CVS expects full-year earnings to be slightly ahead of upgraded forecasts

Veterinary services provider CVS reported continued trading momentum in a full-year trading update on Tuesday, which it said delivered “strong” revenue growth.

The AIM-traded firm said adjusted EBITDA for the year ended 30 June was expected to be “marginally ahead” of its recently-upgraded market expectations.

Its EBITDA margin for the year had remained strong, and was expected to be ahead of the first half’s figure of 18.4%, and a “significant improvement” over the 2020 financial year’s margin of 16.6%.

The board said the easing of restrictions was allowing for a return of clients into the company’s practices, as it entered the new financial year.

Like-for-like sales growth for the full year was 17.4%, accelerating from 0.7% in 2020, and hastening expected in the final quarter, given that the comparative period a year earlier was “severely impacted” by Covid-19 restrictions.

The group said it was still benefiting from “favourable cash dynamics”, despite one-off outflows in the second half relating to acquisitions and the repayment of prior year Covid-19 VAT deferrals of £15m in the final three months.

Net bank borrowings at year-end on 30 June totalled £51.3m, compared to £44.4m on 31 December and £63.5m at the end of the 2020 financial year.

CVS said it was expecting to report leverage “significantly below” 1.0x as at year-end.

“Reflecting the growth in the business and our objective to provide the best clinical care, the group employed around 10% more veterinary surgeons at 30 June compared to the previous financial year-end, and continues to advertise new positions,” the board said in its statement.

“In light of the expansion in the number of new roles created to service the increase in demand, the vet vacancy rate - calculated as the number of live vet vacancies over the total number of vet roles - has increased, averaging 8.3% for the full year,” it added, which compared to 6.9% in 2020.

“The group continues to develop further initiatives to attract and retain the very best talent in the industry.”

Looking ahead, CVS said that in light of the UK government announcing an end to substantive restrictions in England from 19 July, clients would now be welcomed back into practice consulting rooms, improving the overall customer experience.

“We look forward to continuing our growth trajectory as we head into the new financial year and have further plans to improve our level of clinical care through investment in our people and our specialist facilities.

“We are also well placed to pursue further targeted acquisitions.”

CVS said it would announce its preliminary results for the year ended 30 June on 23 September.

At 0916 BST, shares in CVS Group were up 3.09% at 2,335p.