REG - CVS Group plc - Final results for the year ended 30 June 2024
26/09/2024 07:00
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RNS Number : 7767F CVS Group plc 26 September 2024
For Immediate Release
26 September 2024
CVS GROUP plc
("CVS", the "Company" or the "Group")
Final results for the year ended 30 June 2024
Robust results with good progress made in strategic move into Australia
CVS, the UK listed veterinary group and a leading provider of veterinary
services, is pleased to announce its final results for the year ended 30 June
2024 ("2024").
Financial Highlights(1)
· Revenue from continuing operations increased 9.9%, to £647.3m
(2023: £588.9m)
· Group like-for-like(2) sales increased 2.9% (2023: 7.3%), below
our stated ambition of 4%-8% due to a combination of softer demand given wider
publicity around the veterinary sector and the continued cost of living
pressures, the impact of the cyber incident announced on 8 April 2024, and
disruption from the accelerated migration of our practice management system to
the cloud
· Underlying like-for-like(2) sales growth was estimated to be 4.1%
(unaudited) after excluding the impact of disruption from the cyber incident
and cloud migration
· Adjusted EBITDA(3) growth of 4.7%, to £127.3m (2023: £121.6m),
through acquisitions, a continued focus on the provision of high-quality care,
and net Research and Development Expenditure Tax Credits of £12.8m (2023:
£9.6m)
· Profit before tax on continuing operations decreased by 37.1%, to
£38.2m (2023: £60.7m) due to an increase in business combination costs,
finance expense and depreciation from investments made, and £5.8m of
exceptional costs in relation to the cyber incident, cloud migration and the
Competition and Markets Authority (CMA) process
· Statutory profit for the year decreased 84.7% to £6.4m (2023:
£41.9m) after recognising a loss of £20.0m on disposal of the discontinued
Netherlands and Republic of Ireland operations
· Leverage(7) increased to 1.54x (2023: 0.73x) as a result of the
increased strategic capital and acquisition investment, comfortably within our
stated guidance of <2.0x leverage
· Operating cash conversion(8) decreased 4.4ppts to 70.5% (2023:
74.9%) in line with our 70%+ guidance
· The Board is maintaining its progressive dividend policy and
recommending the payment of a final dividend of 8.0p per Ordinary share (2023:
7.5p), reflecting the short-term nature of current headwinds and the Board's
confidence in the long-term outlook for the Group
· Debt facilities successfully extended in January 2024 for a
further year, with committed funds of £350m through to February 2028 with
margin and covenants unchanged
£m except where stated 2024 2023(1) Change %
Revenue 647.3 588.9 9.9%
Group like-for-like ("LFL") sales growth (%)(2) 2.9% 7.3% -4.4 ppts
Estimated Underlying Group LFL sales growth (unaudited) (%)(2) 4.1% 7.3% -3.2 ppts
Adjusted EBITDA(3) 127.3 121.6 4.7%
Adjusted EBITDA(3) margin (%) 19.7% 20.6% -0.9 ppts
Adjusted profit before tax(4) 82.7 87.9 -5.9%
Adjusted earnings per share(5) (p) 86.6 98.9 -12.4%
Operating profit 50.8 68.4 -25.7%
Profit before tax 38.2 60.7 -37.1%
Profit for the year (after loss on discontinued operations) 6.4 41.9 -84.7%
Basic earnings per share (p) 8.6 58.8 -85.4%
Net bank borrowings(6) 168.0 74.0 127.0%
Final dividend (p) 8.0 7.5 6.7%
Notes
1 2023 numbers have been re-presented following the classification of the
Netherlands and the Republic of Ireland operations as discontinued operations.
2 Like-for-like sales shows revenue generated from like-for-like operations
compared to the prior year, adjusted for the number of working days. For
example, for a practice acquired in September 2022, revenue is included from
September 2023 in the like-for-like calculations. Underlying like-for-like
sales is explained further in the Financial Review below.
3 Adjusted EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) is profit before tax adjusted for interest (net finance
expense), depreciation, amortisation, costs relating to business combinations,
and exceptional items. Adjusted EBITDA provides information on the Group's
underlying performance and this measure is aligned to our strategy and KPIs.
4 Adjusted profit before tax is calculated as profit before amortisation,
taxation, costs relating to business combinations, and exceptional items.
5 Adjusted earnings per share is calculated as adjusted profit before tax less
applicable taxation divided by the weighted average number of Ordinary shares
in issue in the year.
6 Net bank borrowings is drawn bank debt less cash and cash equivalents
7 Leverage on a bank test basis is net bank borrowings divided by 'Adjusted
EBITDA', annualised for the effect of acquisitions, deducting cost in relation
to acquisition fees and adding back share option costs, on an accounting basis
prior to the adoption of IFRS 16.
8 Operating cash conversion is defined as cash flows from operating activities
adjusted for discontinued operations, acquisition fees and contingent
consideration paid, less lease liability repayment and maintenance capital
expenditure; divided by adjusted EBITDA.
Successful expansion in Australia with foundations laid for further organic
growth
· Entry into the Australian veterinary service market with 22
acquisitions of 28 practice sites in the financial year for total
consideration of £82.5m. Practices performing fully in line with business
cases with additional purchasing synergies identified and agreements in place
with preferred laboratory and crematoria suppliers
· Investment in our UK facilities and equipment, with total capital
expenditure of £43.1m including the rollout of a new cloud-based practice
management system operational in 375 practice sites. This investment will
improve client engagement and lay the foundation for new revenue streams,
primarily from increased pet food sales
· Improved retention and a 5.8% increase in the average number of
vets employed in the year (10.7% including acquisitions)
· Acquired a further five practices in the UK (six practice sites)
for consideration of £12.7m
· Divested the sub-scale and loss making Netherlands and Republic
of Ireland operations
· Improvement in Sustainability and ESG as set out in our third
standalone Sustainability Report
· Continued success of our Healthy Pet Club preventative healthcare
scheme, with growth of 2.9% to 503,000 members (2023: 489,000)
Outlook
· Fundamentals of the veterinary sector remain strong, and CVS is
well positioned to deliver attractive growth in shareholder value over the
medium term
· The Group continues to face short term headwinds in the UK from
softer demand and the ongoing CMA process
· Capitalising on significant expansion opportunity in Australia
with two further practice acquisitions completed in the new financial year to
date for initial consideration of £5.3m, contracts exchanged for a further
two acquisitions and a healthy deal pipeline. Strong management team in
place in country and purchasing synergies expected to deliver upside from
business cases. As at 30 August 2024, leverage is less than 1.5x.
· The Group continues to support the CMA in their Market
Investigation with the CMA Panel Members visiting two practices in July 2024
and responses submitted to a number of detailed requests for information
· Whilst the Board remains mindful of short-term headwinds in the
UK, the fundamental need for high quality veterinary care remains strong, and
the expansion strategy into Australia is progressing well therefore the Board
is comfortable with consensus estimates for FY25.
Richard Fairman, Chief Executive Officer, commented:
"We have faced a number of challenges in the past financial year with our
financial results adversely impacted by the cyber attack, the subsequent
migration to a new cloud based practice management system and the impact from
the CMA Market Investigation announced in May 2024. Notwithstanding this,
the fundamentals of the sector remain strong and we have laid the foundations
for future growth.
We successfully entered the Australian veterinary services market with 24
practices (31 practice sites) acquired to date, and CVS' reputation
established as an organisation that focuses on people and the provision of
appropriate care to our clients and their animals. I am delighted to welcome
colleagues from all our newly acquired practices to the Group.
In line with our stated strategy, we continue to invest in our UK practice
facilities and equipment and have progressed our technology transformation
with 375 of our 430 UK practices now operating on our new cloud-based practice
management system. We also established a new clinical governance framework
in the year which reflects our commitment to drive standards within the
profession, and to support our clients in providing appropriate care to their
animals.
I am privileged to lead a team of outstanding colleagues who care passionately
about our clients and their animals under our care. I would like to take
this opportunity to thank them all for their commitment and dedication and I
look forward to delivering further growth in 2025 and beyond."
Results webcast
An audio webcast and presentation of these results will be available on
https://stream.brrmedia.co.uk/broadcast/66be0e31ef33bcf5ad2914ab
(https://url.uk.m.mimecastprotect.com/s/fCLnCGwBxuJQ4xjuKXAbE?domain=stream.brrmedia.co.uk)
from 07.00am on 26 September 2024.
A Q&A for analysts and investors will be held today at 09.00am at
Berenberg, 60 Threadneedle St, London EC2R 8HP, attendance is by invitation
only. To access a live streaming of the event, please click of the following
link https://brrmedia.news/CVS_PR_24 (https://brrmedia.news/CVS_PR_24)
Those wishing to participate in the Q&A session remotely should email
CVSG@camarco.co.uk for call details.
Contacts
CVS Group
plc
via
Camarco
Richard Fairman, CEO
Robin Alfonso, CFO
Paul Higgs, Chief Veterinary Officer
Peel Hunt LLP (Nominated Adviser & Joint
Broker)
+44 (0)20 7418 8900
Christopher Golden / James Steel / Andrew Clark / Lalit Bose
Berenberg (Joint
Broker)
+44 (0)20 3207 7800
Toby Flaux / Ben Wright / James Thompson / Milo Bonser
Camarco (Financial
PR)
Ginny
Pulbrook
+44 (0)7961 315 138
Geoffrey
Pelham-Lane
+44
(0)7733 124 226
About CVS Group plc (www.cvsukltd.co.uk)
CVS Group is an AIM-listed provider of veterinary services with operations in
the UK, and Australia. CVS is focused on providing high-quality clinical
services to its clients and their animals, with outstanding and dedicated
clinical teams and support colleagues at the core of its strategy.
The Group now operates c.460 veterinary practices across its two territories,
including specialist referral hospitals and dedicated out-of-hours sites.
Alongside the core Veterinary Practices division, CVS operates Laboratories
(providing diagnostic services to CVS and third-parties), Crematoria
(providing pet cremation and clinical waste disposal for CVS and third-party
practices) and an online retail business ("Animed Direct").
The Group employs c.9,000 personnel, including c.2,400 veterinary surgeons and
c.3,300 nurses.
Chair's statement
Cultivating a strong culture
Introduction
This is my first statement as Chair having been appointed on 1 May 2024 two
months before the financial year end. I must express my profound thanks to my
two predecessors who held office during the year. Richard Connell had to step
down for reasons of ill health in October 2023 having provided wise counsel
and leadership for 16 years. He made a significant contribution to the success
of CVS and we wish him all the best for the future. Deborah Kemp stepped in to
act as Interim Chair in these circumstances at an eventful time for the Group
and oversaw the recruitment process that led to my appointment as Chair after
just over two and a half years as a Non-Executive Director.
The fundamentals of our sector remain very strong with an increased population
of pets post the COVID-19 pandemic, with pet life expectancy increasing and
the humanisation of pets resulting in owners generally willing to spend on
veterinary care for their animals albeit subject to the cost of living
pressures being widely experienced. I look forward to our next phase in
delivering growth in both shareholder and client value.
Whilst CVS is a great business with strong long-term prospects and great
people, we are facing short to medium-term headwinds with the cyber incident
in March, announced on 8 April 2024, and the ongoing process with the
Competition and Markets Authority (CMA).
We have had another successful year in which we have increased investment in
future growth and in particular have successfully entered the Australian
veterinary services market. Shortly before the year end, we made a strategic
decision to divest our sub-scale and loss making operations in the Netherlands
and the Republic of Ireland (ROI).
In November 2022 at our Capital Markets Day, we outlined our updated five-year
plan in support of our growth strategy with continued focus on organic growth
and on investment in people, practice facilities, clinical equipment and
technology and further acquisitions in the UK and overseas. This strategy
remains valid, although we are de-emphasising acquisitions in the UK for the
time being and focusing our efforts on acquisitions in Australia.
