CVS Group Regulatory News (CVSG)

CVS GROUP plc

("CVS", the "Company" or the "Group")

Final Results for the year ended 30 June 2013

CVS, one of the UK's leading providers of veterinary services, is pleased to announce its final results for the year ended 30 June 2013.

· Revenue up 10.4% to £120.1m

· Adjusted EBITDA up 5.5% to £16.5m

· Adjusted earnings per share up 7.0% to 16.9 pence per share

· Like-for-like sales5 growth for the Group of 3.4%

· Acquired and integrated 14 surgeries

· Acquired Valley Pet Crematorium

· Healthy Pet Club members up over 70% to 111,900

· 252 surgeries

· Animed Direct revenue up 62.0% to £4.9m

1Adjusted EBITDA is profit before income tax, net finance expense, depreciation, amortisation, costs relating to business combinations and share option expense.

2Adjusted profit before income tax is calculated as profit on ordinary activities before taxation but before costs relating to business combinations, costs of long term incentive plans and exceptional items.

3Adjusted earnings per share is calculated as profit on ordinary activities after taxation but before costs relating to business combinations, costs of long term incentive plans, exceptional items and amortisation (all net of tax) divided by the weighted average number of Ordinary shares in issue in the year.

4Percentage increases have been calculated throughout this document based on the underlying values.

5 See note 1 of the financial information for definition of like-for-like sales.

Contacts:

Chairman's statement

Significant progress in all areas of the business

I am very pleased to report that CVS has made significant progress in all areas of the business during the year. All divisions delivered organic growth and this was enhanced by further acquisitions. We continued to invest in the development of our services, our staff and our premises, providing improved customer service.

Revenue grew by 10.4% to £120.1m (2012: £108.7m) and like-for-like sales increased by 3.4%. Adjusted EBITDA increased by 5.5% to £16.5m (2012: £15.7m). Operating profit fell marginally to £6.7m (2012: £6.8m) due to higher acquisition and amortisation costs, the benefits of which will be generated in future years. Adjusted EPS grew by 7.0% to 16.9p (2012: 15.8p) and cash generated from operations increased to £16.7m (2012: £15.6m).

We continued to invest carefully in acquisitions. During the year we spent £7.7m to acquire 14 surgeries, through the acquisition of seven practices, and our second crematorium. Subsequent to the year end we made three further acquisitions of Crescent Veterinary Clinic in Melton Mowbray, Miller & Swann in Elgin and West Mount Vets Limited (5 surgeries) in and around Halifax.

On 20 September 2013 we signed an additional £10m borrowing facility. This provides the capacity to develop the Group further through acquisitions, but is at a level that will not put undue pressure on our balance sheet. Further details are set out in the Finance Review.

Importantly, we continued to focus on the development of our staff and now have an industry leading new graduate scheme and a leadership programme for more senior staff.

The Group remains the largest employer in the UK veterinary profession with approximately 2,500 staff today, including around 560 vets. Our people are our most important asset and enable the Group to deliver its strategy. I would like to thank them all, including those new to CVS, for their expertise and professionalism in providing the best possible veterinary care and service.

The Company proposes to pay a dividend of 2.0p per share in December 2013 - a 33% increase on the 1.5p per share paid in 2012. With a strong pipeline of acquisitions, the Board believe that shareholder value can best be grown by reinvesting the majority of operational cash flow back into the business. However, having established our market leading presence, the business can also support a meaningful increase in the level of dividend.

If approved at the Annual General Meeting, the dividend will be paid on 20 December 2013 to shareholders on the register on 6 December 2013. The ex-dividend date will be 4 December 2013.

David Timmins and Paul Coxon left the Group during the year. Both had given many years of valuable service to the Group and I wish them both well in their future endeavours.

Nick Perrin joined as Finance Director and Mike McCollum as a non-executive Director and I am pleased with the contributions that both have made in their early days.

Following the resignation of Paul Coxon, Rebecca Cleal, our in-house solicitor, was appointed as Company Secretary.

