Half year Trading Update

26 January 2023

CVS Group plc

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

Half year Trading Update

Strong demand continues - trading in line with full year expectations

CVS, the AIM-quoted veterinary group and one of the UK's leading providers of integrated veterinary services, issues the following update on trading covering the six months ended 31 December 2022 ("H1 2023"). The Company expects to announce its H1 2023 interim results on 24 February 2023.

Summary

· Strong H1 2023 results with revenue up 8.2% vs H1 2022

· H1 2023 like-for-like (LFL)1 sales growth of 7.5%, within the Group's organic revenue growth ambition of between 4% and 8%

· Adjusted EBITDA2 margin of c.19%, in line with the prior year

· The Group has completed a further two acquisitions bringing the total to six acquisitions comprising of nine practice sites in the financial year to date, for initial consideration of £26.5m

· In December 2022, the Group opened a new Greenfield site in Southport, and is on track to open a further two in H2 2023

· Further investment in practice relocations, refurbishments and technology with £19.9m capex spent year to date (H1 2022: £10.6m)

· Operating cash conversion remains strong and leverage5 at 0.60x as at 31 December 2022 provides significant headroom to drive further growth

· c.5.0% increase in the average number of vets employed vs December 2021 with vet attrition continuing to fall

· Trading in line with market expectations for the full year

H1 2023 Performance

We continue to see positive trading across the Group, with total Group revenue up 8.2% to £296.3m (H1 2022: £273.7m). LFL1 sales increased 7.5% in H1 2023, the Group continues to see strong demand across our integrated veterinary services.

Our Healthy Pet Club preventative medicine scheme3 has seen a further increase in membership, up 4.3% to 481,000 as at 31 December 2022, from 461,000 as at 31 December 2021 (30 June 2022: 470,000). 

Group Adjusted EBITDA2 margin continues to remain in line with the prior year, benefiting from operating leverage and strong revenue growth. The Group has continued to increase its investment in practice refurbishment, relocations, clinical equipment and technology with £19.9m invested in H1 2023 vs £10.6m in H1 2022. In addition, in December 2022 we opened a new Greenfield site in Southport.

The Group remains on track to open a further two Greenfield sites in H2 2023.

Acquisitions

The Group has completed a further two acquisitions bringing the total to six acquisitions comprising nine practice sites in the financial year to date, for a combined initial consideration of £26.5m:

· Werrington Vets - Single site practice in Peterborough acquired July 2022

· Woodlands Vets - Two site practice in Cheltenham acquired September 2022

· Market Cross Veterinary Clinic - Single site practice in Edinburgh acquired October 2022

· Seadown Vets - Three site practice in Southampton acquired November 2022

· The Harrogate Vet - single site practice in Harrogate acquired November 2022

· Stokewood Vets - single site practice in Bournemouth acquired January 2023

Net bank borrowings

Net bank borrowings4 increased to £57.6m (30 June 2022: £36.0m) primarily as a result of the investment in capex and acquisitions in the half, demonstrative of the Group's commitment to investing for the future. Leverage5 on a bank test basis of 0.60x is in line with management expectations (30 June 2022: 0.40x), providing significant headroom for growth.

Our People

The upward trend in our employee Net Promoter Score (eNPS) has continued as a result of our continued effort to engage and empower our teams. We have been focused on improving equity, diversity and inclusion (EDI) and have been rolling out our own EDI course with the aim of making everybody feel welcome at CVS. With this investment in our people, we are pleased that the average number of vets we employ has increased c.5.0% vs December 2021.

Outlook

Whilst the Group remains mindful of the challenging economic backdrop, demand for veterinary care remains resilient. We continue to focus on our purpose to provide the best possible care to animals through our integrated platform and to invest in our practices and clinical equipment to drive organic growth, whilst continuing to explore acquisition opportunities in both the UK and internationally as outlined at our recent Capital Markets Day.

The Board is pleased with H1 2023 performance and considers that current trading remains in line with market expectations for the full year. The Group remains well placed to deliver on further growth opportunities over the longer term.

The Board would like to acknowledge and thank all members of the CVS team for their continued dedication and support.

Notes

1. Like-for-like sales shows revenue generated from like-for-like operations compared to the prior year, adjusted for the number of working days. For example, for a practice acquired in September 2021, revenue is included from September 2022 in the like-for-like calculations.

2. Adjusted EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) is profit before tax adjusted for interest (net finance expense), depreciation, amortisation, costs relating to business combinations, and exceptional items. Adjusted EBITDA provides information on the Group's underlying performance and this measure is aligned to our strategy and KPIs.

3. Healthy Pet Club is our preventative care scheme offering routine preventative care to clients for a monthly or annual membership fee.

4. Net bank borrowings is drawn bank debt less cash and cash equivalents.

5. Leverage on a bank test basis is net bank borrowings, divided by adjusted EBITDA annualised for the effect of acquisitions, including costs relating to business combinations and excluding share option costs, prior to the adoption of IFRS 16.

CVS Group plc via Camarco

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 / James Thompson / Milo Bonser

Camarco (Financial PR)

Geoffrey Pelham-Lane +44 (0)7733 124 226

Ginny Pulbrook +44 (0)7961 315 138

Toby Strong +44 (0)7789 151 644 

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 37 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.8,300 personnel, including c.2,200 veterinary surgeons and c.3,100 nurses.