TIDMCVSG
RNS Number : 2875N
CVS Group plc
29 January 2021
29 January 2021
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, gives the following update on trading covering the six
months ended 31 December 2020 ("H1 2021"). Financial data is stated
in accordance with IFRS, except where otherwise indicated.
Summary
-- Strong H1 2021 financial performance with total sales growing
by 9.4% to GBP245.6m (H1 2020: GBP224.5m) and like-for-like ("LFL")
sales (1) in creased by 7.8% (H1 2020: 8.4%), reflecting continued
momentum across all divisions and recognition of HPC revenue
-- Adjusted EBITDA margin improved from 16.9% in H1 2020 to
18.4% in H1 2021 (pre-IFRS 16 from 13.4% to 15.2%)
-- Vet vacancy rates stable at 7.4% (H1 2020: 7.8%)
-- Positive trading performance, coupled with continued strong
cash generation, has led to a reduction in net bank borrowings(4)
to GBP44.4m, with leverage (5) at 0.72x at 31 December 2020 (30
June 2020: GBP63.5m and 1.14x respectively)
-- Four small animal practice acquisitions have been completed in H1 2021 (H1 2020: three)
-- All CVS practices remain open in current lockdown, offering
essential services to clients in accordance with Royal College of
Veterinary Surgeons ("RCVS") guidance but with a closed door policy
to clients in the interests of public health
H1 2021 Performance
The Group's total sales increased by 9.4% to GBP245.6m and LFL
sales increased by 7.8%. The performance reflects the continued
strengthening of the Group's offering and was achieved through a
combination of growth in our core Practices division and related
services, alongside increased demand in Animed Direct, the Group's
online pharmacy and retail business.
Within the Group's core Practice division, total sales increased
by 7.1% and Practice LFL(2) sales increased by 5.4%. This LFL
growth rate primarily reflects a continued focus on delivering high
quality clinical care and service to our customers across our
integrated veterinary model. This has been coupled with an increase
in new client registrations. The annual price increase, deferred
from 1 July 2020 due to market conditions at the time, was
implemented on 1 January 2021.
Our Healthy Pet Club ("HPC") preventative medicine scheme has
seen a further increase in membership since the financial year end,
up 3.6% to 430,000 (30 June 2020: 415,000). The GBP6m of revenue
deferred from the prior year has now been recognised in full as the
treatments have been performed.
Employment costs for the Group in H1 2021 were 48.9% of total
sales, compared to 51.0% in H1 2020 reflecting continued stability
in the vet vacancy rate at 7.4% (H1 2020: 7.8%) with the Group
continuing to champion initiatives to recruit and retain its
colleagues as it strives to be the veterinary company that people
most want to work for. We have implemented a pay increase across
the Group effective from 1 January 2021 broadly in line with
inflation.
Group Adjusted EBITDA(3) margin has improved from 16.9% in H1
2020 to 18.4% in H1 2021 (pre-IFRS 16 from 13.4% to 15.2%) largely
reflecting the improvement in sales as the Group continues to
benefit from our consolidated veterinary platform.
As a result of the above, CVS expects to report H1 2021 Adjusted
EBITDA(3) of approximately GBP45.1m (H1 2020: GBP37.9m, pre-IFRS 16
GBP37.3m (H1 2020: GBP30.1m)).
Net Debt
As at 31 December 2020, CVS had reduced net bank borrowings(4)
to GBP44.4m and leverage on a bank test basis(5) to 0.72x (30 June
2020: GBP63.5m and 1.14x respectively). Interest cover(6) measured
at the end of the first half was 20.5x (30 June 2020: 19.3x). These
metrics reflect the Group's strong operating cash generation and
the significant headroom provides a resilient platform for further
growth through ongoing investment in people and practices,
supplemented by selective acquisitions.
