CVS Group Regulatory News (CVSG)

28 July 2022

CVS Group plc

("CVS" or the "Company" and, together with its subsidiaries, the "Group")

Trading Update

CVS, the AIM-quoted veterinary group and one of the UK's leading providers of integrated veterinary services, is pleased to announce the following update on trading for the financial year ended 30 June 2022 ("FY22") 1.

Highlights

· Continued organic growth with like-for-like2 sales growth for the full year of 8.0% (FY21: 17.4% against a COVID-19 impacted comparator)

· Membership of our Healthy Pet Club preventative healthcare scheme increased by 20,000 members to 470,000 members

· FY22 adjusted EBITDA3 expected to be marginally ahead of market expectations

· c.6% increase in the average number of vets employed, with the vet vacancy rate stable

· Three acquisitions completed in H2 2022 and a further acquisition since the year end with an increased pipeline of opportunities

· Strong cash generation with net bank borrowings4 of £45.0m, with leverage5 expected to be significantly below 1.0x for the full year

FY22 Performance

The Board is pleased to report the Group delivered strong high single-digit revenue growth for the full year. Like-for-like2 sales for the financial year increased by 8.0% (FY21: 17.4%), notwithstanding increased COVID-19 isolations in March, April and May 2022 as we continue to follow government guidance to protect our colleagues and clients (the prior year like-for-like growth reflects significant severe COVID-19 restrictions in Q4 FY20). Like-for-like2 growth returned to 8.6% in June 2022 against a strong prior year comparator. Our Healthy Pet Club preventative healthcare scheme continues to grow, with membership increasing in the year by 20,000 members (4.4%) to 470,000 members (FY21: 450,000 members).

The Group expects to report adjusted EBITDA3 for FY22 marginally ahead of market expectations, following effective management of costs coupled with selective investments to capitalise on opportunities for organic growth.

Adjusted EBITDA3 margin remained strong and is expected to be in line with the prior year, benefiting from our ongoing focus on high quality clinical care across our integrated platform.

The Group delivered strong cash flow with net bank borrowings4 as at 30 June 2022 totalling £45.0m (31 December 2021: £63.2m, 30 June 2021: £51.3m). The Group expects to report leverage5 significantly below 1.0x as at 30 June 2022.

We continue to develop initiatives to attract and retain the very best talent, including promoting wellbeing and employee satisfaction. On 1 May 2022 we announced a 3% cost of living pay rise for all our colleagues and an ongoing commitment to pay at least 3% above minimum wage across all of our roles. The recruitment of vets remains an area of focus and we are pleased that attrition has reduced over the year.

Demand for our services continues to grow and we are increasing the number of new roles. For the year ended 30 June 2022 we employed on average c.6% more veterinary surgeons than the year ended 30 June 2021. Our vet vacancy rate (calculated as the number of vet vacancies / total number of vet roles) remains stable, averaging 10.4% for the full year (FY21: 8.3%). The Group continues to develop further initiatives to attract and retain the very best talent in the industry. 

Outlook

The veterinary market continues to grow with the humanisation of pets and clinical advancement underpinning attractive and resilient long-term organic growth for the Group. We are pleased to report that the membership of our loyal Healthy Pet Club has increased further, and demand across our veterinary practices remains strong.

Since the financial year end, we completed a further acquisition of Werrington Vets on 27 July 2022, a single site companion animal practice in Peterborough, funded from existing cash reserves. Our UK acquisition pipeline remains strong and we are exploring new opportunities in Europe.

Whilst the Board is mindful of inflationary pressures and the wider economic backdrop, the Group is very well placed for further growth in FY23 and beyond with a strong balance sheet and committed undrawn bank facilities, which can be used to fund investment in our practice refurbishment and relocation strategy, technology advances, greenfield sites and acquisitions. We look forward to sharing further insight into these growth opportunities and our capital allocation priorities at our rescheduled Capital Markets Day on Tuesday 8 November, 2022.

The Board would like to acknowledge and thank all members of the CVS team for their continued dedication to delivering the best possible care to animals.

The Group expects to announce its preliminary results on Thursday 22 September, 2022.

Notes

1 Numbers included are unaudited

2 Like-for-like sales comprise the revenue generated from all operations compared to the prior year. Revenue is included in the like-for-like calculation with effect from the month in which it was acquired in the previous year adjusted for the number of working days; for example, for a practice acquired in September 2020, revenue is included from September 2021 in the like-for-like revenue calculation.

3 Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) is profit before income tax, net finance expense, depreciation, amortisation, costs relating to business combinations and exceptional items. Adjusted EBITDA is an alternative performance measure and is used as a financial metric that removes the cost of debt, costs relating to depreciation and amortisation and one-off costs to get a normalised number that is not distorted by irregular items or structural investment.

4 Net bank borrowings is drawn bank debt less cash at bank.

5 Leverage on a bank test basis is net bank borrowings divided by 'Adjusted EBITDA', annualised for the effect of acquisitions and including costs relating to business combinations and exceptional items. Adjusted EBITDA on a bank test basis is profit before income tax, net finance expense, depreciation, amortisation, costs relating to business combinations and exceptional items, prior to the adoption of IFRS 16.

CVS Group plc via MHP Communications

Richard Fairman, CEO

Ben Jacklin, COO

Robin Alfonso, CFO

Peel Hunt LLP (Nominated Adviser & Broker) +44 (0)20 7418 8900

Adrian Trimmings / Michael Burke / Andrew Clark / Lalit Bose

Berenberg (Joint Broker) +44 (0)20 3207 7800

Toby Flaux / Ben Wright / Ciaran Walsh / Milo Bonser

MHP Communications (Financial PR) +44 (0) 20 3128 8549

Andrew Jaques / Simon Hockridge / Rachel Farrington / Charles Hirst

About CVS Group plc (www.cvsukltd.co.uk)

CVS Group is an AIM-quoted fully-integrated provider of veterinary services in the UK, with practices in the Netherlands and the Republic of Ireland. CVS is focused on providing high quality clinical services to its customers and their animals, with outstanding and dedicated clinical teams and support colleagues at the core of its strategy.

The Group has c.500 veterinary practices across its three markets, including eight specialist referral hospitals and 35 dedicated out-of-hours sites. Alongside the core Veterinary Practices division, CVS operates Laboratories (providing diagnostic services to CVS and third-parties), Crematoria (providing pet cremation and clinical waste disposal for CVS and third-party practices), Buying Groups and the Group's online retail business ("Animed Direct").

The Group employs c.8,100 personnel, including c.2,100 veterinary surgeons and c.3,000 nurses.