Greencross Limited announces profit guidance and new CEO

Greencross Limited (ASX:GXL) has announced a new CEO and its profit guidance

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Greencross Limited (ASX: GXL) is Australia's largest pet company, it owns the Greencross veterinary network and Petbarn retail store network.

Today, the pet giant announced its new CEO and also gave some guidance about what to expect in its half-year result to 31 December 2017.

New CEO

The company announced that Simon Hickey will replace Martin Nicholas on 5 March 2018 as the new chief executive officer and managing director.

The chairman of Greencross, Stuart James, said "Greencross has strong growth foundations in place as Australia's largest integrated pet care company, with more than 190 veterinary practices, 247 specialty retail stores and a fast-growing online presence in Australia and New Zealand."

"With this infrastructure in place, the time is now right for the company to rejuvenate the customer experience and deliver the full benefits of our omni-channel integrated pet care model for our customers and shareholders."

Mr Hickey has 10 years' of experience in chief executive roles at Campus Living Villages, Qantas Airways Limited (ASX: QAN) International & Freight and also Qantas Loyalty. He is currently deputy chairman of the Sydney Children's Hospital Foundation.

Mr James said Mr Hickey's hands-on experience with customer experience and navigating evolving technologies meant he was well positioned to lead Greencross through its next growth phase.

The Greencross release pointed to Mr Hickey's development and launching of Qantas' online retail store, the any seat product, the epiQure food & wine club and the foreign exchange debit card as signs of his entrepreneurial and leadership. He expanded the Qantas Loyalty program to more than triple the membership and created more ways to earn points, which delivered significant growth and profitability.

Clearly, Greencross believe they have found a winning leader. Greencross will be paying Mr Hickey a base package of $950,000 each year plus short term and long term incentives if certain financial and non-financial goals are met.

Profit guidance

Greencross will be announcing its results for the six months ended 31 December 2017 on 20 February 2018, however its unaudited figures show some promising numbers.

Revenue is expected to be approximately $430 million, which would represent growth of around 9%. Like-for-like sales growth was 4.5% for the first half of FY18.

Underlying net profit after tax (NPAT) could be at least $24 million according to the company. Half-year FY17 underlying NPAT was $21.2 million, which suggests growth of at least 13.2% for the upcoming update.

The business said it continues to perform in line with its plan for the second half of FY18 and the company remains comfortable with market consensus for the FY18 result.

Foolish takeaway

Greencross is not without its risks, Amazon and other competitors want a slice of the pet pie. Plus, its roll-out of the co-location strategy is quite expensive and takes a few years before being fully profitable at each store.

But, I do think Greencross would make a good long-term buy at today's price. It's currently trading at 16x FY18's estimated earnings with a grossed-up dividend yield of 4.32%.

Motley Fool contributor Tristan Harrison owns shares of Greencross Limited. The Motley Fool Australia owns shares of and has recommended Greencross Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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