REG - CVS Group plc - Interim Results
29/02/2024 07:15
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RNS Number : 8727E CVS Group plc 29 February 2024
For Immediate Release 29 February 2024
CVS Group plc
("CVS", the "Company" or the "Group")
Interim results for the six months ended 31 December 2023
Continued delivery on growth strategy, trading in line with full year
expectations
CVS, the UK listed veterinary group and one of the leading providers of
veterinary services, is pleased to announce its unaudited interim results for
the six-month period ended 31 December 2023 ("H1 2024") and provide an update
on year-to-date trading. Comparative data is provided for the six months ended
31 December 2022 ("H1 2023"), unless otherwise stated.
Financial Highlights
£m except where stated H1 2024 (unaudited) H1 2023 (unaudited) Change %(6) FY 2023 (audited)
Revenue 329.9 296.3 11.4% 608.3
Group Like-for-like ("LFL") sales growth (%)(1) 6.0% 7.5% (1.5ppts) 7.3%
Adjusted EBITDA(2) 63.0 57.8 8.9% 121.4
Adjusted EBITDA(2) margin (%)
Adjusted EBITDA(2) margin (%) 19.1% 19.5% (0.4ppts) 20.0%
Adjusted profit before tax(3) 42.7 41.1 3.9% 85.4
Adjusted earnings per share(4) ("EPS") (p) 44.5 45.6 (2.4%) 96.0
Operating profit 28.6 31.5 (9.2%) 62.3
Profit before tax 23.4 28.0 (16.4%) 53.9
Basic earnings per share (p) 20.4 29.6 (31.1%) 58.8
Net bank borrowings(5) 129.2 57.6 124.3% 74.0
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.
Alternative performance measures are described in note 2.
( )3( ) Adjusted profit before tax is calculated as profit before
amortisation, taxation, costs relating to business combinations, and
exceptional items. Alternative performance measures are described in note 2.
4 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 period. Alternative performance measures are
described in note 2.
5 Net bank borrowings is drawn bank debt less cash and cash
equivalents.
6 Percentage increases and decreases are calculated based on the
underlying values throughout this document.
7 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 fees and excluding share option costs,
prior to the adoption of IFRS 16.
8 Operating cash conversion is cash generated from operations excluding
acquisition fees and contingent consideration payments but including
repayment of right-of-use liabilities and maintenance capital expenditure
divided by adjusted EBITDA.
Financial Highlights
· Revenue increased 11.4% to £329.9m with like-for-like sales(1)
growth of 6.0%, within the Group's organic revenue growth ambition of between
4% and 8%
· Increase in Adjusted EBITDA(2) of 8.9% to £63.0m with Adjusted
EBITDA(2) margin at 19.1%, in line with our stated ambition of full year
margins between 19% and 23%
· Membership of our preventative healthcare scheme, The Healthy Pet
Club (HPC), has increased to 500,000, up 4.0% vs. 31 December 2022 (+2.2% vs.
30 June 2023) reflecting continued underlying demand for companion pet
veterinary care services in the UK
· Leverage(7) was 1.15x as at 31 December 2023 (31 December 2022:
0.60x; 30 June 2023: 0.73x) reflecting the Group's continued focus on driving
growth through our M&A and capital investment strategy partly offset by
strong EBITDA growth and operating cash conversion
· Bank facilities renewed in January 2024 to extend the term by one
further year to 21 February 2028 on the same terms and £100m hedged in an
interest rate swap over the same period
Operational & Strategic Highlights
· Focus on growth through execution of M&A strategy
Australia
o Entry into Australian veterinary services market with thirteen small
animal acquisitions consisting of fifteen practice sites completed in H1 2024
for aggregate initial consideration of A$103.8m / £54.4m
o Strong pipeline of further acquisition opportunities with a continued
focus on major cities such as Sydney, Melbourne, Brisbane, and Perth
o Local senior management team in place with senior Operations Director
seconded from the UK, with appropriate governance through UK support functions
UK
o Completed a further four small animal practice acquisitions in H1 2024,
all following successful submission of briefing papers to the Competition and
Markets Authority (CMA)
· Focus on capital expenditure to deliver high quality infrastructure
o Continued disciplined approach to investment in our facilities and
equipment, with total capital expenditure of £17.2m (H1 2023: £19.9m, FY
2023: £45.7m)
o A further four projects completed in H1 2024, with one further Greenfield
small animal practice opened in Derby in January 2024
o Bristol Vet Specialists (BVS), a state-of-the art flagship
multi-disciplinary referral hospital, opened in October 2023 providing a range
of services including cardiology, dermatology, diagnostic imaging, internal
medicine, neurology/neurosurgery, oncology, orthopaedics, soft tissue surgery
and anaesthesia & analgesia
· Improved standards of veterinary care
o New Clinical Governance Framework launched by CVS, driving increased
standards of care in the profession: first dedicated veterinary clinical
governance framework for those involved in animal healthcare in the UK
o 8.4% more vets employed on average in calendar year 2023 vs 2022 as we
continue to position CVS as the employer of choice
Current trading and outlook: confident of continued growth and delivery of our
strategic goals
· We are mindful of the wider macroeconomic backdrop and the
potential impact on demand as well as ongoing inflationary pressures on
margins over the near term. However, the Board remains confident that full
year results will be in line with market expectations and the strategy remains
appropriate to deliver longer term sustainable growth in value
· The board is pleased with the Group's entry into Australia with
the practices acquired performing in line with business cases. We have a
strong pipeline of opportunities and are building a meaningful platform
· Investment in our people, technology and clinical facilities
remains a key focus in order to support further organic growth
· Our focus on profitable expansion through acquisition in the UK
and Australia will continue, with at least ten further acquisitions in
Australia expected in H2 2024. We look forward to welcoming new colleagues to
CVS through small animal practice acquisitions in H2 2024
· Positive momentum towards our stated five-year plan to double
Adjusted EBITDA
· We continue to support the Competition and Markets Authority
(CMA) with their market review into the provision of veterinary services for
household pets in the UK. The Group looks forward to an update from the CMA
in due course.
Richard Fairman, Chief Executive Officer, commented:
"Our interim results reflect the continued resilience of our business despite
the challenging macroeconomic backdrop affecting household incomes and
inflationary pressures seen across UK and Europe.
We continue to execute on the growth strategy outlined at our Capital Markets
Day in November 2022 and during the period entered the Australian veterinary
market with thirteen practices acquired alongside a further four acquisitions
in the UK. We extended our bank facilities in January 2024 so that, alongside
our cash generative business model, we have committed funds in place for the
next four years to help fund our investment plans.
Our purpose is to give the best possible care to animals and our highly
skilled team of colleagues are essential to the delivery of this care. I
would like to take this opportunity to thank all CVS colleagues for their
continued professionalism and dedication in providing high-quality care to our
clients and their animals.
With the continued commitment of our colleagues and our focused investment in
their welfare and their working conditions, we look forward to reporting
further growth in the future."
Results webcast
An audio webcast and presentation of these results will be available on
https://stream.brrmedia.co.uk/broadcast/65c62a8da4115474d64b3987
(https://protect-eu.mimecast.com/s/fB5pCqAK5SMmNQsZSHSX?domain=stream.brrmedia.co.uk)
from 07.00am on 29 February 2024. Management will host a Q&A conference
call for analysts and investors at 09.00am GMT this morning. To join the call
in listen-only mode, please click on the following link
https://stream.brrmedia.co.uk/broadcast/65b8e5fc6371e5b884f62627
(https://protect-eu.mimecast.com/s/Q7aqCrgL5UBLZqczbdwK?domain=stream.brrmedia.co.uk)
. Those wishing to participate in the Q&A session should email
CVSG@camarco.co.uk (mailto:CVSG@camarco.co.uk) for call details.
Contacts:
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 Clarke / 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 (http://www.cvsukltd.co.uk) )
CVS Group is an AIM-listed provider of veterinary services with operations 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 operates c.500 veterinary practices across its four territories,
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) and the Group's online retail business ("Animed
Direct").
The Group employs c.9,100 personnel, including c.2,400 veterinary surgeons and
c.3,400 nurses.
