CVS Group plc AGM Statement and Trading Update (9738U)

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RNS Number : 9738U

CVS Group plc

29 November 2023

29 November 2023

CVS Group plc

("CVS" or the "Group")

AGM Statement and Trading Update

Positive start to the financial year, trading in line with expectations

CVS, the UK listed veterinary group and a leading provider of veterinary services, is holding its Annual General Meeting at 11.00am today and provides the following update to shareholders ahead of the meeting.

Current Trading

The Board is pleased to report a good start to the financial year with performance in the first four months in line with expectations.

In the four-month period to 31 October 2023, the Group's total sales grew by 11.9%, with like-for-like sales (1)

increasing by 5.8%, reflecting positive performance across all business areas.

Our Healthy Pet Club preventative care scheme has seen a further increase in membership, with 499,000 members as at 31 October 2023 (31 October 2022: 479,000 members) reflecting an increase of 4.2% over the last twelve months.

In the period we have launched a new Clinical Governance Framework, demonstrating our commitment to driving standards of care across the veterinary profession.

The Group's adjusted EBITDA(2) margin remains in line with the prior period at c.19%, reflecting continued investment in support functions and clinical care.

Strong operating cash conversion has supported investment in acquisitions and capital expenditure with leverage (3) on a bank test basis remaining in line with management expectations and below 1.0x (30 June 2023: 0.73x). The Group has continued to increase its investment in practice refurbishment, relocations, clinical equipment and technology with GBP10.9m invested in the year-to-date vs GBP10.8m in the prior year corresponding period. The Group expects to spend between GBP30m and GBP50m in capital expenditure for the full year.

Acquisitions

Australia

The Group has completed a further four small animal first opinion practice acquisitions bringing the total to nine acquisitions comprising eleven practice sites in the financial year to date, for aggregate initial consideration of A$67.6m / GBP35.6m. The acquisitions made to date, together with our strong pipeline, provide a meaningful platform for our operations in Australia:

 
Name of business combination              % acquired  Date of acquisition 
Vetright Pty Ltd t/a McDowall Veterinary 
 Practice                                    75%         26 July 2023 
                                          ----------  ------------------- 
McDowall Veterinary Hospital Pty. 
 Ltd t/a Warner Vet                          100%        26 July 2023 
                                          ----------  ------------------- 
Brunker Road Veterinary Centre Pty 
 Limited                                     100%       17 August 2023 
                                          ----------  ------------------- 
North Road Veterinary Centre                 100%       23 August 2023 
                                          ----------  ------------------- 
Cattle Dog Health Pty Ltd t/a Happy 
 Pets Family Vet                             100%       23 August 2023 
                                          ----------  ------------------- 
Northgate Veterinary Surgery and St 
 Vincents Vets                               100%       25 October 2023 
                                          ----------  ------------------- 
Parkinson Veterinary Surgery                 100%       25 October 2023 
                                          ----------  ------------------- 
                                                          10 November 
Southside Animal Hospital Pty Ltd            100%             2023 
                                          ----------  ------------------- 
                                                          28 November 
Brimbank Veterinary Clinic                   100%             2023 
                                          ----------  ------------------- 
 

United Kingdom

The Group has completed a further two small animal first opinion practice acquisitions in the UK bringing the total to four acquisitions comprising four practice sites, for aggregate initial consideration of GBP10.1m. The acquisitions were completed following the submission of briefing papers to the Competition and Markets Authority ("CMA").

 
Name of business combination               % acquired  Date of acquisition 
3Tab Holdings Limited and Bridge              100%        15 September 
 Veterinary Practice Limited collectively                      2023 
 trading as Bridge Veterinary Practice 
                                           ----------  ------------------- 
                                                          18 September 
Masefield Veterinary Services Ltd             100%             2023 
                                           ----------  ------------------- 
The Liverpool Vets Limited                    100%       3 October 2023 
                                           ----------  ------------------- 
Fernside Veterinary Centre Limited            100%       9 November 2023 
                                           ----------  ------------------- 
 

All Australia and UK acquisitions are performing in line with expectations.

CMA

Following our update in September, we have met with the CMA and responded to a number of questions and information requests. We will continue to support the CMA with their review and look forward to a further update from the CMA in the coming months.

Dividend

As previously announced, and subject to shareholder approval at the AGM, CVS intends to pay a dividend of 7.5 pence per ordinary share on 8 December 2023 to holders on the register as at 3 November 2023. The ex-dividend date was 2 November 2023.

Board appointment update

Following the resignation of the Group's Chair, Richard Connell, due to ill health, we have commenced a formal search to appoint a successor. The board would like to take the opportunity to thank Richard Connell for his considerable contribution as Chair over the past 16 years. In the interim period Deborah Kemp, the Group's Senior Independent Director continues to undertake this role.

Outlook

We continue to focus on the delivery of our well-defined strategy, with our purpose to give the best possible care to animals and our vision to be the veterinary company people most want to work for. We remain committed to investing in our practices and clinical equipment in order to drive quality services and organic growth.

We are delighted with the progress made in Australia in both completed acquisitions and in developing a strong pipeline of opportunities.

Whilst mindful of the wider macro-economic uncertainty, the Group continues to trade in line with full year market expectations and the Group remains well placed to achieve further growth over the longer term and to deliver on our five-year plan.

The Board would like to thank all members of the CVS team for their continued dedication and support.

Notes

1. 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 2022, revenue is included from September 2023 in the like-for-like calculations.

2. 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 provides information on the Group's underlying performance and this measure is aligned to our strategy and KPIs.

3. Leverage on a bank test basis is drawn bank debt less cash and cash equivalents, divided by adjusted EBITDA annualised for the effect of acquisitions, including acquisition costs arising from business combinations and excluding share option costs, 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) [phone]

Adrian Trimmings / Michael Burke / Andrew Clark / Lalit Bose

Berenberg (Joint Broker) [phone]

Toby Flaux / Ben Wright / James Thompson / Milo Bonser

Camarco (Financial PR)

Geoffrey Pelham-Lane [phone]

Ginny Pulbrook [phone]

About CVS Group plc ( www.cvsukltd.co.uk )

CVS Group is an AIM-listed provider of veterinary services in the UK, Australia, the Netherlands and the Republic of Ireland. 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 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.9,000 personnel, including c.2,400 veterinary surgeons and c.3,300 nurses.

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