Transcription of Finance News Network Interview with Greencross Limited (ASX:GXL) CEO, Jeffrey David
Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from veterinary services company, Greencross Limited
(ASX:GXL) is its CEO, Jeffrey David. Jeff welcome to FNN.
Jeffrey David: Thank you very much.
Lelde Smits: Could you start by introducing the Company. What services do you provide and what’s your current footprint across Australasia?
Jeffrey David: Greencross Limited is a company that’s privileged to serve two million pet owning families, throughout Australia and New Zealand. We have a full suite of services that we supply through our almost 300 outlets, from veterinary support to retail support, crematoriums believe it or not to help people to say farewell, pathology support; everything that you need for your pet, we can offer.
Lelde Smits: What value would you put on the pet care industry and, what slice does Greencross currently have of the market?
Jeffrey David: It’s a very big industry, it’s a $7 billion industry. This year with the merger that we experienced with Mammoth Pet Holdings Pty Limited, which was a retail business, our Petbarn stores, and Greencross Limited saw us extend our addressable market from $2 billion to $7 billion. And we believe as a consequence of that activity that we have 7.5 per cent market share and a lot of growth opportunity.
Lelde Smits: As you mentioned, Mammoth Pet Greencross completed its merger in February this year. How has the merger changed Greencross as a company?
Jeffrey David: What Mammoth did was enable Greencross to provide another platform of support for pet families. So not only did we have our Greencross vet clinics and our emergency centres, and our speciality centres to support the needs of those families, but we now also have retail stores, grooming salons, dog wash centres. So it enabled us to deepen the level of engagement that we could have with pet parents.
Lelde Smits: Greencross has also just tied up the acquisition of City Farmers in July. What was the rationale behind the transaction and, how do you expect to benefit from the asset?
Jeffrey David: The rationale for the acquisition of City Farmers was to extend our footprint further, so that we could support more Australian families with their pet needs. It gave us access to 42 stores of which 21 of those added very, very substantially to our network in Western Australia, which is an important market for us and one that we were underweight in. The other thing for City Farmers, it will add $120 million worth of revenue and about $20 million worth of EBITDA. So it’ll be strongly earnings per share accretive.
Lelde Smits: To your financials, the Company has just delivered its annual earnings report. Where did you achieve growth and which divisions supported your earnings?
Jeffrey David: We achieved growth across the board. We had an incredible transformational year, growing the number of outlets that we served consumers with from 93 to over 240. At the same time, we delivered a 28 per cent earnings per share growth. And right across all of our divisions, we saw very strong underlying revenue growth with like for like in our retail business in Australia, at 7.1 per cent and in our vet business 5.5 per cent. So it’s a record we’re proud of.
Lelde Smits: Could you explain what caused the $130 million impairment impacting your statutory result?
Jeffrey David: At the time that we agreed the merger between Mammoth and Greencross, the share price of Greencross was $5.50. In the time between the announcement and the completion of the transaction, the share price rose to over $8.00. And it’s that movement in the share price and the fact that the accountants had deemed that rather than be a takeover by Greencross of Mammoth, it was in fact a reverse acquisition where Mammoth purchased Greencross. Then that treatment, the reverse acquisition accounting and the movement in the share price, and the subsequent goodwill that was created from that, created an accounting impairment.
Lelde Smits: Finally Jeff, Greencross’ goal is to become Australasia’s pet specialist of choice. What do you hope to achieve over the current 2015 financial year?
Jeffrey David: Of course the key goal for us this year is to complete the integration of the City Farmers stores into our network. And to gain access to all of the synergies that we identified through the Mammoth Greencross merger, and deliver on those. As well as acquiring additional vet practices as they become available, to support our goal of $20 million in additional revenue and to open upwards of 15 retail stores. So we’re going to be very focused on growth again, our target as we’ve identified or guided the market is for 36 cents a share, which will take our 24 cents up by 50 per cent. So another good solid year for us.
Lelde Smits: Jeffrey David, thank you for the update from Greencross.
Jeffrey David: Thank you Lelde.
Ends
