CVS Group backs Australia as UK softness continues

(Sharecast News) - CVS Group reiterated plans to grow its Australian operations on Thursday, as the UK authorities continued to investigate the veterinary market.

Publishing results for the six months to 31 December, the AIM-listed veterinary specialist said revenues from continuing operations rose 6.6%, to £341.8m.

However, underlying sales fell 1.1%, compared to growth of 6.5% a year previously, hit by softer market conditions in the UK, most notably in its online retail and laboratory businesses.

Adjusted earnings before interest, tax, depreciation and amortisation increased 4.5% year-on-year, to £67.4m, while pre-tax profits fell 35.1% to £17.4m, hit by higher costs associated with it investment programme.

The firm expanded its Australian footprint during the period, completing the acquisition of five practices, bringing its total to 27. It has now invested more than £100m buying practices in the country since July 2023.

Looking to the current year, CVS noted the "fundamental need" for high-quality veterinary care in the UK remained strong, and said it was confident of delivering full-year results in line with expectations.

But it continued: "In light of the uncertainty in the UK, due to the ongoing CMA market investigation, the group has reprioritised investment activity into Australia, where there is a more stable and supportive regulatory environment around the sector.

"Until the conclusion of the investigation in November, and pending the decisions to be reached in that process, the group has determined that UK investment can only be undertaken on an exceptionally disciplined based."

The Competition and Markets Authority launched its probe in May 2024. It is investigating high levels of profits in the sector, and whether a limited choice of vets in some areas is impacting pet owners, among other issues.

Richard Fairman, chief executive, said: "I am pleased to report that the group has delivered further growth in revenue and adjusted EBITDA, notwithstanding the current weaker consumer demand for veterinary care in the UK.

"CVS is well-placed to deliver sustainable long-term growth."

Derren Nathan, head of equity research at Hargreaves Lansdown, said: "Tongues have been wagging with rumours of a potential takeover for rival Pets at Home, as well as hopes of a relatively benign outcome from the CMA probe.

"But there was no reference to any potential remedies today, only continuing uncertainty. The focus for consolidation remains on Australia.

"It's inorganic growth that's powering the modest additions seen to the group's top and bottom line so far this year, and if hopes for an improved second half in the UK can be achieved, the overall picture should improve substantially."

As at 1215 GMT, shares in CVS were down 2% at 1,034p.

CVS Group

Pets at home