I often downbet on selected morning spikes and have done so here. |
RBC RAISES CVS GROUP TO 'OUTPERFORM' (SECTOR PERFORM) - PRICE TARGET 1500 (940) PENCE |
 CVS nurses pet sector weakness as private equity rumours circle rival
By JANE DENTON
MAIL
Updated: 11:11 GMT, 27 February 2025
Veterinary business CVS Group saw sales struggle for momentum in the second half of 2024 as the pet sector continues to lag its pandemic era strength.
CVS revenues jumped over 6 per cent to £341.8million in the six months to 31 December, the group said on Thursday.
But like-for-like sales were 1.1 per cent lower compared to the first half of 2024, as previously guided, having been hit by a 'continuation of softer market conditions in the UK most notably in the Group's online retail and laboratory businesses'.
The company saw its pre-tax profit fall in the period amid increased finance expenses and depreciation costs.
Reported profit before tax on continuing operations fell 35.1 per cent to £17.4million.
CVS has been actively expanding in Australia, completing several acquisitions and identifying synergies to enhance returns.
This week market chatter suggested that a European private equity firm may look at taking over Pets at Home.
It has been claimed that the potential bidder could be based in Europe and have a similar business to FTSE 250-listed Pets at Home in the US.
But Pets at Home did not comment on the speculation on Thursday.
David Hughes, equity analyst at Shore Capital, said this suggests 'that no formal approach has happened'.
He added: 'The veterinary sector has been under review from the CMA, however recent comments suggest a softening of the regulators stance here, perhaps fuelling any M&A rumours in the sector.'
CVS Group shares fell 2.41 per cent or 25.50p to 1,032.50p, having fallen over 37 per cent in the last year.
Pets at Home shares were down 1.05 per cent or 2.60p to 245.60p on Wednesday, having fallen over 13 per cent in the last year.
Looking ahead, CVS highlighted 'headwinds in the UK and employment cost increases resulting from the UK Autumn Budget', but said 'the fundamental need for high-quality veterinary care remains strong'.
THIS IS MONEY
Derren Nathan, head of equity research at Hargreaves Lansdown, said: 'Veterinary services provider CVS Group’s first half trading had little to set tails wagging with like-for-like sales still in negative territory.'
The UK's Competition and Markets Authority has been probing the veterinary sector amid concerns pet owners are being overcharged.
Vet groups could be forced to cap prescription fees, sell off parts of their business or give mandatory information to pet owners if the probe finds it necessary.
It follows warnings in March 2024 about weak market competition, partly caused by rapid sector consolidation.
Nathan said: 'There was no reference to any potential remedies today, only continuing uncertainty, which is driving a much more selective approach to acquisitions in the UK.
'The focus for consolidation remains on Australia where eight practice sites have been acquired so far this year with £23million paid up front.'
He added: 'It’s inorganic growth that’s powering the modest additions seen to the Group’s top and bottom line so far this year and if hopes for an improved second half in the UK can be achieved the overall picture could improve substantially.
'Despite a recent recovery, the earnings-based valuation is still around half the long-run average, which could offer investors an opportunity to gain exposure to a high-quality business with attractive long-term growth drivers.
'The CMA enquiry remains a risk but could also prove to be a catalyst if price controls aren’t part of the recommendations.'
In May 2024, the Competition and Markets Authority confirmed its decision to launch a market investigation into veterinary services. In July, the CMA published an issues statement which set out the scope of the investigation and the areas being explored. |
This is what got PETS excited yesterday, but could the target be CVSG? |
Not a great RNS, steady as she goes, no investment in the weaker UK atm, given the probe in to prices, Aus doing OK though. |
I guess cvsg has had more of a recovery since the dip than Pets Has. But yes...if confirmed then another 40% easy here. |
As welcome as this news is, I still find it hard to believe that positive news WRT the CMA would add 15% to P@H and only 2.7% to CVS when the latter, as a pure veterinary play, is likely to benefit more from a positive CMA outcome. |
https://www.cityam.com/pets-at-home-shares-surge-as-watchdog-set-to-go-easy-on-vets/ |
I think it is because of the rise in Pets at Home which spiked up 15% at 08:30, now up ~10%
I can’t yet find a reason for this but I’m guessing it relates to bid rumours perhaps? |
That's a suspicious rise today ahead of tomorrow... |
Thursday 27 February 2025 Interim Results |
After a nice run, it's a freefall today...Profit takings, or any rumours? |
I bought a load more in the £8's.Other than a general re-rating, the real opportunity here is probably Australia. 4,000 vets practices, with only 30% in consolidators hands. Taking practices out on low multiples, and deriving the synergies that efficient operation and the economies of scale provide. |
Yeah , "in the end" was the salient bit! A prolonged opportunity for cheap shares, if I am right, not that I have picked any more up. |
Impact - other than cratering the share price for no good reason! |
Thanks, just noticed the latest update by CMA
Read the 24 page summary and must confess I am impressed by their approach. For instance they have looked at "millions" of invoices. They do seem to recognise that this is a complex market that they don't want to damage by unintended consequences. The high response level by UK vets does give an impression of a genuine consultation rather than a "listen then ignore" approach. The BVA also seems to give a guarded approval of the approach , though with criticisms of course. One significant finding I think is the acknowledgement of a high level of competition in the majority of the country. Pre-empting the eventual conclusions is a bit of a fools game, but I am guessing they will only punish the vet chains in a small number of localities in the end. I don't think there is much enthusiasm amongst young vets to own practices any more ; they see the hassle and prefer to have salaried jobs being vets not running businesses. May be wrong but suspect there won't be much impact in the end on CVS. |
Recent press speculation is that the CMA outcome is likely to be benign. |
I like the last month's share price rise , perhaps the increasing presence down-under is helping. Not going to get much synergy from running two businesses so far apart and with completely different regulators and supply chains though. |
CVS Group Plc
988.00 GBX +38.00 (4.00%)
Feb 6, 13:58 GMT |
TU out this am not going to boost the share price further I suspect, though EBITDA up 4.5% might help, the gloom about NI costs won't. |
Yes, I take your point. |
In order to show that they do not intend to stifle & destroy all British business in spite of the way they've begun over the past year? |
Why do I get the feeling the Liebour government are going to impose non market rates on Vets this year?
Which would make this market rally look a bit silly. |
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