Vet companies big CVS Group stands by full-year forecast

CVS Group has upheld its annual outlook despite subdued demand in Britain, where the veterinary services industry is the subject of a major competition probe.

The Norfolk-based company, which operates around 460 practices, revealed its total revenue rose by 7.6 per cent year-on-year in the four months ending October.

It also declared adjusted earnings before nasties increased by 5.5 per cent, with its margins climbing by 19.5 per cent.

CVS has been steadily expanding its presence in Australia since the summer of last year, making multiple takeovers, including three deals involving four sites since July for a combined £9.5million.

The business recently sold its operations in the Netherlands and Republic of Ireland, citing ‘significant investment opportunities’ in Australia and capital spending in its UK operations.

While it warned that the upcoming hike in National Insurance rates will push up staff costs, the group expects this to be offset by ‘growth, efficiencies and purchasing synergies in Australia.’

Growth: Norfolk-based CVS, which operates around 460 practices, revealed its total revenue rose by 7.6 per cent year-on-year in the four months ending October

Chancellor Rachel Reeves announced in her first Budget last month that employers’ NI rates will rise by 1.2 percentage points to 15 per cent from April. CVS expects the change to cost it around £8million in the next financial year.

‘Whilst the board remains mindful of headwinds in the UK, the fundamental need for high-quality veterinary care remains strong, the expansion into Australia is progressing well, and CVS remains well positioned to deliver attractive growth,’ the company said.

CVS’s trading update comes amid a Competition and Markets Authority investigation into the veterinary sector.

The CMA is concerned that pet owners could be paying too much for medicines or prescriptions because of sector consolidation.

Six firms – CVS, IVC, Linnaeus, Medivet, Pets at Home and VetPartners – have bought nearly a third of Britain’s 5,000 vet practices since 2013, according to the CMA.

It warned these businesses that they could be forced to sell off segments of their business, cap prescription fees, and offer compulsory information to pet owners.

Derren Nathan, head of equity research at Hargreaves Lansdown, said CVS ‘has been badly damaged’ by the probe, but under the bonnet, the company offers exposure to some strong long-term growth drivers.

‘However, until certainty emerges next year about the extent of any changes levied on business practices in the industry, the shares could remain under pressure.’

CVS Group shares rose 2.7 per cent to 843p by late Wednesday afternoon, but the CMA inquiry has contributed to their value slumping by around 49 per cent since the year started.