Shares in veterinary services group CVS (CVSG:AIM) slump 13.2% to 630.5p on the disappointing news soaring rates for temporary veterinary staff and other rising costs are hurting its margins.
CVS says earnings before interest, tax, depreciation and amortisation (EBITDA) margins will be lower than last year as it is relying more on temporary staff despite lower vacancy rates.
Unfortunately for CVS, skilled and temporary veterinary surgeons come at a high price. Day veterinary locum rates are currently 14% above the same period last year.
STRONG GROWTH IN VETERINARY PRACTICES
The good news is all divisions are delivering growth in revenues with overall like-for-like sales climbing 4.7% in the four months to 31 October compared to the same period of 2017.
In the company’s biggest division representing nearly 90% of sales, Veterinary Practices, like-for-sales grew 3.8%.
The Healthy Pet Club continues to attract new members keen to take advantage of loyalty benefits, regular health checks and discounts on pharmaceutical products.
IS CVS A POTENTIAL TAKEOVER TARGET?
Acquisitions are a key part of CVS' growth strategy and several more are expected to complete over the next couple of months as the company consolidates a fragmented industry, although persisting share price weakness could stoke speculation that CVS itself may become a takeover target.
Here in August, we considered whether the long-term predator could become prey, noting that Whiskas pet food owner Mars Petcare had acquired UK services group Linnaeus and BC Partners had bought VetPartners.
