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I totally agree with the sentiment on here. The market over reaction here is farcical. The company has basically lost 50% of share price since CMA investigation announced last year. Options for CMA are limited to being able to reduce prescription fees and possibly reduce drug markup. Clients will still attend closest practices. There was always limited choice due to geographical location. Most clients phone practices regarding prices and practices are happy to disclose costs. Vets always give estimates to avoid bed debt because there are plenty of scumbag fee dodgers out there. This is nonsense. Business metrics will change little. It’s always been the same clients want vets to wave a magic wand and fix pets for nowt. Not gonna happen anymore!
This is a wasteful investigation!
The Competition and Markets Authority said pet owners may be overpaying for medicines and not being given enough information about treatments and their main concerns are ....
• Concentrated local markets, in part driven by private equity groups buying independent practices, may be leading to weak competition ----same as any industry, small business cannot /will not compete as SME's have no incentive, higher costs and it's similar to the mobile phone industry
• Large corporate groups may have incentives to act in ways that reduce choice and weaken competition. ---similar to above and considers price fixing (almost impossible to prove if prices vary)
• Owners may not be given enough information to enable them to choose the best veterinary practice or the right treatment for their needs.-- clearer pricing and clearer serice options (signposting) required
The above are the issues CMA highlighted - they do not have the power to price products, wages, services etc. it is likley better sign posting and clearer pricing points will be the main issue and that can be done easily and quickly working with the industry.
How independent are the CMA? I smell a bit of government direction here... to be seen to be doing something?
Of course the CMA should be allowed to investigate but it seems to me that they don't understand what has driven increases in vet prices - or they should at least have worked that out in the last 6 months... I find it strange that they announced an investigation 6 months ago, and are announcing it again now
If the sp stays down here for any period CVSG may have to consider putting prices up to improve their margins to attract more investors ...how ironic would that be.
Indeed, nothing material has happened it is simply a review and the CMA cannot price services, products, rents, wages etc...they can suggest clear pricing strategies and work with the players to ensure the public are aware of charges etc. as ever on such a day the market/brokers ensure an over reaction and for those able to gather shares down at these prices it could be a rare opportunity for a sound business and one of the larger players that is not going away.
So with 6 big vet groups there are just about as many groups as there are large supermarket chains...
Are the CMA suggesting that there are areas in the country where there isn't a choice of at least 3 vets?
So why was the price double only a few months ago; there's been no change in the underlyings since then? All that has happened is the CMA investigation
OH is just about as senior a vet you can get, and she is finally on something that a 6 year degree and almost 30 years of experience should result in. £70k, though this is for a 45 hour week. Still a fraction of what she'd be on as a doctor. Pre-pandemic she was on barely £50k. She is in one of the few industries to benefit from Brexit; if you voted Brexit and don't like higher vet fees... tough; supply and demand
The pressure on vet resources is only going to get more critical as the demand for pet care has increased - all those Covid pets starting to get to ages that need more care. And the number of dogs that are from care-intensive breeds; don't get a bulldog for example unless you have deep pockets
At under 1100p for one of the best performing stocks over past 10 years, I would suggest this is incredibly cheap and they have market share, pricing power and growth once the storm settles. Sp has dropped over 50% on a review, nothing material and as many in the business know costs are huge, medicines not cheap and economy of scale means the way forward for this type of service with larger organsiations with clear pricing and availability of services. From a competition point of view no small business can or will want to compete as UK regualtion and taxes no longer support the small business, and the route to market even for larger organisations is not easy. CVSG are ideally placed for strong rebound in sp over coming weeks / months.
Have spent a decent amount of time looking at the accounts this morning and my conclusion is this isn't anywhere close to being cheap. Adjusted EBITDA / EBITDA & 'underlying EPS' are completely irrelevant when amortising large acquisition costs and they still have >£300m to put through the P&L.
Basic EPS in the interims was 20.4p, annualised that puts the current PE at >25x. And they have material debt to boot.
This has been an incredible journey for early investors who have held for 10+ years, back in 2012 it traded at just over £1 a share, but until the outcome of the CMA saga becomes clear it's unattractive IMO, especially with the aforementioned debt.
