REG - CVS Group plc - Half Year Trading Update

CVSAnnouncement

30/01/2025 07:00

For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250130:nRSd1943Va&default-theme=true

RNS Number : 1943V  CVS Group plc  30 January 2025

For Immediate
Release
         30 January 2025

CVS Group plc

("CVS", the "Company" or the "Group")

Half year Trading Update

FY2025 Trading in line with expectations; continued growth in Australia

 

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 2024 ("H1 2025").  The Company expects to announce its H1 2025
interim results on 27 February 2025.

 

Unaudited Business Update(1)

In the six-month period to 31 December 2024, Group sales increased 6.6% to
£341.8m (H1 2024: £320.5m).  Overall Group like-for-like sales(2) for the
period compared to H1 2024 were -1.1% impacted by a continuation of softer
market conditions in the UK most notably in our online retail and laboratory
businesses.  Performance across our core Veterinary Practice division was
flat and we expect to deliver year on year growth in this division and across
the Group in the second half of the year.

 

Adjusted EBITDA(3) increased by 4.5% to £67.4m (H1 2024: £64.5m) with an
adjusted EBITDA(3) margin of 19.7% which  is in line with target EBITDA
margins.

 

The UK government budget changes announced in November 2024 will result in
increased employment costs with effect from April 2025. The Group estimates
that the annualised impact to the year ending 30 June 2026 to be c. £8m from
National Insurance scheme changes and c.£3m from National Living
Wage/National Minimum Wage increases. The Group is targeting cost synergies in
Australia and efficiencies in the UK to offset these increases.

 

The Group's Healthy Pet Club preventative healthcare scheme has seen a further
increase in membership, with 507,000 members as at 31 December 2024 (31
December 2023: 500,000 members) reflecting an increase of 1.4% over the last
twelve months.

 

In line with the Group's strategy to provide the best possible facilities and
infrastructure for its clients and staff, the Group has invested £16.8m in H1
2025 (H1 2024: £17.2m) in technology, clinical equipment, practice
refurbishment and relocations.  Following the accelerated investment made
into the Group's technology platform in 2024, the Group launched its new
website for Animed Direct in January 2025 which improves speed and usability,
and is piloting several client engagement projects on a number of trial sites
using the Group's cloud based systems.

 

In light of the uncertainty in the UK due to the ongoing CMA Market
Investigation, the Group continues to be more selective about investment in
the UK, with very disciplined capital investment in facilities, equipment and
IT and no UK acquisitions.  The Group is increasing its investment in growth
in Australia, where there is greater stability and certainty in the regulatory
environment around the sector.

 

The Group is pleased to share an improvement in employee engagement as
measured through the employee Net Promoter Score, which increased to +3.8 in
December 2024 (30 June 2024: -2.8).

 

Strengthened Management Team

The Group has strengthened its management team with the appointment of Claire
Slater as Chief Operating Officer on 13 January 2025.  Claire brings a wealth
of operational and commercial experience from her previous roles including at
IVC Evidensia and WH Smith.

 

Australia Acquisitions on track with healthy pipeline

The Group is pleased with the performance in Australia which continues to be
in line with management's expectations. Synergies are expected to have a
positive impact on Australia and Group adjusted EBITDA margins for the year.
The Group has completed a further two companion animal first opinion practice
acquisitions in Australia since the trading update in November. Five
acquisitions comprising eight practice sites have been made in the financial
year to date, for aggregate initial consideration of A$45.2m / £23.3m.

 

 

 Name of business combination                                   % acquired        Date of acquisition
 Pet Universe                                                   Trade and assets  2 July 2024
 Direct Vet Services                                            Trade and assets  2 September 2024
 Northcote Animal Hospital                                      Trade and assets  18 November 2024
 Cessnock Veterinary Centre and Hospital, Vetcare Aberglasslyn  Trade and assets  21 November 2024

 and Vetcare Kurri
 Ripley Valley Veterinary Hospital Pty Ltd                      100%              21 November 2024

 

The Group now operates across 27 practices in Australia comprising 36 practice
sites, providing increased scale.  The Group has a strong pipeline of future
acquisition opportunities.

 

Net bank borrowings

The Group's investment in capital expenditure and acquisitions, partly offset
by robust operating cashflows, has resulted in net bank
borrowings(4) increasing to £182.9m as at 31 December 2024 (30 June
2024: £168.0m). Leverage(5) on a bank test basis of 1.66x as at 31 December
2024 is in line with management expectations (30 June 2024: 1.54x).  The
Group expects leverage to remain below its c.2.0x target ceiling.

Competition and Markets Authority (CMA)

The Group will continue to support the CMA with its investigation and looks
forward to further updates from the CMA in the coming months as their process
reaches its conclusion later this year.

 

Outlook

Whilst the Board continues to be mindful of headwinds in the UK and the people
cost increases as a result of the UK Autumn Budget, the fundamental need for
high quality veterinary care remains strong. The expansion into Australia is
progressing well and CVS remains well positioned to deliver attractive growth
in shareholder value over the medium term. The Board reiterates its thanks to
its colleagues and all CVS stakeholders.

 

The Board remains confident in the Group delivering full year 2025 results in
line with market expectations.

 

Notes

1. H1 2024 has been re-presented following the classification of the
Netherlands and Republic of Ireland operations as a discontinued operation in
FY 2024.

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 2023, revenue is included from
September 2024 in the like-for-like calculations.

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

5 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.

 

 

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 / Michael Burke / James Thompson / Milo Bonser

 

Camarco (Financial
PR)

Ginny
Pulbrook
 
                   +44 (0)7961 315 138

 

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.

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTPPUACGUPAGBB