REG - CVS Group plc - Half year Trading Update

CVSAnnouncement

25/01/2024 07:00

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RNS Number : 8336A  CVS Group plc  25 January 2024

25 January 2024

 

CVS Group plc

("CVS" or the "Group")

 

Half year Trading Update

Trading in line with full year expectations

 

CVS, the UK listed veterinary group and a leading provider of veterinary
services, issues the following update on trading covering the six months ended
31 December 2023 ("H1 2024").  The Company expects to announce its H1 2024
interim results on 29 February 2024.

 

Current Trading

The Board is pleased to report positive trading in the first half, with
total group revenue up 11.4% to £329.9m (H1 2023: £296.3m), and
like-for-like sales(1)  increasing by 6.0%, within the target range of 4%
to 8% outlined at the Group's Capital Markets Day ('CMD') in November 2022.

 

The Group's Healthy Pet Club preventative care scheme has seen a further
increase in membership, with 500,000 members as at 31 December 2023 (31
December 2022: 481,000 members) reflecting an increase of 4.0% over the last
twelve months. (30 June 2023: 489,000 members).

 

Adjusted EBITDA(2) margin remains consistent with the prior period at c.19%,
reflecting a slight improvement in gross margin, offset by increased utilities
and other costs and continued investment in support functions.

 

The Group has continued its investment in practice refurbishment, relocations,
clinical equipment and technology with £17.2m invested in H1 2024 (H1 2023:
£19.9m).  This is in line with the guidance issued at the CMD for capital
investment of £30m to £50m per annum.

 

Acquisitions

Australia

The Group has successfully completed a further four acquisitions of small
animal first opinion practices in Australia bringing the total to thirteen
acquisitions, comprising fifteen practice sites in H1 2024. The aggregate
initial consideration for these acquisitions was A$103.8m / £54.6m(3).
These acquisitions are performing in line with our business plans.

 

 Practice acquired                                                             % acquired  Date of acquisition
 Vet Referral Pty Ltd t/a Toowoomba Family Vets & Redvets    Toowoomba         100%        01 December 2023
 Wattle Grove Veterinary Hospital                                              100%        12 December 2023
 Bayside Animal Medical Centre                                                 100%        14 December 2023
 Biome Vet Pty Ltd t/a Weston Creek Veterinary Hospital                        100%        15 December 2023

 

Alongside the thirteen acquisitions made to date we have developed a strong
pipeline of potential acquisition opportunities and the Group is confident
that it will complete a number of further small animal practice acquisitions
in H2 2024.  These provide a meaningful platform for our operations in

Australia.

 

United Kingdom

The Group completed a total of four acquisitions of small animal practices in
H1 2024 comprising four practice sites, for aggregate initial consideration of
£10.1m. These acquisitions were made following the submission of briefing
papers to the Competition and Markets Authority ("CMA").

 

Net bank borrowings

The Group's investment in capital expenditure and acquisitions, partly offset
by continued strong operating cashflows, has resulted in net bank
borrowings(4) increasing to £129.2m at 31 December 2023 (30 June
2023: £74.1m). Leverage(5) on a bank test basis of 1.15x at 31 December
2023 is in line with management expectations (30 June 2023: 0.73x).  The
Group expects leverage to remain below its c.2.0x target ceiling.

 

On 24 January 2024, the Group's banking syndicate agreed to a one-year
extension of the bank facilities, thereby extending the term from 22 February
2027 to 22 February 2028.  All other terms of these facilities remain
unchanged.

 

CMA

We continue to support the CMA with their market review and look forward to a
further update from the CMA in line with their current guidance of early 2024.

 

Chair position

Deborah Kemp, the Group's Senior Independent Director continues to undertake
the role of Chair on an interim basis whilst we seek a permanent Chair.  A
formal search process is underway and we expect to make an appointment in the
next few months.

 

Outlook

The Board is pleased with H1 2024 performance and, whilst it continues to be
mindful of the weak economic backdrop, expects to deliver full year results in
line with market expectations.

 

The Group remains excited by the growth opportunity in Australia with
acquisitions made to date performing in line with its business case and a
strong pipeline of acquisition opportunities in place.

 

The Group remains on track to deliver further growth over the longer term and
the Board would like to thank all members of the CVS team for their continued
dedication and support.

 

Notes

1.      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.

2.      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.

3.      Consideration shown at indicative exchange rate of A$1.9:£1

4.      Net bank borrowings is drawn bank debt less cash and cash
equivalents.

5.      Leverage on a bank test basis is drawn bank debt less cash and
cash equivalents, divided by adjusted EBITDA annualised for the effect of
acquisitions, including acquisition costs arising from business combinations
and excluding share option costs, prior to the adoption of IFRS 16.

 

 

CVS Group
plc
via Camarco

Richard Fairman, CEO

Ben Jacklin, Deputy CEO

Robin Alfonso, CFO

 

Peel Hunt LLP (Nominated Adviser &
Broker)
+44 (0)20 7418 8900

Adrian Trimmings / Michael Burke / Andrew Clark / Lalit Bose

 

   Berenberg (Joint
Broker)
+44 (0)20 3207 7800

Toby Flaux / Ben Wright / James Thompson / Milo Bonser

 

Camarco (Financial
PR)

Geoffrey Pelham-Lane
                                                 +44
(0)7733 124 226

Ginny Pulbrook
 
      +44 (0)7961 315 138

 

About CVS Group plc (www.cvsukltd.co.uk (http://www.cvsukltd.co.uk) )

CVS Group is an AIM-listed provider of veterinary services in the UK,
Australia, the Netherlands and the Republic of Ireland.  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 has c.500 veterinary practices across its four markets, including
nine specialist referral hospitals and 39 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), Buying Groups and the Group's online retail business ("Animed
Direct").

 

The Group employs c.9,000 personnel, including c.2,400 veterinary surgeons and
c.3,300 nurses.

 

 

 

 

 

 

 

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