The outlook for CVS is promising with some tentative signs of a return to more favourable market conditions. The initiatives we progressed in 2013 will serve us well in the current financial year, leading to further growth in all divisions.

Subsequent to the year end we launched our first MiPet, own brand, product and MiVetClub, our buying group. Whilst these initiatives are currently small we believe that they have great potential to build further on the strengths of the Group.

The Board remains cautiously optimistic about the Group's future and estimates that CVS only has an 11% share of the UK small animal veterinary market. This demonstrates the major opportunity for further growth and consolidation and we expect to make further practice acquisitions.

Richard Connell

Non-Executive Chairman

23 September 2013

Business review

Focused on customer service

CVS Group is managed across four divisions: Veterinary Practices, Laboratories, Crematoria and Animed Direct, our on-line dispensary and retailer. Veterinary Practices are the core of our business but all areas grew during 2013.

Revenue amounted to £108.0m (2012: £98.8m), an increase of 9.3% on the prior year. Adjusted EBITDA increased by 7.7% from £18.6m to £20.1m. These increases include the impact of acquisitions in both 2012 and 2013.

In the year, CVS acquired 7 practices operating from 14 locations. These practices contributed £4.2m of revenue and £0.7m of earnings before interest, tax, depreciation and amortisation (EBITDA) in the year, which corresponds to about £10.0m of revenue and £1.5m of EBITDA in a full year.

Adjusted EBITDA as a percentage of sales improved year on year on a like-for-like basis but fell from 18.8% in 2012 to 18.6% in 2013 when acquired practices are included. This reflects the post acquisition improvement in profitability that CVS generates, for example through improved purchasing, although this takes time to fully achieve.

A key performance indicator for the division is our margin on sales after charging drugs costs. Despite price pressures in some areas, this margin has increased during the year to 73.7% (2012: 71.8%). We have continued to ensure greater use of products where we get more favourable prices and to negotiate better rates from our suppliers.

During the year we began the development of our own brand MiPet, products. The first two products, Pro-bind (a gut protective) and Active+ (a joint supplement), were launched in July 2013. The own brand label will protect our market as well as our margins and, whilst the initiative is currently limited in scale, further products will be developed during 2014.

The Healthy Pet Club loyalty scheme has continued to show tremendous growth in the year. Over 46,000 pets were added to the scheme, increasing membership by over 70% and bringing the total membership to 111,900. The scheme provides preventative medicine to our customers' pets as well as a range of discounts and benefits. The division gains from improved customer loyalty, encouraging clinical compliance, protecting revenue generated from drug sales, and bringing more customers into the surgery. Monthly subscription revenue generated in the year increased to £9.5m (2012: £5.2m) and at the year end represented 9.0% of total Group revenue. The development and extension of the Healthy Pet Club scheme will remain a focus for the division.

We continued to invest strongly in our surgeries, spending over £1.7m on refurbishing a number of premises including The Grove in Fakenham, Regans in Manchester and Pet Doctors in both Chichester and Seaford.

At The Grove we have installed a CT scanner and elsewhere we equipped a number of surgeries with digital x-ray equipment. Overall we have spent £3.0m on capital expenditure at our practices, demonstrating our commitment to improving our ability to serve our customers and provide a professional environment in which to do so.

The Grove is a referral practice specialising particularly in orthopaedic surgery. Its refurbishment is part of the development of the referral business across the division. On 1 July 2013, Professor John Innes joined us as Referrals Director to run and expand our referrals business. John has been a leading figure in the academic and animal orthopaedic worlds for many years; most recently he has been closely involved in developing clinical services at the University of Liverpool. Not only will John bring world class experience in orthopaedics to the Group, but he will also bring experience and expertise in the development of referral services.

The development of our practices' online sites, including online shops, continued slowly during the year. This was a deliberate policy to allow us to learn from the sites that had been launched in 2012. Volumes through these sites are small but they provide a valuable additional service to our customers such as free home delivery and discounts for Healthy Pet Club members. At the year end we had 11 online practice shops.

