yes, very -- it might be almost negligible, to be honest with you, on a like-for-like because we actually have two stores that we closed, and then new stores that were opened.

Okay. So broadly flat then even on a like-for-like basis, maybe modestly.

Yes. Yes, but that's only the first 5 weeks. So we've got a long way to go.

And 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 '27? 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. The main thing is we're trying to have our dollar go further because it's a tough market for the media. So we're just trying to get better value, is how we're looking at it.

Right. And just one final one from me. I mean we would have just had the U.K. bank holiday weekend over these first 5 weeks. Can you talk to us a little bit about how...

The bank holidays in August. There was one in Wales and Ireland, I think. Scotland, sorry, it's Scotland. Scotland and Wales had the bank holiday, not the U.K.

Okay. Sorry, not England then.

Yes, the bank holiday is at the end of August in the U.K.

Okay. All right. Okay. Can you just talk to us, though, a little bit about how sort of promotional activity amongst the competitors was in the U.K. then?

Yes. Look, the U.K. has got tougher because as you know, the DFS Group, which is more than 25% of the market, reported negative 4% written sales order growth. So it's a tougher environment. Traffic is down, but our conversion has improved a lot. So U.K. is not easy at the moment as well on the macro.

Your next question comes from Thomas Kierath with Barrenjoey.

I've just got a couple on the U.K. That 35% increase in July, I think you're saying that, that was affected by some closures or some remodeling. Like should we expect 35%, you can do that for the rest of the year? Or is that kind of...

No, no, that's what I'm qualifying. I mean, look at the -- it's better to look at the like-for-like, the stores that were opened in the prior year is a better indication. No, we don't expect that.

Yes. Okay. And I think before you've said AUD 51 million is the kind of breakeven point for the U.K. But I think you did AUD 40 million in the year. And just going like how confident are you getting to that AUD 51 million 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 AUD 51 million. 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 is doing well, and we keep introducing proven winners in Australia that seem to be working, and the range is just improving as well. I'm feeling confident in our strategy and what we're offering the customer. The thing holding us back is not enough stores and not enough brand awareness.

And sorry, last one. I think you got two Fabb stores, like Fabb branded stores still operating there. Like 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.

Yes, yes. Look, one of them -- okay, one of them is in a place Canterbury, we inherited the store, and it's in an industrial area. It's not in the retail park. We're just running the lease out there because it's not very high rent, but it hardly makes any sales. So 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, clearance outlet in Australia.

Your next question comes from Sam Teeger with Citi.

Sorry to dwell on it, but there's a couple of questions I'm getting from clients on it. Just wanting to confirm the earlier questions around like-for-like 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 U.K., Lincoln and Nottingham. Which closures were you referring to?

In Australia, we've got one around Brisbane Airport.

Okay. Great. And 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 6 months or so? Remember at the February result, 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, the dividend -- no, we've got a big -- we've got a stronger balance sheet than we've ever had and a lot of cash. So that's not going to impact that at all. No relation to M&A. As you can see, even our properties now, that $200 million, and we've got property debt of $43 million. So a lot of capacity in our balance sheet, a lot of capacity.

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

Are there what?

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

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

Okay. And 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 you 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. I mean that started happening back in February. So I mean, traffic is down. The traffic is down in stores a lot.

Post the federal budget in May, when things really deteriorated.

Yes. Well, it has deteriorated further, yes, I agree. But I don't know. Interest rates might drop sometime later. I don't know. I really don't know at the moment. We [indiscernble] frequently.

Your next question comes from James Ferrier with Canaccord.

First question is on the U.K., so the 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? And how do you see marketing costs ramping up in that line in the year ahead?

Yes. Well, we've moved from a third party to a new warehouse. So 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. So marginally higher, if you like, on the -- so there's a benefit from the third party, the savings there, but then we've got the property cost. So it's a small number, but it's higher overall, that cost.

And marketing, how do you see -- you talked a bit about the macro and the conversion improving from your sales team. So it sort of sounds 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 '27?

Look, the U.K., it's a big population, advertising on what we traditionally do like on TVs. It's 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. So we -- I mean, we -- not advertising, we're getting good results anyway because we are in retail parks after all, and we're nice there and we're paying a lot of rent to be in a retail park for a good reason. So I don't think -- so we will do promotions from time to time, but not -- very controlled, very controlled.

