Cvs Share Discussion Threads

[shopper21544] 10/7/2010 15:07

No wonder the shares are under such pressure. The trading statement was a real shocker - completely illiterate. How can you quote LFLs whilst leaving out two trading months of the year just because they tell a negative story?

[masurenguy] 29/6/2010 11:30

"The shares are trading on a June 2010 earnings multiple of 13.8 times, falling to 11.1 in 2011. The company is not yet paying a dividend. They were recommended at 170p on October 6 last year and are up 20% compared with a market up 9%. Although the share price progression is likely to be slow and steady, the group is emerging as the UK's leading consolidator in a growing market. The shares remain a buy."

Well the shares have halved in the 8 weeks since that Questor update on April 28th !

[undervaluedassets] 29/6/2010 10:44

One other thing - is buying loss making businesses and centralising the admin a great business model?

I hardly think that helping a lossmaking business's do it's paperwork is going to turn that business around.



Why not buy profitable businesses instead?

[undervaluedassets] 29/6/2010 10:35

who would want to give them any more cash?

investors have already shelled out for the placing at 190p (an eyewateringly high price today) and that was only a few short months ago.

IMHO people are unlikely to queue up to burn themselves again on the same stove.

[masurenguy] 29/6/2010 10:28

Big drop following some rather ambiguous and rambling comments over their 'below expectations' update. Their business model is predicated on debt funding of acquisitions which may have been more viable 3 years ago but is distinctly disadvantageous in the current climate. Net debt will now act as a drag on the share price and limit future acquisition opportunities.

Bottom line is that they are inevitably going to have to refinance the company though a placing and dilution. May need to raise funds at a significant discount below todays price of around 100p !

[undervaluedassets] 29/6/2010 10:04

still on a pe of 18 even after debacle today.

clearly set to be serial disappointer

No wonder ceo sold so much stock in september (500k) with the financial director joining him in october

Statement was murky at best (what was all that allowing for the weather nonsense?)-

And another thing - this company looks determined to live way beyond its means - how long before they come back to the city again? those who took up the last set of rights (190p) must be so annoyed.

I now think that my target price of 88p generous. just guessing but 50p looks more like it which give a pe of between 8 and 9. generous I think given outlook and strategy:- which would appear to be biting off more than it can chew in terms of aquisitions whilst earnings and turnover from said aquisitions continue to disappoint. .

[masurenguy] 02/6/2010 11:44

undervaluedassets - 21 May'10 - 170: the venture capitalists had the best of this one (made 10 times their money) and left a company that is carrying alot of dept and an eyewateringly high pe for the shareholders to fret over.

LOL - twas ever thus !

[undervaluedassets] 02/6/2010 11:24

One other thing... this is not Dignity (why does everyone compare this co to Dignity?) ... have you seen the margins? they are minute.

DTY op margin 20.3%
CVSG op margin 5.8%

Needs to be on a pe of 15 ( same as DTY) and even then a pe of 15 would be a generous maximum given uncertain outlook - which by company own admission is set to be poorer than was previously anticipated.

In any respect a pe of 15 equates to a shareprice of 88p.

[undervaluedassets] 21/5/2010 12:29

gonna test the lows one feels.


the venture capitalists had the best of this one (made 10 times their money) and left a company that is carrying alot of debt and an eyewateringly high pe for the shareholders to fret over.

In a word - expensive stock !

[masurenguy] 19/5/2010 11:09

The net debt of £37m here is an issue in the current market climate. They have made some judicious acquisitions but growth is mainly predicted on this model whic is dependent on further investment and earnout deals. They can't keep raising new funds to underwrite this so either debt could increase or growth slow if they back pedal on further acquistions over the next year.

[undervaluedassets] 19/5/2010 10:56

You know that things have gone sour when you can buy stock below recent rights issue price. in this case 190p ( that price was a "bargain" only a few short weeks ago).

pe ratio is hefty 29 at the moment and that is going to get even more dear at next results.

caveat emptor ! this stock is very very expensive!!

[campbed] 19/5/2010 09:57

Trading update today warns that profits this year ending 30 June will be slightly below market expectations which I take to mean around a 10% reduction to an adj EPS of 13.5p. They put that down to acquisitions being completed later than forecasted rather than poorer underlying trading (other than in the very cold snowy period in Dec-Jan). As they don't (understandably)announce the purchase price of smaller acquistions you cannot judge how well priced are the vets practices they are buying until they are disclosed in aggregate in annual accounts

I'm not inclined to catch this buy and build falling knife until we see that the improvement is being achieved in operating margins at these acqisitions, especially Pet Doctors.

[undervaluedassets] 19/5/2010 09:33

reading between the lines this business looks a little overstretched.


I think this is one to pass on at present.

[lomax99] 24/4/2010 14:13

I am pleased that they got the recent placing away at £1.90, given it was not that long ago the stock was trading at £1.20. This deals further cements there position as lead consolidator, by quite some margin. I am looking forward to solid progress over the next 12-18 months, it would not actually surprise me to see them testing previous highs (and I don't mean the recent ones!).