I would like to thank all CVS colleagues for their continued professionalism
and commitment in providing great care to our clients and their animals and I
also thank all our stakeholders for their ongoing support.
Solid financial performance
We have delivered another positive set of financial results with increased
revenue and adjusted EBITDA, strong operating cash conversion and continued
balance sheet strength.
Revenue for the financial year for continuing operations increased by 9.9% to
£647.3m (2023: continuing operations £588.9m). The like-for-like increase
after adjusting for the effect of acquisitions and disposals was 2.9%.
Adjusted EBITDA for continuing operations increased by 4.7% to £127.3m (2023:
continuing operations £121.6m) after recognising net Research and Development
Expenditure Tax Credits of £12.8m (2023: £9.6m). Profit before tax decreased
by 37.1% to £38.2m (2023: continuing operations £60.7m) with adjusted EPS
decreasing by 12.4% to 86.6p (2023: 98.9p) and basic EPS decreasing by 85.4%
to 8.6p (2023: 58.8p). In the year, we divested of our sub-scale operations in
the Netherlands and ROI, resulting in a loss on discontinued operations of
£20.0m. As a result we reported profit for the year of £6.4m, a reduction of
84.7% from £41.9m.
Cash generated from operations decreased by 5.7% to £101.8m (2023: £107.9m).
In accordance with our strategy, we have continued to invest in growth; as a
result, net debt increased to £164.8m (2023: £70.7m) and leverage increased
to 1.54x, from 0.73x.
Strategic progress
Our strategy, purpose and vision remain underpinned by our four strategic
pillars: to recommend and provide the best clinical care every time; to be a
great place to work and have a career; to provide great facilities and
equipment; and to take our responsibilities seriously.
We have continued to invest in practice facilities, clinical equipment and
technology with capital expenditure of £43.1m in the financial year (2023:
£45.7m). We completed 16 property relocation and refurbishment projects in
the year.
We acquired 22 veterinary practices (comprising 28 practice sites) in
Australia and five veterinary practices (comprising six practice sites) in the
UK in the year for initial cash consideration of £95.2m.
At the heart of our growth ambitions is our vision to be the veterinary
company people most want to work for. We have taken further positive steps in
the year to provide additional support to our colleagues including launching
our new values to cultivate a culture where high clinical standards thrive,
expanding our network of Wellbeing Champions and first aiders for mental
health to 470 and promoting events such as the CVS Distance challenge, which
saw nearly 1,000 colleagues travelled close to 100,000 miles over a four-week
period.
Governance and the Board
We remain committed to the highest levels of corporate governance and, as an
AIM-listed group, we voluntarily adopt the UK Corporate Governance Code 2018.
Aside from the changes to the Chair previously referred to, there were further
developments - all of which have been previously announced. On 1 July 2023,
Joanne Shaw was appointed as a new Non-Executive Director and Ben Jacklin
resigned on 18 June 2024, leaving the Board on 8 July 2024. After the year
end, on 25 July 2024, Paul Higgs joined the Board as Chief Veterinary Officer
and Joanne was appointed Chair of the Audit Committee to succeed me in that
role.
We continue to review the composition of the Board in order to ensure that we
have the right balance of skills and experience.
We want to ensure that the Board's time and expertise is utilised to support
the strategic development of the Group. We consider updates on developments in
the profession and market trends. The Board takes its governance
responsibilities very seriously. The structures and processes we have in place
are summarised in this Annual Report. We place strong emphasis on
Environmental, Social and Governance matters to ensure we have the right
framework in place to enable our business to operate in a sustainable and
responsible way.
Dividends
In recognition of our confidence in the outlook, the Board is recommending the
payment of a final dividend of 8.0p per Ordinary share (2023: 7.5p). Subject
to shareholder approval at the Annual General Meeting to be held on 20
November 2024, the dividend will be paid on 29 November 2024 to shareholders
on the register at the close of business on 1 November 2024. The ex-dividend
date is 31 October 2024.
Shareholder engagement
The Board engages actively with existing and potential new shareholders.
The Executive Directors attended a number of investor conferences and meetings
in the UK, the US, Canada and Europe during the financial year and all
Directors make themselves available to meet with investors on request. I spoke
with a number of our larger shareholders following my appointment as Chair and
have continued to have further contact thereafter.
Outlook
The financial performance achieved in the past financial year, and our clear
strategy for future growth, positions CVS well to benefit from the sizeable
and growing veterinary services market and the continued humanisation of pets.
I look forward to reporting on further success in the future.
David Wilton
Chair
26 September 2024
Chief Executive Officer's review
Foundations laid for further long-term sustainable growth
Introduction
The past financial year has seen further growth in line with the strategy we
announced in 2022. We entered the Australia veterinary services market in July
2023 and have successfully established CVS's reputation there with our focus
on people and clinical care. We have continued to invest in our UK practice
facilities and equipment and have progressed our technology transformation
with the majority of our UK practices migrating to our new cloud-based
practice management system from which we expect to reap great efficiencies and
unlock further growth opportunities.
We have also faced and managed a number of challenges with a cyber incident
leading to significant operational disruption in the final quarter and the
Competition and Markets Authority (CMA) in May 2024 announcing a market
investigation into the veterinary sector for household pets in the UK.
Throughout the successes and challenges, our outstanding colleagues have
continued to deliver great care to our clients and their animals and I would
like to use this opportunity to thank them for the passion, dedication and
commitment.
Financial performance
We delivered revenue from continuing operations of £647.3m, an increase of
9.9% over the prior year and adjusted EBITDA increased by 4.7% to £127.3m.
Profit before tax decreased by 37.1% to £38.2m following increases in
business combination costs, finance expense and depreciation as well as cloud
migration and the one-off costs associated with the cyber incident.
Following our entry in Australia at the beginning of the year, we completed 22
acquisitions comprising 28 practice sites for consideration of £82.5m. We
further expanded our UK operations with five acquisitions of six practice
sites for consideration of £12.7m.
We made further investments in our facilities, equipment and technology to
support growth with total capital expenditure of £43.1m (2023: £45.7m).
We also made the strategic decision to divest our sub-scale and loss making
operations in the Netherlands and Republic of Ireland, reporting a loss on
discontinued operations of £20.0m, of which £14.5m is a non-cash loss on
divestment.
Operating cash conversion of 70.5% is in line with our stated target of c.70%.
Our bank facilities were successfully extended in the year with committed
facilities through to 22 February 2028.
In light of our increased investment, net debt has increased to £164.8m and
leverage to 1.54x.
Our five year plan
2024 marked further progress against our plan to double adjusted EBITDA over
five years, as outlined at our Capital Markets Day held November 2022:
Ambition 2024 performance
Organic revenue growth of 4% to 8% per annum 2.9% like-for-like sales(1) growth. Adjusting for the operational disruption
caused by the cyber incident and subsequent rollout of our cloud-based
practice management system, like-for-like growth is estimated to be 4.1%2
(unaudited)
Margin expansion through investment - adjusted EBITDA margins 19% to 23% 19.7% adjusted EBITDA margin
Investment in practice facilities, clinical equipment and technology to £43.1m invested in capital expenditure to improve practice and clinical
deliver organic growth facilities, improve technology, support the retention and recruitment of vets
and ultimately deliver great clinical care
Acquisitions subject to disciplined criteria for returns and earnings 27 acquisitions completed in the financial year for combined initial
accretion consideration of £95.2m
Organic operating cash conversion of > 70% for the full year 70.5% operating cash conversion(1)
Leverage remaining < 2.0x 1.54x leverage(1) as at 30 June 2024
1. Definitions and reconciliations for financial measures are shown on page
107 of the FY24 Annual Report.
2. Further information on underlying like-for-like is shown on page 108 of the
FY24 Annual Report.
Capital allocation
We have a healthy balance sheet and strong free cash flow which underpins our
opportunity for disciplined investment in growth
Healthy balance sheet and strong free cash flow
· Committed facilities of £350m to February 2028
· Operating cash conversion c.70%
· Strong free cash flow
Investment opportunities and dividends
· Investment capex: c.£30m-£50m pa
· Australia acquisitions: £50m pa subject to timing
· Progressive dividend policy: Shareholder returns
Disciplined approach
· Leverage < 2.0x
· Disciplined investment: IRR of > c.10.0%
· Progressive dividend policy: Shareholder returns
Strategic update
Our purpose to give the best possible care to animals and our vision to be the
veterinary company people most want to work for are underpinned by four clear
strategic pillars: to recommend and provide the best clinical care every time;
to be a great place to work and have a career; to provide great facilities and
equipment; and to take our responsibilities seriously.
To recommend and provide the best clinical care every time
We launched, as an industry first in the UK, a new Clinical Governance
Framework through which we will continue to understand what matters to our
clients and deliver high-quality clinical care. This framework focuses on
providing appropriate care in response to each client's requirements.
We continue to encourage our clinicians to advance the knowledge of the
profession and as part of our Clinical Research Awards, we are funding a
number of research projects across companion animal, farm and equine. This
focus includes funding in support of our colleagues and we have enhanced our
offering this year, with all CVS residents now receiving up to £5,000 to
support the research required as part of their board accreditation.
To be a great place to work and have a career
Our colleagues remain at the core of our business and we remain focused on
providing career development and support.
We launched a new nurse career pathway in October 2023 which is aimed at
supporting our nurses in having long-term fulfilling careers. We continued our
focus on recruitment and we have seen an increase in the average number of
vets we employed in 2024 of 5.8% (10.7% including acquisitions) and nurses of
2.3% (6.4% including acquisitions).
To provide great facilities and equipment
As part of our clinical and people focus, we are investing in our practice
facilities and clinical equipment. In 2024, we invested £43.1m in capital
projects, completing 16 refurbishments and relocations. Our flagship
multi-disciplinary referral centre, Bristol Vet Specialists, which opened in
October 2023, allows us to provide the highest standards of care, including
advanced oncology treatment.
Following our cyber incident at the end of March 2024, we took the opportunity
to accelerate our rollout to a cloud-based practice management system and
invest in our related technology infrastructure. The pace of the rollout
naturally resulted in some short-term operational disruption, but I am pleased
that over 375 practices are now fully operational on this new platform which
will provide an opportunity for further growth.
To take our responsibilities seriously
Sustainability continues to be a key priority and I am pleased with the
progress we have made in the past year. Our expanded network of 312
Environment Champions continues to drive environmental improvements in our
practices. We have seen further improvement in reducing the volume of clinical
waste, re-using material where possible and recycling packaging.
In November 2023, we acquired Brimbank Vet Clinic, the first certified carbon
neutral veterinary practice in Australia, and the first for our Group. We are
working with Dr Jeremy Watson and his Brimbank team to learn from their
sustainable initiatives and to consider how these can be applied elsewhere
across the Group.
Disposal of Netherlands and Republic of Ireland
We took the difficult decision to divest of our Netherlands and Republic of
Ireland (ROI) operations, to a former colleague as disclosed on page 149 of
the FY24 Annual Report, given their sub-scale nature, the particular
challenges within these markets and the fact that they were loss making. We
completed the exit on 29 May 2024 with nominal cash consideration of €2.
These operations are shown as discontinued operations throughout this report.
Engaging with the Competition and Markets Authority (CMA)
Following the announcement of the CMA's investigation into the market for
veterinary services for household pets, we are supporting the CMA with their
process. We have held a "teach-in" session with the CMA panel and hosted them
in a visit to two of our practice sites. We have responded to a number of
detailed information requests and will continue to support them in their
process.
As a listed company, we are highly conscious of our responsibility to our
clients and their animals and to the veterinary sector as a whole. We are
committed to the highest standards of governance and voluntarily adopt the
Royal Colleague of Veterinary Surgeons (RCVS) Practice Standards Scheme (PSS),
allowing the RCVS to independently review our practices and our operations. We
have tracked this as a KPI since 2016 and more information can be found on
page 26 of the FY24 Annual Report.