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

Well, I'd say, you look at the percentage. Yes. We need, at least, to really -- another 10 stores to really -- to 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.

Okay. And last question from me. Just your earlier comment around the macro in the ANZ market, one of the worst environments. So 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're seeing from a conversion or maybe average transaction value perspective. I get that foot traffic is down as a consequence of that macro, but...

Correct.

What differences you're seeing in conversion and transaction values?

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%. So there's a lot and lot of focus on conversion. But look, I've been in the stores talking to the salespeople and what they're seeing is that the people coming are really buyers. But that's -- we're fortunate that we've held the average transaction value because that was my concern. And we just -- our focus is on conversion. But, look, it's a tough environment. It's a really tough environment.

Your next question comes from James Leigh with Goldman Sachs.

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 kind of what sort of costs -- like how we're managing costs into next year and what sort of kind of rationalization -- like what sort of rationalization we can achieve?

Well, yes, that's challenging. Fortunately, our people, above award, quite a bit above award. So that won't have an impact. But there's -- I think there's wage inflation, just natural, particularly if you want good salespeople. So it's about being more efficient and rostering and managing numbers carefully and having effective people, I think -- but there's not a lot of -- we don't have a lot of fat in our employment. That can be true.

Yes. Maybe to ask it like slightly differently, like against that 4.75%, I appreciate your wages -- your employees aren't on award wages. Like 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?

Hopefully run leaner than that.

Your next question comes from Chami Ratnapala with Bell Potter Securities.

I think firstly, just on the U.K., within the second half result 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 '27 in terms of incremental profitability would look like, given that you've also brought down the bar of breakeven with better expectations there?

Can you repeat that? Could you repeat it? We missed a bit of that. We have a bad connection.

Yes. Just want to understand U.K. 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 against 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 '27 profitability for the U.K.?

So look, we're -- overall, we're having to hold costs pretty flat. Maybe we're always trying to -- in certain areas, we think there's potential savings on costs, but small. There's lots of small -- but overall, there's nothing material on the cost side.

Perfect. And then on ANZ, I mean, like-for-like 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 is it -- would you predominantly put it down to basically the traffic issue at the moment or macro?

You are saying our margins higher?

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

Yes, of course, we watch that carefully. You're right, and that's something we manage all, every day. So 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 what I would -- how I'd answer this.

Great. And I think obviously, quite a few tough conditions ahead already playing out macro stuff, you sort of talked through everything. But maybe bottom up, is there any that you're optimistic on within the business more thinking bottom up?

When you -- can you clarify what you mean bottom up?

Yes. Just for the business versus what's playing out there in the macro setup. Is there any -- where are you most optimistic on?

None. I don't think so.

None at all.

I think maybe rostering practices across the group. Certainly in the U.K.

That's all the time we have for our question-and-answer session. And that does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the Nick Scali Limited First Half '26 Results. [Operator Instructions]

I would now like to turn the conference over to Mr. Anthony Scali, Managing Director. Please go ahead.

Good morning. Welcome to the results presentation for the first half FY '26.

Looking on Page 2 of the summary for the ANZ Group, written sales were up 10.5% versus prior year. Revenue was $251.7 million, up 13% on the prior year. The gross profit margin was 65.9%, up 1.5 basis points on the first half and 0.9% than FY '25. Net profit after tax was $46.6 million, up $10.6 million or 29% on the first half FY '25 underlying, and up $12.5 million or 37% on the first half FY '25 statutory profit.

For the U.K., revenue was $17.6 million, impacted by store closures due to the rebranding program. Written orders for the first half were $21.7 million, with January written orders $6.7 million.

Nick Scali brand stores like-for-like in January are up 32%. Gross profit margin in the first half '26 was 59.2% compared to 45.1% first half FY '25. 16 stores refurbished and rebranded as Nick Scali by December '25. Net loss after tax of $5.6 million as per forecast. For the group, group net profit after tax was $41 million. Cash and bank deposits was $91.7 million as at December and the interim dividend of 39% per share fully franked.

Turning to Page 3, written sales orders and group revenue. As mentioned, the written sales were up 10.5% on the prior year across Australia and New Zealand, with like-for-like written sales orders of 10.1%. The U.K. written sales orders of $21.7 million, that was 12.8% on the prior comparable half. Year-on-year comparatives are not representative of trading due to the numerous store closures for lengthy periods for store refurbishments. The group written sales of total was $251.6 million, 10.7% up.

