CVS Group confident after robust first half

Integrated veterinary service provider CVS Group reported first-half revenue of £296.3m on Friday, making for an increase of 8.2% compared to the same period a year earlier.

The AIM-traded company said adjusted EBITDA was reported at £57.8m, which was an increase of 11.2%, while adjusted profit before tax was £41.1m, up 13.5%, and adjusted earnings per share increased 9.9% to 45.6p.

Furthermore, operating profit increased 19.7% to £31.5m, and profit before tax was reported at £28m, an increase of 22.1%.

Basic earnings per share also increased by 19.8% to 29.6p, while net bank borrowings decreased by 9% to £57.6m.

The board said the firm’s organic growth continued with 7.5% like-for-like sales growth, within its organic revenue growth ambition of between 4% and 8%.

There was also an increase in its adjusted EBITDA margin to 19.5%, a like-for-like improvement of 0.5 percentage points, within the company's stated ambition of margins between 19% and 23%.

Membership of CVS' preventative healthcare scheme, ‘Healthy Pet Club’ (HPC), increased to 481,000, up 4.3% compared to 31 December 2021, and up 2.3% compared to 30 June.

The company's leverage was reported at 0.60x at period end on 31 December, as a result of strong EBITDA growth and operating cash conversion, offset by an increase in net debt due to the execution of CVS' mergers and acquisitions, and capital investment strategy.

Looking ahead, CVS said demand for its veterinary services remained robust, with the positive first-half performance continuing into the first month of the second half.

While the company noted the wider macroeconomic backdrop and inflationary pressures, its board said it was confident that full-year results would be in line with market expectations.

In February, CVS re-financed its debt facility at the same margin and on improved commercial terms, increasing the total facility to £350m from £170m, to support its five-year growth ambition as set out at its capital markets day.

The company said it was focussed on investment in its people, technology, and clinical facilities to support further organic growth.

CVS said it was also confident that it could continue executing on its pipeline of selective acquisitions and development of greenfield sites.

“These results reflect the continued professionalism and dedication of our colleagues in providing high-quality care to our clients and their animals and I would like to take this opportunity to thank them for their contribution,” said chief executive officer Richard Fairman.

“At our capital markets day in November, we announced six key elements underpinning our ambition to double adjusted EBITDA over the next five years.

“Demand for our services remains strong, notwithstanding a challenging macroeconomic environment and I am pleased to report first-half results are in line with expectations and we are on track to deliver continued growth.”

Fairman said the company’s purpose was to give “the best possible care” to animals, adding that it was increasing investment in its practice facilities, clinical equipment and technology.

“I am also pleased to report that we have welcomed eight practices, comprising 11 sites, into the group in the financial year to date, with a strong pipeline of further opportunities.

“The robust performance in the first half has continued into the second half of the year and we look forward to reporting further growth in the future.”

At 1220 GMT, shares in CVS Group were down 0.1% at 1,910p.

Reporting by Josh White for Sharecast.com.