Just bought some at 1089 , drop seems overdone
So right. Vets get little more than 15 quid an hour and are under relentless pressure to bill. It’s not sustainable. The corporates need to be looked at and fast
We know they'll be clamouring for stories of pets killed because too expensive to fix.
interestingly, BBC compared Austria with UK, the difference being they don't do insurance so much so dont get the inflation that creates in bills... bit like US healthcare.
Indeed - it's the trade off; a bigger organisation will have more costs in the management hierarchy, but will also benefit from economies of scale
And the proceeds to the previous owners of the vet practices…
Got to pay for Head Office somehow…the HQ people will earn way more than the vets.
The SP dropped from 2100 to around 1700 on the original announcement about the investigation.
Oversold, again.
OH is a vet. At last she is being paid a reasonable salary - with 30 years experience. Her salary has gone up because of a shortage of vets, in large part due to Brexit (many EU vets have returned home). Practices have to pay more to attract vets, so the customer has to pay more. Also she says meds are increasing rapidly in price.
So, while I understand your point, I don't think that's the whole story; on vet (and nurse) salaries it's simple supply and demand.
(she doesn't work for CVSG, or Pets, or Lineas/Mars but for an RVC practice - their requirement is simply to break even; they are not a cash cow, but their prices are comparable with other practices)
So CVS are being investigated for "exploiting their customers". Seems strange as dividend payments are poor and the sp even before this CMA intervention had not exactly been doing well. Now the sp has crashed 40% as a result. Wonder if the CMA can find where all these great exploitation bags of money are going ?
As a retired vet, I well remember the days when young vets progressed up the ladder - if they so wished - to become a partner in the practice. That practice was owned by the vets; it could be anything from a one-person practice to a dozen or more - but they OWNED the practice and were free to charge whatever they wanted; however, this was dictated by market forces (i.e. neighbouring 'rival' practices). Everything was in balance, and the veterinary preofeesion was held in high regard.
When the corporates entered the market, everything changed. They became the 'dictators'. Profit became the be-all and end-all of everything. Over time, the public - who are not stupid - cottoned on to this. The result - the profession that I was once proud of is now being treated (quite rightly) as nothing more than a money-grabbing machine.
I don't expect this post to accumulate any 'likes'. After all, I am only a (retired) vet with 40+ years' experience on the front line, not an investor....
Who would have thought:
1 people take their pets to a local vet
2 the vets will copy the practices of private healthcare and private dentistry
3 healthcare no longer tolerates one man bands/small practices which is where the cranks reside
4 consolidation leads to concentrations (4 but perhaps 3 mobile networks are enough? So why concerned about 6 vet groups).
5 there are now secondary referral units akin to private hospitals…these provide much more specialist pet healthcare and are £££ to build, staff and maintain.
The CMA seems to be talking up its enforcement / remediation role…but I am not sure what they are going to be able to do beyond making vets tell customers they can buy services elsewhere and they may be cheaper (but that will involve more effort by the customer and delays in administering medication so I Don’t expect a great change in customer behaviour).
Today would appear to be a buying opportunity for those that expect modest CMA recommendations.
Yup, broker algo's will be set tp collect a few stops today as some will lose their shares in early market crash, share price 1900p this time last year and all wiped off on a lengthy review process that will discover running a business in the UK is thwart with regulation cost,enployer costs, energy costs, product costs, and more costs. A small business is not easy to run and therefore larger business will be more cost effective, hence the growth of CVSG .
The market seems to have forgotten that it trashed the SP by 30% the last time the CMA opened its mouth. It's also forgotten that a significant percentage of CVSs business isn't even in the UK.
Oh well, it's a great buying opportunity for shares in a great Company.
Indeed, my point was they launched the start in September 2023 and are still in the process, government depts work at vastly slower pace than any business that needs to generate income, profits etc.
Nope, that's the consultation period to get industry feedback on lunching a formal market investigation...
Next steps
"The CMA has launched a four-week consultation to seek views from the sector on the proposal to launch a market investigation. The consultation closes on 11 April 2023 at which point it will consider the responses received and a decision will be made on how to proceed."