On the revenue side, ANZ Group revenue was $251.7 million, up 13%. This reflected in the high written sales in May and June FY '25, which is up 16% on the prior year and a strong first quarter FY '26 contributing to the revenue growth. ANZ like-for-like revenue for the first half was positive 12.7%.

For the U.K., the revenue was $17.6 million. That's down 38.5%. This clearly reflects the low written sales over the quarter for FY '25 and first half FY '26, caused by closures of numerous stores for lengthy periods for store refurbishments and rebranding. Group revenue for the half was $269.3 million, up 7%.

Turning to Page 4, group financial performance. As mentioned, the gross profit margin was 65.9% compared to the first half FY '24 of 64.4%. The ANZ underlying operating expenses increased by $5 million compared to the prior year, mainly attributable to employment bonuses and additional marketing in line with sales growth. The U.K. gross margin continues to improve with Nick Scali product in place and the legacy Fabb product now cleared.

First half FY '26 gross margin was 59.2% compared to the first half FY '25 at 45.1%. The U.K. revenue is reported net of interest rate subsidy costs impacting margin. For the first half '26, operating expenses in the U.K. were $10.8 million. In local currency terms, expenses were in line with prior year with savings in employment and property costs offset by additional marketing spend.

I'll now hand over to Kylie Archer, who will deal with the cash flow and balance sheet.

Thank you, Anthony. So looking at the cash flow Slide #5 here. Total group pretax operating cash generated after deducting amounts due on operating leases was $51.5 million for the half compared to $29 million last year, with ANZ contributing $53.4 million.

For the U.K., we see operational funding requirements for the period decrease as the sales orders increase and capital requirements reduce as the refurbishments are completed, with net operating cash flows for the U.K. -- cash outflows for the U.K. of $1.9 million.

Property and capital investments for the group of $17.1 million include 2 property purchases in the period, the first being $3.8 million for land acquired in South Australia to be used for our new distribution center, with construction due to commence this calendar year and the second being $7.9 million for the Nick Scali retail store in Campbelltown. In addition, bid-out costs were incurred for a number of showrooms across Australia and the U.K.

$28.2 million was returned to shareholders in the period by way of payment of the final dividend final FY '25 dividend. And finally, the closing net cash position for the group was $20 million as at end December versus $15.9 million last year.

We move on to the balance sheet on Slide 6. Inventory levels overall remained broadly consistent during the half, as you can see from the table on the right-hand side of the page, with inventory on hand at $42.2 million, slightly down on June '25 levels of $44.6 million. We see an increase in property and net book value from $120 million to $132 million due to the SA land and Campbelltown purchases, as mentioned on the previous slide.

Borrowings remain unchanged in the period at $71.7 million. with $43.7 million relating to property loans secured at less than a 30% loan-to-value ratio. The balance of the borrowings relates to the $28 million corporate debt facility unchanged in the reporting period.

I will now hand back to Anthony.

Thanks, Kylie. So turning to Page 8, U.K. summary. Sales orders continued to improve during the half as more stores were rebranded. The 4 rebrands Nick Scali stores trading like-for-like in January 2025 showed growth of 32%. The margin was 59%. This is net of interest-free subsidy. The margin is expected to improve over the medium term. Distribution progress has been made in restructuring the customer delivery model to reduce margin leakage.

Leadership, further consolidation of U.K. head office roles as Australia and operational processes are adopted in the U.K., driving greater efficiency across the group. Focus remains on retail teams in stores and evaluating and seeking new store opportunities.

Looking at product, the best sellers in the U.K. are now in line with the best sellers in Australia. New product introductions based on Australian performance will be the norm going forward. Pathway to profitability. The breakeven position is $51 million of sales revenue. New stores are critical for our profit growth as is increased brand awareness.

Looking now on Page 9 of the store network. A new Plush showroom was opened in November '25 in Bendigo. A further 5 new stores for FY '26 are being planned to open, which will bring the total to 6 new locations. In the U.K., the Lincoln store was closed at the end of lease as we believe that's not suitable to rebrand to Nick Scali as part of the ongoing optimization of the U.K. store network.

The U.K. refurbishment program is mostly complete with 16 stores converted to the Nick Scali store design, branding and product range. A number of new store locations in the U.K. are under negotiation.