[masurenguy] 20/3/2010 17:49

Salient points:

The group recently agreed to buy Veterinary Enterprises & Trading (VET) for up to £12.2m. This was funded by a £9m placing at 190p a share. The group operates under the Pet Doctors brand and has 27 veterinary surgeries in the South East. Once this deal completes, CVS will operate 197 vet surgeries across the country, six diagnostics laboratories and a pets cemetery.

In its interim results, released last month, revenues in the first half of the year rose 11.4% to £41.5m, with pre-tax profits jumping 50.3% to £2.81m. Most of the increase in revenues was down to new surgeries acquired, but businesses own for more than a year saw revenues increase by 1.5%. The shares are trading on a June 2010 earnings multiple of 14.1 times, falling to 11.4 in 2011. The company is not yet paying a dividend. The purchase of VET means that it will be more difficult for new consolidators to enter the market, as VET was an ideal starting spot. This gives the group significant commercial advantage. The shares were recommended at 170p on October 6 and are up 24% compared with a market up 9%. The shares remain a buy.

I really like their business model and this is on my Watchlist. The only thing holding me back at this stage is that it is looking a bit pricey at a PER of 14, with net debt of nearly £37m at the last interims, in this current financial climate

[rik shaw] 20/3/2010 17:07

telegraph link:

[lomax99] 09/3/2010 12:00

CVS' acquisition frenzy
By James Harris on February 17 2010
Vet market consolidator CVS has undergone acquisition-driven growth in a market continuing to demonstrate high levels of recessionary resilience.

Established in 1999 and floated on AIM in October 2007, with a £93 million fundraising priced at 205p, veterinary services provider CVS Group is pursuing a highly successful, high-growth buy-and-build strategy in a resilient market.

Based in Diss, Norfolk, CVS, whose fortunes are driven by proven business builder Simon Innes, has established a track record of delivering against its financial and strategic targets. Against a backdrop of recession, the strongly cash-generative company managed to grow pre-tax profits by 53 per cent in the year to last June, showcasing the defensive nature of its earnings.

Furthermore, despite being the UK's largest national operator and consolidator of veterinary practices with circa 170 practices and growing, the company speaks for a modest 7 to 8 per cent of its chosen small animal sector, leaving plenty of growth to go for.

Given its market-leading position, reputation and funding firepower, CVS is the 'acquirer of choice' for a wave of veterinary surgery vendors that find their traditional exit route – younger partners buying into practices or taking over – unavailable, as demographics in the veterinary profession continue to change.

With a strong pipeline of acquisitions under evaluation, CVS continues to demonstrate its recession-resistant characteristics and offers investors exposure to defensive, double-digit earnings growth at an undemanding price.

Strategy

Under boss Simon Innes and finance director Paul Coxon, CVS is on a busy buy-and-build mission focused on the small animal end of the veterinary services market.

The company's acquisition model is being driven by the demographic changes under way within the increasingly female-dominated veterinary profession. This is seeing experienced veterinarians, who have built up their practices over time, unable to entice the younger generation of vets into taking over or buying into their businesses.

As Coxon elaborates, 'Younger vets today, male and female, are now less inclined to buy into partnerships. And with the 50-something vets looking to slow down or secure their nest egg, that means their natural exit route is no longer there.'

As the well-funded, biggest UK player in this fragmented sector, with an excellent industry reputation, CVS is seeing willing veterinary vendors knocking on its door, rather than the other way around, with all the inherent pricing advantages that brings.

'We wait, and they come to us,' enthuses Coxon, adding that CVS pays cash for the vet practices it buys and vets are keen to stay on with their practice after it is sold. 'All of our acquisitions since December 2008 have been financed solely from cash,' he adds.

Since coming to market in 2007, CVS has acquired more than 40 surgeries and a number of veterinary laboratories, and in the year to last June purchased and integrated a further 17 surgeries. This took the year-end total to 168 surgeries nationwide (home to 393 vets), with the company boasting six diagnostic laboratories and buying its first pet crematorium and cemetery during the year.

Much strategic emphasis is placed on enhancing the margins of acquired practices, with CVS taking over their management through its own central facilities and leveraging its ever-growing buying power. 'What we do is buy well-established businesses and strip out the inefficiencies,' explains Coxon. Activities such as HR, marketing, payroll and purchasing are incorporated into what he describes as CVS's 'central function', freeing up the vets to concentrate on treating animals and significantly boosting the profitability of the acquired business and group.

'In terms of gross margin generation,' says Coxon, 'we can put 7 to 10 per cent on the bottom line solely on buying products at better prices.' And as a result, acquisitions see 'a significant enhancement in profits in year one'.

Management also aims to maximise sales and capture a greater share of margin via the addition of complementary businesses, such as the veterinary laboratories, to which the CVS vet practices send their lab work. The laboratories business contributed a significant £8.3 million of sales last year, offers diagnostic services including microbiology, clinical chemistry and histopathology and generates 20 per cent of its business from intra-group practices.

