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RNS Number : 9501T
CVS Group plc
24 July 2020
24 July 2020
CVS Group plc
("CVS" or the "Company" and, together with its subsidiaries, the
"Group")
Trading Update
CVS, one of the UK's leading providers of integrated veterinary
services, provides the following update in relation to trading for
the financial year ended 30 June 2020. The Group will announce its
full results on Thursday 24 September 2020.
Introducing the trading update, Richard Connell, Chairman
commented:
"On behalf of the Board I would like to take this opportunity to
thank all CVS employees who have worked tirelessly throughout the
COVID-19 pandemic, often in challenging circumstances and with less
support than usual. I would also like to thank those employees who
agreed to be placed on furlough. The continued dedication and
professionalism of our employees has helped to protect the business
whilst enabling us to provide urgent and emergency care to our
clients and their patients during this very difficult period.
Improved business planning and actions taken have enabled our
continuing focus on customer service and patient care. These
combined factors give the Group a greater resilience in the face of
previously unseen challenges, and we look forward to providing
further updates at the time of our full year results."
Period to February 2020
As previously highlighted in our Interim results issued on 27
March 2020, we were pleased to report a strong performance for the
first eight months of the financial year. Like-for-like [1] growth
in the eight-month period was 7.9% for the Group and 7.1% for the
Practice Division [2] . Focus on improved retention of our clinical
staff continued, with the veterinary surgeon vacancy rate
maintained at 7.9% (H1 2019: 8.8%).
In January 2020, the Group successfully renewed and extended its
non-amortising bank facilities to 31 January 2024 and as at 29
February 2020 had significant headroom in committed but undrawn
bank facilities and covenants. As at 29 February 2020 the Group had
borrowings of GBP96.0m and available headroom on facilities of
GBP79.0m and cash on the balance sheet of GBP3.2m (as at 30 June
2019: borrowings GBP115.0m and cash on balance sheet GBP12.5m). Net
debt at 29 February 2020 was GBP93.0m on a bank test basis [3] and
leverage (net debt / adjusted annualised EBITDA) was 1.61x (28
February 2019: 2.31x), against a covenant test of 3.25x.
A total of four practices were acquired during the 8-month
period, for a total consideration of GBP7.2m (net of cash
acquired). All four practices performed in line with
expectations.
Our strong balance sheet, coupled with the diversified and
essential nature of our revenue streams, meant that the Group was
well placed prior to the onset of COVID-19 and lockdown.
Period from March 2020: COVID-19 and lockdown
On 23 March 2020, the UK Government announced the introduction
of strict lockdown measures. On the same date, the Royal College of
Veterinary Surgeons ("RCVS") and the British Veterinary Association
("BVA") issued a joint statement restricting the work of veterinary
surgeons to maintaining the food supply chain and carrying out
urgent and emergency veterinary work only in practices. Similar
restrictions on our activities were applied by local equivalent
bodies in our non-UK territories.
The Group took swift and decisive action to maintain effective
social distancing and safe working practices, with the primary
focus on providing a safe environment for our people and our
clients. In line with the temporary relaxation by the RCVS of
remote prescribing rules, CVS launched a new Teleconsultation
service for clients with patients requiring non-urgent /
non-emergency services. Operationally, action was taken to protect
our people and the business, with teams split and shift patterns
altered. Wherever possible we have promoted working from home. We
enhanced the level of communication to all employees and maintained
effective feedback mechanisms for all our staff. Individual risk
assessments were carried out with local site employee consultation,
appropriate measures implemented and "Staying COVID-19 Secure"
posters displayed. In addition, appropriate PPE was made available.
Throughout the crisis the health, safety and wellbeing of our
employees has been our key priority and we continue to work
collaboratively with our employees to ensure they have a safe
environment to work in.
As would be expected, the result of the restrictions was a
significant reduction in our revenue streams in our small animal
first opinion practices, our specialist referral centres, our
associated integrated services and in our equine division. Farm
practices were less impacted due both to the requirement to protect
the food chain and the ambulatory nature of the veterinary work.
Reflecting the reduced activity levels, we took swift action to
temporarily close half of our small animal practices by number,
representing approximately a third of our capacity by caseload. The
Group was eligible for, and successfully accessed, the Coronavirus
Job Retention Scheme ("CJRS") and placed over half of all employees
on furlough. CVS also accessed support from taxation authorities in
the UK and Netherlands, in the form of VAT payment deferrals with
the majority of VAT due to be paid in the quarter to 30 June 2020
deferred until 31 March 2021. Furthermore, the Group took action to
preserve cash including, but not limited to, the reduction of
non-essential spend, agreements with major suppliers to defer
payments and voluntary temporary reductions in Director and Senior
Manager salaries.
