Cocktails are out, couches are in.
Having become a mainstay of Saturday night lockdown plans, many Aussies have opted to upgrade their couch (and living room furniture), a trend serving to benefit furniture and homeware retailers. The niche market has reaped the rewards of Aussies feathering their nests in an effort to turn their space into a pandemic free sanctuary. I mean, what else were we going to do if we couldn’t go spend money on espresso martinis at nice bars?
Following a productive FY21, furniture Company Nick Scali (ASX: NCK) is acquiring Plush. The two sofa brands have “highly complementary product offerings and business models” and have both experienced rapid growth over the pandemic which saw their underlying EBITDAs more than double.
Nick Scali will be nabbing Plush for an enterprise value of $103 million on a cash free, debt free basis. Not bad for a leading sofa retailer with 46 showrooms across Australia which generated $160 million in revenue last year, up from $111 million in FY20. The mid-market sofa brand has sold a range of sofas, modular lounges, recliners, occasional chairs, occasional chairs, ottomans and sofa beds to over 250,000 customers over its 20 year history.
Not to be outdone, Nick Scali has also performed financially with their pro forma revenue for FY21 equaling $533 million, up from $373 million the previous year. Their underlying EBITDA boosted too from $76 million in FY20 to $153 million in FY21. Who knew pandemics would be a good time to be a couch mogul?
Shareholders will be glad to hear the acquisition is being funded through a combination of cash on hand and new bank facilities.
The acquisition will increase Nick Scali’s current reach to a combined 108 stores across Australia and New Zealand with opportunities to expand into new markets.
CEO of Nick Scali, Anthony Scali said: “Plush is a high-quality Australian sofa retailer with a strong track record of profitability and performance over a long period of time. The acquisition is a strategic opportunity for Nick Scali and will allow us to leverage the increased scale of the combined group whilst providing a platform to significantly grow the store network.”
Following news of their Plush acquisition, NCK shares reached a high of $12.51 in the first 30 minutes of morning trade, a 13.9% increase on their previous $10.98 close.
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