All vets are required to provide 24-hour cover for their customers. The veterinary practice division does this partly through our own vets but also through other out of hours providers. In areas where we have a high density of surgeries it is generally more efficient and effective to provide this through our own vets. Progress was made during 2013 in establishing our own out of hours services leading to this service being launched in July 2013 at Emmview (in Wokingham, Berkshire) and in August 2013 at St Davids (in Exeter). Initial results have been promising and further out of hours services will be established during 2014.

We have begun our own recruitment business, Pet Medic Recruitment (www.Petmedicrecruitment.com), currently focussing on providing locums for the practice division. This initiative is helping to deliver our continuing aims of improving service and reducing costs.

Our team within the veterinary practice division is one of our most valuable assets. The two essential skills of retail management experience and clinical expertise are combined through our Director of Practice Operations being supported by our Director of Clinical Services. They are supported by regional and local practice managers. Many of the regional managers are vets with many years' experience of operating in practice.

The development of the team is an increasing focus within the division from the day people join us. Our new graduate training scheme is now well known by graduates and highly respected in the universities providing veterinary degrees. This scheme is designed to assist the newly qualified vet make the challenging transition from university to day-to-day practice. 32 graduates were recruited and went through this scheme during 2013. We have also developed a senior manager Aspirational Leadership Programme to develop the management and business abilities not only of our vets but also practice mangers and head nurses. 24 vets attended these courses during 2013 and the programme is now an established part of our training. Clinical development remains a core aspect of our training. All of our vets and nurses are provided with a wide range of training on surgical procedures, nutrition and drugs both through in-house expertise and external courses, sponsoring further qualifications for vets such as certificates and diplomas.

The veterinary practice division systems have continued to be developed during 2013 with 68% of practices now using the Robovet system. Experience shows that results improve when this system is implemented and it will be rolled out further during 2014.

The laboratory division generated revenue of £9.8m, a 7.6% increase on the prior year figure of £9.1m; however, Adjusted EBITDA remained at £1.1m.

The competitive price pressures experienced during 2012 continued into 2013 so whilst volumes were significantly higher in 2013 than in 2012, this increase was not fully reflected in revenue. Costs increased as a consequence of the increased volume.

The focus continues to be on prompt and reliable customer service to drive growth. The enhancement of the sales team in 2012 has shown benefits in 2013. In the coming 12 months we are investing in the laboratories to consolidate procedures and protocols with one bespoke reporting system and the same set of analysers across all laboratories resulting in a more efficient work force with greater buying power.

To ensure there are further areas of growth for the future we are extending our routine diagnostic service to include farm animal work, especially in the light of the government closing six of their AHVLA labs in the coming year. Also we will launch our in-practice analyser business in the first half of the year, giving us further scope for growth in the coming years.

The crematoria division delivered revenue of £1.0m (2012: £0.9m), an increase of 13.5%. Adjusted EBITDA increased by 15.1% from £0.4m to £0.5m.

In December 2012 we acquired Valley Pet Crematorium, based near Exeter. This business contributed only modest figures to the division during 2013. We have now leased additional space and installed a second, modern cremator - this began operating in July 2013. These developments allow us to transfer internal CVS cremations from a third party operator into Valley Pet Crematorium. We have also applied for a clinical waste transfer licence which will allow us to provide a full service to all of our customers.

The Rossendale crematorium business has been developed in the year by an increased focus on customer service and on internal operating efficiencies.

Animed Direct, our on-line retail platform, made good progress during the year. Revenue was £4.9m, a 62.0% increase on the prior year figure of £3.0m. Adjusted EBITDA increased by 93.3% to £0.2m. Whilst the business currently provides a relatively small contribution to the Group, it is now well established and clearly has potential for significant further growth.

