CVS Group (LON:CVSG) reported full-year revenue growth of 5.9% to £712.8 million and adjusted EBITDA growth of 5.1% to £141.5 million, as all three divisions contributed to growth despite softer market conditions late in the year.
Chief Executive Officer Richard Fairman said the company delivered results in line with market expectations and maintained margins despite inflationary pressures. Adjusted earnings per share rose 6.9% to 85.6 pence, aided by improved financial performance and a lower average share count following share buybacks and cancellations.
The company said it had made a solid start to the new financial year and expects to perform in line with market consensus.
Acquisition activity resumes in the U.K.
CVS expanded its Australian presence through six acquisitions comprising 14 sites during the financial year, paying £43.3 million. Since the start of the new financial year, it has completed two additional Australian acquisitions and signed contracts for two more.
The company also announced it had signed a contract for its first U.K. acquisition in some time, involving a two-site practice for an initial consideration of £15 million. Fairman described the practice as high quality and said the purchase multiple was accretive to the group, though CVS did not disclose the multiple.
Management said it remains interested in acquisitions in both geographies and would continue to be selective. Fairman said the company’s stated leverage ceiling is two times, though it could temporarily exceed that level if it identifies attractive, accretive opportunities and has sufficient capital available.
On acquisition returns, Alfonso confirmed that CVS continues to apply a minimum investment hurdle rate of 10%, despite the measure no longer appearing in its investor presentation. The company said acquisition multiples cited are first-year measures and that synergies are expected to improve returns over time.
- In the U.K., anticipated synergies include laboratory services, increased referrals and purchasing-scale benefits.
- For the newly announced U.K. transaction, management said the deal includes deferred consideration, with a structure broadly comparable to the approximately 80% upfront and 20% deferred structure referenced for Australian deals.
Client growth and membership initiatives
Fairman said future like-for-like growth will be supported by pricing, client volumes and spending per client. CVS raised prices over the summer, with increases slightly above those seen in recent years. However, management said footfall remains challenging in routine and preventative treatments, while demand has been more resilient for care involving ill or injured animals.
The company pointed to strong growth in its laboratory and referral operations, which it said reflects clients’ willingness to seek treatment for sick or injured pets. Laboratory EBITDA increased 25% in the year, although management said repeating that percentage rate of growth would be more challenging. CVS nevertheless expects further laboratory growth.
Its Animed Direct business returned to EBITDA growth in the second half after a weaker first half. Alfonso said CVS had re-platformed the website and introduced features including subscription payments, Apple Pay, Google Pay and next-day delivery. He said the company does not expect easier revenue comparisons, but could face easier EBITDA comparisons following first-half margin pressure associated with price-elasticity testing.
CVS also launched Healthy Pet Club Advanced on July 1. The membership option includes unlimited consultations for an additional monthly fee and has attracted both new customers and upgrades from the existing Healthy Pet Club offering. While total Healthy Pet Club membership declined slightly, management said the reduction had stabilized and retention rates remained strong.
Chief Veterinary Officer Paul Higgs said the advanced scheme could support earlier diagnosis by encouraging clients to bring pets into practices. He said earlier intervention benefits animal welfare and may improve pet longevity.
Customer focus, CMA clarity and staffing
CVS has created a Chief Client Officer position, which will join the executive committee and focus on central marketing, customer relationship management and improving client footfall and service. Fairman said the company’s unified brand and technology investments create an opportunity to improve the client journey.
The company said the conclusion of the Competition and Markets Authority process has provided greater certainty. Higgs said the veterinary profession has work to do to rebuild trust, while CVS believes it is well positioned as an established provider of veterinary care.
Management said customer and employee Net Promoter Scores improved during the year. Higgs said CVS examines score trends across employee groups, including veterinarians, nurses, leaders and non-clinical teams, to identify areas for improvement.
On staffing, Higgs said the availability of veterinarians has improved over the past two years and CVS has reduced veterinary vacancy rates through both stronger supply and retention initiatives. He said the company has focused on creating working environments that encourage veterinarians to remain with the group.
Fairman said inflationary pressures have begun to ease, although the business continues to face higher utility and other costs. He reiterated that higher employer national insurance costs represented an annualized £8 million impact, while management’s forecasts assume no further national insurance surprises and a return to more moderate wage inflation.
Fairman, who has announced plans to retire, said the board is conducting a thorough search for his successor. He said he remains committed to leading CVS until a replacement is appointed.
About CVS Group (LON:CVSG)
CVS Group is a leading provider of veterinary services, operating in the UK and Australia, listed on the Main Market of the London Stock Exchange. CVS is focused on providing high-quality clinical services to its clients and their animals, with outstanding and dedicated clinical teams and support colleagues at the core of its strategy.
The Group operates from over 475 veterinary practices across its two territories, including specialist referral hospitals and dedicated out-of-hours sites. Alongside the core Veterinary Practices division, CVS operates Laboratories (providing diagnostic services to CVS and third-parties) and an online retail business (“Animed Direct”).
The Group employs c.8,900 personnel, including c.2,400 veterinary surgeons and c.3,300 nurses.
