4 December 2015
CVS Group plc
("CVS", the "Company" or the "Group")
Acquisition of Albavet Limited ('Albavet'), The Pet Crematorium Limited ('The Pet Crematorium') and New Bank Facilities
Acquisition of Albavet
CVS (AIM: "CVSG"), the UK's leading provider of integrated veterinary services, is pleased to announce that on 3 December 2015 it acquired the entire share capital of Albavet and its wholly owned subsidiary, VETisco Limited (together the "Albavet Group" and the "Acquisition").
The Albavet Group employs some 34 professional vets and over 150 staff in total across three separate businesses: 11 veterinary surgeries; a veterinary buying group, trading under the name of Vetshare; and an instrumentation business trading under the name of VETisco.
The veterinary surgeries are well established businesses and are based in the Fife area (4 sites), Glasgow (1 site), Nottingham (1 site), the Stoke-on-Trent area (4 sites) and Wallington, Surrey (1 site). The surgeries perform small animal work.
The Vetshare buying group currently has over 400 members operating from over 500 surgeries across the UK. Vetshare negotiates supplier rebates on behalf of its members and generates its revenues based on commission on members' purchases from wholesalers. It also sources and negotiates other veterinary services for its members, including crematoria and laboratory work. In September 2014 members of the London Vet Forum buying group transferred to Vetshare, increasing the number of members by over 20%.
The VETisco instrumentation business is a small distribution business having commenced in 2012. It currently makes a small loss.
In the year to 31 October 2014, the last for which published accounts are available, the Albavet Group had turnover of approximately £6.6 million, of which £5.5 million was generated by the surgeries. Earnings before Interest, Tax and Depreciation and Amortisation ("EBITDA") was c. £0.8m million and profit before tax was £0.6 million (both after adjusting for rent that will be payable on properties owned by the Albavet Group pre acquisition but which will be leased post acquisition). As at 31 October 2014 net liabilities excluding goodwill of Albavet were £0.7 million.
The total consideration payable to the shareholders of Albavet is £11.3 million including costs. This figure is subject to adjustment based on the working capital and indebtedness of Albavet at the date of acquisition. In addition CVS will acquire net debt of approximately £0.1 million with Albavet. Intangible assets and goodwill of approximately £11.6 million are expected to arise on completion of the Acquisition.
The consideration for the Acquisition was paid out of the Group's new bank facilities.
Albavet is a strong fit with the Group's existing operations. Its surgeries fit well into the geographical spread of the Group's existing small animal sites. The acquisition of the Vetshare buying group will provide a significant base for further development of CVS's buying group strategy. As part of the CVS Group, Albavet is expected to benefit substantially from better purchasing power. Many of the benefits within the Albavet surgeries are expected to be generated over the first year post acquisition, while benefits in the enlarged buying group are expected to be achieved over the medium term.
Acquisition of The Pet Crematorium
CVS has also acquired the entire share capital of The Pet Crematorium which consists of two crematoria: the first is located at Witton Gilbert, near Durham and the second is at Larkhall, near Hamilton. It employs about 22 staff. The terms of this transaction are below the threshold requiring further disclosure.
This acquisition significantly improves the geographical coverage of CVS's crematoria network. The Scottish and North East England locations complement the existing CVS sites at Rossendale, Runcorn, Exeter and Cobham.
New Bank Facilities
CVS is also pleased to announce that it has entered into a new bank facility agreement which provides the Group with total facilities of £115 million to support the Group's organic and acquisitive growth initiatives over the coming years. These facilities are provided by a syndicate of three banks: RBS, HSBC and AIB. They replace the existing banking arrangements on more favourable terms, including a lower coupon, and comprise the following elements:
· A fixed term loan of £67.5 million, repayable on 23rd November 2021 via a single bullet repayment; and
· A six year Revolving Credit Facility ("RCF") of £47.5 million that runs to 23rd November 2021.
In addition the Group has a £5.0 million overdraft facility renewable annually.
The two main financial covenants associated with these facilities are based on Group Borrowings to EBITDA and Group EBITDA to interest. The Group Borrowings to EBITDA ratio must not exceed 3.5 for the period up to 31st December 2017 from when it must not exceed 3.0. The Group EBITDA to interest ratio must not be less than 4.5. The facilities require cross guarantees from the most significant of the CVS Group's trading subsidiaries but are not secured on the assets of the Group. EBITDA is based on the last 12 months' performance adjusted for the full year impact of acquisitions made during the period.
Commenting on the Acquisitions and on the new facility agreement, Simon Innes, CVS Chief Executive, said:
"The Albavet Group is a well-established, high quality operation. This acquisition significantly develops our surgeries in central Scotland and in the Midlands. The Vetshare buying group provides a major step forward in our strategy of developing a significant buying group which can benefit from the scale and scope of CVS.
The Pet Crematorium is a great addition to our Crematoria Division with the two locations near Hamilton and Durham ideally complementing our existing crematoria network.
We are delighted to welcome the Albavet and The Pet crematorium staff to CVS.
The new borrowing facility provides CVS with ability to finance the acquisition of Albavet and a number of other acquisitions that we expect to take place in the remainder of the financial year. The Group is comfortable with operating at a Group Borrowings to EBITDA ratio in the region of 3.0 for a period of time and the maximum ratio of 3.5 allows us the flexibility to do so. This level of gearing is a temporary measure, to allow us to complete the unusually large number of significant acquisitions that have taken place this year. The reduction of the maximum ratio to 3.0 from 31 December 2017 underlines our intention to reduce gearing gradually following the current period of higher acquisitive growth, and reflects the strong cash generation in the business which also funds the Group's numerous organic growth initiatives."
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 Albavet, CVS Group plc will operate 333 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, acquired the Dovecote referral centre in July 2015 and the Highcroft referral centre in October 2015.
The Group has five laboratories which provide diagnostic services to third party and CVS owned practices and, following the acquisition of The Pet Crematorium, 6 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.
Following the acquisition of The Pet Crematorium, CVS Group will operate 6 pet crematoria near Rossendale, Runcorn, Exeter, Cobham, Durham and Hamilton. This division services all of CVS's surgeries as well as third party practices and individual customers.
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 230,000 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.