We recognise the challenges that the CMA market investigation is presenting
for our colleagues, with negative press articles which at times have resulted
in difficult client encounters. We remain extremely proud of the dedication
and commitment of our colleagues in providing great care to animals and we
will continue to support them through the investigation.
We look forward to updates from the CMA over the course of the new financial
year.
Sustainability
We have published our third Sustainability Report which provides a detailed
update on our six focus groups, namely: Energy and Carbon, Waste, One Health,
People Development, Wellbeing and Equity, Diversity and Inclusion (EDI).
Since 2022, our ESG programmes have been galvanising a Company-wide effort
involving our people and our suppliers. Last year, we outlined the metrics
that we are targeting and I am pleased to see our considerable progress
towards becoming a sustainable company. I would like to thank our teams and
particularly our environment champions.
As part of our commitment to ensuring we focus on the material sustainability
issues for our stakeholders, in 2025 we are undertaking an enhanced
materiality assessment to ensure our focus continues to evolve with our
stakeholders' priorities.
Outlook
I was pleased with the underlying trading performance in the financial year to
30 June 2024 notwithstanding the short-term operational challenges of the
cyber incident and the resulting accelerated rollout of a new practice
management system.
I am excited by the opportunity ahead for CVS through continued investment in
the UK and through our expansion in Australia. With continued good operating
cash conversion and headroom in both our loan facility and leverage target, we
are well placed to complete further Australian acquisitions in 2025.
Whilst we continue to be mindful of cost of living pressures on household
incomes, we are confident that our strategy for growth focused on our people
and on high-quality clinical care positions us well to deliver further growth
over the coming years.
Our clients continue to seek high-quality care and we are fortunate to employ
such a talented team of colleagues who are passionate at providing the best
possible care to our clients and to their animals. I look forward to sharing
further success with them in 2025 and beyond.
Richard Fairman
Chief Executive Officer
26 September 2024
Clinical review
Clinical approach in CVS and the CVO role
CVS's core purpose is to deliver the best care for animals. This requires a
complex interaction between the needs of animal owners, the needs and welfare
of the animals themselves and how we as veterinary professionals use
knowledge, experience and evidence to support this process.
To achieve this balance, the role of Chief Veterinary Officer (CVO) is
critical. This role oversees clinical standards, sets out and supports the
strategy for continuous improvement of these standards and acts as a steward
at the interface of commercial and clinical outcomes.
To provide the transparency of how this process is undertaken, CVS published
the UK first in the profession Veterinary Clinical Governance Framework in
November 2023. This framework has three specific components.
1.
The definition of quality of care that we should expect to deliver. There are
six components to this which define that our care should be (1) Welfare
centred, (2) Contextualised, (3) Effective, (4) Equitable, (5) Efficient and
(6) Timely in nature.
2.
The values that underpin the behaviours needed to create the environment in
which continuous improvement can thrive. These five values are (1) Just
culture, (2) Accountability, (3) Inclusive leadership, (4) Teamwork and (5)
Systems thinking.
3.
Our six governance pillars which help us to identify areas of process that
need ongoing review. These six pillars are (1) Clinical Effectiveness, (2)
Research and Development, (3) Ethical Integrity and Sustainability, (4)
Information Sharing and Collaboration, (5) Education and Training, and (6)
Quality Improvement and Patient Safety.
Implementation of this framework is a continuous process and, to oversee the
strategy of this, the Chief Veterinary Officer chairs our Integrated Care
Council made up of a total of twelve representatives covering the critical
elements of the pillars.
An example of how we maintain good governance of our pillars is the Clinical
Advisory Committees. In Small Animal, there is a Committee of senior team
members; however, the decision-making process is supported by 13
discipline-specific working groups who review protocols, products and new
evidence that may benefit or improve the quality of care that we deliver.
Continuous improvement is the critical driving force in clinical governance
and our teams are supported to engage in clinical research projects and
quality improvement.
Our clinical research grants support £200,000 of clinical research projects
annually. Many of these are undertaken within our practices.
For example: we support a study to identify the prevalence of lungworm in the
South West. This has involved eleven practices and aims to analyse blood from
1,000 dogs. The information gained will help determine whether pre-operative
testing for lungworm improves patient safety.
In addition, we financially support research by universities through funding
post-graduate study. For example: we fund a PhD at the University of Bristol
which is evaluating the environmental impact of ectoparasite usage in pets.
These are examples of the many areas in which we take our responsibilities
seriously to improve animal welfare whilst also understanding what
implications these might have from a "One Health" perspective.
Our strategy is to be proactive and help our teams to understand what areas of
clinical care we believe our energies should be channelled into. By creating a
collaborative network, we are able to develop "whole system improvements"
where each team member, no matter where they are in the business, can
experience autonomy over engaging with our priorities whilst seeing how their
activities contribute to our overall goals.
Looking to the future, we are using our collaborative networks to focus on
antimicrobial stewardship. Each clinical division will have its own priority
areas of focus in either improving the responsible use of antibiotics or
infection control. Each region will create its own sub-focus with each
individual practice creating its own projects to engage with this.
Supported by our network of over 300 clinical improvement advocates, all
volunteers who have received additional training in clinical governance, our
practices can be truly engaged with our clinical improvement strategy. The
result of this will be sustainable, continuous improvement in the standards of
care that we deliver.
Paul Higgs
Chief Veterinary Officer
26 September 2024
Financial review
Continued progress against our plan to grow adjusted EBITDA over the next five
years
Financial highlights1
2024 marked further progress against our plan to double adjusted EBITDA over
five years, as outlined at our Capital Markets Day held November 2022 with
revenue growth of 9.9% to £647.3m (2023: £588.9m) and adjusted EBITDA growth
of 4.7% to £127.3m (2023: £121.6m).
During the year we made the strategic decision to dispose of our Netherlands
and Republic of Ireland (ROI) operations due to specific challenges in both
these markets and the sub-scale nature of the operations we had there. As such
we have re-presented our numbers to reflect the Netherlands and ROI as
discontinued in both the current and prior year. We wish all our former
colleagues well for the future.
Like-for-like performance was softer in the year increasing by 2.9% (2023:
7.3%) against a backdrop of a challenging economic environment and an ongoing
CMA process, as well as the COVID puppy and kitten boom being in their healthy
young adult stage requiring less veterinary care. As those young adults age we
expect the need for veterinary care to increase.
Like-for-like performance was also impacted by significant disruption from the
cyber incident (the incident) and subsequent decision to accelerate plans to
migrate to a new cloud-based practice management system. Comparing
like-for-like performance post the incident to performance in the period
immediately preceding the incident we estimate the disruption to have impacted
revenue by c.£7m and EBITDA by c.£5m (unaudited). Adjusted for this
underlying like-for-like sales growth is estimated to be c.4.1% (unaudited).
Costs directly relating to the cyber incident of £4.2m have been booked as
exceptional. The disruption from the incident itself was short lived. However,
the disruption from the move to a new practice management system continues as
our colleagues get used to new ways of working and whilst further developments
are made. We are nevertheless excited by the move to the new practice
management system as it potentially opens up new revenue streams, primarily
from increased pet food sales, as well as improving the ways we interact with
our clients.
Whilst like-for-like performance was softer than in previous years we are
really pleased with our expansion into the Australian veterinary services
market and are delighted to welcome new colleagues from 24 practice
acquisitions in Australia to date from July 2023, as well as welcoming new
colleagues from five practice acquisitions in the UK. This represents a step
up in practice acquisitions and performance has been in line with
expectations. The Group's short-term expansion focus will be on the Australian
market where there is a strong pipeline of exciting opportunities.
Leverage has increased to 1.54x from 0.73x and remains well within our stated
guidance of <2.0x. The increase in net debt by £94.1m to £164.8m comes
from acquisition investment of £95.2m (2023: £54.6m) and continued focus on
investment in practice facilities of £43.1m (2023: £45.7m). Operating cash
conversion remains strong at 70.5%.
The Group continues to deliver its strategy, which translates and is supported
by the statutory financial highlights as shown below:
2024 2023 Change
%
Revenue (£m) 647.3 588.9 9.9%
Gross profit (£m) 277.9 258.1 7.8%
Operating profit (£m) 50.8 68.4 -25.7%
Profit before tax (£m) 38.2 60.7 -37.1%
Profit from continuing operations (£m) 26.4 48.1 -45.1%
Profit for the year including discontinued operations (£m) 6.4 41.9 -84.7%
Basic earnings per share (p) 8.6 58.8 -85.4%
Adjusted1 financial highlights
2024 2023 Change
%
Adjusted EBITDA (£m) 127.3 121.6 4.7%
Adjusted profit before tax (£m) 82.7 87.9 -5.9%
Adjusted earnings per share (p) 86.6 98.9 -12.4%
1. Adjusted financial measures (adjusted EBITDA, adjusted profit before
income tax and adjusted earnings per share) are defined in the financial
statements, and reconciled to the financial measures defined by International
Financial Reporting Standards (IFRS) on pages 107 and 108 of the FY24 Annual
Report. Management uses adjusted EBITDA and adjusted earnings per share
(adjusted EPS) as the basis for assessing the financial performance of the
Group. These figures exclude costs relating to business combinations and
exceptional items and hence assist in understanding the performance of the
Group. These terms are not defined by IFRS and therefore may not be directly
comparable with other companies' adjusted profit measures.
Revenue
Total revenue increased 9.9% to £647.3m from £588.9m benefitting from
acquisitions made during the current and prior year, and a continued focus on
people and the provision of care our clients require.
Like-for-like revenue growth of 2.9% (2023: 7.3%) was impacted by the
disruption of the cyber incident and subsequent decision to accelerate the IT
modernisation programme to a cloud-based solution. We have also experienced
softer like-for-like performance from cost of living pressures alongside wider
negative publicity following the CMA announcement of the market investigation
into the veterinary sector, in addition to the COVID puppy and kitten boom
being in their healthy young adult stage requiring less veterinary care.
We are pleased that despite this backdrop our preventative Healthy Pet Club
scheme continued to grow in the year increasing by 2.9% to 503,000 at June
2024 from 489,000 at June 2023.
Gross profit/gross profit margin
Gross profit of £277.9m increased by 7.8% from £258.1m benefitting from an
increase in revenue partially offset by a decrease in gross profit margin to
42.9% from 43.8%.
Whilst cost of sales excluding clinical staff costs as a percentage of revenue
decreased slightly to 22.0% from 22.3%, this was offset by an increase in
clinical staff as a percentage of revenue to 35.1% from 33.9% as a result from
the disruption from the cyber incident and subsequent roll out of the new
practice management system. We continue to invest in our people and our focus
on ensuring we purchase drugs at the best possible price whilst maintaining
the highest quality to enable us to focus on great clinical care.
Operating profit
Operating profit decreased 25.7% to £50.8m from £68.4m impacted by an
increase in depreciation following a step up in recent years in capex
investment and an increase in amortisation from increased acquisition
investment.
In addition operating profit was impacted by one-off exceptional costs in the
year relating to the cyber incident and CMA market investigation and an
increase in costs relating to business combinations following our entry into
the Australian veterinary services market. The increase in costs relating to
business combinations is driven by both the number of acquisitions being made
but also an increase in deferred contingent consideration. It is common in
Australia to defer a proportion of the acquisition consideration over a number
of years. This cost is booked to the income statement and not to goodwill as a
result of continuous employment being one of the conditions needed to be met
for payment.
The impact of cost and wage inflation and continued investment in people was
partially offset by an increase in Research and Development Expenditure Tax
Credits (RDEC) to £12.8m (2023: £9.6m) of which £6.3m relates to a change
in the discount applied, further information on our recognition approach is
explained on page 109 of the FY24 Annual Report.
