TIDMCVSG
RNS Number : 3337H
CVS Group plc
27 July 2023
27 July 2023
CVS Group plc
("CVS" or the "Company" and, together with its subsidiaries, the
"Group")
Full year Trading Update, Expansion into Australia and UK
acquisitions
CVS, the UK quoted veterinary group and a leading provider of
integrated veterinary services, is pleased to issue the following
update on trading for the financial year ended 30 June 2023
("FY23")(1) . The Group expects to announce its FY23 preliminary
results on 21 September 2023.
The Group is also pleased to announce its entry into the
Australian veterinary services market. CVS's expansion into
Australia is in accordance with its growth objectives, outlined in
the five-year plan at the Group's Capital Markets Day in November
2022, to execute on scalable international consolidation
opportunities, subject to maintaining its disciplined acquisition
criteria. Having explored a number of new potential markets, the
Board has identified Australia as particularly attractive given the
relatively low levels of corporate consolidation, favourable market
dynamics and strong similarities with the UK, including highly
trained veterinary surgeons, shared language and culture, and the
Group's experience with UK vets working between Australia and the
UK.
FY23 Financial Highlights
-- Continued organic revenue growth with a 7.3% increase in
like-for-like sales(2) (FY22: 8.0%), consistent with the Group's
organic revenue growth ambition of between 4% and 8%;
-- Adjusted EBITDA(3) margins also expected to be within our
stated ambition of margins between 19% to 23%;
-- FY23 adjusted EBITDA(3) expected to be comfortably in line with market expectations;
-- Continued investment in our facilities and equipment to
support growth, with total capital expenditure of c.GBP46m (FY22:
GBP24.5m), within the Group's capital expenditure ambition of
GBP30m to GBP50m investment per annum;
-- Investment of c.GBP55m in 11 practice acquisitions
(comprising 16 practice sites) (FY22: GBP8.4m in three practice
acquisitions (comprising three practice sites)), in line with the
guidance of GBP50m+ investment per annum;
-- Leverage(5) comfortably less than 1.0x at 30 June 2023 (30
June 2022: 0.40x) well below our stated target of less than 2.0x
leverage. This reflects strong EBITDA growth and continued
operating cash conversion, partly offset by an increase in drawn
debt to fund growth investment in capital expenditure and
acquisitions;
-- Further increase in membership of our preventative healthcare
scheme, Healthy Pet Club to 489,000 members (30 June 2022:
470,000);
-- 6.5% increase in the average number of vets employed in FY23
reflecting a further reduction in attrition and a record graduate
vet intake.
FY23 Performance
The Board is pleased to report the Group delivered strong high
single-digit revenue growth for the full year. Like-for-like(2)
sales for the financial year increased by 7.3% (FY22: 8.0%), at the
upper end of the Group's ambition of like-for-like growth between
4% and 8%. We continue to see resilience in the veterinary sector,
with membership of our Healthy Pet Club preventative healthcare
scheme increasing in the year by 19,000 members (an increase of
4.0%) to 489,000 (30 June 2022: 470,000 members).
The Group expects to report adjusted EBITDA(3) for FY23
comfortably in line with market expectations, notwithstanding
increased utility costs and other inflationary pressures.
Adjusted EBITDA(3) margin is expected to be within the range of
19% to 23%, reflecting our continued focus on the provision of high
quality clinical care across our integrated veterinary services
platform.
In accordance with our five-year plan, we have increased
investment in our practice facilities, clinical equipment and
technology in support of future growth. Total capital expenditure
was c.GBP46m (FY22: GBP24.5m), in line with the GBP30m to GBP50m
per annum ambition. We completed 21 practice refurbishment and
projects in the financial year and our new practice management
system is now being trialled in the UK.
This investment was funded from a combination of cash generated
from our operations and additional drawing under our bank
facilities which were successfully refinanced in February 2023,
with margins on these facilities remaining unchanged. Net bank
borrowings(4) increased as at 30 June 2023 to GBP74.1m (31 December
2022: GBP57.6m, 30 June 2022: GBP36.0m). The Group expects to
report leverage(5) comfortably below 1.0x as at 30 June 2023 (30
June 2022: 0.40x).