Introduction
The Board is pleased to report that the Group has delivered further growth in
both revenue and adjusted EBITDA, as it continues to focus on providing
high-quality care to its patients. This focus has delivered like-for-like
sales(1) growth in H1 2024 of 6.0%, and Adjusted EBITDA margin of 19.1% which,
whilst impacted by ongoing inflationary pressures on costs, remains within our
stated ambition to maintain margins between 19% and 23%.
We are pleased with our continued growth, with our H1 2024 results
demonstrating positive momentum towards our stated five-year plan to double
Adjusted EBITDA by focusing on:
· Organic revenue growth of 4% - 8% per annum;
· Adjusted EBITDA margin between 19% to 23%;
· Investment in practice facilities and technology to deliver
additional organic growth;
· Investment in selective acquisitions subject to disciplined
criteria for returns and earnings accretion;
· Operating cash conversion greater than 70%; and
· Maintaining leverage (net debt to EBITDA ratio) below 2.0x.
CMA
We continue to support the Competition and Markets Authority (CMA) with their
market review into the provision of veterinary services for household pets in
the UK. The Group looks forward to an update from the CMA in due course.
M&A: delivering against our plan, with entry into Australia and building a
sustainable platform
Australian Market Entry
In July 2023 CVS entered the Australian veterinary services market in
accordance with its growth objectives, as outlined in the five-year plan, to
execute on scalable international consolidation opportunities subject to
maintaining its disciplined acquisition criteria.
CVS completed a total of thirteen small animal first opinion acquisitions in
Australia (comprising 15 practice sites) in H1 2024 for aggregate initial
consideration, inclusive of cash acquired, of A$103.8m / £54.4m with
representation in the major cities of Sydney, Melbourne, Brisbane, and Perth.
The combined historical multiples paid are lower than those in the UK and the
internal rate of return within the relevant acquisition business cases is
comfortably above our hurdle rate of 10%. The acquisitions made to date are
performing well and in line with expectations. These acquisitions, together
with our strong pipeline, provide a meaningful platform for our operations
in Australia.
Our focus is on acquiring high-quality small animal practices with good
facilities and strong practice management teams. Our local senior management
team work closely with the practice management teams in supporting the growth
of their practices and in generating value from our Australia presence. We
have appropriate governance through our support functions in the UK. Whilst
acquisition multiples in Australia are lower than in the UK, practice margins
are similar. However, the internal rate of return is expected to be similar
to the UK as synergies have not been included initially, and the rate of
corporation tax is higher at 30% in Australia. The Group expects to benefit
increasingly over time from additional advantages of scale as it further
expands in Australia, including improved drug purchasing terms, revenue growth
and margin enhancement with a focus on high-quality clinical care and
developing a market leading employee experience.
Australia market trends
The Australian veterinary services market has relatively low levels of
consolidation with two major established competitors, VetPartners and
Greencross, collectively owning c.11% of the market. With c.3,500 practices
across Australia, there is a significant potential opportunity for CVS. The
Australian market has similar characteristics to the UK with an increasing pet
population post the COVID-19 pandemic, humanisation of pets and consumers
willing to invest in veterinary care for their animals. There is a history of
UK and Australian vets spending time working in the two markets and the
approach to clinical care is similar. CVS's purpose, to give the best possible
care to animals, and its vision, to be the veterinary company people most want
to work for, fit well with the Australian market and we are excited by the
opportunity. Our expansion into Australia will also provide career progression
opportunities for UK vets and nurses who may wish to gain experience in
Australia and a formal exchange programme is soon to be launched, to attract
and retain colleagues within the wider CVS Group.
Continued UK pipeline of acquisitions
CVS continues to augment its UK operations with targeted acquisitions with a
further four acquisitions completed in the first half comprising four practice
sites, for aggregate initial consideration, inclusive of cash acquired,
of £10.1m. The acquisitions were completed following the submission of
briefing papers to the CMA. These acquisitions are performing in line with
expectations.
The Group anticipates to complete a number of additional first-opinion
practice acquisitions in H2 2024 subject to appropriate appraisal and due
diligence. Our leverage remains significantly below 2.0x, and there continues
to be considerable headroom in our undrawn loan facility.
Driving clinical standards in the profession and delivering great clinical
care
Clinical Governance Framework
In November 2023, CVS launched a new Clinical Governance Framework, a system
through which CVS will hold itself accountable for improving the quality of
its services and cultivating a culture in which clinical care will continue to
improve. Unlike previous veterinary approaches to clinical governance this
framework focuses on creating the environment in which high standards of care
can thrive.
It represents the first dedicated veterinary Clinical Governance Framework for
those involved in animal healthcare in the UK. Similar frameworks have been
adopted by the NHS and others in human healthcare, but a different approach
has been required for the veterinary profession.
The components of the CVS Clinical Governance Framework are:
· A definition of what is meant by the term "Quality of Care"
within animal healthcare in a way that can be individualised to every
situation;
· A description of the six pillars that represent the
organisation's clinical priorities namely:
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.
· Five values central to a culture of clinical improvement that CVS
colleagues will aspire to namely: a just culture, accountability; inclusive
leadership; teamwork; and systems thinking.
Paul Higgs, Chief Veterinary Officer at CVS, said: "We hope that this
framework is useful for everybody in our profession. Understanding the real
benefits of a fantastic Clinical Governance Framework and the psychological
safety culture that must underpin it can have a hugely positive impact on the
wellbeing of our profession, our clients and our patients. It provides a safe
way for us to understand our current working practices and identify change
where needed.
Defining 'Quality of Care' is essential for us to understand what we are
trying to achieve with that change. To cultivate the right environment we must
also commit to behaviours that engage inclusively, challenge fairly and
encourage sustainable accountability."
The Clinical Governance Framework will act as a guiding light to our
clinicians as they give the best possible care to animals. Within three months
of launching our framework, we have trained 164 Clinical Improvement advocates
across small animal, farm and equine.
Investing in great facilities and equipment
As part of the Group's commitment to provide great clinical care, CVS
continually reviews its facilities and equipment to ensure they meet the high
standards our care requires. In H1 2024 we invested £17.2m in capital
projects, completing four refurbishments and relocations. Where appropriate
these refurbishments and relocations include advanced imaging equipment,
enhancing the clinical offering and therefore patient care.
Alongside investment in improving and developing our existing practices, we
opened a further greenfield site in Derby in January 2024. Greenfield
practices support clinicians looking to establish new veterinary practices and
hospitals in state-of-the-art facilities.
Our flagship multi-disciplinary referral centre, Bristol Vet Specialists,
opened in October 2023 in Avonmouth. The new hospital, which covers over
30,000 square feet, was custom built with uniquely designed facilities for our
clinical colleagues to accommodate the very best workflow and patient care.
The facilities include:
· fourteen consultation rooms, set up to facilitate engagement with
the patient and their owners;
· designated accident and emergency;
· five operating theatres including a dedicated interventional
theatre;
· advanced imaging; and
· a linear accelerator capable of performing stereotactic
treatments advancing cancer treatment available to pets.
Delphine Holopherne-Doran, Clinical Director at BVS, said: "we are proud to
open our new veterinary hospital in Bristol. Our advanced facilities and
eminent colleagues will mean we can provide the best animal care to pets in
the Southwest and further afield, and we have invested in cutting edge
technology to bring cancer treatment in pets to the next level. This site will
become a centre of excellence in the veterinary world."
People: Our vision is to be the veterinary company people most want to work
for
Our people remain at the core of our business, and we are pleased to see
continued high levels of employee satisfaction, measured through our employee
net promoter score stabilising at 11.9 at 31 December 2023. A simple but
effective way we engage with our colleagues is through regular check ins, of
which 87% of our colleagues report they have these regularly with their line
managers; and interactive team meetings, of which 86% of our colleagues have
regular interactive team meetings. We fundamentally believe these regular team
touch points contribute to colleague satisfaction by creating an opportunity
for feedback, development and also an opportunity to talk about wellbeing.
We continue to recruit more clinicians, and we now employ more vets and nurses
than ever before. We have seen an increase in the average number of vets we
employed in calendar year 2023 vs calendar year 2022 of 8.4% and nurses of
8.5%. Our well-understood, people focused strategy is delivering positive
momentum in CVS becoming the veterinary company people most want to work for.