Profit before tax and basic earnings per share
Profit before tax decreased by 37.1% to £38.2m from £60.7m. Finance expense
increased to £12.6m from £7.7m following an increase in the cost of
borrowing and increased bank borrowing to support our strategy of investment
in our practices and acquisitions. Consequently, basic EPS decreased by 85.4%
to 8.6p from 58.8p.
Adjusted EBITDA and adjusted earnings per share
Adjusted EBITDA increased by 4.7% to £127.3m from £121.6m benefitting from
an increase in revenue. Adjusted EBITDA margin decreased to 19.7% from 20.6%
impacted by disruption from the cyber incident and subsequent roll out of the
new practice management system. Adjusted EBITDA margin was also impacted
negatively by wage and utility inflation in particular, as well as continued
investment in people, partially offset by an increase in Research and
Development Expenditure Tax Credits to £12.8m (2023: £9.6m).
Despite the increase in adjusted EBITDA, Adjusted EPS (as defined in note 1 of
the FY24 Annual Report) decreased 12.4% to 86.6p from 98.9p impacted by an
increase in UK corporation tax rate from 19% to 25% in April 2023 reducing EPS
by c.6.0p; an increase in depreciation from increased capital investment in
recent years; and an increase in finance expense from increases in both cost
of borrowing and net debt. Adjusted EBITDA and adjusted EPS excludes the
impact of amortisation of intangible assets, costs relating to business
combinations and exceptional items.
A reconciliation between adjusted EBITDA and Operating profit is shown below:
2024 2023
£m £m
Adjusted EBITDA 127.3 121.6
Adjustments for:
Amortisation, depreciation, impairment and profit on disposal (55.6) (47.1)
Costs relating to business combinations (15.1) (6.1)
Exceptional items* (5.8) -
Operating profit 50.8 68.4
* Exceptional items relate to the cyber incident of £4.2m, and costs
incurred regarding engagement with the Competition and Markets Authority of
£1.6m.
Long-term prospects for the Group continue to be strong supported by its great
people, despite some short-term headwinds the Group has faced over the past
twelve months. The fundamentals in the sector remain strong with an increasing
pet population, pet life expectancy increasing and continued advancements in
the provision of clinical care.
Taxation
The adjusted effective tax rate on profit before tax on continuing operations
was 30.9% in 2024 (2023: 20.8%), which reflects the mix of tax rates in the
jurisdictions where the Group operates, together with the impact of an
increase in non-deductible expenses predominantly in connection with
acquisitions.
The loss on disposal of subsidiaries met the conditions of substantial
shareholding exemption and resulted in a non-allowable tax loss. The adjusted
effective tax rate including discontinued operations was therefore 65.1% in
2024 (2023: 22.2%) and the Group's tax charge for the year was £11.8m (2023:
£12.6m).
All of the Group's revenues and the majority of its expenses are subject to
corporation tax. The main expenses that are not deductible for tax purposes
are costs relating to acquisitions and depreciation on fixed assets that do
not qualify for tax relief.
Dividend
The Board is recommending the payment of a final dividend of 8.0p per Ordinary
share (2023: 7.5p). Subject to shareholder approval at the Annual General
Meeting to be held on 20 November 2024, the dividend will be paid on 29
November 2024 to shareholders on the register at the close of business on 1
November 2024. The ex-dividend date is 31 October 2024.
Cash flow and movement in net debt
2024 2023
£m £m
Adjusted EBITDA 127.3 121.6
Working capital movements (12.5) (5.8)
Capital expenditure - maintenance (10.3) (11.4)
Repayment of right-of-use liabilities (14.8) (13.3)
Operating cash flow 89.7 91.1
Operating cash conversion (%) 70.5% 74.9%
Taxation paid (15.7) (14.9)
Net interest paid (12.0) (6.5)
Free cash flow 62.0 69.7
Capital expenditure - investment (32.2) (33.2)
Business combinations (net of cash acquired)/other investments (96.2) (54.6)
Contingent consideration and acquisition costs (11.6) (4.4)
Dividends paid (5.5) (5.0)
Other financing activities (5.3) (3.1)
Cash movement in relation to discontinued operations (4.6) (7.4)
Impact of foreign exchange (0.6) -
Net outflow (94.0) (38.0)
(Decrease)/increase in unamortised borrowing costs (0.1) 2.6
Increase in net debt (94.1) (35.4)
The Group's operating cash flow for continuing operations decreased by 1.5% to
£89.7m (2023: £91.1m) with the increase in adjusted EBITDA offset by
negative working capital movements and increase in repayment of right-of-use
liabilities. The negative working capital movement was largely driven by RDEC
submissions awaiting payment and an increase in stock. The Group's operating
cash conversion remained stable at 70.5% in line with expectations set at our
Capital Markets Day November 2022.
Free cash flow decreased 11.0% to £62.0m from £69.7m with an increase in
finance expense from increases in both cost of borrowing and net debt to
support our strategy of investment in our practices and acquisitions.
Net debt increased by £94.1m from £70.7m to £164.8m mainly from an increase
in acquisition investment to £96.2m (2023: £54.6m) and continued focus on
investment in practice facilities of £42.5m (2024: including discontinued
operations £43.1m) (2023: £44.6m, £45.7m including discontinued
operations). In addition there were cash outflows in the year for exceptional
costs within other financing activities, discontinued operations and an
increase in contingent and acquisition costs from an increase in the number of
acquisitions made during the year.
Divisional highlights
2024 2023 Change
£m £m %
Revenue
Veterinary practices 577.5 522.2 10.6%
Laboratories 31.6 29.3 7.9%
Crematoria 12.0 10.9 9.7%
Online retail business 50.0 49.1 1.8%
Central administration (23.8) (22.6) 5.3%
Total Group revenue 647.3 588.9 9.9%
2024 2023 Change
£m £m %
Adjusted EBITDA
Veterinary practices 120.1 116.8 2.8%
Laboratories 9.2 9.2 0.8%
Crematoria 4.3 3.6 18.7%
Online retail business 3.3 3.9 -16.3%
Central administration (9.6) (11.9) -19.3%
Total Group adjusted EBITDA 127.3 121.6 4.7%
Veterinary practices
Our Companion Animal division forms the majority of our Veterinary Practices
division. The focus of our Companion Animal division on delivering care our
clients require and benefits from a growing market as customers continue to
seek out veterinary care for their pet.
We continue to focus on the recruitment, retention and development of our
highly skilled and dedicated colleagues. We employed an average of 5.8% more
vets in 2024 vs 2023, reflecting a further reduction in attrition, a record
graduate vet intake and the ongoing recruitment of some of the best talent in
the profession.
The division also includes Referrals, Equine, Farm, Vet Direct, Mipet Products
and our Healthy Pet Programme.
During the year, we opened our state-of-the-art Referral facility Bristol
Veterinary Specialists which, since opening, is off to a pleasing start.
We are delighted with the performance of our Australian practices which are
all performing in line with expectations.
Laboratories
Our Laboratories division provides diagnostic services and in-practice desktop
analysers to both CVS and third-party practices and employs a national courier
network to facilitate the collection and timely processing of samples from
practices across the UK. We continue to develop our capability to ensure we
can support the wider Group focus on growing diagnostic care.
The strong revenue performance in the year was offset by increased
inflationary pressures which led to EBITDA remaining flat year on year.
However, we continue to see an increase in case volumes with a 7.6% increase
to c. 495,000 tests.
4.7%*
Crematoria
Our Crematoria division provides both individual and communal cremation
services for companion animal and equine clients, as well as clinical waste
disposal services for both CVS and third-party veterinary practices.
The strong revenue and adjusted EBITDA growth in the division continued to be
driven by the Direct Pet Cremation service, which puts customers directly in
contact with crematoria to make pet aftercare arrangements, and giving them
more time to consider their range of options which has resulted in significant
changes to customers' choices and generated improved customer care.
1.7%*
Online retail business
Our online pet food and retailer "Animed Direct" focuses on supplying pet food
and prescription and non- prescription medicine directly to customers.
During the year, we invested in a new packaging machine, enabling more
efficient packing with less waste and a greater dispatch capacity.
It was a challenging year for Animed Direct in FY24 but we are confident the
launch of our new website in 2025 will bring future growth.
7.5%*
* Revenue share for continuing operations before intercompany sales
between practices and other divisions.
Net debt
2024 2023
£m £m
Borrowings repayable:
Within one year - -
After more than one year:
Loan facility 184.5 95.5
Unamortised borrowing costs (3.2) (3.3)
Total borrowings 181.3 92.2
Cash and cash equivalents (16.5) (21.5)
Net debt 164.8 70.7
The Group's loan facility comprises a £87.5m term loan and £262.5m revolving
credit facility. This facility is supported by eight banks. During the year,
the Group took the option to utilise the one-year extension and all facilities
now run until February 2028. The facility has two key financial covenants:
• net debt to bank-test EBITDA of not more than 3.25x; and
• the bank-test EBITDA to interest ratio of not less than 4.5x.
Bank-test EBITDA is based on the last twelve months' adjusted EBITDA
performance annualised for the effect of acquisitions deducting costs relating
to acquisition fees and adding back share option expense, prior to the
adoption of IFRS 16.
The Group manages its banking arrangements centrally. Funds are swept daily
from its various bank accounts into central bank accounts to optimise the
Group's net interest payable position.
Interest rate risk is also managed centrally and derivative instruments are
used to mitigate this risk. During the year, the existing two interest rate
hedges in place for a combined amount of £70.0m ceased in February 2024 and
the Group entered into two new four-year fixed interest rate swap arrangements
to hedge fluctuations in interest rates on £100.0m of its loan facility,
which ends on in February 2028.
The Group continues to have a strong balance sheet coupled with the ability to
generate cash, which enables it to effectively manage working capital. The
Group targets a long-term net debt to EBITDA ratio of less than 2.0x and
closely monitors this in line with acquisition investment opportunities.
Goodwill and intangible assets
The Group's goodwill and intangible assets of £334.9m (2023: £256.1m) arise
from the various acquisitions undertaken. Each year, the Board reviews
goodwill for impairment and, as at 30 June 2024, the Board believes there are
no material impairments. The intangible assets arising from business
combinations for customer relationships are amortised over an appropriate
period.
Going concern
The Directors have considered the Group's medium-term cash forecasts and
conducted stress test analysis on these projections in order to assess the
Group's ability to continue as a going concern. Having also made appropriate
enquiries, the Directors consider it reasonable to assume that the Group has
adequate resources to continue for the period of at least twelve months from
the date of approval of the financial statements and, for this reason, have
continued to adopt the going concern basis in preparing the full year Group
financial statements. Further detail is provided on page 86 of the FY24 Annual
report.
Share price performance
At the year end, the Company's market capitalisation was £0.7bn (1,008p per
share), compared to £1.4bn (1,970p per share) at the previous year end. The
Board believes that the share price has been impacted by the CMA review and
subsequent investigation into the veterinary sector.
Key contractual arrangements
The Directors consider that the Group has only two significant third-party
supplier contracts which are for the supply of veterinary drugs. In the event
that these suppliers ceased trading, the Group would be able to continue in
business without significant disruption in trading by purchasing from
alternative suppliers.
Forward-looking arrangements
Certain statements and arrangements described in the Annual Report and results
release are forward looking. Although the Board is comfortable that the
expectations reflected in these forward-looking statements are reasonable, it
can give no assurance that these expectations will prove to be correct.
Because these statements involve risks and uncertainties, actual results may
differ materially from those expressed or implied by these forward-looking
statements.
Robin Alfonso
Chief Financial Officer
26 September 2024
The Group's principal risks and uncertainties are available on pages 47 to 55
of the Group's FY24 Annual Report and the Group's key performance indicators
are available on pages 24 to 27 of the Group's FY24 Annual Report.
Consolidated income statement
for the year ended 30 June 2024
Continuing operations Note 2024 2023 1
£m £m
Revenue 2 647.3 588.9
Cost of sales (369.4) (330.8)
Gross profit 277.9 258.1
Administrative expenses (227.1) (189.7)
Operating profit 50.8 68.4
Finance expense (12.6) (7.7)
Profit before tax 38.2 60.7
Tax expense 3 (11.8) (12.6)
Profit from continuing operations 26.4 48.1
Loss from discontinued operations 9 (20.0) (6.2)
Profit for the year 6.4 41.9
Profit attributable to:
Owners of CVS Group plc 6.2 41.9
Non-controlling interests 0.2 -
6.4 41.9
Earnings per Ordinary share (EPS) for profit from continuing operations
attributable to the ordinary equity holders of the Company:
Basic 4 36.5p 67.6p
Diluted 4 36.5p 67.3p
Earnings per Ordinary share (EPS) for profit attributable to the ordinary
equity holders of the Company:
Basic 4 8.6p 58.8p
Diluted 4 8.6p 58.5p
1. 2023 has been re-presented following the classification of the
Netherlands and Republic of Ireland operations as a discontinued operation;
see note 9 for further details.
Reconciliation of alternative performance measures
The Directors believe that adjusted measures, being adjusted EBITDA, adjusted
PBT and adjusted EPS, provide additional useful information for shareholders.
These measures are used by the Board and management for planning, internal
reporting and setting Director and management remuneration. In addition, they
are used by the investor analyst community and are aligned to our strategy and
KPls. These measures are not defined by IFRS and therefore may not be directly
comparable with other companies' adjusted measures.
Adjusted EBITDA is calculated by reference to profit before tax for continuing
operations, adjusted for interest (net finance expense), depreciation,
amortisation, costs relating to business combinations and exceptional items.
The following table provides the calculation of adjusted EBITDA:
Alternative performance measure: adjusted EBITDA Note 2024 2023 1
£m £m
Profit before tax from continuing operations 38.2 60.7
Adjustments for:
Finance expense 12.6 7.7
Amortisation of intangible assets 24.8 22.6
Depreciation of property, plant and equipment 17.7 12.6
Depreciation of right-of-use assets 16.0 15.2
Depreciation and amortisation attributable to discontinued operations (2.6) (3.1)
Profit on disposal of property, plant and equipment and right-of-use assets (0.3) (0.2)
Costs relating to business combinations2 15.1 6.1
Exceptional items3 5.8 -
Adjusted EBITDA 2 127.3 121.6
Adjusted earnings per share (EPS):
Adjusted EPS 4 86.6p 98.9p
Diluted adjusted EPS 4 86.5p 98.4p
1. 2023 has been re-presented following the classification of the
Netherlands and Republic of Ireland operations as a discontinued operation;
see note 9 for further details.
2. Includes amounts accrued in respect of contingent consideration in
relation to acquisitions in prior years expensed to the income statement and
acquisition fees.
3. Exceptional items relate to costs associated with the cyber incident
of £4.2m and costs incurred regarding engagement with the Competition and
Markets Authority of £1.6m. Further information is available in note 6 of the
FY24 Annual Report.
Consolidated and Company statement of financial position
as at 30 June 2024
Company registration number: 06312831
Note Group Group
2024 2023
£m £m
Non-current assets
Intangible assets 334.9 256.1
Property, plant and equipment 123.0 101.5
Right-of-use assets 102.6 102.9
Investments - -
Amounts owed by Group undertakings - -
Derivative financial instruments 0.9 -
561.4 460.5
Current assets
Inventories 31.8 28.4
Trade and other receivables 67.7 58.1
Derivative financial instruments - 2.1
Current tax receivable 12.6 1.7
Cash and cash equivalents 16.5 21.5
128.6 111.8
Total assets 2 690.0 572.3
Current liabilities
Trade and other payables (102.6) (91.1)
Provisions (0.9) (0.7)
Current tax liabilities (0.7) -
Lease liabilities (13.9) (13.3)
(118.1) (105.1)
Non-current liabilities
Borrowings 6 (181.3) (92.2)
Lease liabilities (92.6) (93.6)
Deferred tax liabilities (37.5) (24.8)
(311.4) (210.6)
Total liabilities 2 (429.5) (315.7)
Net assets 260.5 256.6
Shareholders' equity
Share capital 0.1 0.1
Share premium 109.0 107.0
Capital redemption reserve 0.6 0.6
Treasury reserve - -
Cash flow hedge reserve 0.5 1.4
Merger reserve (61.4) (61.4)
Foreign exchange translation reserve 0.4 (0.2)
Retained earnings 211.2 209.1
260.4 256.6
Non-controlling interest 0.1 -
Total equity 260.5 256.6
The financial information comprising the consolidated income statement, the
statement of consolidated comprehensive income, the consolidated balance
sheet, the consolidated statement of changes in shareholders' equity, the
consolidated cash flow statement and related notes, were authorised for issue
by the Board of Directors on 26 September 2024 and were signed on its behalf
by:
Richard Fairman
Robin Alfonso
Director
Director
Consolidated statement of changes in equity
for the year ended 30 June 2024
Share capital Share premium Capital redemption Treasury Cash flow Merger reserve Foreign exchange translation reserve Retained earnings Total Non-controlling Total
£m £m reserve reserve hedge £m £m £m £m interest equity
£m £m reserve £m £m
£m
At 1 July 2023 0.1 107.0 0.6 - 1.4 (61.4) (0.2) 209.1 256.6 - 256.6
Profit for the year - - - - - - - 6.2 6.2 0.2 6.4
Other comprehensive income and loss
Cash flow hedges:
Fair value loss - - - - (1.2) - - - (1.2) - (1.2)
Deferred tax on - - - - 0.3 - - - 0.3 - 0.3
cash flow hedge
and available-for-
sale financial assets
Exchange - - - - - - 0.6 - 0.6 - 0.6
differences on
translation of foreign operations
Total other comprehensive (loss)/income - - - - (0.9) - 0.6 - (0.3) - (0.3)
Total comprehensive (loss)/income - - - - (0.9) - 0.6 6.2 5.9 0.2 6.1
Transactions with owners
Issue of Ordinary shares - 2.0 - - - - - - 2.0 - 2.0
Purchase of Treasury shares - - - (0.9) - - - - (0.9) - (0.9)
Disposal of Treasury shares - - - 0.9 - - - (0.5) 0.4 - 0.4
Credit to reserves for share-based payments - - - - - - - 2.4 2.4 - 2.4
Deferred tax relating to share-based payments - - - - - - - (0.6) (0.6) - (0.6)
Dividends paid - - - - - - - (5.4) (5.4) (0.1) (5.5)
Total transactions with owners - 2.0 - - - - - (4.1) (2.1) (0.1) (2.2)
At 30 June 2024 0.1 109.0 0.6 - 0.5 (61.4) 0.4 211.2 260.4 0.1 260.5
Note Share capital Share premium Capital redemption Treasury Cash flow Merger reserve Foreign exchange translation reserve Retained earnings Total Non-controlling Total
£m £m reserve reserve hedge £m £m £m equity interest equity
£m £m reserve £m £m £m
£m
At 1 July 2022 0.1 105.4 0.6 - 1.6 (61.4) - 171.1 217.4 - 217.4
Profit for the year - - - - - - - 41.9 41.9 - 41.9
Other comprehensive income and loss
Cash flow hedges:
Fair value loss - - - - (0.2) - - - (0.2) - (0.2)
Deferred tax on cash flow - - - - - - - - - - -
hedge and available-for-
sale financial assets
Exchange differences on - - - - - - (0.2) - (0.2) - (0.2)
translation of foreign
operations
Total other comprehensive loss - - - - (0.2) - (0.2) - (0.4) - (0.4)
Total comprehensive (loss)/income - - - - (0.2) - (0.2) 41.9 41.5 - 41.5
Transactions with owners
Issue of Ordinary shares - 1.6 - - - - - - 1.6 - 1.6
Purchase of Treasury shares - - - (1.2) - - - - (1.2) - (1.2)
Disposal of Treasury shares - - - 1.2 - - - (0.7) 0.5 - 0.5
Credit to reserves for share-based payments - - - - - - - 1.7 1.7 - 1.7
Deferred tax relating to share-based payments - - - - - - - 0.1 0.1 - 0.1
Dividends paid - - - - - - - (5.0) (5.0) - (5.0)
Total transactions with owners - 1.6 - - - - - (3.9) (2.3) - (2.3)
At 30 June 2023 0.1 107.0 0.6 - 1.4 (61.4) (0.2) 209.1 256.6 - 256.6
Consolidated and Company statement of cash flow
for the year ended 30 June 2024
Note Group Group
2024 2023
£m £m
Cash flows from operating activities
Cash generated from operations 8 101.8 107.9
Taxation paid (15.7) (14.9)
Interest paid (12.4) (7.2)
Exceptional items (5.9) (1.3)
Net cash generated from operating activities 67.8 84.5
Cash flows from investing activities
Business combinations (net of cash acquired) 5 (97.0) (54.6)
Purchase of property, plant and equipment (39.5) (42.3)
Proceeds from sale of property, plant and equipment 0.2 0.3
Purchase of intangible assets (3.6) (3.4)
Payments for financial assets at amortised cost (0.6) -
Proceeds from sale of other investments - 0.1
Net cash used in investing activities (140.5) (99.9)
Cash flows from financing activities
Dividends paid to Company's shareholders 7 (5.4) (5.0)
Dividends paid to non-controlling interests in subsidiaries (0.1) -
Proceeds from issue of Ordinary shares 2.0 1.6
Proceeds from sale of Treasury shares 0.4 0.5
Purchase of Treasury shares (0.9) (1.2)
Repayment of obligations under right-of-use assets (15.6) (14.1)
Debt issuance costs (0.8) (3.6)
Repayment of borrowings (0.3) (0.8)
Increase in borrowings 89.0 10.5
Net cash generated from/(used in) financing activities 68.3 (12.1)
Effects of exchange rate changes gain (0.6) -
Net decrease in cash and cash equivalents (5.0) (27.5)
Cash and cash equivalents at the beginning of the year 21.5 49.0
Cash and cash equivalents at the end of the year 16.5 21.5
Cash flows from discontinued operations are shown in note 9.
Notes to the consolidated financial statements
for the year ended 30 June 2024
1. General information
The principal activity of CVS Group plc, together with its subsidiaries (the
Group), is to operate veterinary practices, complementary veterinary
diagnostic businesses, pet crematoria and an online pharmacy and retail
business. The principal activity of CVS Group plc (the Company) is that of a
holding company.
CVS Group plc is a public limited company incorporated under the Companies Act
2006 and domiciled in England and Wales and its shares are listed on AIM of
the London Stock Exchange (CVSG). Its company registration number is 06312831
and registered office is CVS House, Owen Road, Diss, Norfolk IP22 4ER.
Statement under s498 - publication of non-statutory accounts
The financial information set out in this preliminary announcement does not
constitute statutory financial statements for the years ended 30 June 2024 or
2023, for the purpose of the Companies Act 2006, but is derived from those
financial statements. Statutory financial statements for 2024, on which the
Group's auditors have given an unqualified report which does not contain
statements under Section 498(2) or (3) of the Companies Act 2006, will be
filed with the Registrar of Companies subsequent to the Group's next annual
general meeting. Statutory financial statements for 2023 have been filed with
the Registrar of Companies. The Group's auditors have reported on those
accounts; their reports were unqualified and did not contain statements under
Section 498(2) or (3) of the Companies Act 2006.