We continue to focus on the recruitment, retention and
development of our highly skilled and dedicated colleagues. We
employed an average of 6.5% more vets in FY23 vs FY22 reflecting a
further reduction in attrition and a record graduate vet
intake.
Australian acquisitions
On 10 July 2023, the Group signed four separate sale and
purchase agreements for the conditional acquisitions of four
independent small animal first opinion veterinary practices in
Australia (comprising six sites) namely:
-- McDowall Veterinary Practice, a nine-vet single site practice
in McDowall, Brisbane, Queensland;
-- Northgate Veterinary Surgery and St Vincents Vets, a five vet
two site practice in Brisbane, Queensland;
-- Warner Vet, a four-vet single site practice in Cashmere, Queensland; and
-- Southside Animal Hospital, a six vet two site practice in Sydney, New South Wales.
On 26 July 2023, the Group completed the acquisitions of
McDowall Veterinary and Warner Vet Practices with the remaining two
acquisitions expected to be completed shortly.
Combined initial consideration for the completed acquisitions
and the two pending acquisitions is A$31.9m (c.GBP16.8m) settled /
to be settled in cash. In addition, each acquisition is also
subject to market-standard performance based contingent
consideration, which will (if achieved) be settled in cash.
These four acquisitions are the first of a number of planned
Australian practice acquisitions which CVS expects to announce in
the coming months. The Group has identified a strong pipeline of
opportunities and a number of non-binding indicative offers have
been accepted for further practice acquisitions. The Group's focus
will be on acquisition opportunities in major urban conurbations,
including Sydney, Melbourne, Brisbane, Perth, Canberra, Newcastle
and Adelaide.
The Group has established an Australian-based senior management
team to support acquired practices and continue to develop the
pipeline of new acquisition opportunities. This team includes a
highly experienced operations director with seven years' service at
CVS on secondment from our UK veterinary practice division, and an
acquisitions director with extensive experience of the Australian
veterinary market. Members of the CVS executive committee will
continue to spend appropriate time in Australia to support the
establishment of our new operations.
The Group expects gradually to benefit from additional
advantages of scale as it further expands in Australia, including
improved drug purchasing terms, revenue growth and margin
enhancement with a focus on high quality clinical care and
developing a market leading employee experience.
Additional UK acquisitions
The Group is also pleased to announce the acquisition of a
further three veterinary practices (comprising five practice sites)
in the UK in the financial year to 30 June 2023 for combined
consideration of c.GBP20m, namely:
-- East of England Veterinary Specialists, a single site small
animal specialist referral practice in Wimpole, Cambridgeshire;
-- Brunswick Place Veterinary Clinic, a single site small animal
first opinion practice in Basingstoke, Hampshire; and
-- Riverside Veterinary Practice, a three-site small animal
first opinion practice near Edinburgh in West Lothian,
Scotland.
Including these acquisitions, the Group completed 11 practice
acquisitions (comprising 16 practice sites) in the financial year
to 30 June 2023 for combined consideration of c.GBP55m.
The consideration for the completed acquisitions was fully
satisfied in cash from the Group's existing funding resources, with
the Group's leverage(5) remaining below 1.0x post these
acquisitions, retaining significant headroom for further
growth.
Outlook
Whilst the Board remains mindful of the uncertain economic
outlook, the veterinary market continues to show resilience with
ongoing demand for the Group's services. With the growth delivered
in the financial year to 30 June 2023, ongoing investment in
delivering further organic growth and recent acquisitions in the UK
and Australia, the Group remains well placed to deliver further
increases in shareholder value.
The Board would like to acknowledge and thank all CVS colleagues
for their continued dedication and commitment in delivering the
best possible care to animals.
The Group expects to announce its preliminary results on
Thursday, 21 September 2023.
