REG - Kelso Group Holdings - New investment in CVS Group plc

Kelso groupAnnouncement

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RNS Number : 2476T  Kelso Group Holdings PLC  17 February 2026

17 February 2026

Kelso Group Holdings Plc
("Kelso" or the "Company")

New investment in CVS Group plc and rationale for investment

Kelso, the main market listed acquisition vehicle, today announces a new
investment in CVS Group plc ("CVS") following the purchase of 130,000 shares
at an average price of 1,387p in recent weeks. CVS's market capitalisation was
£971.0 million as at close of business on 16 February 2026.

Kelso provides its shareholders with the following background to its
investment decision:

Summary

CVS is a leading integrated veterinary service provider in the UK and
Australia, having listed on AIM in October 2007 with a market capitalisation
of £105 million. Since then, its market capitalisation has grown to just
under £1 billion, representing one of the LSE's most consistent long-term
growth stories.

Following its recent transition to the Main Market of the London Stock
Exchange in January 2026, and now with potential for inclusion in the FTSE 250
Index, CVS joins a select group of UK-listed companies with structural
compounding growth over 20 years. Diploma plc, Halma plc and Games Workshop
Group plc have each delivered near-unbroken revenue and EBITDA growth over the
past 20 years. Kelso believes that CVS's near 20-year record of uninterrupted
revenue and EBITDA growth places it amongst the most successful and consistent
growth companies listed on the UK markets.

The three long-term structural compounders above currently trade on average
forward valuation multiples of 30.4x P/E and c.20.3x EV/EBITDA, as per S&P
Capital IQ. Despite having comparable historic performance and similar
long-term growth characteristics, albeit at a smaller scale, CVS currently
trades at approximately half this rating, with a current year P/E ratio of
c.16x and an EV/EBITDA multiple of c.8.0x.

Given CVS's strong balance sheet, with net debt of c.£160m as at 31 December
2025, alongside forecast EBITDA of c.£140m for the year to 30 June 2026 and
robust cash generation, Kelso believes the current valuation presents a
compelling opportunity. In our view, a consistent and disciplined share
buyback programme should form a core element of CVS's capital allocation
policy while the shares continue to trade at a material discount to both these
comparable companies and the Group's historic valuation levels. Kelso also
recognises CVS's management's strong operational execution and believes that
buybacks should be considered in parallel with the established acquisition
strategy, organic growth targets, and dividend policy.

CVS's resilient earnings profile and balance sheet strength, while taking into
consideration lease capitalisation under IFRS16, would, in Kelso's view,
support moderately higher leverage. This capacity could be utilised both to
enhance shareholder returns and to mitigate potential interest from private
equity fund investors, who may otherwise seek to capitalise on available
leverage. Kelso strongly believes it is in shareholders' interests for CVS to
remain a long-term UK-listed success story, and that its continued disciplined
capital allocation decisions at this stage will meaningly enhance long-term
shareholder returns.

Rationale for investment

·      Consistent long-term growth: Since IPO in 2007, revenue has
increased from £39m to £673m as at June 2025, implying a CAGR of c.17%.
EBITDA has grown from £5.1 million to c.£134 million as at June 2025 (c.20%
CAGR), as a result of meaningful margin expansion, supported by organic growth
and disciplined M&A execution. Over the 18 years since listing, CVS has
consistently generated profit, with the market capitalisation peaking at
£1.9bn in September 2021 with an EBITDA of c.£100m.

·     Expansion and scale benefits: CVS has expanded from 128 veterinary
practices at IPO to c.470 across the UK and Australia as at January 2026.
Scale provides buying power and operational synergies, alongside the ability
to invest in practices where required, providing a competitive advantage
versus independent operators. Investment in facilities and employees has led
to improving clinical care, resulting in continuing high net promoter scores
with a score of 78.9 in the financial year ended 30 June 2025. This reflects
survey-based feedback on how likely clients are to recommend the CVS's
veterinary services.

·     Defensive sector with structural growth: Demand for veterinary
services is typically resilient, reflecting the fact that pets become part of
the family. CVS-cited survey data indicates only 5.8% of pet owners would
consider reducing spend on their pets during a recession, demonstrating the
defensive characteristics of the sector. Kelso believes the growth potential
remains significant in all territories, with CVS's entry into Australia, where
the pet population is estimated at 29 million compared with c.36 million in
the UK, illustrating the scale of opportunity present outside its core market.