Basis of preparation
The consolidated and Company financial statements of CVS Group plc have been
prepared in accordance with United Kingdom adopted international accounting
standards as applied in accordance with the provisions of the Companies Act
2006 and applicable law. The consolidated financial statements have been
prepared on a going concern basis and under the historical cost convention,
except for certain financial instruments that have been measured at fair
value. After making enquiries, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational existence for
the foreseeable future. For this reason, they continue to adopt the going
concern basis in preparing the FY24 financial statements. Further details are
provided in the Directors' Report of the Group's FY24 Annual Report.
The accounting policies set out in the FY24 Annual Report have, unless
otherwise stated, been applied consistently to all years presented in the
financial statements.
Use of alternative performance measures
The Directors believe that adjusted performance measures, provide additional
useful information for shareholders. These measures are used by the Board and
management for planning, internal reporting and setting Director and
management remuneration. In addition, they are used by the investor analyst
community and are aligned to our strategy and KPls. These measures are not
defined by International Financial Reporting Standards (IFRS) and therefore
may not be directly comparable with other companies' adjusted measures. They
are not intended to be a substitute for, or superior to, IFRS measurements of
profit or earnings per share.
Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation
(adjusted EBITDA), adjusted profit before tax (adjusted PBT) and adjusted
earnings per share (adjusted EPS)
Adjusted EBITDA is calculated by reference to profit before tax for continuing
operations, adjusted for interest (net finance expense), depreciation,
amortisation, costs relating to business combinations and exceptional items.
An exceptional item is where the item is deemed to be outside the ordinary
course of business or where the value of the item is such that it distorts the
view of performance from the underlying ongoing business and operations.
Adjusted PBT is calculated as profit before tax, amortisation, costs relating
to business combinations and exceptional items.
Adjusted EPS is calculated as adjusted PBT attributable to the owners of CVS
Group plc, less applicable tax, divided by the weighted average number of
Ordinary shares in issue in the period.
The following table provides the calculation of adjusted EBITDA as defined
above:
Alternative performance measure: adjusted EBITDA Note 2024 2023 1
£m £m
Profit before tax for continuing operations 38.2 60.7
Adjustments for:
Finance expense 12.6 7.7
Amortisation of intangible assets 24.8 22.6
Depreciation of property, plant and equipment 17.7 12.6
Depreciation of right-of-use assets 16.0 15.2
Depreciation and amortisation attributable to discontinued operations (2.6) (3.1)
Profit on disposal of property, plant and equipment and right-of-use assets (0.3) (0.2)
Costs relating to business combinations2 15.1 6.1
Exceptional items3 5.8 -
Adjusted EBITDA 127.3 121.6
Adjusted earnings per share from continuing operations (EPS):
Adjusted EPS 4 86.6p 98.9p
Diluted adjusted EPS 4 86.5p 98.4p
1. 2023 has been re-presented following the classification of the
Netherlands and Republic of Ireland operations as a discontinued operation;
see note 9 for further details.
2. Includes amounts accrued in respect of contingent consideration in
relation to acquisitions in prior years expensed to the income statement and
acquisition fees.
3. Exceptional items relate to costs associated with the cyber incident
of £4.2m and costs incurred regarding engagement with the Competition and
Markets Authority of £1.6m. Further information is available in note 6 of the
FY24 Annual Report.
The reconciliations for adjusted PBT and adjusted EPS can be found in note 4.
Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue.
Net debt
Net debt is calculated as bank borrowings less gross cash and cash equivalents
and unamortised borrowing costs.
2024 2023
£m £m
Borrowings repayable after more than one year:
Term loan and revolving credit facility 184.5 95.5
Unamortised borrowing costs (3.2) (3.3)
Total borrowings 181.3 92.2
Cash and cash equivalents (16.5) (21.5)
Net debt 164.8 70.7
For bank covenant reporting, an alternative calculation for net debt is used.
This definition can be found in note 3 of the FY24 Annual Report.
Leverage
Leverage on a bank test basis is drawn bank debt less cash at bank, divided by
adjusted EBITDA annualised for the effect of acquisitions, including costs
relating to acquisition fees and excluding share option costs, prior to the
adoption of IFRS 16.
Like-for-like sales
Like-for-like sales show revenue generated from like-for-like continuing
operations compared to the prior year, adjusted for the number of working
days. For example, for a practice acquired in September 2022, revenue is
included from September 2023 in the like-for-like calculations.
Operating cash conversion
Operating cash conversion is defined as cash flows from operating activities
adjusted for discontinued operations, acquisition fees and contingent
consideration paid, less lease liability repayment and maintenance capital
expenditure; divided by adjusted EBITDA.
Free cash flow
Free cash flow is defined as cash flows from operating activities adjusted for
discontinued operations, acquisition fees and
contingent consideration paid, less lease liability repayment, maintenance
capital expenditure, net interest paid and taxation
paid.
2. Segment reporting
Segment information is presented in respect of the Group's business and
geographical segments. The primary format, operating segments, is based on the
Group's management and internal reporting structure and monitored by the
Group's Chief Operating Decision Maker (CODM).
Segment results, assets and liabilities include items directly attributable to
a segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise mainly interest-bearing borrowings and associated
costs, tax-related assets and liabilities, costs relating to business
combinations, and Head Office salary and premises costs.
Revenue comprises £469.9m of fees and £177.4m of goods (2023: £428.0m and
£160.9m respectively).
Operating segments
The Group is split into four operating segments (Veterinary Practices,
Laboratories, Crematoria and Online Retail Business) and a centralised support
function (Central administration) for business segment analysis. In
identifying these operating segments, management generally follows the Group's
service lines representing its main products and services.
Each of these operating segments is managed separately as each segment
requires different specialisms, marketing approaches and resources.
Intra-group sales eliminations are included within the Central administration
segment. Central administration includes costs relating to the employees and
property and other overhead costs associated with the centralised support
function together with finance costs arising on the Group's borrowings.
Year ended 30 June 2024 Veterinary Laboratories Crematoria Online Retail Central Group Discontinued
Practices £m £m Business administration £m operations
£m £m £m £m
Revenue 577.5 31.6 12.0 50.0 (23.8) 647.3 17.5
Adjusted EBITDA 120.1 9.2 4.3 3.3 (9.6) 127.3 (2.1)
Profit/(loss) before tax 56.7 8.0 3.6 3.2 (33.3) 38.2 (5.5)
Total assets 567.6 49.3 25.9 21.2 26.0 690.0 -
Total liabilities (190.0) (2.2) (2.3) (15.5) (219.5) (429.5) -
Reconciliation of adjusted EBITDA
Profit/(loss) before tax 56.7 8.0 3.6 3.2 (33.3) 38.2 (5.5)
Finance expense 3.9 - - - 8.7 12.6 0.8
Amortisation of intangible assets 23.4 - 0.1 0.1 - 23.6 1.2
Depreciation of property, plant and equipment 14.9 1.0 0.7 - 0.4 17.0 0.7
Depreciation of right-of-use assets 14.6 0.1 - - 0.6 15.3 0.7
Profit on disposal of property, plant and equipment and right-of-use assets (0.2) - (0.1) - - (0.3) -
Costs relating to business combinations 6.1 - - - 9.0 15.1 -
Exceptional items 0.7 0.1 - - 5.0 5.8 -
Adjusted EBITDA 120.1 9.2 4.3 3.3 (9.6) 127.3 (2.1)
Veterinary Laboratories Crematoria Online Retail Central Group 1 Discontinued operations
Year ended 30 June 2023 Practices 1 £m £m Business administration £m £m
£m £m £m
Revenue 522.2 29.3 10.9 49.1 (22.6) 588.9 19.4
Adjusted EBITDA 116.8 9.2 3.6 3.9 (11.9) 121.6 (0.2)
Profit/(loss) before tax 66.5 8.2 3.1 3.8 (20.9) 60.7 (6.8)
Total assets 471.9 44.0 23.9 19.4 13.1 572.3 -
Total liabilities (171.3) (5.3) (3.2) (15.5) (120.4) (315.7) -
Reconciliation of adjusted EBITDA
Profit/(loss) before tax 66.5 8.2 3.1 3.8 (20.9) 60.7 (6.8)
Finance expense 3.5 - - - 4.2 7.7 0.7
Amortisation of intangible assets 21.0 - - 0.1 - 21.1 1.5
Depreciation of property, plant and equipment 10.1 0.9 0.5 - 0.3 11.8 0.8
Depreciation of right-of-use assets 13.9 0.1 - - 0.4 14.4 0.8
Profit on disposal of property, plant and equipment and right-of-use assets (0.2) - - - - (0.2) -
Costs relating to business combinations 2.0 - - - 4.1 6.1 0.5
Exceptional items - - - - - - 2.3
Adjusted EBITDA 116.8 9.2 3.6 3.9 (11.9) 121.6 (0.2)
1. 2023 has been re-presented following the classification of the
Netherlands and Republic of Ireland operations as a discontinued operation;
see note 9 for further details.
Geographical segments
The business operates predominantly in the UK. As at 30 June 2024, it has 28
veterinary practice sites in Australia. It performs a small amount of
laboratory work and teleradiology work for Europe-based clients and a small
amount of teleradiology work for clients based in the rest of the world. In
accordance with IFRS 8, 'Operating Segments', no segment results are presented
for operations in Australia or trade with clients in Europe or the rest of the
world as these are not reported separately for management reporting purposes
and are not considered material for separate disclosure.
Revenue and non-current assets split between the United Kingdom and Australia
are shown below. All prior year revenue and non-current assets relate to the
United Kingdom.
Revenue
UK £625.2m
Rest of world £22.1m
Non-current assets
UK £459.8m
Rest of world £101.6m
3. Tax expense
a) Analysis of tax expense recognised in the income statement
2024 2023
£m £m
Current tax
Current tax on profits for the year 14.6 14.1
Adjustments in respect of previous years (2.0) (2.3)
Total current tax charge 12.6 11.8
Deferred tax
Origination and reversal of temporary differences (1.8) (0.2)
Adjustments in respect of previous years 1.0 0.4
Total deferred tax (credit)/charge (0.8) 0.2
Total tax expense 11.8 12.0
Income tax expense attributable to:
Profit from continuing operations 11.8 12.6
Loss from discontinued operations - (0.6)
11.8 12.0
b) Reconciliation of effective tax charge
The UK corporation tax rate is calculated using the UK standard rate of tax
for the year of 25.0% (2023: blended rate 20.5%). Taxation for other
jurisdictions is calculated at the rates prevailing in the respective
jurisdictions. The total taxation charge for the year differs from the
theoretical amount that would arise using the standard rate of UK corporation
tax of 25.0% (2023: blended rate 20.5%) as explained below:
2024 2023
£m £m
Profit before tax for continuing operations 38.2 60.7
Loss before tax for discontinued operations (20.0) (6.8)
Profit before tax 18.2 53.9
Effective tax charge of 25.0% (2023: 20.5%) 4.5 11.1
Effects of:
Expenses not deductible for tax purposes 3.3 1.3
Non-allowable loss on sale of subsidiaries 3.6 -
Adjustments to deferred tax charge in respect of previous years 1.0 0.4
Adjustments to current tax charge in respect of previous years (2.0) (2.3)
Current year tax losses not recognised/utilisation of brought forward 1.3 0.6
losses previously
unrecognised
Effect of difference between closing deferred tax rate and current tax rate - 0.9
Impact of tax rates in overseas jurisdictions 0.1 -
Total tax expense 11.8 12.0
Factors affecting the current tax charge
The effective tax rate on reported profits is 65.1% (2023: 22.2%) and has
increased from the prior year mainly due to an increase in non-deductible
expenses predominantly in connection with acquisitions, and as a result of the
loss on disposal of subsidiaries resulting in non-allowable tax losses as the
conditions of substantial shareholding exemption were met.
Total tax expense of £11.8m (2023: £12.6m) on continuing operations would
represent an effective tax rate on profit before tax for continuing operations
of 30.9% (2023: 20.8%).
