Shares in integrated veterinary practices company CVS (CVSG:AIM) hit an all-time high on Thursday, surging 6.5% to £26.55 after reporting full year growth in revenues and profit ahead of market expectations.
The company said that strong growth had continued with revenues growing 17.5% in the first two months of the new financial year with like-for-like growth accelerating to 14.4% compared with 3.9% last year, although this included a 4% price increase in July.
For the full year to 30 June, revenues climbed 19.2% to £510.1 million with like-for-like growth of 17.4%, as the company benefitted from a favourable market backdrop with pet ownership increasing over the year.
EARNINGS BEAT
Operating leverage in the business and tight control of costs led to pre-tax profit surging by 234.3% to £33.1 million.
Adjusted earnings per share grew 78.8% to 75.1p, which was around 8% better than analysts’ consensus expectation of 69.7p according to Refinitiv data.
The company added 15 new locations, spending £20 million on acquisitions in the year while a further eight have been made since the period end.
While acquisitions remain a key part of the company’s growth strategy, organic growth has also been a focus as more services are rolled out across the group’s practices.
NETWORK EFFECT
Analysts at Peel Hunt noted that CVS has been a pioneer in developing a broad-based business with the addition of crematoria services, diagnostic labs, in-house specialist referrals and e-commerce.
The broker believes this aspect of the business model gives CVS the potential to create a network effect whereby it becomes more attractive to third parties.
Following today’s positive update and confident outlook, Peel Hunt increased estimates for pre-tax profit by 3% for 2022 and 2023 to £72.6 million and £78.1 million respectively.
