The Greencross Limited (ASX: GXL) share price has fallen 4% to $5.91 following its half-year results this morning. Revenues rose 9% to $433 million, with net profit after tax (NPAT) also growing 9% to $23.2 million. Earnings per share rose 7% to 19.7 cents per share, and dividends were increased 5% to 10 cents per share.
(Results look slightly better than this on an underlying basis, if acquisition and restructuring costs are excluded.)
Like-for-like sales growth remained strong, with Vet growing 5.9% and retail sales growing 4% in Australia and 4.5% in New Zealand. Greencross added 6 vet clinics, 3 specialist vet businesses, and 6 retail stores in Australia, and 2 new vets and 2 retail stores in New Zealand.
Pleasingly, Greencross is (almost) funding its own expansion, with the company generating $47 million in cash from operations, reinvesting $39 million in the business, and paying $12 million in dividends and debt repayment. This resulted in a $4 million decrease in net cash. Greencross has $53 million cash in the bank and net debt of $240 million, up from $236 million last year.
While I don't like that the company basically paid dividends from debt, its financial situation appears stable.
The decision to invest in co-located stores (vet clinic inside a retail store) is paying off handsomely, as is the group's investment in online technology. Like-for-like sales growth was 7.5% in co-located stores, and there was a 92% increase in online sales as well as a 34% increase in 'cross shoppers' (people that shop at more than one 'proposition' – vet, retail, and grooming).
Greencross' outlook for the full year is: "The business continues to perform in line with plan in FY2018 YTD and the Company remains comfortable with market consensus for the full year result" which doesn't really tell us a whole lot.
Thomson Reuters consensus estimates for Greencross forecast the company earning 38 cents per share for full year 2018, pricing the business at about 16x estimated full year earnings.
I like Greencross a lot and I think it is good value given the further improvements that are likely to be delivered by co-locating vet stores and investing in own-brand products. On the downside, competition in the vet/pet space is definitely heating up, the company carries a fair bit of debt, and is vulnerable to a downturn in consumer spending. Even so, I think Greencross is a buy at today's prices, and I am looking at making a purchase myself in the future, when trading rules permit.