CVS Group Regulatory News (CVSG)

10 Oct 2007 08:00

CVS Group plc10 October 2007 For Immediate Release 10 October 2007 NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE IN THE UNITED STATES, CANADA, JAPAN OR AUSTRALIA CVS Group plc ('CVS' or 'the Company' or 'the Group') First Day of Dealings on the AIM market of the London Stock Exchange CVS (AIM: CVSG), one of the UK's leading providers of veterinary services,announces that its ordinary shares have been admitted to trading on AIMfollowing its successful Placing to raise £92.7million led by Panmure Gordon &Co. CVS' ticker symbol is CVSG. Highlights • The Placing, associated with CVS' admission to AIM, of 45,205,800 shares (representing 87.7% of the Company's issued share capital) at 205 pence per share, raises £92.7 million for Selling Shareholders, valuing the whole of CVS at £105.7 million. • The Placing was comfortably over-subscribed, with high quality demand at the Placing Price. • The purpose of the flotation is to raise the public profile of the Group, to help drive new business and to increase awareness of the Group within the veterinary profession. It has also provided an opportunity for Nash Sells Limited Partnership II, a fund managed by Sovereign Capital Partners LLP, to realise its investment after eight years of support. • The Company's three recently appointed non-executive directors have agreed to buy a total of £100,000 worth of shares at the Placing price. • The current management team of Simon Innes, Chief Executive since 2004, and Paul Coxon, Finance Director since 2003, has increased sales from £12.8m in 2005 to £39.0m in 2007 (year end 30 June), a compound annual growth rate ('CAGR') of 75%. EBITDA has increased from £1.3m to £5.1m over the same period, a CAGR of 98%. • CVS was established in August 1999, with financial backing from funds managed by Sovereign Capital Partners LLP, to acquire and operate veterinary practices which were well established within their local community and had a reputation for high quality service. • Based in Diss, Norfolk, the Group operates two divisions: the practice division composed of 45 small animal practices and one equine specialist practice (128 individual surgeries throughout the UK) and the diagnostic division made up of three veterinary diagnostic laboratories which provide services to CVS and to third parties. • CVS currently employs 1,214 staff, including 271 vets, as well as using additional locums, and is the largest national consolidator of veterinary practices. Commenting on the start of trading of CVS' shares on AIM, Simon Innes, ChiefExecutive of CVS, said: "The company's admission to the London AIM market and commencement of dealingsis a significant step for CVS. Our business has been built by a strong team ofdedicated professionals who ensure both quality and reputation result in CVSbeing highly regarded within the sector. Becoming a public company is a natural progression for us raising our corporateprofile and securing our continued success in both acquisitive and organicgrowth. I am delighted with the response from investors and look forward to engagingwith the investment community as a quoted company." For further information contact: CVS Group plc Simon Innes, Chief Executive 01379 644 288Paul Coxon, Finance Director Panmure Gordon (Nominated Adviser and Broker) 020 7459 3600Richard GrayAndrew GodberChris Bucknall Buchanan Communications 020 7466 5000Richard OldworthSuzanne Brocks Sovereign Capital 020 7828 6944Kevin Whittle The information required by Rule 26 of the AIM Rules for Companies (February2007) is available under the heading AIM Rule 26 within the Investors/Financialssection of the Company's website at www.cvsgroupplc.com. PLACING STATISTICS Placing Price 205 pence per share Number of Ordinary Shares placed on behalf of Selling Shareholders 45,205,800 Number of Ordinary Shares in issue immediately following Admission 51,563,475 Market capitalisation of the Company at the Placing Price £105.7 million Net proceeds of the Placing to be received by Selling Shareholders £89.5 million ISIN GB00B2863827 AIM symbol CSVG Notes to Editors Introduction CVS is one of the leading veterinary service providers in the UK, operating 45veterinary practices (consisting of 128 individual surgeries) nationwide andthree veterinary diagnostic laboratories. It is the UK's largest employer ofvets with 271 employed, representing 2.2 per cent. of all vets estimated to beregistered and practising in the UK. CVS was founded in 1999 with financialbacking from funds managed by Sovereign Capital Partners LLP with the objectiveof consolidating the fragmented UK veterinary services market, and has completedacquisitions for consideration of approximately £32.1 million to date. Business Description The CVS business model is to offer to owner-vets operating under a partnershipstructure the chance to realise the value of their asset in a market wheredemographic and other changes are creating a situation whereby new younger vetsare now no longer able or inclined to buy into partnerships themselves. The CVSstructure offers to remove the administrative burden from the veterinarypractices it acquires through the provision of central services such as finance,human resources, marketing, health and safety, information technology andpurchasing, allowing the practice to concentrate on the provision of clinicalcare. CVS now operates 128 surgeries which were acquired in the following periods. July 99 - July 04 - July 05 - July 06 - July 07 - June 04 June 05 June 06 June 07 presentSurgeries Acquired 17 12 30 62 7 CVS has also acquired three veterinary diagnostic laboratories, which providelaboratory services to CVS practices and to third parties. The laboratoryservices represent a key saving and growth opportunity to the Group asadditional acquired practices drive incremental diagnostic revenues through theCVS laboratories. Further scale benefits are accessed through the ability toobtain favourable terms from suppliers and wholesalers of veterinary supplies,intra-Group referrals and the operational leverage that the centralisedadministration structure brings to the Group as it continues to grow. Investment Highlights 1. Leading market position CVS operates 128 individual surgeries across the UK, which is more than twicethe number operated by the nearest competitor. The Directors believe that theGroup has built a reputation in the veterinary profession as the leadingnational consolidator, without sacrificing its reputation for working alongsidethe profession as a consolidator and not as a predatory competitor. 2. Nationwide Infrastructure CVS's nationwide network of 128 veterinary surgeries is capable of significantoperational leverage. Efficiency is improved as more administrative services canbe delivered by the head office. Scale also brings benefits in the buying ofdrugs and equipment. 3. Organic profit growth CVS (UK) Limited has demonstrated the ability to extract organic profit growthfrom the practices it acquires in the post-acquisition period, over and abovethe profit growth attributable to the immediate contribution of thoseacquisitions. This is driven by scale efficiencies, operational leverage,pricing management, collective buying power, and growth in the underlying marketfor veterinary care. 4. Growth through acquisition Consolidation in the UK veterinary market is being driven by demographic changesin the profession which are creating an opportunity to acquire more practices asthe industry moves from a fragmented partnership structure towards a morecorporate-owned structure. CVS has made 40 separate acquisitions and istherefore well proven in its ability to assess the attractiveness of potentialnew acquisitions and successfully integrate and operate them thereafter. 5. Financially robust The CVS business model is highly cash generative, with the last three financialyears of trading each benefiting from cash generation through working capital asa result of strong cash receipts at the point of sale, favourable credit termswith suppliers and low levels of stock. In addition, property rental costs arelow at under 5 per cent. of revenues, and capital expenditure is also relativelylow. No new money has been raised on Admission through the sale of shares. TheDirectors anticipate that the acquisition pipeline will be adequately fundedthrough a combination of debt finance and internally generated cash flows. This information is provided by RNS The company news service from the London Stock Exchange