CVS Group flags lower full-year sales growth

Listed veterinary service provider CVS Group said in an update on Thursday that it achieved growth of around 10% in full-year revenue for continuing operations, with like-for-like sales increasing 2.9%, compared to 7.3% in the 2023 financial year.

The AIM-traded firm said its revenue growth for the 12 months ended 30 June was impacted by a cyber incident in April, which prompted an accelerated cloud migration for the group’s UK companion animal practices, alongside softer demand which it put down to publicity around the veterinary sector and ongoing cost-of-living pressures.

Adjusted for the cyber incident, underlying like-for-like sales growth would have been around 4.1%.

The group said it expected to report 2024 adjusted EBITDA of around £127m, with an adjusted EBITDA margin at the lower end of the stated range of 19% to 23%.

CVS said it continued to expand its presence in Australia, completing 22 practice acquisitions at 28 practice sites for a total initial consideration of AUD 157.6m (£82.4m) in the financial year, with one additional acquisition post-year-end.

Leverage was anticipated to be around 1.5x as of 30 June, up from 0.73x a year ago, while maintaining significant headroom with over £165m in undrawn bank facilities.

Membership in the group’s Healthy Pet Club preventive healthcare scheme increased by 14,000 to 503,000 members.

Notably, CVS paused its UK acquisition activity pending the outcome of the Competition and Markets Authority (CMA) market investigation.

The group said it was actively supporting the CMA’s investigation, which was expected to conclude by November next year.

CVS said the cyber incident detected in April involved unauthorised access to some IT servers.

The incident, now fully resolved, was expected to incur exceptional costs of £4m to £5m.

CVS said the event, alongside the subsequent IT infrastructure modernisation, adversely impacted trading by about £7m in the final quarter.

Strategically, CVS divested its loss-making operations in the Netherlands and the Republic of Ireland in May, resulting in a non-cash write-down in its 2024 accounts.

The group said it was continuing to invest in practice facilities, clinical equipment, and technology, with total capital expenditure of around £42m in 2024.

Looking ahead, CVS reaffirmed its capital allocation strategy, focusing on operational cash conversion of around 70%, investing over £50m annually in overseas acquisitions, and maintaining leverage below 2.0x.

The group said it anticipated focusing its 2025 capital allocation towards opportunities in Australia, building on its existing platform to drive sustainable growth.

Board changes included the appointment of Paul Higgs, chief veterinary officer, as an executive director, and Joanne Shaw as the new chair of the audit committee, succeeding David Wilton.

“On behalf of the board I am delighted to welcome Paul Higgs,” said chair David Wilton.

“Paul's commitment to advancing clinical quality, his passion for the development of the group's clinicians and his engagement with the veterinary professional bodies will support the board and the wider group in delivering its purpose to give the best possible care to animals.”

Despite short-term headwinds, CVS said it was still optimistic about its long-term prospects, supported by a growing pet population, increasing pet life expectancy, and advancements in clinical care.

The firm said it expected to announce its 2024 preliminary results on 26 September.

At 1148 BST, shares in CVS Group were up 0.57% at 1,056p.

Reporting by Josh White for Sharecast.com.