The PDF linked chart below shows the rolling seven-day average
revenue in our GB small animal practices relative to the level seen
in early March 2020, prior to the UK lockdown and the guidance from
RCVS and BVA. The data excludes recurring Healthy Pet Club ("HPC")
revenue. Clearly, the initial impact of COVID-19 on the Group's
revenue was swift and sharp. However, from the low point in the
early part of April, the gradual easing of lockdown and amended
RCVS / BVA guidance, together with the adaptations we have made to
our working regime, have resulted in a steady increase in revenues
which have now recovered to pre COVID-19 levels.
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/9501T_1-2020-7-23.pdf
Timeline:
-- On 9 April 2020, the RCVS issued new guidance to allow more
work to be undertaken whilst continuing to minimise contact and
reduce the spread of COVID-19.
-- On 19 May 2020, the RCVS issued further revised guidance
removing reference to consider whether treatment could be delayed
for two months without causing patient welfare issues. In light of
this, on the 28 May 2020 the BVA issued updated guidance with the
intention to "support veterinary practices to make the transition
to providing a more normal range of veterinary services".
Whilst we are now able to provide a full range of services in
our small practices, we have not yet returned to pre COVID-19
working practices. For example, clients are currently only allowed
to accompany their animals into practices where the animal is being
euthanased.
Nevertheless, this recovery and a strong first eight months mean
that the Board is able to report full year revenue which is
comfortably ahead of the prior year.
People
We continue to invest in our people, and have recently announced
the appointment of Richard Gray, who brings significant additional
experience to the Board, as an additional non-executive director.
We have also recently appointed a new HR Director, Helen Finney,
who has broad experience in people focused professional services
businesses and who joins CVS in October this year.
Final dividend
Having taken advantage of government support, and in line with
the approach taken by many other companies, the Board does not
intend to recommend the payment of a final dividend.
Outlook: post COVID-19 lockdown
Since April 2020 CVS have, where possible, reopened practices
and un-furloughed employees. We are pleased that by the financial
year end the majority of our practices were open and the majority
of employees have returned to work. The Board is confident that the
actions taken have been in the best interest of both our employees
and our clients and have not had a detrimental impact on the number
of active clients that the Group services. Alongside the re-opening
of our practices, we have taken the decision to permanently close
33 sites in the Group, the majority of which are small branches of
larger practice groups which were either marginal or loss-making.
The Board is confident that the majority of clients formerly served
by these sites will continue to be served by our larger and better
equipped CVS veterinary sites close by.
CVS is a diversified business with strong coverage in the UK and
an established platform in the Republic of Ireland and the
Netherlands. The Group provides an essential service to companion
animals and supports the maintenance of the food supply chain. We
continue to maintain 415,000 Healthy Pet Club subscription
memberships which provide recurring revenue and which continue to
be a resilient source of cashflow.
Animed Direct, our online pharmacy and retail business, has
performed well throughout the financial year and has benefitted
from an increase in demand during the lockdown period.
Leverage has materially reduced from the 1.61x reported at the
end of February 2020 due to the actions taken by the Board to both
protect the business and preserve cash (30 June 2019: 2.08x).
The Company continues to refrain from giving guidance to
analysts. Whilst there is ongoing COVID-19 uncertainty with the
potential risk of further future lockdowns, the Board is confident
that the business is robustly managed and well positioned to drive
further increases in shareholder value.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No 596/2014.
The persons responsible for releasing this announcement on
behalf of the Company are Richard Fairman, Robin Alfonso and Ben
Jacklin.
Contacts:
CVS Group plc 01379 644288
Richard Fairman, Chief Executive Robin Alfonso, Finance
Director
Ben Jacklin, Chief Operating Officer
N+1 Singer (Nominated Adviser & Broker) 020 7496 3000
Aubrey Powell / Ben Farrow (Corporate Finance)
Rachel Hayes (Corporate Broking)
[1] Like-for-like ("LFL") sales comprise the revenue compared to
the prior year adjusted for working days. Revenue from prior year
acquisitions is included in the LFL calculation with effect from
the month in which it was acquired in the previous year
[2] Practices LFL sales comprises of revenue from our four key
veterinary practice areas of Small Animal, Referrals, Equine and
Farm and excludes revenue from our Buying-Groups and other and
intra-group elimination
[3] Net bank debt is calculated as drawn debt and finance lease
debt less gross cash
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END
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