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Greencross Limited (ASX:GXL) releases a trading update: Should you invest?

National Vet Care share price
Credit: Michael Gil

This morning Greencross Limited (ASX: GXL) will host its annual general meeting in Sydney. Ahead of the meeting the company has released its presentation which includes a trading update for the first 17 weeks of FY 2019.

Shareholders will no doubt be pleased to learn that the company has achieved solid like for like sales growth so far this year.

According to the release, Greencross has seen its revenue grow 7.6% during the period thanks to the combination of a 5.4% increase in like for like sales and the contribution of new stores.

The main driver of its like for like sales growth has been its retail operations. They are up 6.4% on the prior corresponding period.

One drag on its performance has been its standalone vet clinics. Like for like sales have fallen 1.8% for these clinics.

This compares to a 2.9% overall lift in vet clinic like for like sales thanks to solid performances from its in-store clinics. Which is great to see considering overall “vet market conditions remain challenging” according to management.

In addition to this, management provided an update on its cost savings initiatives. It advised that it continues to make progress with these initiatives, but it does not expect them to deliver incremental EBITDA in the first half due to a lower cost capitalisation and reinvestment in strategic initiatives.

Finally, during the period Greencross opened three new stores and two in-store clinics. It aims to open five new stores and ten in-store clinics in FY 2019.

Should you invest?

I thought that this was a positive update from Greencross.

While I wouldn’t class it as a must buy, I do think it could be worth considering and would suggest investors choose it ahead of National Veterinary Care Ltd (ASX: NVL) due to the diversification that its retail operations offer.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Greencross Limited. The Motley Fool Australia owns shares of NATVETCARE FPO. 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 Scott Phillips.

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