CVS Group confident despite tough year for UK vet market

Veterinary practice operator CVS Group reported a 9.9% increase in full-year revenue on Thursday, to £647.3m, reflecting its ongoing expansion efforts, particularly in Australia.

The AIM-traded firm’s profit before tax from continuing operations, however, fell sharply, by 37.1% to £38.2m, impacted by higher business combination costs, finance expenses, depreciation from recent investments, and £5.8m in exceptional costs related to a cyber incident, cloud migration, and the ongoing Competition and Markets Authority (CMA) market investigation.

Its statutory profit dropped significantly, to £6.4m for the 12 months ended 30 June, down from £41.9m in 2023, mainly due to a £20m loss on the disposal of its operations in the Netherlands and the Republic of Ireland.

Adjusted EBITDA rose 4.7% to £127.3m, supported by acquisitions and a focus on providing care, along with research and development tax credits of £12.8m.

CVS made a significant strategic move into the Australian market during the year, acquiring 22 veterinary practices comprising 28 sites for £82.5m.

The board said the practices were performing in line with expectations, with additional purchasing synergies identified, including agreements with preferred laboratory and crematoria suppliers.

It also made further investments in its UK operations, including £43.1m in capital spend and the rollout of a new cloud-based practice management system across 375 sites, aimed at enhancing client engagement and driving new revenue streams such as increased pet food sales.

In the UK, like-for-like sales grew 2.9%, below the company's target range, attributed to softer demand, cost of living pressures, and disruptions from the cyber incident and cloud migration.

Underlying like-for-like sales growth, excluding the disruptions, was estimated at 4.1%.

Operating cash conversion declined slightly to 70.5%, but the board maintained its progressive dividend policy, proposing a final dividend of 8p per share, up from 7.5p last year.

The company successfully extended its debt facilities in January, securing £350m in committed funds through February 2028, with no changes to margins or covenants.

Leverage increased to 1.54x due to strategic capital investments but remained within the company’s guidance of below 2x.

Looking ahead, CVS said it planned to capitalise on growth opportunities in Australia, where it had already completed two additional practice acquisitions in the new financial year, with contracts exchanged for two more.

The group was navigating short-term challenges in the UK, including softer demand and the CMA’s ongoing market investigation, but remained confident in the long-term outlook for the veterinary sector.

Its board was comfortable with consensus estimates for the 2025 financial year, supported by the strong fundamentals of the veterinary market and the company’s strategic expansion into Australia.

“We have faced a number of challenges in the past financial year with our financial results adversely impacted by the cyber attack, the subsequent migration to a new cloud based practice management system and the impact from the CMA market investigation announced in May 2024,” said chief executive officer Richard Fairman.

“Notwithstanding this, the fundamentals of the sector remain strong and we have laid the foundations for future growth.

“We successfully entered the Australian veterinary services market with 24 practices - 31 practice sites - acquired to date, and CVS' reputation established as an organisation that focuses on people and the provision of appropriate care to our clients and their animals.”

Fairman said that in line with the firm’s stated strategy, it continued to invest in its UK practice facilities and equipment, and had progressed its technology transformation with 375 of its 430 UK practices now operating on its new cloud-based practice management system.

“We also established a new clinical governance framework in the year which reflects our commitment to drive standards within the profession, and to support our clients in providing appropriate care to their animals.”

At 0815 BST, shares in CVS Group were up 2.14% at 1,144p.

Reporting by Josh White for Sharecast.com.