Although the business focusses on prescription and non prescription medicines, its range of pet food and other pet products was expanded during the year, providing a better service to our customers. The business now has a customer database of over 130,000 people. The average value of each purchase during the year was £28.34 (2012: £27.78).

Animed Direct began to sell through its existing website into Europe during the year. The level of sales has been low but sufficient to demonstrate that there is strong potential in these markets. We will be developing the website in local languages to increase this potential.

On an adjusted basis, the total costs for the central administration segment were £5.4m (2012: £4.5m), representing 4.5% of revenue (2012: 4.2%).

The continuing growth of the Group requires increased infrastructure to support it, but over time the Group expects these central costs to fall as a percentage of sales. However, the increase in costs does not always happen smoothly and 2013 was a year when significant changes took place to strengthen the central administrative functions and to build a base on which the Group can grow.

Resources were required to deliver new initiatives such as Pet Medic Recruitment, the MiPet own brand products, to strengthen the buying function and to develop the MiVetClub buying group which was launched in August 2013. Expansion of the Healthy Pet Club scheme and the increased scale of the business in general also required more resources. The ageing payroll system was replaced with a modern Human Resources and Payroll system which has allowed us to cope with HMRC's Real Time Information initiative. The new system will not only ease the process of pension auto enrolment that the Group will commence in October 2013 but, more importantly for the future, it will provide enhanced information to manage our resources.

Simon Innes

Chief Executive Officer

23 September 2013Finance review

A healthy balance sheet and strong cash flow

CVS has continued to deliver growth in terms of revenue and pre-exceptional profit over the prior year. Key financial highlights are shown below:

Management uses Adjusted EBITDA and Adjusted earnings per share ("EPS") as the basis for assessing the underlying financial performance of the Group. These figures exclude certain non-recurring and non-trading items and hence assist in understanding the underlying performance of the Group. These terms are not defined by International Financial Reporting Standards and therefore may not be directly comparable with other companies' adjusted profit measures.

An explanation of the difference between the reported operating profit figure and Adjusted EBITDA is shown below:

The 5.5% improvement in the Adjusted EBITDA figure compared with the prior year arises primarily from the full year effect of previous year acquisitions, acquisitions during the year, underlying growth within Veterinary Practices and growth in Animed Direct.

Adjusted EBITDA as a percentage of revenue (adjusted EBITDA margin) was 13.8% (2012: 14.4%). This fall reflects three main factors: a small fall in the margin at the veterinary practices due to the short term dilutive impact of lower margin acquisitions; the lower inherent margin of Animed Direct and the growth in that business; and an increase in central costs due to investment to establish a base for further growth of the Group.

Adjusted earnings per share (as defined in note 11 to the financial statements) increased 7.0% to 16.9p (2012: 15.8p). Basic earnings per share were 39.2% higher than prior year at 7.1p (2012: 5.1p). In part this was as a result of the exceptional finance expense incurred in 2012.

Profit before tax for the year increased from £3.8m to £5.5m. A major reason for this increase was the £1.5m charge in 2012 that arose from the termination of interest rate swap (as described in note 5 to the financial statements). Adjusted profit before tax excludes the impact of the £1.5m charge and other one off items; we believe this more fairly reflects the underlying performance of the business and shows a 5.7% increase in the year.

Cash flow and net debt

Cash generated from operations was £16.7m (2012 £15.6m). Net debt fell to £30.0m (2012: £30.9m). The cash generated was used as follows:

Capital expenditure included £1.7m spent on the refurbishments across the Group, £1.4m was spent on maintaining and improving equipment and £0.5m on IT systems development.

£7.7m was paid for the 14 surgeries and one pet crematoria which were acquired during 2013. These businesses have been integrated into the Group and are trading as expected.

Taxation paid has increased in line with the profits of the Group and the stable payment of interest of £1.2m reflects the limited change in the overall debt levels of the Group. The exceptional interest payment in 2012 was due to the termination of the interest rate swap linked to the previous borrowing arrangements.