Now turning to Page 10 and the outlook. For ANZ, the written sales for the month of January '26 increased by 3%. Like-for-like written sales increased 3.2%. During the half -- second half, a further 5 stores are planned for opening with additional opportunities currently being reviewed. In the U.K., with store refurbishment now mostly complete, material improvements are being seen in written sales compared to the prior period. Total January written sales were $6.7 million for the 4 like-for-like written sales were up 32% compared to last year. A number of potential new U.K. stores are currently in negotiation.

Well, that now concludes our presentation, and we're happy to take questions.

[Operator Instructions] Your first question comes from Tom Kierath with Barrenjoey.

Just the first one on January. I thought it might have been a bit stronger than 3% in ANZ, just given you're lapping negative 8.5%, I think it was. Is there anything like in the promotional timing or the calendar or anything? Or is that just, I guess, a reflection of -- a true reflection of how you're tracking at the moment?

Well, I think the -- what's happening now in November, the month is getting stronger and stronger every year. So we had a very strong November being very close to the Boxing Day sales, but just seems a bit of a shift now because of that. So you're getting quite a lot of, I guess, orders you might have got in January. We did see traffic was down in January by 7% and sales were still up 3%, so conversion did improve. That's one thought. The other thought is maybe interest rates may be having an impact on the consumer. We're not sure yet. I think March and over will tell that story.

Yes. That makes sense. And then just the second one is just on your order bank. So you did obviously more profit than you guided to in December, which is more profit than you guided to at the AGM. What's the shape of the order bank like at the moment? Like based on my math, the order bank reduced by about $22 million in the half. I know you don't actually report that number anymore, but just be good to get some color on the order bank and kind of logistics and just how quickly you're getting product to customers?

Yes. Look, I think our lead times have probably increased by 3 to 4 days. So yes, we're delivering a little bit quicker, but not materially quicker. Yes, we don't call out the order bank because it can create some confusion sometimes. I mean, at the end of the day, we -- our revenue is based on FY '26, it's really about May to March sales orders written gives you the revenue number, if you like.

Is it fair to assume the order bank has reduced in the half?

No.

Our next question is from Garth Francis with MST Marquee.

The gross margin performance was good. It does feel like it's been a fairly promotional environment. Have you had to engage or has that impacted your promotional activity in the market? And then if you could just touch on FX and currency impacts looking and when you expect those benefits to wash through? Should we expect some to come through in this half? Or is that more of an FY '27 story?

Yes. I would say, first, the margin did not impact our promotional activity. On the FX side, yes, obviously, we take forward cover. And that won't -- the benefit of the currency, if there is any, will be it won't be until the first half next year, next financial year. And clearly, being in a competitive environment, not necessarily we will bank the currency. We might pass it on with further promotion.

Terrific. And if I may, one more, just the tax rate that was -- the effective tax rate in the half was up quite a bit. Can you just maybe -- was there anything in there that resulted in that? Were you not allowed to deduct U.K. losses or had something else? Was there another impact that we should be aware of?

No, nothing out of the ordinary.

So is the 30% tax rate going forward more likely or something.

Yes. Traditionally, that has been the rate.

Yes.

Yes.

Your next question comes from James Ferrier with Canaccord Genuity.

Can I ask you, first of all, about the store sales team in the U.K. You've been on a bit of a journey there to improve the quality capability of that team. Where are you at, at this point in time?

Well, looking at the January results, say a lot better at the moment. So yes, I think the leadership -- we've got good leadership in the U.K. and they -- I mean, it's always something that you continually work on better sales teams. It's -- there's never any point you say it's as good as I can get and it's never as bad. So I think we're making good progress in the U.K., and we can see that from the January results.

And would you -- like if you use a benchmark like foot traffic conversion to sales orders, would you say it's now comparable to Australia?

It's improving, yes, not quite yet at Australian level, Nick Scali Australia anyway, but it's improved a lot.

Yes. Yes. Understood. Second thing I want to ask about was marketing spend. Just in your earlier remarks and maybe Kylie's as well, you mentioned that marketing spend in ANZ increased in line with sales. So if my math is right, that would imply that you spend about AUD 0.5 million on marketing in the U.K. Does that sound about right?

It's -- yes, yes, it could be -- yes, maybe marginally more in fact. You're converting Australian dollars, yes.

Yes. That's right. So just based on that, when you look forward now, Anthony, and you sort of see the landscape as it is, sales trends, things like that, what are your plans with marketing spend in the ANZ business through the rest of the year? Do you sort of see it sort of pretty stable? Or do you see an opportunity to lift it up, maybe reinvest some of that stronger gross margin. What are your plans on that marketing spend?