New Graduate Programme
Our industry leading New Graduate Programme continues to attract an increased
share of the available new graduates to CVS each year with just over 200
graduates employed from the summer 2023 graduate pool. A strategic focus
over the last year has been on new graduate induction, adopting a
collaborative approach with practices and key stakeholders to deliver a
structured and supported onboarding experience for our new graduates to help
ease their transition into the profession. Graduates work closely with a
dedicated mentor in practice who has undergone additional in-house training,
and they are encouraged to develop their peer support networks via the
introduction of regional tutor groups. By constantly monitoring and improving
the experience of new graduates within CVS, we are better able to retain this
talent within the business and deliver on our commitment to provide a great
place to work and have a career.
Rob Kelly, Head of Veterinary Clinical Education at CVS, said "With 80% plus
of UK veterinary professionals working in general practice, the aim of the
programme is to develop new members of our profession to benefit their career,
colleagues, and animals under their care. Our new graduate programme is
designed to enable individuals to continually reflect on their own
competencies in a supported learning environment to develop as capable
clinicians."
New veterinary nursing career pathway
We launched a new nursing career pathway in H1 to offer clear career
progression for nurses across small animal first opinion, referral and equine
practices. At each level of the pathway there is a tailored learning
curriculum from newly qualified advancing into three clinical activity levels
reflecting the direction of the nurse's careers and areas of interest. Beyond
that, we have also introduced 3 new job titles clinical lead where you would
be responsible for managing a clinical area of the practice, team lead where
you are responsible for managing a subset of the nursing team, and nurse
manager where you would be responsible for leading a large multi-tiered or
multi practice team.
Tara Ryan, Chief Veterinary Nursing Officer at CVS, said: "There are so many
good reasons to provide structure and clarity around nursing careers. The
nursing career pathway will enhance the role of the Veterinary Nurse in our
practices and ensure we are utilising the skills of our nurses. The pathway
will give confidence to vets when delegating to nurses and it will enable
nurses to do more for our clients and patients, whether that be through
advanced clinical care, surgery or consulting procedures.
Most importantly it will support nurses in taking the direction in their
career that they want to take. There are multiple different options for nurses
to progress within CVS - whether it be in practice, procurement, client
services or learning, education and development. It means nurses truly can
have a life-long career within CVS."
Apprentice Scheme
In line with our strategy of building careers for the future, we also continue
to grow our apprentice programme, supporting nearly 500 active apprentices
across the business. Such is the strength of this programme we were winners
of the Apprenticeship Employer of the Year Award in the East of England, for
the macro employer category (over 5,000 employees). As such, we reached the
national finals being the only veterinary and animal care employer
represented.
Care at our Heart: embedding our Environmental, Social and Governance (ESG)
strategy
We published our second annual sustainability report in September 2023
highlighting the progress we have made as well as setting our first public
targets, included in the report, within our six workstreams: Energy and
Carbon, Waste, One Health, Wellbeing, People Development, and Equity,
Diversity and Inclusion (EDI).
We are targeting clear metrics which are ambitious and show our intent to
become a more sustainable company.
We continue to support wellbeing across our business areas, and the continued
work of our wellbeing working group supports over 60% of colleagues reporting
we are providing relevant and helpful wellbeing resources, training,
activities and support.
We continued to invest in a range of interventions to conserve energy,
increase energy efficiency and reduce our carbon footprint and these have so
far led to a 12% reduction in energy use and an 11% reduction in our carbon
footprint since we started to target these improvements.
We have strengthened our Environmental Champion programme, and provided
additional resources to practices to help improve waste segregation, thereby
reducing our impact on the environment. This has contributed to a further
reduction in medical waste in excess of 10% in H1 2024 vs H1 2023.
We use a data driven approach to balance the use of treatments that may have
an impact on the environment and public health whilst maintaining our primary
responsibility for animal welfare. This has led to elimination of the use of
Nitrous Oxide.
In November 2023, we acquired Brimbank Vet Clinic, the first carbon neutral
veterinary practice in Australia. We are looking forward to working with the
team at Brimbank to learn from their sustainable initiatives and to consider
how these can be applied elsewhere across the group.
Jeremy Watson, former owner and Clinical Director at Brimbank Vet clinic said
"We achieved our carbon neutral status in 2021, where we became Australia's
first certified carbon neutral veterinary practice on the Australian
Government Climate Active Register. I know some people get overwhelmed by
where to start, but it is about understanding why it is important to be
addressing climate change because of its escalating impact on animal health,
and as veterinary teams, animal health is our responsibility. Management needs
to engage your whole team in a culture of sustainability so it makes this a
normal part of practice. We designed and built a practice that minimised its
impact on the environment, creating a place that the team want to work in and
clients want to visit. A sustainability program that includes net zero
strategy has delivered increased team engagement, improved profitability and
better client value."
Financial review: investing to deliver future growth
CVS delivered a positive performance in H1 2024, making progress towards its
five-year plan to double adjusted EBITDA (to FY 2028). CVS continues to focus
on delivering the very best care to animals and is pleased with the continued
growth.
In November 2022, CVS announced its intention of building a sustainable and
meaningful business overseas, and in July 2023 entered the Australia
veterinary market. In H1 2024 we acquired thirteen first-opinion small animal
practices (15 practice sites), with a healthy pipeline of opportunities.
Revenue
Group revenue was £329.9m in the period, an increase of 11.4% over the prior
period (H1 2023: £296.3m), with group like-for-like sales(1), growth of 6.0%
(H1 2023: 7.5%) reflected growth across each of our four divisions
notwithstanding a challenging economic climate and cost of living crisis.
Gross profit/gross profit margin
Gross profit of £141.1m increased by 11.4% (H1 2023: £126.7m) benefitting
from revenue growth. During the period there was an improvement in gross
margin before clinical staff costs to 78.1% (H1 2023: 77.5%); offset by an
increase in employment costs where we continue to invest in clinicians and
support roles. As a result, gross profit margin was flat overall vs H1 2023.
Adjusted EBITDA and adjusted EPS
Adjusted EBITDA for the half-year increased 8.9% to £63.0m (H1 2023: £57.8m)
primarily due to growth in revenue and gross profit. Included is recognition
of £6.0m Research and Development Tax Credits (H1 2023: £5.0m).
Adjusted EBITDA margin was 19.1% (H1 2023: 19.5%) impacted by conscious
investment in support functions; inflationary pressures particularly in wages
and establishment costs; the opening of BVS and a new greenfield site; and
poorer performance across the Netherlands and the Republic of Ireland. BVS
will continue to impact margin during the early months post opening as it
establishes itself and builds a full caseload.
Adjusted earnings per share decreased 2.4% to 44.5p (H1 2023: 45.6p) following
the increase in the rate of corporation tax in the UK to 25.0% from April
2023.
Operating profit, profit before tax and basic earnings per share
Operating profit decreased 9.2% to £28.6m (H1 2023: £31.5m). The increase in
adjusted EBITDA was offset by an increase in depreciation as a result of
increased capex spend and an increase in costs relating to business
combinations.
Profit before tax decreased 16.4% to £23.4m (H1 2023: £28.0m). Finance
expenses increased to £5.2m (H1 2023: £3.5m) following an increase in SONIA
rates and increased bank borrowings to support investment.
Additionally, tax expense increased to £8.7m from £6.9m following the
increase in UK corporation tax rate. Consequently, basic earnings per share
for the period decreased to 20.4p (H1 2023: 29.6p).
A reconciliation between statutory operating profit and adjusted EBITDA is
shown below:
H1 2024 H1 2023
£m £m
Operating profit 28.6 31.5
Adjustments for:
Amortisation, depreciation, impairment and profit on disposal 26.8 24.5
Costs relating to business combinations 7.5 1.8
Exceptional items 0.1 -
Adjusted EBITDA 63.0 57.8
Cash generated from operations/net bank borrowings
Cash generated from operating activities was £39.4m (H1 2023: £35.0m) with
the increase driven mainly from increased EBITDA. Operating cash conversion(8)
of 63.7% (H1 2023: 62.1%) is in line with management expectations and the full
year is expected to be in excess of 70%, with the first half structurally
impacted by prior year bonus payments.
