Nick Scali Limited (ASX: $NCK) announcement overview

Nick Scali Limited (ASX: $NCK) has announced its entry into the UK market through the acquisition of Fabb Furniture, a specialist UK home furniture retailer. The acquisition involves a consideration of £2.00 (A$3.821) for Fabb Furniture and all of its secured debt owed for £3.5m (A$6.7m). Nick Scali also intends to invest further in the existing Fabb Furniture network to establish the Nick Scali brand in the UK, including store refurbishments, re-branding, and new store openings. The acquisition and additional investment will be funded by a A$46.0m underwritten institutional placement and a A$4.0m conditional placement to an entity associated with Anthony Scali, CEO and Managing Director of Nick Scali, subject to shareholder approval at the Company's AGM expected in October 2024.

Executive commentary on the acquisition and UK growth strategy

Nick Scali CEO, Anthony Scali, expressed that the acquisition of Fabb Furniture provides an opportunity to enhance the company's geographic diversity and scale beyond Australia and New Zealand for the first time. He highlighted that the acquisition offers an immediate entry point into the large UK market with a 21-store network across key locations, providing a scaled platform to establish the Nick Scali brand and product offering in an attractive new market. Mr Scali also mentioned the potential to leverage Nick Scali's buying power and supply chain to deliver significant gross margin uplift for the UK business.

Summary of the acquisition and outlook

The acquisition of Fabb Furniture marks Nick Scali's strategic move into the UK market, offering a unique opportunity to establish its brand at scale with relatively low cost. The company aims to leverage its expertise to provide the UK market with a quality/value product offer and drive profitable growth in the medium term. The acquisition and UK growth strategy will be funded through an underwritten institutional placement and conditional placement, with eligible shareholders offered the ability to participate in a non-underwritten Share Purchase Plan. The company's CEO expressed confidence in the potential for significant gross margin uplift for the UK business through leveraging Nick Scali's buying power and supply chain. The acquisition is expected to complete in mid-May, and the company looks forward to further expanding its presence and driving growth in the UK market.