Proceeds from ordinary shares are primarily from the exercise of options under the Group's approved SAYE scheme which allows staff to save regular amounts each month over a three year period and benefit from increases in the Group's share price over that time.

The Group's net debt comprises the following:

£0.8m of borrowings is due to be repaid in December 2013 and for each of the next three quarters. The quarterly amount payable then rises to £1.0m, and the balance of the loan is repayable in December 2016.

On 20 September 2013 the Group signed a Revolving Credit Facility agreement (with the Group's existing bank) to borrow up to a further £10m. The facility runs to December 2016 - the same date as the existing £36m loan. This facility is on broadly the same terms and under the same covenants as the existing £36m bank loan.

The additional £10m of borrowing is to fund further acquisitions. We have seen an increase in the number of vets wanting to sell their practices and the additional borrowing will allow us to take advantage of these opportunities.

The Board considers that maintaining a reasonably leveraged balance sheet is appropriate for the Group, given the strong and stable nature of its cash flows and the opportunities to acquire businesses that enhance profitability. Whilst the loan agreements allow a borrowings to EBITDA ratio of up to 3.0 times the Board generally seeks to operate within a ratio of 2.5 times.

The Group manages its banking arrangements centrally. The Group sweeps funds daily from its various bank accounts into deposit accounts to optimise interest generation.

Interest rate risk is also managed centrally and derivative instruments are used to mitigate this risk. The bank facility agreement requires that at least 60% of the interest rate exposure on the bank loan is hedged and the hedge has been maintained at this level throughout the year.

The Group's effective tax rate was 26.7% (2012: 23.5%). A reconciliation of the expected tax charge at the standard rate to the actual charge in £m and as a percentage of profit before tax is shown below: 

All of the Group's revenues and the majority of expenses are subject to corporation tax. The main expenses which are not deductible for tax are costs relating to acquisitions. Tax relief against some expenses, mainly depreciation, is received over a longer period than that for which the costs are charged in the financial statements.

At the year end the market capitalisation was £107.2m (188p per share) compared to £72.4m (128p per share) at the previous year end.

The directors consider that the Group has only one significant third party supplier contract which is for the supply of veterinary drugs. In the event that this supplier ceased trading the Group would be able to continue in business without any disruption in trading by purchasing from alternative suppliers.

Certain statements in these final results are forward-looking. Although the Board believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

Key performance indicators ('KPIs')

The Directors monitor progress against the Group's strategy by reference to the following financial KPIs. Performance during the year is set out in the table below

Principal risks and uncertainties

The Group's businesses are subject to a wide variety of risks. Some of the most significant risks are explained below together with details of actions that have been taken to mitigate these risks.

Consolidated income statement for the year ended 30 June 2013

The following table is provided to show the comparative earnings before interest, tax, depreciation and amortisation ("EBITDA") after adjusting for costs relating to business combinations and share option expense.

Statement of consolidated comprehensive income for the year ended 30 June 2013

Consolidated balance sheet as at 30 June 2013

The financial information comprising the consolidated income statement, the statement of consolidated comprehensive income, the consolidated balance sheet, the consolidated statement of changes in shareholders' equity, the consolidated cash flow statement and the related notes, were authorised for issue by the Board of Directors on 23 September 2013 and were signed on its behalf by:

Nick Perrin Simon Innes

Director Director

Company registered number: 06312831

Consolidated statement of changes in equity for the year ended 30 June 2013

Consolidated cash flow statement for the year ended 30 June 2013

Notes to the consolidated financial statements for the year ended 30 June 2013

1. Summary of significant accounting policies

Statement under s498 - publication of non-statutory accounts

The financial information set out in this final announcement does not constitute statutory financial statements for the years ended 30 June 2013 or 2012, for the purpose of the Companies Act 2006, but is derived from those financial statements. Statutory financial statements for 2013, on which the Group's auditors have given an unqualified report which does not contain statements under Section 498(2) or (3) of the Companies Act 2006, will be filed with the Registrar of Companies subsequent to the Group's next annual general meeting. Statutory financial statements for 2012 have been filed with the Registrar of Companies. The Group's auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