Net bank borrowings increased to £129.2m (H1 2023: £57.6m, 30 June 2023:
£74.0m) after funding £63.1m of acquisitions (net of cash acquired), along
with £17.2m of capital expenditure. This continued investment reflects the
implementation of our capital allocation programme for future growth.
Operating segment performance
Veterinary Practices division
Our Veterinary Practices division comprises c.500 veterinary practices across
four markets, including nine specialist referral hospitals and 39 dedicated
out-of-hours sites, as well as our buying groups, Vet Direct and MiPet
insurance. The Veterinary Practice division generated revenues of £294.8m in
H1 2024, an increase of 11.9% on the £263.4m achieved in the prior period.
Like-for-like sales growth, adjusted for the number of working days in the
period, was 5.9% (H1 2023: 7.3%), demonstrating our continued ability to
generate organic growth.
Gross margin before clinical staff costs in the Veterinary Practices Division
improved to 80.5% (H1 2023: 80.3%).
Adjusted EBITDA for the Veterinary Practices division increased to £59.7m (H1
2023: £55.4m). Adjusted EBITDA margin was down slightly at 20.3% (H1 2023:
21.0%), reflecting increased investment in our people and inflationary costs
increases.
Laboratories division
Our Laboratories division provides diagnostic services and in-practice
laboratory analysers to CVS practices and third-party owned veterinary
practices. Diagnostic services are offered via post and courier allowing
complete coverage of the UK. Revenue of £16.3m was generated in the period,
reflecting strong growth of 14.4% from the £14.2m generated in H1 2023 due to
increased case volume and increased volume of analysers in practice.
Adjusted EBITDA increased to £5.3m (H1 2023: £4.4m) primarily due to the
increased revenue.
Crematoria division
Our Crematoria division provides pet cremation and clinical waste disposal for
CVS and third-party practices. Revenue was £6.0m in the period (H1 2023:
£5.3m) reflecting the success of the Direct Pet Cremation project, offering a
more compassionate aftercare service and increased options for pet owners.
Adjusted EBITDA was £2.1m (H1 2023: £1.6m) primarily due to the increase in
top line revenue.
Online retail business
We have continued to improve our Online retail business, Animed Direct, with
revenue increasing to £25.0m (H1 2023: £24.5m), benefitting from increased
basket spend. Adjusted EBITDA was flat at £1.7m (H1 2023: £1.7m).
Central administration
Central administration costs were £5.8m (H1 2023: £5.3m). Expressed as a
percentage of Group revenue, excluding RDEC and associated costs, these costs
remained broadly consistent at 3.6% (H1 2023: 3.5%).
Cash flow and funding position
CVS had borrowings of £161.5m at 31 December 2023 with cash and cash
equivalents of £32.3m, resulting in net bank borrowings of £129.2m (H1 2023:
£57.6m). The Group had leverage (net debt / bank test EBITDA) of 1.15x as of
31 December 2023 (30 June 2023: 0.73x).
The Group has total facilities of £350.0m committed through to 21 February
2028 and provided by a syndicate of eight banks: AIB, Barclays, Danske, HSBC,
JP Morgan, Lloyds, NatWest and Virgin Money. The facilities comprise the
following elements:
· a fixed term loan of £87.5m, repayable on 21 February 2028 via a
single bullet repayment; and
· a four-year Revolving Credit Facility of £262.5m, available to
21 February 2028; and
· a £5.0m overdraft facility, renewable annually.
The Group is subject to two financial covenants associated with these
facilities which are based on the ratios of net debt to EBITDA (no more than
3.25x) and EBITDA to interest (no lower than 4.5x). EBITDA for this purpose is
based on adjusted EBITDA annualised for the effect of acquisitions, including
acquisition fees and excluding share option costs, prior to the adoption of
IFRS 16. Interest cover was 25.7 at 31 December 2023 (30 June 2023: 34.3).
Dividends
A dividend of 7.5p (December 2022: 7.0p) per share was paid in December 2023
in respect of the financial year ended 30 June 2023. The Board will continue
to review its dividend policy and anticipates the payment of a final dividend
in respect of the current financial year, which will be payable in December
2024. In line with our customary practice, the amount of this dividend will be
dependent on the outcome of the full year results and the growth capital needs
of the business.
Current trading & Outlook
We remain confident of delivering sustainable long-term growth and delivery of
our strategic goals.
We continue to execute on the strategy outlined at our Capital Markets Day in
November 2022 and we extended our bank facilities in January 2024 so that we
have committed bank facilities through to February 2028.
We continue to be mindful of the wider macroeconomic backdrop and the
potential impact on demand as well as continued inflationary pressures on
margins over the near term. However, the Board remains confident that full
year results will be in line with market expectations and the strategy remains
appropriate to deliver longer term sustainable growth in value.
We will continue our investment in our people, technology and our clinical
facilities in order to support further organic growth. This will be augmented
by investment in our exciting pipeline of selective acquisitions and
development of exceptional Greenfield sites. In H2 2024 to date, we have
completed a further small animal practice acquisition in the UK for initial
consideration of £5.2m.
The Board would like to acknowledge and thank all members of the CVS team for
their efforts to provide the very best care for animals, and with their
support, we look forward to sharing continued success in the future.
Deborah Kemp
Interim Chair
29 February 2024
Condensed consolidated income statement for the six-month period ended 31 December 2023 (unaudited)
Note Six months ended 31 December 2023 (Unaudited) Six months ended 31 December 2022 (Unaudited) £m Year ended 30 June 2023 (Audited) £m
£m
Revenue 329.9 296.3 608.3
Cost of sales (188.8) (169.6) (346.0)
Gross profit 141.1 126.7 262.3
Administrative expenses (112.5) (95.2) (200.0)
Operating profit 28.6 31.5 62.3
Finance expense 5 (5.2) (3.5) (8.4)
Profit before tax 23.4 28.0 53.9
Tax expense 8 (8.7) (6.9) (12.0)
Profit for the period 14.7 21.1 41.9
Profit for the period attributable to:
Owners of the parent 14.6 21.1 41.9
Non-controlling interests 0.1 - -
Profit for the period 14.7 21.1 41.9
Earnings per Ordinary share (EPS)
Basic 6 20.4p 29.6p 58.8p
Diluted 6 20.4p 29.4p 58.5p
All activities derive from continuing operations.
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
KPIs. 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, 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 Six months ended 31 December 2023 (Unaudited) Six months ended 31 December 2022 (Unaudited) Year ended 30 June 2023 (Audited) £m
£m
£m
Profit before tax 23.4 28.0 53.9
Adjustments for:
Finance expense 5 5.2 3.5 8.4
Amortisation of intangible assets 9 11.7 11.3 22.6
Depreciation of property, plant and equipment 9 7.7 6.1 12.6
Depreciation of right-of-use assets 10 7.5 7.1 15.2
Profit on disposal of property, plant and equipment and right-of-use (0.1) - (0.2)
assets
Costs relating to business combinations(1) 7.5 1.8 6.6
Exceptional items(2) 0.1 - 2.3
Adjusted EBITDA 63.0 57.8 121.4
Adjusted earnings per share (EPS):
Adjusted EPS 6 44.5p 45.6p 96.0p
Diluted adjusted EPS 6 44.4p 45.2p 95.5p
(1) Includes amounts paid in respect of acquisitions in prior years expensed to the income statement.
(2) Exceptional items in the current and prior year relate to impairment in respect of the Gilabbey Veterinary.
