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Pin to quick picksCVS Group Share News (CVSG)

Share Price Information for CVS Group (CVSG)

London Stock Exchange
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Share Price: 991.00
Bid: 982.00
Ask: 985.00
Change: 36.00 (3.77%)
Spread: 3.00 (0.305%)
Open: 980.00
High: 998.00
Low: 960.00
Prev. Close: 955.00
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CMA to launch formal investigation into vet market

Tue, 12th Mar 2024 09:14

(Sharecast News) - The UK's Competition and Markets Authority said on Tuesday that it has provisionally decided to launch a formal market investigation after a review into the veterinary industry found that pet owners could be paying too much for medicines or prescriptions.

The watchdog highlighted "multiple concerns" in the market.

Consumers may not be given enough information to enable them to choose the best veterinary practice or the right treatment for their needs, it said. In addition, concentrated local markets, in part driven by sector consolidation, may be leading to weak competition in some areas.

The CMA found that large corporate groups may have incentives to act in ways which reduce choice and weaken competition.

The review also found that the regulatory framework is outdated and may no longer be fit for purpose.

The watchdog noted that since 2013, 1,500 of the 5,000 vet practices in the UK have been bought by the six large corporate groups: CVS, IVC, Linnaeus, Medivet, Pets at Home and VetPartners.

CMA chief executive Sarah Cardell said: "We launched our review of the veterinary sector last September because this is a critical market for the UK's 16 million pet owners. The unprecedented response we received from the public and veterinary professionals shows the strength of feeling on this issue is high and why we were right to look into this.

"We have heard concerns from those working in the sector about the pressures they face, including acute staff shortages, and the impact this has on individual professionals. But our review has identified multiple concerns with the market that we think should be investigated further.

"These include pet owners finding it difficult to access basic information like price lists and prescription costs - and potentially overpaying for medicines. We are also concerned about weak competition in some areas, driven in part by sector consolidation, and the incentives for large corporate groups to act in ways which may reduce competition and choice.

"Given these strong indications of potential concern, it is time to put our work on a formal footing. We have provisionally decided to launch a market investigation because that's the quickest route to enable us to take direct action, if needed."

Shares of AIM-listed veterinary services provider CVS Group tumbled on the news and by 0915 GMT, they were down 18% at 1,196.45p. Meanwhile, Pets at Home shares were 2.8% lower at 267.40p.

CVS said it has engaged "constructively and proactively" with the CMA throughout the review.

"As the announcement today cites, CVS along with certain other corporate groups who together own around 50% of First Opinion Practices in the UK, has already engaged constructively with the CMA and put forward a package of possible remedies to address its concerns," it said.

"CVS continues to believe this package could be adopted across the market and could address the CMA's concerns more quickly than an 18-month investigation."

Pets at Home said: "While we are disappointed that the CMA fails to fully acknowledge the differences our differentiated model brings to our practice owners and consumers, we will continue to cooperate as they conduct their consultation up until 11 April 2024."

The company said its independent practice owners operate with "complete clinical autonomy and set pricing at a local level".

"Our support frees them to deliver the best clinical outcomes for pets, something they excel at, resulting in us being the most trusted UK vet care brand by pet owners," it said.

In addition, it has no exposure to other verticals within the UK vet industry, having sold its specialist referral division in 2021.

"Where work is referred out by our vet partners, it is done so with complete freedom based on delivering the best clinical outcomes and with complete transparency for our clients," it insisted.

Pets at Home does not expect any impact on its growth strategy or ambitions "where the strength of our consumer proposition is demonstrated by the high-quality growth the business is seeing".

Russ Mould, investment director at AJ Bell, said: "Pet owners are happy to splash the cash on their beloved furry friends, yet the competition watchdog is worried that they're paying far too much for medicines or prescriptions.

"These concerns have got so serious that the CMA is now launching a formal investigation. The implication is that veterinarians have been exploiting their customer base either through overcharging or not giving enough information so customers can choose from a range of treatments priced at different levels. The watchdog also implies that some vet practices are too dominant in parts of the country and that is hurting competition.

"The biggest vet group on the UK stock market is CVS and understandably its share price has crashed on the news that the watchdog is stepping up its probe. Pets at Home is also exposed, though its vet practices are only one part of a broader group which includes selling pet food and accessories.

"The vet industry has been struggling with a lack of qualified workers, which has led to existing staff having to work longer hours, the recruitment of more staff from overseas or locums which has pushed up costs, or fewer appointments which has impacted takings for certain vet centres. This shake-up in the sector might have led some vets to push hard on prices to make up for any disruption to how their practices are run."

"If the CMA finds the industry guilty of poor practices around pricing and disclosure, vet companies face a significant downgrade to earnings forecasts. Worst case scenario, it might even render some smaller vet practices as far less economical and potentially lead to closures."

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