Acquisitions
Since the trading update on 26 November 2020, the Group has
completed one further acquisition, meaning that four purchases have
been completed in the H1 2021 (H1 2020: three). These were:
-- Tremain Veterinary Group, a two site small animal practice in
Oxfordshire, acquired on 4 November 2020;
-- Astonlee Veterinary Group, a single site small animal
practice in Milton Keynes, acquired on 17 November 2020;
-- White Lodge Vets, a single site small animal practice in
Devon, acquired on 19 November 2020; and
-- Charter Veterinary Group, a three site small animal practice
in Devon, acquired on 2 December 2020
The Group remains committed to complement organic growth with
acquisitions of carefully selected practices, which enhance its
existing business.
COVID-19
On the 6 January 2021 the RCVS issued guidance that veterinary
practices may remain open in the current lockdown to provide
services essential for public health and animal welfare and not
just urgent and emergency only work as was the case in the initial
March 2020 guidance. The RCVS also issued a reminder for veterinary
practice support colleagues to work from home if possible in line
with the Government's stay at home message. Currently, all CVS
practices remain open, operating under appropriate safety protocols
for the benefit of customers and personnel.
Outlook
The veterinary market continues to benefit from favourable
consumer trends, with increasing pet ownership and the humanisation
of pets driving wider appreciation of animal care. These trends,
coupled with advances in clinical care increases the range of
services we can offer. Alongside our excellent clinical standards
and preventative care offerings, and the breadth of our integrated
model, this is providing additional resilience to a number of our
revenue streams.
The Board is pleased with the Group's resilience as shown
through the positive performance of the business, despite the
challenges experienced from the second half of the prior financial
year. Although the Board remains cautious given the current level
of macro uncertainty, particularly in light of the recent UK
lockdown restrictions, the improved performance has been maintained
across all operations during the first half. The Board therefore
remains confident in the Group's ability to maintain clinical
excellence and in the adaptability of its people and processes,
which together support the Group's continuing momentum and its
strong longer-term prospects.
The Board would like to acknowledge and thank all the members of
the CVS team for their continuing dedication to the delivery of the
best possible care to animals.
The Company expects to announce its H1 2021 interim results on
25 March 2021.
Notes
1 Like-for-like sales are defined as 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 2019, revenue is included in the like-for-like
calculations from September 2020
2 Practices LFL growth stated is for core Small Animal,
Referrals, Equine and Farm practices and excludes Buying Groups
& Other and intra-group elimination
3 Adjusted EBITDA (earnings before interest, tax, depreciation
and amortisation) is profit before income tax, net finance expense,
depreciation, amortisation, costs relating to business combinations
and exceptional items
4 Net bank borrowings is drawn bank debt less cash at bank
5 Leverage on a bank test basis is net bank borrowings; divided
by 'Adjusted EBITDA' annualised for the effect of acquisitions and
including costs relating to business combinations and exceptional
items. Adjusted EBITDA is profit before income tax, net finance
expense, depreciation, amortisation, costs relating to business
combinations and exceptional items, prior to the adoption of IFRS
16
6 Interest cover is calculated as Adjusted EBITDA, prior to the
adoption of IFRS 16, annualised for the effect of acquisitions and
including costs relating to business combinations and exceptional
items, divided by Interest expense
Contacts:
CVS Group plc via MHP Communications
Richard Fairman, CEO
Ben Jacklin, COO
Robin Alfonso, CFO
N+1 Singer (Nominated Adviser & Broker) +44 20 7496 3000
Aubrey Powell / Jen Boorer (Corporate Finance)
Rachel Hayes (Corporate Broking)
MHP Communications (Financial PR) +44 20 3128 8549
Andrew Jaques / Simon Hockridge / Rachel Mann / Charles
Hirst
Notes to Editors
CVS Group is one of the leading integrated veterinary service
providers in the UK, the Netherlands and the Republic of Ireland.
CVS is focused on providing a high quality, people-led service to
its customers and their animals, with outstanding and dedicated
clinical teams and support colleagues at the core of its
strategy.
The Group operates an integrated model with over 480 veterinary
practices across its three markets, including eight specialist
referral hospitals and 29 dedicated out-of-hours sites. Our broad
range of animal care services centre around the core Practices
division, supported by our 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 Animed Direct (the Group's online
pharmacy and retail business).
The Group employs over 7,000 personnel, including over 1,900
veterinary surgeons and in excess of 2,300 nurses across its three
territories.
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