Condensed consolidated statement of comprehensive income for the six-month period ended 31 December 2023 (unaudited)
Year ended 30 June 2023 (Audited)
Six months ended 31 December 2023 (Unaudited) Six months ended 31 December 2022 (Unaudited)£m £m
£m
Profit for the period 14.7 21.1 41.9
Other comprehensive income - items that will or may be reclassified to profit or loss in future periods
Cash flow hedges:
Net movement on cash flow hedge (1.8) 0.5 (0.2)
Cost of hedging reserve - - -
Deferred tax on cash flow hedge and available-for-sale financial assets 0.5 (0.1) -
Exchange differences on translation of foreign operations 1.6 - (0.2)
Other comprehensive income / (expense) for the period, net of tax 0.3 0.4 (0.4)
Total comprehensive income for the period 15.0 21.5 41.5
Total comprehensive income for the period attributable to:
Owners of the parent 14.9 21.5 41.5
Non-controlling interests 0.1 - -
Total comprehensive income for the period 15.0 21.5 41.5
Condensed consolidated statement of financial position as at 31 December 2023 (unaudited)
Note 31 December 31 December 30 June 2023
(Audited)
2023 2022
£m
(Unaudited) (Unaudited)
£m £m
Non-current assets
Intangible assets 9 321.7 234.4 256.1
Property, plant and equipment 9 111.3 82.7 101.5
Right-of-use assets 10 105.7 99.4 102.9
Investments - 0.1 -
Derivative financial instruments - 2.8 -
538.7 419.4 460.5
Current assets
Inventories 28.5 28.7 28.4
Trade and other receivables 58.2 49.4 58.1
Derivative financial instruments 0.3 - 2.1
Current tax receivable 8 2.8 2.8 1.7
Cash and cash equivalents 32.3 27.4 21.5
122.1 108.3 111.8
Total assets 660.8 527.7 572.3
Current liabilities
Trade and other payables 12 (91.2) (83.3) (91.1)
Provisions 13 (0.8) (0.9) (0.7)
Lease liabilities 14 (14.0) (9.5) (13.3)
(106.0) (93.7) (105.1)
Non-current liabilities
Borrowings 16 (158.6) (84.5) (92.2)
Lease liabilities 14 (95.7) (93.4) (93.6)
Deferred tax liabilities (34.2) (22.2) (24.8)
(288.5) (200.1) (210.6)
Total liabilities (394.5) (293.8) (315.7)
Net assets 266.3 233.9 256.6
Condensed consolidated statement of financial position as at 31 December 2023 (unaudited)
31 December 2023 31 December 2022
(Unaudited) (Unaudited) 30 June 2023
£m £m (Audited)
£m
Shareholders' equity
Share capital 0.1 0.1 0.1
Share premium 107.1 105.7 107.0
Capital redemption reserve 0.6 0.6 0.6
Treasury reserve (0.9) (1.2) -
Cash flow hedge reserve 0.1 2.0 1.4
Merger reserve (61.4) (61.4) (61.4)
Foreign exchange translation reserve 1.4 - (0.2)
Retained earnings 219.2 188.1 209.1
266.2 233.9 256.6
Non-controlling interest 0.1 - -
Total equity 266.3 233.9 256.6
The interim financial information above is reproduced from that on pages 11 to 32 of the Group's Interim Report which was approved by the Board of Directors on 29 February 2024.
Condensed consolidated statement of changes in equity for the six-month period ended 31 December 2023 (unaudited)
Share premium Capital redemption reserve Treasury reserve Cash flow hedge reserve Cost of hedging reserve Merger reserve Foreign exchange transaction reserve Non- controlling interest Retained earnings Total equity
Share capital
£m £m £m £m £m £m £m £m £m £m £m
At 1 July 2023 0.1 107.0 0.6 - 1.4 - (61.4) (0.2) - 209.1 256.6
Profit for the period - - - - - - - - 0.1 14.6 14.7
Other comprehensive income and losses
Cash flow hedges: Fair value income - - - - (1.8) - - - - - (1.8)
Exchange differences on translation of foreign operations - - - - - - - 1.6 - - 1.6
Deferred tax on cash flow hedge and available-for-sale financial assets - - - - 0.5 - - - - - 0.5
Total other comprehensive income - - - - (1.3) - - 1.6 - - 0.3
Total comprehensive income - - - - (1.3) - - 1.6 0.1 14.6 15.0
Transactions with owners:
Issue of Ordinary shares - 0.1 - - - - - - - - 0.1
Credit to reserves for share-based payments - - - - - - - - - 1.4 1.4
Deferred tax relating to share-based payments - - - - - - - - - (0.5) (0.5)
Purchase of Treasury shares - - - (0.9) - - - - - - (0.9)
Dividends to equity holders of the Company - - - - - - - - - (5.4) (5.4)
Transactions with owners - 0.1 - (0.9) - - - - - (4.5) (5.3)
At 31 December 2023 0.1 107.1 0.6 (0.9) 0.1 - (61.4) 1.4 0.1 219.2 266.3
Condensed consolidated statement of changes in equity for the six-month period ended 31 December 2022 (unaudited)
Share premium Capital redemption reserve Treasury reserve Cash flow hedge reserve Cost of hedging reserve Merger reserve Foreign exchange transaction reserve Non- controlling interest Retained earnings Total equity
Share capital
£m £m £m £m £m £m £m £m £m £m £m
At 1 July 2022 0.1 105.4 0.6 - 1.6 - (61.4) - - 171.1 217.4
Profit for the period - - - - - - - - - 21.1 21.1
Other comprehensive income and losses
Cash flow hedges: Fair value income - - - - 0.5 - - - - - 0.5
Exchange differences on translation of foreign operations - - - - - - - - - - -
Deferred tax on cash flow hedge and available-for-sale financial assets - - - - (0.1) - - - - - (0.1)
Total other comprehensive income - - - - 0.4 - - - - - 0.4
Total comprehensive income - - - - 0.4 - - - - 21.1 21.5
Transactions with owners:
Issue of Ordinary shares - 0.3 - - - - - - - - 0.3
Credit to reserves for share-based payments - - - - - - - - - 1.2 1.2
Deferred tax relating to share-based payments - - - - - - - - - (0.3) (0.3)
Purchase of Treasury shares - - - (1.2) - - - - - - (1.2)
Dividends to equity holders of the Company - - - - - - - - - (5.0) (5.0)
Transactions with owners - 0.3 - (1.2) - - - - - (4.1) (5.0)
At 31 December 2022 0.1 105.7 0.6 (1.2) 2.0 - (61.4) - - 188.1 233.9
Condensed consolidated statement of cash flows for the six-month period ended 31 December 2023 (unaudited)
Note Six months ended 31 December 2023 Six months ended 31 December 2022 Year ended 30 June 2023
(Unaudited) (Unaudited) (Audited)
£m
£m
£m
Cash flows from operating activities
Cash generated from operations 15 47.8 45.5 107.9
Taxation paid (3.5) (7.2) (14.9)
Interest paid (4.8) (3.3) (7.2)
Exceptional items (0.1) - (1.3)
Net cash generated from operating activities 39.4 35.0 84.5
Cash flows from investing activities
Business combinations (net of cash acquired) (63.1) (24.4) (54.6)
Purchase of property, plant and equipment 9 (15.7) (18.0) (42.3)
Proceeds from sale of property, plant and equipment 0.1 0.1 0.3
Purchase of intangible assets 9 (1.5) (1.9) (3.4)
Proceeds from sale of other investments - - 0.1
Net cash used in investing activities (80.2) (44.2) (99.9)
Cash flows from financing activities
Dividends paid 17 (5.4) (5.0) (5.0)
Proceeds from issue of Ordinary shares 0.1 0.3 1.6
Proceeds from sale of Treasury shares - - 0.5
Purchase of Treasury shares (0.9) (1.2) (1.2)
Repayment of obligation under right-of-use asset (7.9) (6.5) (14.1)
Debt issuance costs - - (3.6)
Repayment of borrowings 16 (0.3) - (0.8)
Increase of borrowings 16 66.0 - 10.5
Net cash generated from/(used in) financing activities 51.6 (12.4) (12.1)
Net increase/(decrease) in cash and cash equivalents 10.8 (21.6) (27.5)
Cash and cash equivalents at the beginning of period 21.5 49.0 49.0
Cash and cash equivalents at end of the period 32.3 27.4 21.5
Notes to the interim consolidated financial information
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.
CVS Group plc is a public limited company incorporated under the Companies Act
2006 and domiciled in England and Wales and its shares are quoted on the AIM
Market of the London Stock Exchange ("CVSG"). Its company registration number
is 06312831 and registered office is CVS House, Owen Road, Diss, IP22 4ER.
This interim consolidated financial information does not constitute statutory
accounts within the meaning of Section 434 of the Companies Act 2006. The
statutory accounts of CVS Group plc in respect of the year ended 30 June 2023
have been delivered to the Registrar of Companies, upon which the Company's
auditors have given a report which was unqualified and did not contain any
statement under Section 498 of the Companies Act 2006.
