Veterinary giant CVS Group sticks to its annual forecast

CVS Group has maintained its full-year guidance despite weak demand in Britain, where the veterinary services sector is the subject of a major competitive probe.

The Norfolk-based company, which operates around 460 practices, announced that total revenue rose 7.6 per cent year-on-year in the four months ended October.

The company also stated that adjusted profit before nasties increased 5.5 percent, while margins rose 19.5 percent.

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

The company recently sold its operations in the Netherlands and Ireland, citing “significant investment opportunities” in Australia and capital expenditure in its UK operations.

While the group warned that the upcoming increase in national insurance rates will increase staff costs, the group expects this will be offset by “growth, efficiencies and purchasing synergies in Australia”.

Chancellor Rachel Reeves announced in her first budget last month that the employer rate will rise by 1.2 percentage points to 15 percent from April. CVS expects the change to cost the company around £8 million in the coming financial year.

“While the board remains aware of the headwinds in the UK, the fundamental need for quality veterinary care remains strong, 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 may be paying too much for medicines or prescriptions due to industry consolidation.

According to the CMA, six companies – CVS, IVC, Linnaeus, Medivet, Pets at Home and VetPartners – have bought almost a third of the UK’s 5,000 veterinary practices since 2013.

It warned these companies that they could be forced to sell parts of their business, cap prescription costs and offer mandatory information to pet owners.

Derren Nathan, head of equity research at Hargreaves Lansdown, said CVS has been “badly damaged” by the investigation, but under the hood the company offers exposure to a number of strong long-term growth drivers.

‘However, until certainty emerges next year on the extent of any changes imposed on industry business practices, shares may remain under pressure.’

CVS Group shares rose 2.7 per cent to 843p at the end of Wednesday afternoon, but the CMA investigation has contributed to their value falling by around 49 per cent since the start of the year.