Basis of preparation

The consolidated financial statements, from which this preliminary announcement is derived, have been prepared on a going concern basis and under the historical cost convention, except for certain financial instruments that have been measured at fair value. The Group has operated within the levels of its current debt facility and complied with both the financial and non-financial covenants contained in the facility agreement therein throughout the year under review and to the date of the approval of the financial statements. The Group is forecasting that it will continue to operate within the levels of its current facility and comply with the financial and non-financial covenants contained in the facility agreement. On this basis the Directors consider it appropriate to prepare the consolidated financial statements on the going concern basis.

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRS. Other than as stated below, the accounting policies applied in preparing this financial information are consistent with the Group's financial statements for the year ended 30 June 2013.

Changes in accounting policy and disclosure

Standards, amendments and interpretations effective in the year ended 30 June 2013

The following amendment to existing standards was effective for the current year, but the adoption of this amendment to the existing standard did not have a material impact on these financial statements:

§ Amendment to IAS 1, 'Financial statement presentation' regarding other comprehensive income.

Use of non-GAAP measures

Adjusted EBITDA and Adjusted Profit Before Tax ("Adjusted PBT")

The Directors believe that adjusted EBITDA and adjusted PBT provide additional useful information for shareholders on underlying trends and performance. These measures are used for internal performance analysis. Adjusted EBITDA and Adjusted PBT are not defined by IFRS and therefore may not be directly comparable with other companies' adjusted profit measures. These are not intended to be a substitute for, or superior to, IFRS measurements of profit. Adjusted EBITDA is calculated by reference to profit/(loss) before income tax, adjusted for interest (net finance expense), depreciation, amortisation, share option expense and costs relating to business combinations. Adjusted PBT is calculated by reference to profit/(loss) before income tax, adjusted for share option expense and costs relating to business combinations.

Like-for-like sales

Like-for-like sales comprise the revenue generated from all operations compared to the prior year (on a pro forma basis, i.e. including pre acquisition revenues in respect of acquisitions in the current and comparative periods), after adjusting for sites under refurbishment and discontinued operating activities.

2. Segmental reporting

The primary segment format, operating segments, is based on the Group's management and internal reporting structure. Inter-segment pricing is determined on an arm's length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly interest-bearing borrowings and associated costs, taxation related assets/liabilities, costs relating to business combinations and head office salary and premises costs.

Geographical segments

The business operates predominantly in the UK. It performs a small amount of laboratory work for European based clients and Animed Direct Limited distributes a small quantity of goods to European countries. In accordance with IFRS 8 "Operating segments" no segmental results are presented for trade with European clients as these are not reported separately for management reporting purposes.

Operating segments

The Group is split into four operating segments (veterinary practices, laboratories, crematoria and Animed Direct) and a centralised support function for business segment analysis. Management now monitors Animed Direct separately and therefore the comparative analysis has been amended to reflect this.

1Inter-segment revenues representing laboratory sales of £3.3m (2012: £2.8m) and crematoria fees of £0.3m (2012: £0.3m) to veterinary practices are eliminated on consolidation through the Head Office segment.

3. Income tax expense

Factors affecting the current tax charge

UK corporation tax is calculated at 23.8% (2012: 25.5%) of the estimated assessable profit for the year. The standard rate of UK corporation tax changed from 24% to 23% with effect from 1 April 2013.

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

The Chancellor of the Exchequer has stated his intention to reduce the main rate of corporation tax from 23% to 21% from 1 April 2014 and a further reduction to 20% from 1 April 2015. These changes have not been substantively enacted at the balance sheet date and, therefore, are not reflected in these financial statements. Had these changes been enacted, then the cumulative effects would have been to decrease the net deferred tax liability provided at the balance sheet date by £0.3m (21%) and £0.5m (20%).

