Pets at Home, CVS tumble as CMA launches review of vet services

Shares of Pets at Home and CVS Group tumbled on Thursday after the Competition and Markets Authority said it was launching a probe into the £2bn veterinary services market for household pets.

The competition watchdog said it will explore how well the market is working for pet owners and whether they are receiving the information they need at the right time to get appropriate treatment for their pets.

The CMA said it was keen to hear more about pet owners’ and vet practitioners’ experiences of pricing of services, including whether pet owners were aware of how much a treatment would cost, and how they pay for it.

It also wants to hear about how prescriptions and medication for pets are arranged and sold and how pet owners choose a vet surgery - whether they are aware that their vet may be part of a larger chain which might also own other surgeries in the area.

The use of out-of-hours and emergency vet services where options might be limited will also be looked into.

CMA chief executive Sarah Cardell said: "Caring for an ill pet can create real financial pressure, particularly alongside other cost of living concerns. It’s really important that people get clear information and pricing to help them make the right choices.

"There has been a lot of consolidation in the vet industry in recent years, so now is the right time to take a look at how the market is working.

"When a pet is unwell, they often need urgent treatment, which means that pet owners may not shop around for the best deal, like they do with other services. This means they may not have the relevant information to make informed decisions at what can be a distressing time. We want to hear from pet owners and people who work in the sector about their experiences."

Pets at Home owns veterinary groups Companion Care Vets and Vets4Pets and has a network of more than 450 vet practices across the UK. CVS Group, meanwhile, is one of the largest integrated veterinary services providers in the UK.

At 1220 BST, Pets shares were down 8% at 350p, off earlier lows. Shares of AIM-listed vet services provider CVS Group were down 30% at 1,461p.

Responding to the news, CVS said in a statement: "Our purpose at CVS is to give the best possible care to animals and we continually invest in our colleagues, practices and clinical equipment to enhance the care to our clients and their patients. The Group has always sought to ensure its prices are appropriate and reflect fair value to our clients. Our pricing structures are set by clinicians to ensure these align with our purpose.

"As the CMA have recognised, there continues to be a significant shortage of vets in the UK and employment costs represent the most significant proportion of our cost base. Our pricing reflects this and other inflationary pressures experienced in recent years."

Russ Mould, investment director at AJ Bell, said: "Being in the pets and vet space has felt like a healthy place to be in recent years. That’s been reflected in strong share prices for the likes of vet group CVS and Pets at Home which has its own veterinary arm within a broader retail and grooming offering.

"Britons love their animal companions and are willing to pay up to keep them healthy and happy.

"News that the competition authorities are looking into the rising costs and potentially anti-competitive practices in the industry has set the cat among the pigeons when it comes to the share prices of CVS and Pets at Home.

"The sell-off seen today could be an overreaction, although the CMA review looks to be wide-ranging. The problem for both businesses is the process is likely to be time-consuming and, with a further update not due until early 2024, it could weigh on both stocks for some time to come."

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "The size of the market’s reaction shows how much of a hurdle this investigation could be for companies focused on pets. For the likes of CVS Group, whose main business model centres around buying up smaller clinics and vet groups, the announcement could have direct and profound implications for its operations.

"Pets at Home, although a retail giant, also has a substantial vet business, and it won’t be immune to scrutiny. A lot of the concerns from the CMA centre around making sure pet owners have clear and easily accessible information when it comes to treatment pricing and options. Pet ownership has spiralled upwards since the pandemic, at a time when the cost-of-living crisis is squashing household incomes. Initial worries suggest people could be pushed towards inappropriate or unnecessary spending for their pet’s health, and the review also wants competition to be fairer. At the moment, in the case of bigger companies that have acquired up to hundreds of smaller clinics, it’s not always clear if your local vets is actually part of a supergroup.

"Until there’s further detail on the scope and consequences of the CMA’s findings, it’s tough to map exactly what this will mean for listed vet companies. A slower rate of acquisitions could dent CVS Group’s growth, and a crackdown on treatments and pricing could hurt margins across the sector. For now, it’s wait-and-see mode."