Yes. Look -- it's something we continually manage on a month-to-month basis, to be honest. So depending on the strength and the traffic into stores, we may in certain promotions where we think we've got a strong offer may increase the spend. It's something we manage. But if we do increase, it's managed. We're trying to ensure we don't waste money on advertising. We need to get the result. And we continue to invest -- able to invest more as we open more stores. So that's beneficial for the whole brand.

Yes. And then just lastly, same topic, but for the U.K., how quickly do you see the trajectory for marketing spend as a percentage of sales to move up towards maybe not to 10%, but towards 10%?

Yes. I think -- well, yes, 10% is a lot. I'm not sure we want to get to that. I mean, well, it depends -- the marketing gets more efficient with more stores. And clearly, at the moment, we have quite a bit of waste in our spend in the U.K. because we've only got 16 stores, and they're spread across the U.K. So there's not a lot of opportunity for localized advertising. It's mainly national. And hence, we are aggressively pursuing more stores to open in the short term, so we can then increase the spend in marketing, which increases the brand awareness, which does 2 things, helps the same-store sales improve, we would expect from that and a larger store network.

Your next question comes from Chami Ratnapala with Bell Potter Securities.

Just the first question is on the U.K. like-for-likes, I mean, with those 4 rebranded stores that were trading last year as well, the 32% up figure, what sort of confidence does it give you on, firstly, the breakeven position and sort of where some of these stores still hit revenue per store versus some of the Australian stores?

Yes. Well, yes, it certainly gives us that is -- that's not the January number on the like-for-like stores was a great uplift. The whole January result was very good in the U.K. Clearly, we need to continue that momentum, particularly in this half, which will get us sooner to the breakeven point in the short term.

But look, I'm not so focused in the short term, whether it's a small loss or a small profit is what's really relevant is that we open new stores and continue with the strategy and have a conviction to continue to open stores and improve every aspect of the business is which we are doing. But yes, on the whole, really encouraging result for January.

Perfect. And the second question, you talked a bit about earlier, it came up that pretty intense promo environment here in Australia, but margins have been very solid. Turning to U.K., 59%. I mean, how did that track? And into the rest of the second half, how will that balancing act of margins versus driving sales work as the brand awareness increases?

Yes. Well, look, our -- look, the first thing is, obviously, our buying strength is helping us have prices even on promotion that are very, very competitive and yet be able to deliver that margin. And that's particularly because of our lounge volumes across Australia and now the U.K. So we are very confident that we're going to be more than competitive in our pricing yet maintain this margin.

And as I said earlier, look, we expect in the medium term that margin will improve in the U.K. One thing to also point out with that margin is there's an interest rate subsidy cost that does -- is included as a cost in the margin, which is necessarily not here in Australia.

Your next question comes from Sean Xu with CLSA.

Can you hear me?

Yes. Can hear you, Sean.

Just hoping to do a follow-up question on the order banking within ANZ business. Could you please tell me what's the implied GP margin performance for your order bank compared to the same time last year?

The implied margin on the order bank. Well, it's going to be slightly higher, I guess, given what our margin has been delivering. We don't expect our margin to -- it will be consistent with the first half for the second half is what our expectation is subject to external factors that may potentially impact it like a shipping issue. But at the moment, that's -- the order bank is in line with the first half margin.

Got it. Got it. Can I just do another follow-up? So this is the same question I asked you 6 months ago. I'd love to have an update on this -- because of the U.S. tariff situation, my understanding is the access manufacturing capacity in China from your supplier with their manufacturing plant moving to Vietnam to catering for the U.S. export business. I guess, I just want to hoping to get an update how Nick Scali is positioned to negotiate or renegotiate a more favorable supply term with some of your partners in Asia, please?

Well, that has been occurring already. Yes. I mean the factories, a lot of the production for the U.S. -- well, all the production in the U.S. has moved to Vietnam from many of the China factories. And yes, you've got more capacity in China, but that's been for some time now. So I think yes, we've been getting better value, and we've had good support from the factories, but I don't see any more change now in respect of that.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Mr. Scali for closing remarks.

Thank you, everyone, for attending the results presentation. And we plan to provide a good result for the first half and look forward to good results for the full year. Thank you.

That does conclude our conference for today.