Ann: Nick Scali Ltd FY16 Appendix 4E-NCK.AX, page-6

Well, well, well, where do I start????

I'm finding it very hard to find something to dislike in this set of numbers. Everything is simply pointing at the right direction.

Reading the accompanying commentary, there is one paragraph that makes my day:

Borrowings increased by $9.1m to $21.2m and relate to property purchases. With cash reserves (including customer deposits) of $37.0m, the Company is well positioned for further investment initiatives, including strategic property purchases in key locations to position the business for the future and act as a hedge against possible cost increases for leased properties.

I fully support this strategic decision to continue building the property portfolio. As I have mentioned in previous posts, over time, NCK's balance sheet profile will slowly but surely mimic REH's exemplary balance sheet. This paragraph made my day because it confirms the inkling that I have about NCK's new property strategy from reading between the lines NCK's reports & presentations for the past 2 years.

I was so blown away after reading about the 75% increase in the final dividend to $0.14, that it took a numbskull like me another 45 minutes of reading the report and the presentation before realising that there is an extra $0.03 special dividend. Needless to say, I was blown away again for the second time....

Now to the numbers:

I'm not going to discuss the more common ratios that are looking very healthy as a result of 30% increase in sales accompanied with 50% increase in NPAT.

I will look at some of the less prominent ones:

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7
0	Year	Fixed Charge Coverage Ratio FCCR	Revenue / Average No. Store	EBIT / Average No. Store	Stock Turnover	Operating Lease Commitments	Total Stores
1	2007	2.06	3,431,200	547,644	2.60	66,510,000	24
2	2008	1.64	3,153,600	374,920	2.42	55,770,000	26
3	2009	1.44	2,870,630	255,815	2.67	74,274,000	28
4	2010	1.98	3,504,182	584,691	2.82	68,012,000	27
5	2011	1.97	3,390,339	573,729	2.86	72,251,000	32
6	2012	1.61	3,217,382	378,412	3.31	69,464,000	36
7	2013	1.79	3,444,081	479,568	3.54	61,702,000	38
8	2014	1.87	3,673,818	536,597	3.34	67,129,000	39
9	2015	1.99	3,664,541	584,659	2.84	82,425,000	46
10	2016	2.34	4,366,559	814,516	3.18	78,423,000	47

As we can see from the above table:

- Operating lease commitments has increased from $66m in 2007 to only $78m in 2016, while the number of stores has doubled. I expect this flattening pattern to continue as NCK continues purchasing more properties.

- Revenue/store and EBIT/store are at record highs and these increases were achieved with an increase in staff numbers of only 10% from 299 to 333.

- FCCR is the highest for the past 10 years and has been increasing steadily for the past 5 years.

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As you can expect, I intend to continue to hold my NCK shares. After today's rise, it has just become the second largest position in my portfolio.