Changes in tax rates
The Group's future tax charge, and effective tax rate, could be affected by
several factors including changes in tax laws and rates in the respective
jurisdictions.
Uncertain tax position
The Group recognises taxation based on estimates of whether taxes will be due.
No material uncertain tax positions exist at 30 June 2024.
OECD Pillar Two - Global Minimum Tax
The UK substantively enacted the OECD Pillar Two global minimum tax model
rules of the OECD's Inclusive Framework on Base Erosion and Profit Shifting in
June 2023 (the Pillar Two rules). The legislation will come into effect for
accounting periods from 1 January 2024, making it effective for the Group from
1 July 2024.
Since the legislation was not effective at the reporting date, the Group has
no related current tax exposure in FY24. The Group has applied the temporary
exception issued by the IASB in May 2023 from the accounting requirements for
deferred taxes in IAS 12. Accordingly, the Group neither recognises nor
discloses information about deferred tax assets and liabilities related to
Pillar Two.
Under the Pillar Two rules, a top-up tax arises where the effective tax rate
of the Group's operations in any individual jurisdiction, calculated using
principles set out in Pillar Two legislation, is below a 15% minimum rate. Any
resulting tax would be payable by CVS Group plc to the UK tax authority (HMRC)
being the Group's ultimate parent.
The Group is in the process of assessing its exposure to Pillar Two
legislation for when it comes into effect for the Group. The quantitative
impact of the Pillar Two rules is not yet reasonably able to be estimated.
In May 2023, the Australian Government announced it will implement key aspects
of Pillar Two. The measure is not yet law in Australia. The Group continues to
monitor the enactment of Pillar Two rules in Australia to ensure compliance
with obligations.
4. Earnings per Ordinary share
a) Reconciliation of earnings
2024 2023 1
£m £m
Profit from continuing operations 26.4 48.1
Profit attributable to non-controlling interest (0.2) -
Profit for the year from continuing operations attributable to equity holders 26.2 48.1
of the Company
Profit for the year from discontinued operations attributable to equity (20.0) (6.2)
holders of the Company
Profit for the year attributable to equity holders of the Company 6.2 41.9
b) Basic
2024 2023 1
Weighted average number of Ordinary shares in issue 71,595,871 71,272,880
Basic earnings per share from continuing operations attributable to the 36.5 67.6
ordinary equity holders of
the Company (pence)
Basic earnings per share from discontinued operations attributable to the (27.9) (8.8)
ordinary equity holders of the Company (pence)
Total basic earnings per share attributable to the ordinary equity holders of 8.6 58.8
the Company (pence)
c) Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of Ordinary shares outstanding to assume conversion of all dilutive
potential Ordinary shares. The Company has potentially dilutive Ordinary
shares, being the contingently issuable shares under the Group's LTIP schemes
and SAYE schemes. For both share option schemes, a calculation is undertaken
to determine the number of shares that could have been acquired at fair value
(determined as the average annual market share price of the Company's shares)
based on the monetary value of the subscription rights attached to outstanding
share options. The number of shares calculated as above is compared with the
number of shares that would have been issued assuming the exercise of the
share options.
2024 2023 1
Weighted average number of Ordinary shares in issue 71,595,871 71,272,880
Adjustment for contingently issuable shares - LTIPs - 173,688
Adjustment for contingently issuable shares - SAYE schemes 60,844 205,853
Weighted average number of Ordinary shares for diluted earnings per share 71,656,715 71,652,421
Diluted earnings per share from continuing operations attributable to the 36.5 67.3
ordinary equity holders of the Company (pence)
Diluted earnings per share from discontinued operations attributable to the (27.9) (8.8)
ordinary equity holders of the Company (pence)
Total diluted earnings per share attributable to the ordinary equity holders 8.6 58.5
of the Company (pence)
d) Alternative performance measure: adjusted earnings per share
2024 2023 1
£m £m
Profit before tax for continuing operations 38.2 60.7
Adjustments for:
Amortisation of intangible assets 24.8 22.6
Amortisation of intangible assets attributable to discontinued operations (1.2) (1.5)
Costs relating to business combinations 15.1 6.1
Exceptional items 5.8 -
Adjusted profit before tax 82.7 87.9
Tax expense amended for the above adjustments (20.4) (17.5)
Adjusted profit after tax 62.3 70.4
Less: adjusted profit after tax attributable to non-controlling interest (0.2) -
Adjusted profit after tax attributable to the parent 62.1 70.4
Weighted average number of Ordinary shares in issue 71,595,871 71,272,880
Weighted average number of Ordinary shares for diluted earnings per share 71,656,715 71,652,421
Pence Pence
Adjusted earnings per share 86.6 98.9
Diluted adjusted earnings per share 86.5 98.4
1. 2023 has been re-presented following the classification of the
Netherlands and Republic of Ireland operations as a discontinued operation;
see note 9 for further details.
5. Business combinations
Details of business combinations in the year ended 30 June 2024 are set out
below. The reason for each acquisition was to expand the CVS Group business
through acquisitions aligned to our strategic goals.
Name of business combination % Share capital acquired Date of acquisition Country of incorporation
Vetright Pty Ltd t/a McDowall Veterinary Practice 75% 26 July 2023 Australia
McDowall Veterinary Hospital Pty Ltd t/a Warner Vet 100% 26 July 2023 Australia
Brunker Road Veterinary Centre Pty Limited 100% 17 August 2023 Australia
Cattle Dog Health Pty Ltd t/a Happy Pets Family Vet 100% 23 August 2023 Australia
North Road Veterinary Centre Trade and asset 23 August 2023 Australia
3Tab Holdings Limited and Bridge Veterinary Practice Limited collectively 100% 15 September 2023 United Kingdom
trading as Bridge Veterinary Practice
Masefield Veterinary Services Ltd t/a Masefield Veterinary Centre 100% 18 September 2023 United Kingdom
The Liverpool Vets Limited 100% 3 October 2023 United Kingdom
Northgate Veterinary Surgery and St Vincents Vets Trade and asset 25 October 2023 Australia
Parkinson Veterinary Surgery Trade and asset 25 October 2023 Australia
Fernside Veterinary Centre Limited 100% 9 November 2023 United Kingdom
Southside Animal Hospital Pty Ltd 100% 10 November 2023 Australia
Brimbank Veterinary Clinic Trade and asset 28 November 2023 Australia
Toowoomba Family Vets and Vet Referral Pty Ltd t/a Red Vets Toowoomba 100% and Trade 1 December 2023 Australia
and asset
Wattle Grove Veterinary Hospital Trade and asset 12 December 2023 Australia
Bayside Animal Medical Centre Trade and asset 14 December 2023 Australia
Biome Vet Pty Ltd t/a Weston Creek Veterinary Hospital 100% 15 December 2023 Australia
Ark Animal Services Limited t/a Ark Veterinary Surgery 100% 12 February 2024 United Kingdom
Walkerville Vet Trade and asset 25 March 2024 Australia
Selwood House Vets Pty Ltd 80% 09 April 2024 Australia
GVHCO Pty Ltd t/a Gordon Veterinary Hospital 100% 11 April 2024 Australia
Mayfield Veterinary Hospital, Georgetown Veterinary Clinic and Stockton Trade and asset 16 May 2024 Australia
Veterinary Clinic
Grantham Street Veterinary Clinic and Dalkeith Veterinary Clinic Trade and asset 22 May 2024 Australia
North Perth Veterinary Centre Trade and asset 22 May 2024 Australia
Northam Veterinary Centre Trade and asset 22 May 2024 Australia
The Gap Veterinary Surgery Trade and asset 28 May 2024 Australia
Mossman Park Veterinary Hospital Trade and asset 29 May 2024 Australia
The table below summarises the total assets acquired through business
combinations in the year ended 30 June 2024:
Book value of Fair value Fair value
acquired adjustments £m
assets £m
£m
Property, plant and equipment 2.3 - 2.3
Patient data records - 45.4 45.4
Right-of-use assets 8.1 - 8.1
Inventories 0.8 - 0.8
Deferred tax asset/(liability) 0.2 (13.2) (13.0)
Trade and other receivables 1.4 - 1.4
Cash 4.1 - 4.1
Trade and other payables (4.4) - (4.4)
Loans (0.3) - (0.3)
Lease liabilities (8.1) - (8.1)
Total identifiable assets 4.1 32.2 36.3
Goodwill 64.6
Total purchase consideration 100.9
Purchase consideration - cash outflow
2024 2023
£m £m
Total purchase consideration 100.9 62.3
Less:
Deferred consideration payable (1.6) (1.2)
Contingent consideration payable - (1.5)
Cash acquired (4.1) (5.0)
Cash outflow for in-year acquisitions 95.2 54.6
Add:
Deferred consideration paid on prior period acquisitions 1.0 -
Contingent consideration paid on prior period acquisitions 0.8 -
Net outflow of cash - investing activities 97.0 54.6
The total consideration of £100.9m is prior to the agreement of the
completion accounts. The amounts recognised are subject to adjustment in line
with IFRS 3 for up to twelve months from acquisition, with goodwill being
adjusted accordingly.
Goodwill and intangible assets recognised in the year relating to business
combinations are not expected to be deductible for tax purposes.
Acquired receivables
The fair value of acquired trade receivables is £1.4m. The gross contractual
amount for trade receivables due is £1.4m with a loss allowance of £nil
recognised on acquisition.
Acquisitions with non-controlling interests
On 26 July 2023, the Group acquired a 75% interest in Vetright Pty Ltd
(included above) in Australia for consideration of £9.2m. The identifiable
net assets at acquisition were valued at £3.8m, of which 25% will be
attributed to non-controlling interest (NCI). NCI is measured at the
proportionate share of the identifiable net assets at the date of acquisition.
The acquisition comprised net assets (being principally patient data records)
with a fair value of £3.8m, resulting in goodwill of £5.4m.
On 9 April 2024, the Group acquired an 80% interest in Selwood House Vets Pty
Ltd (included above) in Australia for consideration net of cash acquired of
£1.8m. The identifiable net assets at acquisition were valued at £0.7m, of
which 20% will be attributed to NCI. NCI is measured at the proportionate
share of the identifiable net assets at the date of acquisition. The
acquisition comprised net assets (being principally patient data records) with
a fair value of £0.7m, resulting in goodwill of £1.1m.
Goodwill recognised represents the excess of purchase consideration over the
fair value of the identifiable net assets. Goodwill reflects the synergies
arising from the combination of the businesses; this includes the assembled
workforce and clinical knowledge, cost synergies arising from shared support
functions as well as buying power synergies. Goodwill includes the recognition
of an amount equal to the deferred tax that arises on non-qualifying fixed
assets acquired under a business combination.
The Group recognises non-controlling interests in an acquired entity either at
fair value or at the non-controlling interest's proportionate share of the
acquired entity's net identifiable assets. The decision is made on an
acquisition-by-acquisition basis. For the non-controlling interests in
Vetright Pty Ltd and Selwood House Vets Pty Ltd, the Group elected to
recognise the non-controlling interests at its proportionate share of the
acquired net identifiable assets. See note 2 of the FY24 Annual Report for the
Group's accounting policies for business combinations.
Revenue and profit contribution
If the acquisitions made in the period had been owned for the full year it is
estimated that revenue would have been £50.2m and adjusted EBITDA £13.1m for
the acquired businesses.
Post-acquisition revenue and post-acquisition adjusted EBITDA were £26.9m and
£7.2m respectively. The post-acquisition period is from the date of
acquisition to 30 June 2024. Post-acquisition EBITDA represents the direct
operating result of practices from the date of acquisition to 30 June 2024
prior to the allocation of central overheads, on the basis that it is not
practicable to allocate these.
Acquisition-related costs
Acquisition costs of £9.0m (2023: £4.4m) are included within other expenses
in note 6 of the FY24 Annual Report.
Contingent consideration, expensed to the income statement, of £6.1m (2023:
£1.7m) are included within other expenses in note 6 of the FY24 Annual
Report.
