- Solid full-year revenue and profit growth
- Acquisitions continue despite CMA investigation
- Shortage of UK vets continues
There was some relief for investors in integrated veterinary services provider CVS (CVSG:AIM) on Thursday as full-year sales and profit came in broadly in line with analysts’ expectations.
The shares gained 4% to £15.63 but remain around 26% below where they traded before the CMA (Capital Markets Authority) launched an investigation (6 September) into the UK pet industry.
HOW DID THE BUSINESS PERFORM?
Revenue for the year to 30 June increased by 9.8% to £608 million driven by a 7.3% increase in like-for-like sales which was at the upper-end of company guidance (4%-8%).
The firm added 6.5% more vets on average during the year but flagged constrained supply across the industry.
Liberum noted that a shortage of qualified staff had resulted in average annual price increases across the industry of 22%, 9% and 12% respectively over the last three years.
Importantly for the CMA review, Liberum also noted that price rises across independent and corporately-owned practices were not that different.
‘Unlike some other industries, price increases haven’t been solely about lining the pockets of the corporate owners and this is clearly evidenced by the longer-term trend in CVS’ EBITDA (earnings before interest, tax, depreciation and amortisation) margin.’
Adjusted pre-tax profit came in 13% higher at £85.4 million.
STEADY START TO NEW YEAR
The company said current trading was in line with market expectations and it was on track to deliver on medium-term targets.
It has seen healthy growth in Healthy Pet Club membership to 494,000 representing 40% of the companion animal client base.
The acquisitive firm said it had a healthy pipeline of additional opportunities in the UK and Australia, which it entered in July. It has acquired two further UK practices and now runs seven practices in Australia.
The company said the UK deals were made following submission papers to the CMA. Analysts at Berenberg said this showed the regulator implicitly approved the deals, demonstrating ‘the market for UK acquisitions is not dead’.
Referring to the CMA review, Berenberg said: ‘we expect a focus from the regulator (if any) on so-called “sunlight remedies”, focused on greater quality consumer information and price transparency.’
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