CVS Group Share News (CVSG)

Reduced spending by pet owners and greater online competition has hit veterinary practices owner CVS Group.A decline in underlying interim profit from £4.86m to £4.78m indicates the problems. Acquisitions helped revenues rise from £41.5m to £50.5m in the six months to December 2010 but like-for-like revenues were 2.1% lower. Prescriptions for drugs have to be obtained from a vet for a charge but pet owners can then buy the drugs from where they like. Many are shopping for them online because prices can be up to 30% lower. CVS is suffering along with other vets. There was a like-for-like decline in practice revenues of 1.9% in the six months to December 2010. Higher charges could only partly offset fewer visits to the vet and lower product sale volumes. Product sales fell by £700,000. CVS has started up its own online dispensary with a range of 2,700 products. That contributed revenues of £200,000 in the first half and the annualised run rate is up to £1.2m. The website is running profitably. Around 50% of sales are prescription medicines and 94% of those sales are to non-CVS customers. CVS is looking at ways of marketing the website and is about to offer 500 of its products via Amazon.com, which will take a percentage of the revenues and the transaction fee. CVS also plans to launch online shops for each of its practices. CVS is also revamping its Healthy Pet Club scheme in order to protect it against competition. So far, there are 22,019 members of the club with a possibility of 32,000 members in a year's time. The club members tend to spend 15% more than non-members. Chief executive Simon Innes says that there has been some like-for-like growth in the past couple of months but that is partly because the comparatives are weak because of snow in January. Innes admits that in reality the overall market is likely to stay flat. CVS remains acquisitive and it is managing to reduce its debt so that it can afford to make more purchases. Net debt was £37.8m at the end of 2010 and the total debt facilities are £46m. The business is cash generative and that debt will continue to fall without further acquisitions. Brewin Dolphin forecasts an improvement in profit from £8.6m to £10.2m in the year to June 2010.