4. Earnings per Ordinary share

Basic earnings per Ordinary share are calculated by dividing the profit after taxation by the weighted average number of shares in issue during the year.

Adjusted earnings per Ordinary share is calculated by dividing the profit after taxation excluding amortisation, share option expense, costs relating to business combinations, non-recurring tax credits and fair value adjustments, and having adjusted for the tax effects of such adjustments, by the weighted average number of shares in issue during the year.

5. Business combinations

Details of business combinations in the year ended 30 June 2013 are set out below, in addition to an analysis of post acquisition performance of the respective business combinations, where practicable.

Given the nature of the veterinary surgeries acquired (mainly partnerships or sole traders) and the records maintained by such practices it is not practicable to disclose the revenue or profit/loss of the combined entity for the year as though the acquisition date for all business combinations effected during the year had been the beginning of that year. It is not practicable to disclose the impact of the business combinations on the consolidated cash flow statement as full ledgers were not maintained for each business combination in relation to all related assets and liabilities post acquisition.

The table below summarises the assets acquired in the year ended 30 June 2013:

Post-acquisition revenue and post-acquisition EBITDA were £4.2m and £0.7m respectively. The post-acquisition period is from the date of acquisition to 30 June 2013. Post-acquisition EBITDA represents the direct operating result of practices from the date of acquisition to 30 June 2013 prior to the allocation of central overheads, on the basis that it is not practicable to allocate these.

Business combinations in previous years

Details of business combinations in the comparative year are presented in the consolidated financial statements for the year ended 30 June 2012.

Business combinations subsequent to the year end

Subsequent to the year end the Group acquired the trade and assets of Miller & Swann, a veterinary practice based in Elgin, on 2 September 2013, the share capital of Crescent Veterinary Clinic Limited, based in Melton Mowbray, on 15 July 2013, and the share capital of West Mount Vets Limited based in Halifax on 23 September 2013. The total cash consideration of these acquisitions was £3.6m, including £0.3m of deferred consideration payable over a four year period. Assets acquired comprise intangible patient data records and customer lists with a provisional fair value of £3.6m. The businesses reported unaudited combined pre-tax profits of £0.7m for the years ended 30 April 2013, 31 December 2012 and 30 September 2012 respectively. Given the nature of the records maintained by the above practices it is not practicable to provide details of revenue, profits or recognised gains and losses for the period from the prior period end to the date of acquisition.

6. Dividends

7. Borrowings

Borrowings comprise bank loans and are denominated in Sterling. The repayment profile is as follows:

The balances above are shown net of issue costs of £0.2m (2012: £0.2m), which are being amortised over the term of the bank loans. The carrying amount of borrowings is deemed to be a reasonable approximation to fair value.

On 6 December 2011, the Group entered into a banking facility agreement with The Royal Bank of Scotland plc comprising a £36.0m term loan to refinance existing bank indebtedness, and a working capital facility of £4.0m. The term bank loan facility is subject to an initial 24 month capital repayment holiday. The loan is repayable in staged quarterly instalments starting at £0.8m from 31 December 2013 through to 6 December 2016, with a bullet repayment for the balance due on that date.

 On 20 September 2013, the Group entered into a Revolving Credit Facility agreement with The Royal Bank of Scotland plc which allows the group to borrow up to £10m under this facility. The facility terminates on 6 December 2016.

The overdraft facility was increased to £5.0m on 20 September 2013.

The bank loans, Revolving Credit Facility and overdraft are secured by a first debenture incorporating fixed and floating charges over the assets and undertakings of each Group company. The bank loans and overdraft are also secured on first legal mortgage charges over freehold property included in property, plant and equipment.

Undrawn committed borrowing facilities

At 30 June 2013 the Group has a committed working capital facility of £4.0m (2012: £4.0m) of which £4.0m was undrawn at 30 June 2013 (2012: £4.0m) and which is repayable on demand.

8. Cash flow generated from operations