Forward looking statements
Certain statements in this interim report are forward-looking. Although the
Group believes that the expectations reflected in these forward-looking
statements are reasonable, we can give no assurance that these expectations
will prove to have been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements. Save as required by regulation or
law, we undertake no obligation to update any forward-looking statements
whether as a result of new information, future events or otherwise.
2. Basis of preparation
The interim consolidated financial information of CVS Group plc is for the six
months ended 31 December 2023. It is unaudited and has been prepared in
accordance with the AIM Rules for Companies and with IAS 34, 'Interim
Financial Reporting'. The interim consolidated financial information should be
read in conjunction with the annual financial statements for the year ended 30
June 2023, which have been prepared in accordance with international
accounting standards and in conformity with the requirements of the Companies
Act 2006.
The interim consolidated financial information has been prepared on a going
concern basis.
Use of alternative performance measures
Adjusted EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation), adjusted profit before tax (adjusted PBT) and adjusted earnings
per share (adjusted EPS)
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
KPIs. 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 EBITDA is calculated by reference to profit before tax, adjusted for
interest (net finance expense), depreciation, amortisation, costs relating to
business combinations and exceptional items.
Adjusted PBT is calculated as profit before tax, amortisation, costs relating
to business combinations and exceptional items.
Adjusted EPS is calculated as adjusted profit before tax, less applicable tax,
divided by the weighted average number of Ordinary shares in issue during the
period.
The following table provides the calculation of adjusted EBITDA as defined
above:
Alternative performance measure: adjusted EBITDA Note Six months ended 31 December 2023 (Unaudited) Six months ended 31 December 2022 (Unaudited) Year ended 30 June 2023 (Audited) £m
£m
£m
Profit before tax 23.4 28.0 53.9
Adjustments for:
Finance expense 5 5.2 3.5 8.4
Amortisation of intangible assets 9 11.7 11.3 22.6
Depreciation of property, plant and equipment 9 7.7 6.1 12.6
Depreciation of right-of-use assets 10 7.5 7.1 15.2
Profit on disposal of property, plant and equipment and right-of-use (0.1) - (0.2)
assets
Costs relating to business combinations(1) 7.5 1.8 6.6
Exceptional items(2) 0.1 - 2.3
Adjusted EBITDA 63.0 57.8 121.4
Adjusted earnings per share (EPS):
Adjusted EPS 6 44.5p 45.6p 96.0p
Diluted adjusted EPS 6 44.4p 45.2p 95.5p
(1) Includes amounts paid in respect of acquisitions in prior years expensed to the income statement.
(2) Exceptional items in the current and prior year relate to impairment in respect of the Gilabbey Veterinary practice closure.
Net debt
Net debt is calculated as bank borrowings less gross cash and cash equivalents
and unamortised borrowing costs.
Six months ended 31 December 2023 (Unaudited) Six months ended 31 December 2022 (Unaudited) £m Year ended 30 June 2023 (Audited)
£m
£m
Borrowings repayable after more than one year
Loan facility 161.5 85.0 95.5
Unamortised borrowing costs (2.9) (0.5) (3.3)
Total borrowings 158.6 84.5 92.2
Cash and cash equivalents (32.3) (27.4) (21.5)
Net debt 126.3 57.1 70.7
Net bank borrowings
Net bank borrowings is drawn bank debt less cash and cash equivalents.
Like-for-like sales
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 sales calculation.
3. Summary of significant accounting policies
The accounting policies adopted are consistent with those set out on pages 116
to 124 of the consolidated financial statements of CVS Group plc for the year
ended 30 June 2023 (which are available upon request from the Company's
registered office or on the Company's website).
The policy for recognising and measuring taxation in the interim period is
described in note 8.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The significant judgements made by management in applying the
Group's accounting policies, and the key sources of estimation uncertainty,
were the same as those described in the last annual financial statements.
4. 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.
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 central administration salary and premises costs.
Revenue comprises £241.2m of fees and £88.7m of goods (31 December 2022:
£214.4m and £81.9m 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,
property and other overhead costs associated with the centralised support
function, together with finance costs arising on the Group's borrowings.
Veterinary Practices Laboratories Crematoria Online Retail Business Central Administration Group £m
Six-months ended £m £m £m £m £m
31 December 2023
Revenue 294.8 16.3 6.0 25.0 (12.2) 329.9
Adjusted EBITDA 59.7 5.3 2.1 1.7 (5.8) 63.0
Profit/(loss) before tax 33.0 4.8 1.7 1.7 (17.8) 23.4
Total assets 544.9 46.4 24.5 24.3 20.7 660.8
Total liabilities (179.2) (1.5) (1.7) (19.3) (192.8) (394.5)
Reconciliation of adjusted EBITDA
Profit/(loss) before tax 33.0 4.8 1.7 1.7 (17.8) 23.4
Finance expense 2.2 - - - 3.0 5.2
Depreciation of property, plant and equipment 6.6 0.5 0.4 - 0.2 7.7
Depreciation of right-of-use assets 7.2 - - - 0.3 7.5
Profit on disposal of property, plant and equipment and right-of-use assets (0.1) - - - - (0.1)
Amortisation of intangible assets 8.4 - - - 3.3 11.7
Costs relating to business combinations 2.3 - - - 5.2 7.5
Exceptional items 0.1 - - - - 0.1
Adjusted EBITDA 59.7 5.3 2.1 1.7 (5.8) 63.0
Veterinary Practices Laboratories Crematoria Online Retail Business Central Administration Group £m
Six-months ended £m £m £m £m £m
31 December 2022
Revenue 263.4 14.2 5.3 24.5 (11.1) 296.3
Adjusted EBITDA 55.4 4.4 1.6 1.7 (5.3) 57.8
Profit/(loss) before tax 32.5 4.0 1.4 1.6 (11.5) 28.0
Total assets 436.2 39.4 21.6 27.6 2.9 527.7
Total liabilities (166.8) (1.7) (1.6) (17.0) (106.7) (293.8)
Reconciliation of adjusted EBITDA
Profit/(loss) before tax 32.5 4.0 1.4 1.6 (11.5) 28.0
Finance expense 2.0 - - - 1.5 3.5
Depreciation of property, plant and equipment 5.4 0.4 0.2 - 0.1 6.1
Depreciation of right-of-use assets 6.8 - - - 0.3 7.1
Amortisation of intangible assets 7.8 - - 0.1 3.4 11.3
Costs relating to business combinations 0.9 - - - 0.9 1.8
Adjusted EBITDA 55.4 4.4 1.6 1.7 (5.3) 57.8
Laboratories Crematoria £m Online Retail Business Central Administration Group £m
Veterinary Practices £m £m £m
Year ended 30 June 2023 £m
Revenue 541.6 29.3 10.9 49.1 (22.6) 608.3
Adjusted EBITDA 116.6 9.2 3.6 3.9 (11.9) 121.4
Profit/(loss) before tax 59.7 8.2 3.1 3.8 (20.9) 53.9
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 59.7 8.2 3.1 3.8 (20.9) 53.9
Finance expense 4.2 - - - 4.2 8.4
Amortisation of intangible assets 22.5 - - 0.1 - 22.6
Depreciation of property, plant and equipment 10.9 0.9 0.5 - 0.3 12.6
Depreciation of right-of-use assets 14.7 0.1 - - 0.4 15.2
Profit on disposal of property, plant and equipment and right-of-use assets (0.2) - - - - (0.2)
Costs relating to business combinations 2.5 - - - 4.1 6.6
Exceptional items 2.3 - - - - 2.3
Adjusted EBITDA 116.6 9.2 3.6 3.9 (11.9) 121.4
Geographical segments
The business operates predominantly in the UK. As at 31 December 2023, it has
15 veterinary practices in Australia, 24 in the Netherlands and 3 in the
Republic of Ireland. 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 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.