The Directors do not consider any individual in-year acquisition to be
material to the Group and therefore have not separately disclosed these.
Contingent consideration
At the acquisition date of each acquisition contingent consideration of £nil
is recognised. Contingent consideration is expensed to the income statement
for a period of up to three years subject to meeting fixed profitability and
employment targets. If these targets are met, an aggregated £11.5m of
contingent consideration would be payable on the first anniversary of the
acquisitions, an aggregated £11.2m would be payable on the second anniversary
of the acquisitions and an aggregated £6.3m would be payable on the third
anniversary of the acquisitions.
Business combinations in previous years
Details of business combinations in the comparative year are presented in the
consolidated financial statements for the year ended 30 June 2023. Adjustments
to the provisional amounts during the measurement period has result in
additional goodwill of £0.7m offset by a reduction in property, plant and
equipment of £0.5m resulting in an increase in consideration payable of
£0.2m.
During the year, £1.0m (2023: £nil) was paid to settle deferred
consideration payable from the prior year and £0.8m was paid to settle
contingent consideration payments (2023: £nil).
Contingent consideration of £0.8m paid relates to a business combination made
in the prior year where consideration is payable over a three-year period
based on the veterinary practice reaching certain adjusted EBITDA targets.
This is held at fair value and it is expected that this will be payable. As at
30 June 2024, £0.7m remains payable (2023: £1.5m).
Business combinations subsequent to the year end
Details of business combinations made subsequent to the year end are set out
below. The reason for each acquisition was to expand the CVS Group business
through acquisitions aligned to our strategic goals.
Name of business combination % Share capital acquired Date of acquisition Country of incorporation
Pet Universe Trade and asset 2 July 2024 Australia
Direct Vet Services Trade and asset 2 September 2024 Australia
The table below summarises the total assets acquired through business
combinations subsequent to the year end:
Book value of Fair value Fair value
acquired adjustments £m
assets £m
£m
Property, plant and equipment 0.6 - 0.6
Patient data records - 3.0 3.0
Right-of-use assets 0.8 - 0.8
Deferred tax liability 0.1 (0.9) (0.8)
Trade and other payables (0.2) - (0.2)
Lease liabilities (0.8) - (0.8)
Total identifiable assets 0.5 2.1 2.6
Goodwill 2.8
Total purchase consideration 5.4
Purchase consideration - cash outflow
£m
Total purchase consideration 5.4
Less:
Deferred consideration payable (0.1)
Net outflow of cash 5.3
The total consideration of £5.3m is prior to the agreement of the completion
accounts. The amounts recognised are subject to adjustment in line with IFRS 3
for up to twelve months from acquisition, with goodwill being adjusted
accordingly.
Goodwill and intangible assets recognised in the year relating to business
combinations are not expected to be deductible for tax purposes.
6. Borrowings
Borrowings comprise bank loans and are denominated in Sterling. The repayment
profile is as follows:
Group 2024 2023
£m £m
Within one year or on demand - -
Between one and two years - -
After more than two years 181.3 92.2
181.3 92.2
The balances above are shown net of issue costs of £3.2m (2023: £3.3m),
which are being amortised over the term of the bank loan. The carrying amount
of borrowings is deemed to be a reasonable approximation to fair value.
The Group has total facilities of £350.0m to 21 February 2028, provided by a
syndicate of eight banks: AIB, Barclays, Danske, HSBC, JP Morgan, Lloyds,
NatWest and Virgin Money. The facility comprises the following elements:
• a fixed-term loan of £87.5m, repayable on 21 February 2028 via a
single bullet repayment;
• a revolving credit facility of £262.5m, available to 21 February
2028; and
• we retain our £5.0m overdraft facility, renewable annually.
The two financial covenants associated with these facilities are based on the
ratios of bank-test net debt to bank-test EBITDA and bank-test EBITDA to
interest. The bank-test net debt to bank-test EBITDA ratio must not exceed
3.25x. The bank-test EBITDA to interest ratio must not be less than 4.5x. The
facilities require cross-guarantees from the most significant of CVS Group's
trading subsidiaries but are not secured on the assets of the Group.
Bank-test EBITDA is based on the last twelve months' adjusted EBITDA
performance annualised for the effect of acquisitions deducting costs relating
to business combinations and adding back share option expense, prior to the
impact of IFRS 16.
Bank covenants are tested quarterly and the Group has considerable headroom in
both financial covenants and in its undrawn but committed facilities as at 30
June 2024. More information can be found in note 3 of the FY24 Annual Report.
Interest rate risk is also managed centrally and derivative instruments are
used to mitigate this risk. On 31 January 2024, the Group entered into a
four-year interest rate fixed swap arrangement to hedge fluctuations in
interest rates on £100.0m of its term loan.
At the year end, £100.0m (2023: £70.0m) of the combined term loan and
revolving credit facility was hedged using an interest rate swap. The
remainder of the debt is not hedged. Further information on the cash flow
hedge can be found in note 17 of the FY24 Annual Report.
Undrawn committed borrowing facilities
At 30 June 2024, the Group has a committed overdraft facility of £5.0m (2023:
£5.0m) and an RCF of £262.5m (2023: £262.5m). The overdraft was undrawn at
30 June 2024 (2023: undrawn) and the RCF was £165.5m undrawn (2023: £254.5m
undrawn).
7. Dividends
Dividends
The Directors have proposed a final dividend of 8.0p (2023: 7.5p) per share,
giving a total of £5.7m (2023: £5.4m). During the year, the 2023 final
dividend totalling £5.4m was paid (2023: £5.0m).
Dividends paid to non-controlling interests amount to £0.1m (2023: £nil).
8. Cash flow generated from operations
Group
2024 2023
£m £m
Profit/(loss) for the year 6.4 41.9
Tax expense 11.8 12.0
Finance expense 13.4 8.4
Loss on sale of discontinued operation 14.3 -
Amortisation of intangible assets 24.8 22.6
Depreciation of property, plant and equipment 17.7 12.6
Depreciation and impairment of right-of-use assets 16.0 15.2
Profit on sale of property, plant and equipment and right-of-use assets (0.3) (0.2)
Increase in inventories (3.0) (1.8)
(Increase)/decrease in trade and other receivables (17.4) (4.6)
Increase/(decrease) in trade and other payables 10.2 (0.8)
Decrease in provisions (0.3) (1.4)
Share option expense 2.4 1.7
Exceptional items 5.8 2.3
Total net cash flow generated from operations 101.8 107.9
9. Discontinued operations
On 21 May 2024, the Group announced the disposal of its Netherlands and
Republic of Ireland operations. The subsidiary entities were sold on 29 May
2024 and this is reported in the current period as a discontinued operation.
Financial information relating to the discontinued operation for the period to
the date of disposal is set out below.
Financial performance and cash flow information
The financial performance and cash flow information presented are for the
period ended 28 May 2024 (2024 column) and the year ended 30 June 2023.
2024 2023
£m £m
Revenue 17.5 19.4
Expenses (23.0) (26.2)
Loss before tax (5.5) (6.8)
Tax expense - 0.6
Loss after tax of discontinued operations (5.5) (6.2)
Loss on sale of the subsidiaries after tax (14.5) -
Loss from discontinued operations (20.0) (6.2)
Exchange differences on translation of discontinued operations (0.2) (0.2)
Other comprehensive loss from discontinued operations (20.2) (6.4)
Net cash outflow from operating activities (2.7) (5.7)
Net cash outflow from investing activities (1.1) (0.9)
Net cash (outflow)/inflow from financing activities (0.8) (0.8)
Net decrease in cash generated by the discontinued operation (4.6) (7.4)
Details of the sale of the discontinued operation
2024 2023
£m £m
Consideration received* - -
Carrying amount of net assets sold (14.3) -
Loss on sale before income tax and reclassification of foreign currency (14.3) -
translation reserve
Reclassification of foreign currency translation reserve (0.2) -
Tax on gain - -
Loss on sale after tax (14.5) -
* Consideration received was €2.
The carrying amounts of assets and liabilities as at the date of sale (29 May
2024) were:
29 May 2024
£m
Intangible assets 11.0
Property, plant and equipment 2.0
Right-of-use assets 6.2
Inventories 1.0
Trade receivables 2.8
Total assets 23.0
Trade creditors (1.8)
Lease liabilities (6.7)
Deferred tax (0.2)
Total liabilities (8.7)
Net assets 14.3
10. Events after the reporting period
Since 30 June 2024, the Group has completed two acquisitions comprising of
three practice sites for initial cash consideration of £5.3m (Australian
$10.3m), detailed below. This is aligned with the Group's strategic goals.
Name of business combination % Share capital acquired Date of acquisition Country of incorporation
Pet Universe Trade and asset 2 July 2024 Australia
Direct Vet Services Trade and asset 2 September 2024 Australia
Further information on these business combinations can be found in note 5.
In addition the Group has exchanged contracts in respect of a further two
acquisitions of additional small animal first-opinion veterinary practices in
Australia, with completion expected in due course. Consideration for these
pending acquisition is £15.3m.
11. Related party transactions
Directors' and key management's compensation is disclosed in note 8 of the
FY24 Annual Report.
Company
During the year, the Company had the following transactions with CVS (UK)
Limited:
2024 2023
£m £m
Recharge of expenses incurred by CVS (UK) Limited on behalf of the Company (0.9) (0.8)
Cash advanced to fund payment of dividend (5.4) (5.0)
The following balances were owed by related companies:
2024 2023
Receivable Payable Receivable Payable
£m £m £m £m
CVS (UK) Limited 70.9 - 75.2 -
Amounts owed by CVS (UK) Limited are unsecured and interest free and have no
fixed date of repayment.
Transactions with Directors and key management
On 24 November 2022, the Group completed the purchase of 100.0% of the share
capital of The Harrogate Vet Limited, a company registered in England and
Wales, comprising one companion animal veterinary practice site in the UK.
Prior to acquisition, the company was partially owned by the spouse of one of
the Executive Directors of the Group, and as such the acquisition was
considered a related party transaction. The terms of the acquisition,
including consideration paid, were on an arm's length basis and consistent
with acquisitions of other unrelated entities.
During the year, £0.4m contingent consideration was paid and £0.7m remains
payable to the related party contingent on fixed EBITDA targets within the
practice acquired. The related party remained in part-time employment within
the Group and received a salary in 2024 of £23,556 (2023: £15,400) which is
on an arm's length basis.
During the year, the Group divested its operations in the Netherlands and the
Republic of Ireland to a member of key management personnel who was not a
Director of the Company, and ceased to be an employee of the Group following
divestment. A short-term interest-bearing loan on an arms-length basis was
made to Global Veterinary Excellence Limited, a company owned by the member of
key management personnel for £600,000, repayable in May 2025. Further
information is shown in note 9. The following dividends were paid to the
Directors of the Group:
2024 2023
£ £
R Connell 12,675 11,830
R Gray 450 420
D Kemp 601 561
D Wilton 488 455
R Fairman 4,904 1,381
B Jacklin 2,662 467
R Alfonso 1,183 -
Spouse of R Fairman 908 848
Spouse of B Jacklin 92 86
Spouse of R Alfonso 261 243
Ultimate controlling party
The Directors consider there is no ultimate controlling party.
12. Exceptional items
2024 2023(1)
£m £m
Competition and Markets Authority(2) 1.6 -
Cyber incident;
Legal costs 2.2 -
Additional IT infrastructure 0.3 -
Security risk management software 0.5 -
Staff and consultant costs 0.7 -
Property cost provision 0.5 -
5.8 -
1. 2023 has been re-presented following the classification of the Netherlands
and Republic of Ireland operations as a discontinued operation; see note 9 for
further details.
2. Cost incurred regarding engagement with the Competition and Markets
Authority including legal and economist fees.
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