Management

Occupying the hot seat at CVS is Simon Innes, the former Hamleys and Marks & Spencer man, appointed as CEO at the beginning of 2004 in the days before CVS's AIM float. Innes is a well-followed entrepreneur, best known in business circles as the man who, between 2000 and 2004, built up Vision Express into a £220 million turnover business with 205 practices. During his stint, he turned the company around from losses and into one of the most profitable corporate optical chains in the UK.

Armed with his Vision Express experience, Innes, who in his earlier years served for seven years in the British Army, is successfully repeating the trick in the veterinary industry with CVS.

Overseeing developments from the non-executive chair is Richard Connell, who brings his financial sector knowledge to the boardroom table, having formerly worked at the likes of HSBC, 3i and Amvescap. Aside from CVS, the Oxford-educated Connell also chairs acquisitive funeral services specialist Dignity, listed on London's main board.

Since his appointment in the summer of 2003, amiable finance director Paul Coxon has been in charge of CVS's ever-improving numbers. Coxon, with around

20 years of experience in financing and accounting, is used to handling the finances of some substantial growth businesses. In his pre-CVS days, he was the finance director of Allied Grain (South), a £160 million turnover subsidiary of Associated British Foods.

On the non-executive side, the company can call upon the services of suitably qualified former Genus numbers man David Timmins. During his time at Genus, he played a prominent role in the reverse takeover of a rival company, which involved a significant fundraising from institutions, and picked up knowledge of the veterinary sector through one of Genus's divisions.

Prospects

CVS is strongly positioned to nurture healthy, acquisitive growth rates in the attractive veterinary services market. Despite already being the UK number one, there is still plenty of growth for CVS to go for, since its share of its chosen small animal sector remains very small at between 7 and 8 per cent and it is the most attractive acquirer to vet vendors. 'There are over 4,000 veterinary practices in the UK and 2,300 of them are small animal practices,' points out Coxon. 'We have 170, which is over three times more than our nearest competitor'.

With less than 20 per cent of the small animal surgery sector presently under corporate ownership, CVS is seeing a healthy pipeline of available takeover targets and is in pole position to deliver future growth through takeovers given its funding firepower.

Prospects are further underpinned by the resilient, dependable nature of earnings in this market, which stems from the emotional attachment owners have to their pets. Although more prudent pet owners might stop paying for non-essential treatments or vaccines when the economy turns down, they will always tend to take their beloved animal to the vet if it falls ill, which means CVS's earnings are highly defensive.

Full-year results, announced back in September, reflected this resilience, with CVS reporting improvements in sales, profits and cash flow in the midst of a severe recession. Pre-tax profits moved an impressive 53 per cent higher to £8.4 million, and earnings per share expanded by 44 per cent to 11.5p. Turnover grew by 23 per cent to £76.6 million and modest but welcome like-for-like growth of 2 per cent allayed any fears investors may have had about the impact of the downturn on the company's market.

Furthermore, CVS generated a dramatically improved £12.4 million of cash from operations, and while the company finished the period with £40.8 million of net debt, analysts believe debt levels should reduce to £38 million by June.

This year, CVS has continued to expand organically and by acquisition, with the latest takeover being that of Warrington-based Rees Veterinary Clinic, which made £87,000 pre-tax on £643,000 turnover in the year to last June. Moreover, trading has continued in line with expectations at a time when small-cap companies in less defensive sectors have been forced to issue profit warnings. As Coxon assures, 'The veterinary business is very solid and we are still delivering growth.'

[jange] 04/3/2010 12:09

One problem with these shares is liquidity just like a lot of AIM stocks some of which are utter rubbish. Why don't CVS apply for a full listing? It is because they are too small market cap. or perhaps the expense of a proper listing? A full listing would surely improve liquidity.

[hootster] 04/3/2010 11:17

Yes I was Given the nod on these back in September so was in around 1.33 I also like the business model and is a cash Generative business so I don't have too much worry on the borrowings because I think in time these will reduce Substantially. Not much competition also so this will help them get a very large slice of this Profitable Mkt.
One to Hold ;-)
REGARDS THE HOOT.........

[jange] 04/3/2010 11:04

I've always like this stock even if the borrowing is high. The whole business model just looks right to me. A little like Dignity. I have the shares at around this price and only wish I had had the courage to buy some more a couple of months ago.

[hootster] 04/3/2010 09:33

Ummmm looks like the Mkt may disagree with you Guys :-)
REGARDS THE HOOT........

[ukinvestor220] 12/1/2010 09:16

yes teh debt is the problem here - great business model for pre 2007 but in the current climate is going to be heavily weighted down. OK they can complete some acquisitions out of cash but the debt will not be paid off as a result (unlike other indebted cos focussing on debt reduction).

The next thing will be either a nice little in house investor diluting placement, or an investment bank boosting RI / OO.

Continuing to watch. I doubt it will tank, but it wont rocket either.

[weemonkey] 03/1/2010 17:29

this is gonna tank