Shareholding Review: Greencross (ASX:GXL) 2016 Results

By | September 22, 2016

shareholding-review-greencross-asx-gxl-2016-results-dividends-down-under-blogAuthor: Mr and Mrs DDU.

Disclaimer: Stocks mentioned on this blog are for general entertainment/documentation purposes only, following our own investment journey and decisions.Nothing in this article should be considered investment advice nor is intended to be investment advice. Please click here to continue reading our disclaimer. By viewing any page on this blog you are agreeing to the linked terms & conditions.

Every six months Australia has a reporting season; nearly all the major companies on the Australian Stock Exchange report their full-year financials at the end of the tax/financial year (the financial year ends on the 30th June). So we get a busy few weeks of company reports to read in August (as well as the half-year result in 6 month’s time). We find it the most exciting time of year (for shares) because we get to see how our companies have actually performed. For 363 days of the year, the share price moves up and down whilst bearing no correlation to actual results, but on the 2 reporting dates the truth is revealed.

Since we bought Greencross Vets(ASX:GXL) (Vets and pet retailer) they have done well. Let’s have a look at what they’ve achieved in their results.

 

Greencross Vets (ASX:GXL) full year results ending 30th June 2016

All of these figures are taken directly from Greencross’ annual investor presentation and are comparing against the 2015 figures.

Total revenue up 14% to $733.7m
Gross profit margin up 1.3% to 55.7%
‘Underlying’ Earnings/Profit per share up 8%
Dividends per share up 9%
Net debt decreased by $6m to $228m

 

Initial thoughts

The total revenue increasing by 14% is pleasing as the biggest part of their business is pet retailing – there aren’t many retailers increasing their sales convincingly at the moment.

The expansion of their vet and retail businesses profit margin is encouraging, as it shows their economy of scale is having more effect – they will earn more gross profit for each dollar they earn – which should help future net profits and dividends.

Sustainable dividend increases are one of the main things we’re after when we invest, so Greencross’ 9% increase is very welcome.

Over the past several years Greencross has been expanding its business by buying the Petbarn chain, Cityfarmers (another pet retailer), opening stores and acquiring vet practices. This expansion meant their debt increased each year. Greencross is still expanding, but now they’re funding the growth with their own profits and paying down debt. This is highly encouraging because Greencross’ balance sheet should just become more secure each year going forwards. A decrease of $6m isn’t much compared to the total, but it’s a great signal of what’s to come.

 

Investment breakdown

If you’d like to see Greencross’ dividends over the last few years, check out their ASX and dividend page (which is one of resources we use when checking out stocks)

Here is a graph showing the yield we’re receiving on our initial 115 shares of Greencross Vets:

greencross-asx-gxl-dividends-down-under-dividend-yield-on-cost

We’re happy with that growth; it’s showing that we are earning extra income without extra effort or investment.

 

What other things did Greencross report?
They reported that the co-location stores (a vet inside a petbarn) are performing even better than expected. So they aim to open a further 15 dual-stores during the next financial year.

They recently launched their own private label food brand (‘leaps and bounds’) – this is a great strategy as it means Greencross will receive more of the sale money, rather than their suppliers. This private label now accounts for over 20% of their Australian retail sales, so it’s really helping.

On a charitable note, during this financial year Greencross saved the life of 6,000 animals and raised $2.5m for the RSPCA, Seeing Eye Dogs Australia and other charities.

 

Final thoughts

The number of Australian pets continues to climb roughly in line with Australia’s human population. With Greencross aiming (and growing) to capture 20% of the increasing pet market, we take this as a promising sign for future Greencross profits and dividends.

They will have to watch out for any online-only competition to their retail business though, as well as the newly listed National Vet Care (ASX:NVL) as a competitor to their veterinary business.

We generally aren’t fans of retail businesses, but Greencross is a market leader that gives our portfolio some good diversification in a growing industry.

 

Thanks for reading this article about our investing journey Down Under.

Onwards and upwards!

2 thoughts on “Shareholding Review: Greencross (ASX:GXL) 2016 Results

  1. ADI

    Im always jealous of your yield on cost graphs! Dividend increases everywhere!

    I think about investing in this company everytime one of my friends buys organic dog food or $100 collars for their dogs. Crazy what people will do for their pets nowadays… truly a family member. Such a great demographic tailwind to have behind the company.

    Reply
    1. Dividends Down Under Post author

      Dividend increases are awesome indeed 🙂

      You’re right, the pet is becoming more integral to the family and we’re willing to spend more on them. Plus as the population increases and the pets per person ratio increases too..all points to good things 🙂

      Mr DDU

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *