- Pets at Home shares drop 5%
- CVS Group shares gain 3%
- Vet services market £5 billion
Shares in pet care supplier Pets at Home (PETS) were down 5% to 265p in morning trading as the CMA (Competition and Markets Authority) confirmed it would launch a full investigation into the veterinary services sector.
In contrast, shares in veterinary practice operator CVS (CVSG:AIM) were up nearly 3% in morning trading to £10.66.
Commenting on the different reaction, AJ Bell investment director Russ Mould said: ‘A lot of bad news about a probe into the vet sector has already been priced into CVS shares, hence the muted reaction to today’s update that a formal market investigation will take place.’
CONSUMER CONCERNS
Last September, the CMA carried out an initial review which prompted 56,000 responses from pet owners and people working in the vet industry.
In March, the regulator outlined its concerns, which were: consumers weren’t getting the information they needed, there was a limited choice of vet businesses and the regulatory framework was preventing the market from functioning ‘as well as it could.’
The CMA also gave the following tips to pet owners: look further for the closest vet, ask if there are other treatment options, and if it is not urgent consider buying medication elsewhere.
Martin Coleman, inquiry group chair, said: ‘The vet services market is worth an estimated £5 billion a year and provides a necessary service to pet owners so it’s right that we fully investigate competition concerns – this matters to businesses, veterinary professionals and crucially, the 16 million households in the UK who have pets.’
EXPERT VIEW
Analysts at Liberum are positive on the veterinary sector as a whole but cautious on Pets at Home shares.
In a research note published prior to the CMA's latest announcement, they said: ‘In Vets, we like the very strong momentum, positive profit trajectory, growing cash generation and defensiveness of the division. We think it is well positioned against the five main potential concerns raised by the CMA and the proposed formal market investigation. But the shares have not performed well reflecting the lack of profit growth.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Ian Conway) own shares in AJ Bell.
