CVS Group optimistic after year of growth

Veterinary service provider CVS Group reported a solid set of full-year financial results on Thursday, as revenues surged 9.8% to £608.3m.

The AIM-traded company put the growth down to the persistent demand for high-quality clinical care.

Consistent with its organic revenue growth target, the group said its like-for-like sales grew by 7.3%.

Adjusted EBITDA for the 12 months ended 30 June was ahead 13% at £121.4m, while pre-tax profit saw an impressive rise of 49.7%, settling at £53.9m.

The increment in adjusted EBITDA played a significant role in that increase, although some factors, such as an increase in finance expenses, depreciation, and costs linked to business combinations, partially offset growth.

CVS said the prior year's numbers were influenced by the one-time impairment of investment associated with the acquisition of Quality Pet Care.

The group's leverage rose to 0.73x from 0.40x in 2022 due to its investments and acquisitions, while operating cash conversion saw an enhancement, growing 4.9 percentage points to 70.0%.

Acknowledging the sustained group growth and positive cash generation, the board recommended a final dividend 7.5p per share, a slight rise from the 7p distribution in 2022.

In February, CVS successfully refinanced its debt facilities, increasing the available funds to £350m from the previous £170m, with the interest margin and covenants remaining unchanged.

The company noted the Competition and Markets Authority’s market review of the Veterinary sector for household pets in the UK, announced on 7 September.

CVS said it intended to cooperate closely with the CMA, which was expected to provide an update early next year.

Looking at its current operations, CVS confirmed that trading aligned with market expectations.

The Healthy Pet Club had grown by 4%, tallying 494,000 members, making up around 40% of its active client base for companion animals.

Following its July announcement of entering the Australian veterinary services market, the company finalised acquisitions of five small animal practices for an initial £23.8m and had contracts for an additional two.

It also reported acquiring two more veterinary practices in the UK for £6.6m.

CVS said it was optimistic about its growth potential in both the UK and Australia.

While cautious about the broader economic landscape and inflationary trends, it said it was confident in its positioning to offer attractive growth and shareholder value.

The group said it was committed to meeting the key performance indicators it presented on its last year's capital markets day in November.

“I'm pleased that we have delivered another strong set of results, with good growth against all of our six strategic targets announced at our capital markets day in November,” said chief executive officer Richard Fairman.

“Our continued focus on providing the best possible care to animals, led by our passionate and caring colleagues who are committed to high-quality veterinary care, has contributed to the strength of our performance.

“I am delighted to announce we have now completed five acquisitions in Australia, comprising five sites, and a further two acquisitions in the UK, comprising two sites.”

Fairman said the firm was excited by the opportunity Australia presented and was delighted to welcome the teams from the Australian and UK practices into the group.

“CVS remains committed to providing high-quality care to our clients and their animals.

“With the continued support of our outstanding colleagues and our planned investment in people, practice facilities and technology, I look forward to sharing further successes in 2024 and beyond.”

At 1229 BST, shares in CVS Group were up 2.94% at 1,553.37p.

Reporting by Josh White for Sharecast.com.