Greencross under the weather, vet business and impairments to blame

Greencross under the weather, vet business and impairments to blame

Poor performance in its veterinary business and forewarned exceptional costs have drained Greencross' (ASX: GXL) profits in FY18.

The pet product retailer and veterinary specialist realised $24.2 million worth of impairments across areas including projects, investments, store assets and provisions.

In the second half alone, Greencross paid $22.6 million in one-off costs including $2.5 million for restructuring the business. Total statutory profit dropped by 51 per cent to hit $20.7 million.

Underlying earnings in the Australian veterinary segment fell 17 per cent at $24.6 million, a result which Greencross managing director and CEO Simon Hickey says is underwhelming.

"The performance of our veterinary business during FY18 was disappointing," says Hickey.

"Several initiatives are now in place to improve the performance of our veterinary division including a comprehensive marketing program to introduce retail customers to our Healthy Pets Plus wellness program, better labour rostering and the introduction of a new vet incentive program."

Group retail, which is comprised of Petbarn and City Farmers in Australia and the Animates brand in New Zealand, contributed more than 70 per cent of company revenue and delivered 5.1 per cent like-for-like sales growth in FY18.

It was the lifeline the company needed to raise its total sales revenue margin by 7 per cent to $878.7 million.

"Our Australian and New Zealand retail businesses have continued to perform well," says Hickey.

"We will continue to broaden our range across different products and extend our private label offering into premium categories like fresh and frozen."

Going into FY19 the company plans to grow its online retail channels across both the retail and veterinary businesses.

It also plans to build on its pet wellness programs which will operate on an annual subscription basis in the coming financial year.

"This is a key strength of Greencross' business model and we have an enormous opportunity to leverage this growing and engaged membershipbase," says Hickey.

During early trade, Greencross shares rose 9.2 per cent to hit $4.62 at the time of writing (10:30am AEST).

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