25 January 2024

CVS Group plc

("CVS" or the "Group")

Half year Trading Update

Trading in line with full year expectations

CVS, the UK listed veterinary group and a leading provider of veterinary services, issues the following update on trading covering the six months ended 31 December 2023 ("H1 2024").  The Company expects to announce its H1 2024 interim results on 29 February 2024.

Current Trading

The Board is pleased to report positive trading in the first half, with total group revenue up 11.4% to £329.9m (H1 2023: £296.3m), and like-for-like sales¹  increasing by 6.0%, within the target range of 4% to 8% outlined at the Group's Capital Markets Day ('CMD') in November 2022.

The Group's Healthy Pet Club preventative care scheme has seen a further increase in membership, with 500,000 members as at 31 December 2023 (31 December 2022: 481,000 members) reflecting an increase of 4.0% over the last twelve months. (30 June 2023: 489,000 members).

Adjusted EBITDA² margin remains consistent with the prior period at c.19%, reflecting a slight improvement in gross margin, offset by increased utilities and other costs and continued investment in support functions.

The Group has continued its investment in practice refurbishment, relocations, clinical equipment and technology with £17.2m invested in H1 2024 (H1 2023: £19.9m).  This is in line with the guidance issued at the CMD for capital investment of £30m to £50m per annum.

Acquisitions

Australia

The Group has successfully completed a further four acquisitions of small animal first opinion practices in Australia bringing the total to thirteen acquisitions, comprising fifteen practice sites in H1 2024. The aggregate initial consideration for these acquisitions was A$103.8m / £54.6m³.  These acquisitions are performing in line with our business plans.

Alongside the thirteen acquisitions made to date we have developed a strong pipeline of potential acquisition opportunities and the Group is confident that it will complete a number of further small animal practice acquisitions in H2 2024.  These provide a meaningful platform for our operations in

Australia.

United Kingdom

The Group completed a total of four acquisitions of small animal practices in H1 2024 comprising four practice sites, for aggregate initial consideration of £10.1m. These acquisitions were made following the submission of briefing papers to the Competition and Markets Authority ("CMA").

Net bank borrowings

The Group's investment in capital expenditure and acquisitions, partly offset by continued strong operating cashflows, has resulted in net bank borrowings⁴ increasing to £129.2m at 31 December 2023 (30 June 2023: £74.1m). Leverage⁵ on a bank test basis of 1.15x at 31 December 2023 is in line with management expectations (30 June 2023: 0.73x).  The Group expects leverage to remain below its c.2.0x target ceiling.

On 24 January 2024, the Group's banking syndicate agreed to a one-year extension of the bank facilities, thereby extending the term from 22 February 2027 to 22 February 2028.  All other terms of these facilities remain unchanged.

CMA

We continue to support the CMA with their market review and look forward to a further update from the CMA in line with their current guidance of early 2024.

Chair position

Deborah Kemp, the Group's Senior Independent Director continues to undertake the role of Chair on an interim basis whilst we seek a permanent Chair.  A formal search process is underway and we expect to make an appointment in the next few months.

Outlook

The Board is pleased with H1 2024 performance and, whilst it continues to be mindful of the weak economic backdrop, expects to deliver full year results in line with market expectations.

The Group remains excited by the growth opportunity in Australia with acquisitions made to date performing in line with its business case and a strong pipeline of acquisition opportunities in place.

The Group remains on track to deliver further growth over the longer term and the Board would like to thank all members of the CVS team for their continued dedication and support. 

Notes

1.      Like-for-like sales shows 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 2022, revenue is included from September 2023 in the like-for-like calculations.

2.      Adjusted EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) is profit before tax adjusted for interest (net finance expense), depreciation, amortisation, costs relating to business combinations, and exceptional items. Adjusted EBITDA provides information on the Group's underlying performance and this measure is aligned to our strategy and KPIs.

3.      Consideration shown at indicative exchange rate of A$1.9:£1

4.      Net bank borrowings is drawn bank debt less cash and cash equivalents.

5.      Leverage on a bank test basis is drawn bank debt less cash and cash equivalents, divided by adjusted EBITDA annualised for the effect of acquisitions, including acquisition costs arising from business combinations and excluding share option costs, prior to the adoption of IFRS 16.

CVS Group plc                                                                                                                                via Camarco

Richard Fairman, CEO

Ben Jacklin, Deputy CEO

Robin Alfonso, CFO

Peel Hunt LLP (Nominated Adviser & Broker)                                                 +44 (0)20 7418 8900

Adrian Trimmings / Michael Burke / Andrew Clark / Lalit Bose

   Berenberg (Joint Broker)                                                                                          +44 (0)20 3207 7800

Toby Flaux / Ben Wright / James Thompson / Milo Bonser

Camarco (Financial PR)                                                                                             

Geoffrey Pelham-Lane                                                                                        +44 (0)7733 124 226

Ginny Pulbrook                                                                                                     +44 (0)7961 315 138

About CVS Group plc (www.cvsukltd.co.uk)

CVS Group is an AIM-listed provider of veterinary services in the UK, Australia, the Netherlands and the Republic of Ireland.  CVS is focused on providing high quality clinical services to its clients and their animals, with outstanding and dedicated clinical teams and support colleagues at the core of its strategy.

The Group has c.500 veterinary practices across its four markets, including nine specialist referral hospitals and 39 dedicated out-of-hours sites. Alongside the core Veterinary Practices division, CVS operates 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 the Group's online retail business ("Animed Direct").

The Group employs c.9,000 personnel, including c.2,400 veterinary surgeons and c.3,300 nurses.