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Nick Scali’s (ASX: NCK) plans to expand into the UK have received a big vote of confidence from institutional investors, with the company successfully securing $46 million today before it opens its doors to raise another $10 million from retail shareholders.
The fresh funds make up most of the $60 million the retailer is raising to turn around UK-based Fabb Furniture, comprising a 21-store network. Under the agreement, Nick Scali will acquire all secured debt owed by Fabb Furniture for £3.5 million ($6.7 million), and intends to spend a further £0.5 million ($1.0 million) to exercise an option for exiting the group's existing distribution centre arrangement.
Nick Scali will now forge ahead with its share purchase plan, which aims to raise up to $10 million at $13.25 per share, reflecting a 17 per cent discount to the current trading price of $15.85. The remaining chunk will be covered by a $4 million conditional placement from CEO and managing director Anthony Scali.
The foray into the UK has seen investors go gangbusters for NCK stock, with shares reaching an all-time high of $16.03 each earlier today – levels not seen since November 2021.
“We are very pleased with the strong support for the Institutional Placement and our growth plans in the United Kingdom,” Anthony Scali said.
“The acquisition of Fabb Furniture and entry into the UK market is an important strategic step for Nick Scali which is expected to unlock a significant opportunity for profitable growth in the future.”
Founded in 1961 by Nick D. Scali, Nick Scali is one of Australia and New Zealand's largest importers of furniture, sourcing more than 5,000 containers per year. The company operates 64 stores across ANZ, in addition to 43 Plush locations since acquiring the sofa store in 2021 for $103 million.
The company has budgeted for a net working capital injection of up to £6.0 million ($11.5 million) at Fabb Furniture, the trading name of Anglia Home Furnishings Limited. For the financial year that ended on 31 March this year, Fabb is expected to deliver a revenue decline of 19 per cent to £34 million ($65 million) and a loss of £2.8 million ($5.4 million), which is around £1 million ($1.9 million) down on the previous year's result.
The suitor intends to reset Fabb to the Nick Scali lounge and dining offering, sourced from its existing supplier network where it claims there will be "significant overlap", and also plans to set up a new distribution centre in Peterborough. All stores for the UK group are in out-of-town retail parks and are predominantly of a large format, with an estimated total retail space of 39,000 square metres.
Nick Scali expects the UK business will return to profitability on a run rate basis within 18 months, although losses are set to increase temporarily in FY25 during the transition period as a result of store refurbishments, rebranding and introduction of new product range.
The group expects to pump a further $27.2 million into store refurbishments, rebranding, marketing, additional working capital to support losses during the transition period, and general corporate purposes.
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