5. Finance expense
Six months ended 31 December 2023 Six months ended 31 December 2022 Year ended
(Unaudited) (Unaudited) 30 June
£m £m 2023
(Audited)
£m
Interest expense on bank loans and overdraft 2.6 1.2 3.1
Interest expense on lease liabilities 2.2 2.1 4.3
Amortisation of debt arrangement fees 0.4 0.2 1.0
Net finance expense 5.2 3.5 8.4
6. Earnings per Ordinary share
(a) Basic
Basic earnings per share is calculated by dividing the profit after taxation
by the weighted average number of shares in issue during the period.
Six months ended 31 December 2023 Six months ended 31 December 2022 Year ended
(Unaudited) (Unaudited) 30 June
2023
(Audited)
Profit for the period (£m) 14.6 21.1 41.9
Weighted average number of Ordinary shares in issue 71,508,834 71,215,385 71,272,880
Basic earnings per share (pence) 20.4 29.6 58.8
(b) 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 Long-Term
Incentive Plan (LTIP) schemes and Save-As-You-Earn (SAYE) schemes. For share
options, 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.
Six months ended 31 December 2023 Six months ended 31 December 2022 Year ended
(Unaudited) (Unaudited) 30 June
2023
(Audited)
Profit for the period (£m) 14.6 21.1 41.9
Weighted average number of Ordinary shares in issue 71,508,834 71,215,385 71,272,880
Adjustment for contingently issuable shares - LTIP schemes 113,803 277,538 173,688
Adjustment for contingently issuable shares - SAYE schemes 27,594 232,314 205,853
Weighted average number of Ordinary shares for diluted earnings per share 71,650,231 71,725,237 71,652,421
Diluted earnings per share (pence) 20.4 29.4 58.5
Alternative performance measure: adjusted earnings per share
Six months ended 31 December 2023 Six months ended 31 December 2022 Year ended
(Unaudited) (Unaudited) 30 June
£m £m 2023
(Audited)
£m
Profit before tax 23.4 28.0 53.9
Adjustments for:
Amortisation of intangible assets 11.7 11.3 22.6
Costs relating to business combinations 7.5 1.8 6.6
Exceptional items 0.1 - 2.3
Adjusted profit before tax 42.7 41.1 85.4
Tax expense amended for the above adjustments (10.7) (8.6) (17.0)
Adjusted profit after tax 32.0 32.5 68.4
Adjusted profit after tax attributable to:
Non-controlling interest 0.1 - -
Adjusted profit after tax attributable to the parent 31.9 32.5 68.4
Weighted average number of Ordinary shares in issue 71,508,834 71,215,385 71,272,880
Weighted average number of Ordinary shares for diluted earnings per share 71,650,231 71,725,237 71,652,421
Adjusted earnings per share (pence) 44.5 45.6 96.0
Diluted adjusted earnings per share (pence) 44.4 45.2 95.5
7. Share-based payments
Long-Term Incentive Plans
The Group operates incentive schemes for certain senior executives and others,
the CVS Group Long-Term Incentive Plan (LTIP).
Under the LTIP schemes, awards are made at an effective nil cost. Executive
schemes vest over a three-year performance period conditional upon the Group's
adjusted earnings per share growth and Total Shareholder Return (TSR). Schemes
for others vest over a three-year period but are not conditional on
performance. The LTIP scheme arrangements are a mixture of equity-settled and
cash-settled. Cash-settled LTIP schemes are linked to a number of shares, the
value of which is settled in cash upon exercise.
The following LTIP schemes were issued in H1 2024:
LTIP 17
Issue date 29 September 2023
Option life 3 years
Number of shares 140,648
Share price at grant date £16.30
Exercise price 0.2p
Settlement Equity-settled
During the six months to 31 December 2023, Directors and employees exercised
107,903 share options (31 December 2022: 115,280) with a weighted average
share price at the date of exercise of £16.17 (31 December 2022: £20.01) in
respect of the LTIP 14 (31 December 2022: LTIP 13) scheme.
Options are valued using the Monte-Carlo option pricing model and
Black-Scholes option pricing models. The share-based payment charge for the
period in respect of the options issued under the LTIP schemes amounted to
£0.6m (31 December 2022: £0.6m), which has been charged to administrative
expenses. National Insurance contributions amounting to £0.1m (31 December
2022: £0.1m) have been accrued in respect of the LTIP scheme transactions and
are treated as cash-settled transactions.
Save As You Earn (SAYE)
The Group operates an incentive scheme for all employees, the CVS Group SAYE
plan, an HM Revenue & Customs-approved scheme. Under the new SAYE16
scheme, awards were made at a 20.0% discount (SAYE15, SAYE14 and SAYE13 were
made at a 20.0% discount and SAYE12 scheme awards were made at a 10.0%
discount) of the closing mid-market price on date of invitation, vesting over
a three-year period. There are no performance conditions attached to the SAYE
schemes.
SAYE16 was opened for subscription in November 2023 with 568,989 options
granted and a contract start date of 1 January 2024. The exercise price was
£11.46, a 20.0% discount to the closing mid-market price on the date of
invitation.
Options were valued using the Black-Scholes option pricing model and the
share-based payment charge for the period in respect of the options issued
under the SAYE schemes amounted to £0.8m (31 December 2022: £0.6m), which
has been charged to administrative expenses.
8. Tax expense
The tax charge for the six months ended 31 December 2023 is recognised based
on management's estimate of the weighted average annual effective tax rate
expected for the full financial year, adjusted for the tax impact of any
discrete items arising in the period. The estimated average annual tax rate
used for the six months ended 31 December 2023 is 31.8% (31 December 2022:
22.8%).
The reported effective tax rate for the six months ended 31 December 2023 is
36.8% (31 December 2022: 24.6%). The reported effective tax rate has increased
from the previous period by 12.2ppts. This is predominantly due to an increase
in the standard rate of UK corporation tax rate to 25.0% from April 2023,
effect of profits of Australian subsidiaries being taxable at the standard
rate of corporation tax of 30.0% in Australia and an increase in expenses not
deductible for tax purposes, mainly in respect of business acquisitions.
9. Intangible assets and property, plant and equipment
Intangible assets Property, plant and equipment
£m £m
Six months ended 31 December 2023
Opening net book value at 1 July 2023 256.1 101.5
Foreign currency translation 1.6 -
Additions 1.5 15.7
Other additions - -
Additions arising through business combinations 74.2 1.8
Disposals - -
Amortisation and depreciation (11.7) (7.7)
Closing net book value at 31 December 2023 321.7 111.3
Six months ended 31 December 2022
Opening net book value at 1 July 2022 216.5 69.7
Foreign currency translation 0.5 -
Additions 1.9 18.0
Other additions 0.2 -
Additions arising through business combinations 26.6 1.1
Disposals - -
Amortisation and depreciation (11.3) (6.1)
Closing net book value at 31 December 2022 234.4 82.7
10. Right-of-use assets
Right-of-use assets
£m
Six months ended 31 December 2023
At 1 July 2023 102.9
Foreign currency translation -
Remeasurement of lease term 3.1
Additions 2.0
Acquired through business combinations 5.8
Disposals (0.6)
Depreciation (7.5)
Closing net book value at 31 December 2023 105.7
Six months ended 31 December 2022
At 1 July 2022 101.7
Foreign currency translation 0.2
Remeasurement of lease term 0.7
Additions 2.2
Acquired through business combinations 2.5
Disposals (0.8)
Depreciation (7.1)
Closing net book value at 31 December 2022 99.4
11. Business Combinations
Details of business combinations in the six months ended 31 December 2023 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 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
Vet Referral Pty Ltd 100% 1 December 2023 Australia
t/a 'Red Vets Toowoomba & 'Veterinary Emergency & Referral Toowoomba
Wattle Grove Vet 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
Given the nature of the veterinary practices acquired and the records
maintained by such practices, it is not practicable to disclose the revenue or
profit or loss of the combined entity for the period as though the acquisition
date for all business combinations during the year had been at the beginning
of that period.
