REG - CVS Group plc - Trading Update

CVSAnnouncement

27/01/2022 07:00

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RNS Number : 7722Z  CVS Group plc  27 January 2022

27 January 2022

 

CVS Group plc

("CVS" or the "Company" and, together with its subsidiaries, the "Group")

 

Trading Update

 

CVS, one of the UK's leading providers of integrated veterinary services,
gives the following update on trading covering the six months ended 31
December 2021 ("H1 2022").  The Company expects to announce its H1 2022
interim results on 24 March 2022.

 

Summary

·    Revenue up 11.4% vs H1 2021 with underlying(1) revenue growth up
13.2%

·    Adjusted EBITDA(2) up 15.5% vs H1 2021

·    Adjusted EBITDA(2) margin up 0.6ppts vs H1 2021

·    £10.6m capex, with good returns from recent investments in practice
relocations and refurbishments

·    c.9% more vets employed in 2021 vs 2020, with the vet vacancy rate
stable as we continue to focus on recruiting more colleagues to service
increased demand

·    Trading comfortably in line with full year expectations

 

H1 2022 Performance

We continue to see good momentum across the Group, with total Group revenue up
11.4% to £273.7m (H1 2021: £245.6m).  Underlying(1) revenue growth up
13.2%, excluding the prior year impact of Healthy Pet Club ("HPC") revenue
which was deferred from FY20 to H1 2021 and the one-off revenue in H1 2021
from COVID-19 travel testing.  The Group continues to benefit from the
increase in demand for its integrated veterinary services.

 

Like-for-like ("LFL")(3) revenue increased 9.6% in H1 2022 with underlying(1)
LFL revenue up 11.3%.  Trading in H1 2022 was impacted by colleagues required
to self-isolate and the catch up of holiday postponed from H2 2021, a trend we
do not anticipate continuing into the second half.

 

Our HPC preventative medicine scheme(4) has seen a further increase in
membership, up 7.6% to 461,000 as at 31 December 2021, from 430,000 as at 31
December 2020 (30 June 2021: 450,000).

 

Group Adjusted EBITDA(2) margin remains strong, up 0.6ppts to 19.0% (H1 2021:
18.4%).  As a result of the revenue growth and improved margin, CVS expects
to report H1 2022 Adjusted EBITDA(2) of approximately £52.0m (H1 2021:
£45.1m).

 

We continue to invest in our practices, with £10.6m of Capex in H1 2022 (H1
2021: £6.2m).  We have completed 19 practice relocations and refurbishments
since the financial year-end and are pleased with the payback of these
investments to date, with an average increase of c.20% in revenue from these
practices.

 

Our People

We continue to strive to be the veterinary company people most want to work
for and are pleased that, reflecting the growth needs of the business, we
employed c.9% more vets on average over the 12 months to 31 December 2021 vs
the prior year, including a record number of new graduates.  Nevertheless, we
continue to look to recruit further clinical colleagues to meet demand and
therefore the vet vacancy rate remains stable at c.10%, reflecting the
inclusion of newly created roles in the analysis in each of the last two
years.

 

 

Net Debt

As at 31 December 2021, CVS had net bank borrowings(5) of £63.2m and leverage
on a bank test basis(6) of 0.76x (30 June 2021: £51.3m and 0.68x
respectively).  Interest cover(7) measured at the end of the first half was
38.2x (30 June 2021: 25.0x).  These metrics reflect the Group's strong
operating cash generation and are after paying annual bonus payments to
colleagues and an annual dividend payment.  The significant headroom within
existing facilities provides a resilient platform for further growth through
ongoing investment in people and practices, supplemented by selective
acquisitions.

 

Outlook

The demand for veterinary services remains strong, with increased ownership
levels and the humanisation of pets driving a wider appreciation of quality
veterinary care.  To maximise the opportunity from these positive consumer
trends, and to drive long-term and sustainable growth, our focus remains on
providing the best possible care to animals through our integrated platform,
by investing in our people and practices to improve our quality of care and
service levels, whilst also pursuing further acquisition opportunities.

 

The Board is pleased with H1 2022 performance and considers that current
trading remains comfortably in line with management's full year
expectations.  The Group is well placed to deliver on further growth
opportunities over the longer term.

 

The Board would like to acknowledge and thank all members of the CVS team for
their continued dedication and support.

 Notes

1        Underlying sales exclude the impact of prior year COVID-19
testing in our laboratories and Healthy Pet Club revenue deferred from FY20 to
FY21. Management considers this unaudited measure to provide a useful insight
to business performance as it adjusts expected reported revenue for these
one-off factors.

2        Adjusted Earnings Before Interest, Tax, Amortisation and
Depreciation ("adjusted EBITDA") is profit before income tax adjusted for
interest (net finance expense), depreciation, amortisation, costs relating to
business combinations and exceptional items. Adjusted EBITDA is used as a
financial metric that removes the cost of debt, costs relating to depreciation
and amortisation and one-off costs to achieve a normalised earnings figure
that is not distorted by irregular items or structural investment.

3        Like-for-like sales are defined as 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 2020,
revenue is included in the like-for-like calculations from September 2021.

4        Healthy Pet Club is our preventative care scheme for companion
animals offering routine preventative care to clients for a monthly or annual
membership fee.

5        Net bank borrowings is drawn bank debt less cash.

6        Leverage on a bank test basis is net bank borrowings; divided
by adjusted EBITDA annualised for the effect of acquisitions, including costs
relating to business combinations and excluding share option costs and
exceptional items, prior to the adoption of IFRS 16.

7        Interest cover is calculated as adjusted EBITDA, annualised
for the effect of acquisitions, including costs relating to business
combinations and excluding share option costs and exceptional items, prior to
the adoption of IFRS 16, divided by interest paid.

8        Percentage increases have been calculated throughout this
document based on the unrounded values.

 

 Contacts:

 CVS Group plc                                                                                    via MHP Communications
 Richard Fairman, CEO
 Robin Alfonso, CFO
 Ben Jacklin, COO

 Singer Capital Markets (Nominated Adviser & Broker)                                              +44 20 7496 3000

 Aubrey Powell / Rachel Hayes / Jen Boorer

 MHP Communications (Financial PR)                                                                +44 20 3128 8549
 Andrew Jaques / Simon Hockridge / Rachel Mann / Charles Hirst

 

Notes to Editors

CVS Group is a fully integrated provider of veterinary services in the UK,
with practices in the Netherlands and the Republic of Ireland.  CVS is
focused on providing high quality clinical services to its customers 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 three markets, including
eight specialist referral hospitals and 35 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.7,900 personnel, including c.2,000 veterinary surgeons and
c.2,800 nurses.

Further information is available via the Company's website, at
www.cvsukltd.co.uk (http://www.cvsukltd.co.uk)

 

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