Nick Scali Limited

       NCK Dividend Details
 
Growth from same store sales and new openings: For the year ended 30 June 2015, Nick Scali Limited (ASX: NCK) reported record revenues and net profit after tax. This can be considered to be an impressive performance in a difficult retail trading environment when customers remained cautious about spending despite the low interest rates prevailing.


Store Numbers (Source: Company Reports)
 
 
There was an increase in same-store sales while the company continued to benefit from the new store openings. The 10.1% increase in sales revenue to $ 155.7 million was the result of same-store growth of 3.4%, some contributions from seven new stores opened in the second half of the year and consistent investment in marketing. Net profit after tax grew impressively by 20% to $ 17.1 million. Net margins were slightly higher than the previous year despite the weakness of the AUD and this was the result of successful forex management, the appropriate product range and the pricing adjustments. Operating expenses as a percentage of sales declined by 1% to 44.3% because of continued cost efficiencies despite the growing sales and despite the start-up costs incurred in the expansion into Western Australia.
 

Dividends Paid (Source: Company Reports)
 
The store network continued to expand with seven new store openings bringing the total number of stores to 46. The company has also made a positive start to trading performance for the new fiscal year and total sales order growth was 34% for the first quarter and comparative sales order growth was 10% higher. The current expectation for net profit after tax for the six months to December 2015 is growth of approximately 20% over the same period in the previous year. The stock has delivered year to date returns of 51.46% (as at November 25, 2015) but is trading close to its 52-week high price. Despite the results and the continued optimistic outlook, we believe that the share is overpriced at the moment.
 

 

Reckon Ltd

        RKN Dividend Details
 
Growth at the back of enhanced subscription: Reckon Ltd. (ASX: RKN) is known to have three divisions of which the business group develops and distributes accounting software solutions, desktop hosted or cloud-based, for small and medium businesses. It has more than 300,000 active customers, supports 6000 partners and has more than 30,000 online users. The accountant group is associated with software on accounting practices while the international group is associated with business efficiencies for accountants, lawyers and business in general. Among the achievements for FY 2015 are revenue growth of 6% to $ 54 million and EBITDA growth of 5% to $ 20.2 million with continued investment in cloud infrastructure, sales capabilities and product development. EPS grew by 8% to 7.9 cents per share while operating cash flows grew by 11%.
 

Revenue Growth for half year ended 30 June 2015 (Source: Company Reports)
 
There was continued growth in volumes including annualised growth of 10% in APS seats in the Accountant Group, 30% in online users in the Business Group and 20% in Virtual Cabinet seats in the International Group. The subscription component, portion of the group revenues, has been enhanced in terms of long-term sustainability. Subscription accounts for 91% of practice management revenue in the Accountant Group along with 70% of core Business Group revenue and 77% of International Group revenue. The group has been the repeated target of takeover which is why we believe that the current price represents a premium over the true value. We believe that the stock is expensive at the current levels and do not recommend an investment at this stage.
 

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