The table below summarises the total assets acquired through business
combinations in the six months ended 31 December 2023:
Note Book value of
acquired Fair value
assets adjustments Fair value
£m £m £m
Property, plant and equipment 9 1.8 - 1.8
Patient data records 9 - 34.4 34.4
Right-of-use assets 10 5.8 - 5.8
Inventories 0.5 - 0.5
Deferred tax liability 0.1 (10.3) (10.2)
Trade and other receivables 2.0 - 2.0
Trade and other payables (2.8) - (2.8)
Loans (0.3) - (0.3)
Right-of-use liabilities (5.8) - (5.8)
Total identifiable assets 1.3 24.1 25.4
Goodwill 9 39.8
Total consideration (net of cash acquired of £1.9m) 65.2
Initial consideration paid (net of cash acquired of £1.9m) 62.6
Deferred consideration payable 2.6
Contingent consideration payable -
Total consideration (net of cash acquired of £1.9m) 65.2
*On 26 July 2023, the Group acquired a 75% interest in Vetright Ptd Ltd
(included above) in Australia for total consideration of £9.2m.
The identifiable net assets at acquisition were valued at £5.8m, of which
25% will be attributed to Non-Controlling Interest (NCI). NCI are 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 £5.2m, resulting in goodwill of £5.3m.
The total consideration of £65.2m, net of the cash acquired, 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. The Group has also paid £0.5m in
settling amounts now agreed by completion accounts. Adjustments have been
recognised in accordance with IFRS 3 and where Goodwill impacted, this is
shown within other additions in note 9.
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 cost synergies
arising from shared support functions and 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.
Post-acquisition revenue and post-acquisition adjusted EBITDA were £7.1m and
£2.2m respectively. The post-acquisition period is from the date of
acquisition to 31 December 2023. Post-acquisition EBITDA represents the direct
operating result of practices from the date of acquisition to 31 December 2023
prior to the allocation of central overheads, on the basis that it is not
practicable to allocate these.
Goodwill and intangible assets recognised in the year relating to business
combinations are not expected to be deductible for tax purposes.
Acquisition costs of £4.5m (H1 2023: £0.9m) are included within cost
relating to business combinations in note 4 of the financial statements.
The Directors do not consider any individual in-year acquisition to be
material to the Group and therefore have not separately disclosed these.
Subsequent to the period end, the Group has made a further acquisition:
- 100% of the share capital of Ark Animal Services Limited, a two
site companion animal veterinary practice in Cheshire on 12 February 2024 for
initial consideration of £5.2m.
12. Trade and other payables
31 December 2023 31 December 2022 30 June
(Unaudited) £m (Unaudited) 2023
(Audited)
£m
£m
Trade payables 39.7 35.7 41.5
Social security and other taxes 22.7 19.9 21.8
Other payables 4.2 5.4 5.8
Deferred income(1) 2.3 2.2 2.2
Accruals 22.3 20.1 19.8
Total 91.2 83.3 91.1
(1) Deferred income relates to the contract liability relating to the Healthy
Pet Club (HPC) contract.
13. Provisions
31 December 2023 31 December 2022 30 June 2023
(Audited) £m
(Unaudited) £m (Unaudited)
£m
At the beginning of the period 0.7 2.1 2.1
Charged to the income statement within administration expenses 0.1 - 0.3
Utilised in the period - (1.2) (1.7)
At the end of the period 0.8 0.9 0.7
Provisions relate to costs set aside for properties including site closures and other property maintenance obligations. It is anticipated these will be utilised in the next twelve months.
14. Lease liabilities
31 December 2023 31 December 2022 30 June
(Unaudited) £m (Unaudited) 2023
(Audited)
£m
£m
Current 14.0 9.5 13.3
Non-current 95.7 93.4 93.6
Total discounted lease liabilities 109.7 102.9 106.9
Maturity analysis - contractual undiscounted cash flows
Less than one year 18.5 13.4 17.3
Between one and five years 61.7 56.1 58.3
More than five years 49.5 53.3 51.7
Total 129.7 122.8 127.3
15. Cash flow generated from operations
Six months ended 31 December 2023 Six months ended 31 December 2022 (Unaudited) £m Year ended 30 June
(Unaudited) £m 2023
(Audited)
£m
Profit for the period 14.7 21.1 41.9
Tax expense 8.7 6.9 12.0
Finance expense 5.2 3.5 8.4
Amortisation of intangible assets 11.7 11.3 22.6
Depreciation of property, plant and equipment 7.7 6.1 12.6
Depreciation and impairment of right-of-use assets 7.5 7.1 15.2
Profit on sale of property, plant and equipment and right-of-use assets (0.1) - (0.2)
Decrease/(increase) in inventories 0.4 (2.3) (1.8)
Increase in trade and other receivables (5.5) (1.2) (4.6)
Decrease in trade and other payables (4.1) (7.0) (0.8)
Increase/(decrease) in provisions 0.1 (1.2) (1.4)
Share option expense 1.4 1.2 1.7
Exceptional items 0.1 - 2.3
Total net cash flow generated from operations 47.8 45.5 107.9
16. Analysis of movement in liabilities from financing activities
At 1 July 2023 Cash flow New leases £m Liabilities on disposed leases Non-cash movement £m At 31 December 2023
£m £m £m £m
Lease liabilities (106.9) 10.1 (10.9) 0.6 (2.6) (109.7)
Bank loans (92.2) (65.7) - - (0.7) (158.6)
Total liabilities from financing activities (199.1) (55.6) (10.9) 0.6 (3.3) (268.3)
At 1 July Cash flow New leases £m Liabilities on disposed leases Non-cash movement £m At 31 December 2022
2022 £m £m £m
£m
Lease liabilities (104.5) 8.6 (5.4) 0.8 (2.4) (102.9)
Bank loans (84.3) - - - (0.2) (84.5)
Total liabilities from financing activities (188.8) 8.6 (5.4) 0.8 (2.6) (187.4)
Non-cash movements on right-of-use lease liabilities mainly comprise interest.
Non-cash movements on borrowings and bank loans mainly include amortisation of
issue costs on bank loans and bank debt acquired.
17. Dividends
The dividends paid in December 2023, representing the final dividend payable
for the year ended 30 June 2023, amounted to £5.4m (7.5 pence per share) (31
December 2022: £5.0m (7.0 pence per share)).
18. Events after the reporting period
On 12 February 2024. The Group completed the purchase of 100% of the share
capital of Ark Animal Services Limited, a company registered in England and
Wales. The business comprise two companion animal veterinary practice sites in
the UK, aligned with the Group's strategic goals. Initial cash consideration
for this acquisition was £5.2m.
Directors and advisers
Directors D Kemp (Interim Chair)
R Gray (Non-Executive Director)
D Wilton (Non-Executive Director)
J Shaw (Non-Executive Director) (Appointed 1 July 2023)
R Connell (Chairman) (Resigned 26 October 2023)
R Fairman (Chief Executive Officer)
B Jacklin (Deputy CEO)
R Alfonso (Chief Financial Officer)
Company Secretary S Morrison
Company number 06312831
Registered office CVS House
Owen Road
Diss
Norfolk
IP22 4ER
Independent auditor Deloitte LLP
1 Station Square
Cambridge
CB1 2GA
Bankers NatWest Bank Plc
Gentleman's Walk
Norwich
NR2 1NA
HSBC Bank plc
8 Canada Square
London
E14 5HQ
AIB Group (UK) plc
St Helen's
1 Undershaft
London
EC3A 8AB
Barclays Bank plc
1 Churchhill Place
London
E14 5HP
Virgin Money
15(th) Floor
The Leadenhall Building
122 Leadenhall Street
London
EC3V 4AB
JPMorgan Chase Bank
25 Bank Street
Canary Wharf
London
E14 5JP
Lloyds Bank plc
25 Gresham Street
London
EC2V 7HN
Danske Bank UK
75 King William Street
London
EC4N 7DT
Rabobank
Willemskade 1
8011 AC Zwolle
Netherlands
Commonwealth Bank of Australia
Commonwealth Bank Place - South
Level 1
11 Harbours Street
Sydney
New South Wales
Australia
Legal advisors Leathes Prior
74 The Close
Norwich
NR1 4DR
DLA Piper UK LLP
Victoria Square House
Victoria Square
Birmingham
B2 4DL
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115 Colmore Row
Birmingham
B3 3AL
Linklaters LLP
One Silk Street
London
EC2Y 8HQ
Nominated advisor and broker Peel Hunt LLP
7(th) Floor
100 Liverpool Street
London
EC2M 2AT
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60 Threadneedle Street
London
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3rd Floor
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