·     Favourable demographic tailwinds: Pet ownership increased
materially during the Covid pandemic, with the UK dog population estimated to
have risen 13.4% between 2021 and 2023 (from 9.7 million to 11.0 million). As
this larger cohort ages, and moves into middle age in dog years, demand for
veterinary services is expected to increase given higher healthcare
expenditure in later life stages. Kelso believes this demographic effect could
support earnings growth for at least the next five years.

·   Undervaluation relative to history: Over the past decade, CVS has
traded at an average Forward EV/EBITDA multiple of c.14x, including several
periods of above 20x. The shares currently trade at c.8.0x EV/EBITDA to June
2026, representing a significant discount to historical levels. Kelso believes
this rating reflects temporary factors, including selling pressure (notably
from IHT-oriented funds) following the move from AIM, and uncertainty relating
to the Competition and Markets Authority ("CMA") review which is expected to
conclude in March 2026. With like-for-like growth improving and regulatory
clarity approaching, Kelso expects a positive period for shareholders, with a
likely re-rating arising as confidence returns.

·     Strengthened balance sheet: Following the disposal of its pet
crematoria division for £42.4 million in May 2025, net debt was reported at
£160m as of 31 December 2025 versus c.£140m consensus EBITDA in the year to
June 2026. Net leverage excluding leases is expected to fall below 1.0x in the
coming year, supporting a robust balance sheet and providing capacity for
continued share buybacks, acquisition and dividend policy. The rationale for
this is further supported by the solid outlook and currently low valuation.

·     FTSE 250 Index inclusion catalyst: Kelso congratulates management
on completing the transition to the Main Market on 29 January 2026. With the
next FTSE index review scheduled for March 2026, Kelso believes CVS should
qualify for inclusion driving incremental buying demand for the shares.

·     CMA review nearing conclusion: The CMA review announced in September
2023 resulted in a decline of more than 25% in CVS's share price as a period
of uncertainty weighed on the shares. Initial findings were released in
October 2025, and the final report is expected in March 2026. In an
announcement released on 15 October 2025 in response to the CMA provisional
findings, CVS welcomed the additional certainty that the CMA conclusions had
delivered. In Kelso's opinion, as currently envisaged, the CMA review should
not present a huge impediment to CVS's business model in the UK.

·   Investment decision: With the CMA uncertainty nearing resolution,
leverage declining, potential index inclusion approaching, and the shares
trading at close to a ten-year valuation low, Kelso believes that now is an
attractive entry point. We look forward to CVS's interim results on 26
February 2026. While we have not yet formally engaged with CVS management, we
intend to do so constructively over time. Kelso believes the Company already
maintains a strong reputation among institutional investors and sees
opportunities to further enhance investor relations and market awareness.

 

Sir Nigel Knowles, Chairman, Kelso said:

 

'CVS has built a high-quality resilient platform operating in a structurally
attractive market and has delivered an exceptional long-term record of
consistent growth. Kelso's investment reflects our conviction that the current
valuation does not reflect the strength of the business, the quality of its
earnings or its long-term strategic value.

 

We believe disciplined capital allocation will be increasingly important in
unlocking future shareholder value. Kelso is a supportive long-term
shareholder, and we look forward to engaging constructively with management
over time. Our objective is to see CVS continue to develop as a UK-listed
success story and to ensure that shareholders fully benefit from this
potential.

 

As a pet owner myself, I am well aware how much care and investment goes into
ensuring an animal's long-term health, which reinforces my conviction in the
strength of this market and the appeal of CVS as an investment.'

 

 

Note to Editors

Kelso Group Holdings Plc 'Kelso' is a listed investment vehicle founded in
November 2022 which is backed now by 75 individuals known to the Board and
more recently a small number of institutions. The Board own close to 20% of
Kelso and between them have approaching 150 years of experience in UK listed
companies through a mixture of fund management, corporate broking, M&A,
private equity and law. Kelso's aim, which is unique, is to capitalise on an
undervalued UK small and mid-cap stock market by investing in a small number
of stocks being less than ten core investments. Kelso's aim is to actively
help its investee companies by offering constructive advice, support and ideas
predominantly around investor relations and strategy in order to unlock
trapped value. Kelso's current principal holdings are CVS Group Plc, Saga plc,
NCC Group plc, THG plc, Angling Direct plc, The Works.co.uk Plc and Selkirk
plc.

 

 

For further information, please contact:

 

 Kelso Group Holdings plc                 +44 (0) 75 4033 3933
 John Goold, Chief Executive Officer

 Jamie Brooke, Chief Investment Officer
 Zeus (Broker)                            +44 (0) 20 3829 5000
 Louisa Waddell, John Moran (Investment Banking)

Ben Robertson (Corporate Broking)

 

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