Richard Fairman, CEO commented;
"I am delighted to announce the continued growth of CVS in the
financial year ended 30 June 2023 and our entry into the Australian
veterinary services market. At our Capital Markets Day in November
2022, we set out our plans and ambition to double Adjusted EBITDA
over the next five years through a continued focus on organic
growth and through acquisitions in the UK and overseas. Our entry
into the Australian market is consistent with these plans and we
are excited by the opportunity. I am delighted to welcome the teams
at McDowall Vets, Northgate Veterinary Surgery & St Vincent
Vets, Warner Vet and Southside Animal Hospital in Australia, and
those of East of England Veterinary Specialists, Brunswick Place
Veterinary Clinic and Riverside Veterinary Practice in the UK to
the CVS Group."
Ben Jacklin, Deputy CEO stated;
"The announcement of this strong trading update, and our entry
into the Australia market represents more good news for CVS. Having
worked as a vet in Australia earlier in my career, I know well
their high standards of clinical care, and the dedication of highly
talented veterinary professionals that work there. As a company
dedicated to giving the best possible care to animals, I see a
fantastic opportunity for us to enter this growing market, with low
levels of corporate consolidation, and execute our vision of being
the veterinary company people most want to work for. I have spent
time in Australia over the last 12 months, including meeting some
fantastic veterinary practices, and it is clear we have a
significant opportunity. With the four outstanding practices that
are joining us, and a strong pipeline of further acquisition
opportunities, I am excited to build a significant CVS business in
Australia with the same culture and values that have brought us
success in the UK."
Notes
1 Numbers included are unaudited.
2 Like-for-like sales shows revenue generated from like-for-like
operations compared to the prior year, adjusted for the number of
working days. For example, for a practice acquired in September
2021, revenue is included from September 2022 in the
like-for-like
calculations.
3 Adjusted EBITDA (earnings before interest, tax, depreciation
and amortisation) is profit before tax adjusted for interest (net
finance expense), depreciation, amortisation, costs relating to
business combinations and exceptional items. Adjusted EBITDA is an
alternative performance measure and is defined in note 1 of the
2022 Annual Report.
4 Net bank borrowings is drawn bank debt less cash and cash equivalents.
5 Leverage on a bank test basis is net bank borrowings divided
by 'Adjusted EBITDA', annualised for the effect of acquisitions,
deducting costs relating to business combinations and adding back
share option costs, on an accounting basis prior to the adoption of
IFRS 16.
CVS Group plc via Camarco
Richard Fairman, CEO
Ben Jacklin, Deputy CEO
Robin Alfonso, CFO
Peel Hunt LLP (Nominated Adviser & Broker) +44 (0)20 7418
8900
Adrian Trimmings / Michael Burke / Andrew Clark / Lalit Bose
Berenberg (Joint Broker) +44 (0)20 3207 7800
Toby Flaux / Ben Wright / James Thompson / Milo Bonser
Camarco (Financial PR)
Geoffrey Pelham-Lane +44 (0)7733 124 226
Ginny Pulbrook +44 (0)7961 315 138
About CVS Group plc ( www.cvsukltd.co.uk )
CVS Group is an AIM-quoted fully-integrated provider of
veterinary services in the UK, with practices in Australia, the
Netherlands and the Republic of Ireland. CVS is focused on
providing high quality clinical services to its customers and their
animals, with outstanding and dedicated clinical teams and support
colleagues at the core of its strategy.
The Group has c.500 veterinary practices across its four
markets, including nine specialist referral hospitals and 39
dedicated out-of-hours sites. Alongside the core Veterinary
Practices division, CVS operates Laboratories (providing diagnostic
services to CVS and third-parties), Crematoria (providing pet
cremation and clinical waste disposal for CVS and third-party
practices), Buying Groups and the Group's online retail business
("Animed Direct").
The Group employs c.8,700 personnel, including c.2,250
veterinary surgeons and c.3,200 nurses.
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END
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