After months of off and on pressure from sceptical investors, vet and pet care group, Greencross saw its shares up more than 4% despite reporting a slide in profit for the year to June.
New management at the company has been reshaping the group and a downgrade and clean out revealed in May saw investors become wary about the outcome. As a result the share shave come under selling pressure several times in the past couple of months as investors wondered if the revamp would work.
Yesterday we saw the impact of the changes – despite a rise in 7.5% revenues to nearly $879 million and a solid 4.9% rise in like for like sales (it is after all a retailer especially through its Pet Barn chain) net profit fell 51% to $20.7 million after taking $24.2 million of mostly non-cash losses.
Group underlying EBITDA fell 6.4% to $97.6 million and Group underlying gross profit margin dropped 170bps to 11.1%.
The Directors cut its fully franked final dividend to 5.5 cents a share, down from 10 cents a share last year, bringing the total dividend for FY18 to 15.5 cents a share fully franked. That also was down from 19 cents a share the year before.
Investors liked the result and the tone and the shares were up nearly 5% to $4.44 just after 1pm on Monday. But then investors changed their tune and the shares fell to close down 2.15 at $.14 by the close.
“FY18 was a year of substantial change for Greencross. The strength of our business model is clearly evident from the excellent like-for-like sales growth that was delivered,” Greencross CEO and managing director Simon Hickey said.
“We have an unrivalled integrated pet care platform and the new management team is excited by the opportunities to grow market share by leveraging our unique retail, vet care and service offering and our 1.9 million active loyalty members.”
The group saw over 90 per cent of retail sales revenue coming from its ‘Friends for Life’ loyalty program members, which has grown to over 1.9 million customers. Mr Hickey described the loyalty program a key strength and an enormous opportunity to leverage.
Greencross said there had been a positive start to the 2019 financial year FY19, and after the first six weeks it is seeing a 5.8% rise in Group like for like sales growth, a 6.1% rise in like for like sales in its Australian retail business (Pet Barn) and 8% overall growth in group revenue.
"Greencross will adopt a disciplined approach to investment and capital management in FY19. The Company plans to reduce total capex in FY19 to approximately $50 million, without slowing the strategic expansion of our integrated network and our digital and omnichannel capabilities,” the company said in yesterday’s statement.
"Following its strategic and operational business wide review, the Company reconfirms its annualised operating cost savings target of $10 million to $13 million, with $5.8 million realised to date.
"Management’s focus in FY19 will be on executing its strategic priorities to improve operational performance and deliver revenue and earnings growth,” the company said.
