26 October 2015
CVS Group plc
("CVS", the "Company" or the "Group")
Acquisition of Highcroft Pet Care Limited ("Highcroft")
CVS, the UK's leading provider of integrated veterinary services, is pleased to announce that has acquired the entire share capital of Highcroft, a provider of small animal veterinary services in the Bristol area comprising 13 surgeries (the "Acquisition"). Completion took place on 23 October 2015.
Highcroft has operated from its main site in Whitchurch, Bristol since 1982, which the Royal College of Veterinary Surgeons has accredited the highest practice standard, and has developed its other sites gradually since then. Highcroft has some 50 professional vets, including 5 diploma holders, and approximately 220 staff in total.
Highcroft is a rapidly growing and strategically important acquisition for the Group, bringing CVS its first significant presence in the Bristol area, a large market where it currently has few surgeries. Highcroft is an integrated practice, already offering out-of-hours and referrals services to which CVS will direct business from other existing CVS practices in the wider area. Recent growth in Highcroft is being driven by the development of a new referral business, which comprises over 20% of turnover, four sites acquired and fully refurbished in 2014 and the establishment of three small sites in 2014 which will act as feeders for the Group's wider service proposition.
Until recently Highcroft operated as two separate legal entities which were brought together as Highcroft Pet Care Limited in February 2015. Based on unaudited pro forma figures for the combined Highcroft group for the year to 31 January 2015, Highcroft generated turnover of approximately £7.3 million, adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA") of approximately £0.5 million and a reported profit before tax of approximately £0.2 million. As at 31 January 2015, net assets of Highcroft were £0.5 million.
The Directors believe that these unaudited pro forma figures do not fully reflect the current performance of Highcroft, which benefits from a high and growing level of referrals business at higher gross margin than first treatment practice revenue. Unaudited sales for the 8 months to September 2015 grew by over 30% against the comparable period last year. This growth is being driven by the development of the referrals business, the full year impact of the sites that were acquired and refurbished in the previous year and the growth of the more recently established, immature sites. These factors will continue to have an on-going impact on Highcroft, with high growth expected to continue in the near term.
The Group intends to continue to develop the Highcroft business to optimise its potential. As part of CVS, Highcroft is also expected to benefit substantially from better purchasing power as well as overhead synergies. These benefits are conservatively estimated to approach £0.6 million within three years. CVS expects the Acquisition to be mildly accretive in the Group's current financial year, reflecting the initial investment in the business, with phasing of synergy benefits and further growth delivering fuller accretive benefit in the first full year of ownership and beyond.
The initial total consideration payable to the shareholders of Highcroft is £7.4 million including costs. This figure is subject to adjustment based on the working capital and indebtedness of Highcroft as at 23 October 2015. In addition CVS will acquire net debt of approximately £4.1 million with Highcroft. Intangible assets and goodwill of approximately £11.0 million are expected to arise on completion of the Acquisition.
Up to £1.0 million of deferred consideration is payable to the vendors of Highcroft in 2017, subject to sales of at least £10.2m being achieved in the Highcroft business year ending 31 January 2017.
The Directors believe that the Acquisition is a particularly strong fit with the Group's existing operations and a further important step in the Group's strategy of growing integrated operations in practices, out-of-hours and referrals centres. The Acquisition follows the opening of the Group's Lumbry Park referral centre earlier this month and the acquisition of the Dovecote referral centre in July 2015.
Simon Innes, Chief Executive of CVS commented, "CVS looks forward to working with the Highcroft team to continue to deliver high levels of expertise and service as we deliver the next phase of growth together."
Contacts:
CVS Group plc Simon Innes, Chief Executive Nick Perrin, Finance Director |
Tel: 01379 644 288 |
N+1 Singer (Nominated Adviser & Broker) Aubrey Powell Alex Wright |
Tel: 020 7496 3000 |
About CVS Group
CVS Group plc ("CVS" or the "Group") is the UK's leading provider of integrated veterinary services.
Established in 1999 to acquire and operate veterinary practices, the Group now has four key business areas: veterinary practices, diagnostic laboratories, pet crematoria and an on-line dispensary. In addition, the Group operates a buying group for third party practices and is developing a range of own brand veterinary medicines.
Following the acquisition of Highcroft, CVS Group plc will operate 322 surgeries, up from 128 in 2007 at the time of the Group's AIM IPO. The practice division is also supported by the Group's referrals business which provides high value specialist services both to its own and third party practices and is a core area of development focus for the business. The Group opened its major multi-disciplinary referral centre at Lumbry Park, Alton in October 2015 and acquired the Dovecote referral centre in July 2015.
The Group has five laboratories, which provide diagnostic services to third party and CVS owned practices, and 3 pet crematoria. Since 2013/14 the Group's laboratories have also begun to supply in-house analysers and reagents to the Group's own practices and externally.
The Group's on-line dispensary, Animed Direct, sells medicines, pet food and other animal related products in the UK and France.
To date, the Group has developed nine own brand clinical products under the name MiPet, with more planned. It has recently launched its own brand pet food and a range of waiting room retail products. It has over 225,000 members enrolled in its Healthy Pet Club Scheme, which provides preventative medicine to Group customers' pets as well as a range of discounts and other benefits.
The Group's MiVetClub buying group, launched in August 2013, uses its buying strength and range of complementary businesses to provide a unique offering of services to other practices, so as to strengthen their business as well as the Group's.
CVS also has a wide range of clinical and management training schemes for all of its employees. These include a unique graduate development programme, assisting newly qualified vets in the challenging transition from university to practice, and an innovative Nurse Academy, providing structured post qualification clinical training. The breadth of the Groups businesses provide for a career structure for vets that is unique to the industry.
In addition to various organic growth initiatives, the Group is committed to further expansion through acquisitions and has a successful track record of profitably integrating acquired businesses. The Group is aware that there remains a large number of independent businesses that recognise the benefits of becoming part of a larger specialist group and the breadth of service that it can offer. The CVS Group structure provides central administrative services including finance, human resources, marketing, health and safety, information technology and purchasing, allowing the practitioners in acquired businesses to concentrate on service provision, including clinical care.
For further information, please visit the Group's website, www.cvsgroupplc.com
