- First half profit up 13.5%, like-for-like sales up 7.5%
- Increased borrowing facilities on improved terms
- Market remains resilient
Integrated veterinary services provider CVS (CVSG:AIM) confirmed first half revenue grew 8.2% to £296.3 million, while adjusted pre-tax profit jumped 13.5% to £41.1 million reflecting higher margins.
With the key numbers already disclosed in the 26 January trading update, the main takeaway is that the group has successfully refinanced its borrowing facilities at the same margin on improved commercial terms to support future growth.
Total borrowing facilities have increased from £170 million to £350 million comprising a £87.5 million fixed term loan and a £262.5 million revolving credit facility. Both have a four-year term with an optional one-year extension.
GROWTH AMBITIONS
Berenberg said the refinancing reflects the scale of the company’s ambition considering plans revealed at the November 2022 capital markets day to double adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) over the next five years.
‘We believe making this move now reflects the scale of the company’s ambitions, and its potential acquisition appetite,’ said Berenberg.
‘Given that we believe the business will generate circa £65 million of free cash flow (excluding growth capex) this year and next, and that it has announced ambitions to spend an annual £30 million to £50 million on further growth capex, and >£50 million per annum on M&A, an additional circa £300 million of financial firepower implies a much more aggressive pace of acquisitions over the years to come, and thus also indicates further upside to forecasts.’
A ROBUST FIRST HALF
Acquisitions remain a key leg of the company’s growth strategy and during the first half it added five practices for an aggregate consideration of £24.4 million and a further three have been completed in the second half taking the spend to £35.3 million.
Like for like sales grew 7.5% which is within the group’s target range of between 4% and 8% but below the 9.6% notched-up in the first half of 2021.
Management said the market remained ‘robust’ with pet owners willing to continue spending on high-quality care because of increased ‘humanisation of pets’ developed during the pandemic.
Looking forward the robust first half has continued giving the board confidence in meeting full year expectations.
CEO Richard Fairman commented: ‘Demand for our services remains strong, notwithstanding a challenging macroeconomic environment and I am pleased to report H1 2023 results are in line with expectations, and we are on track to deliver continued growth.’
The shares dipped 0.5% to £19.03 on Friday and have risen 17% over the last year.
