Leading veterinary services provider CVS Group reported a revenue increase of 11.4% to £329.9 million, with good financial stability – but there are some matters to keep an eye on, says financial services company Hargreaves Lansdown.
CVS Group operates as a comprehensive solution for pet owners, offering services ranging from vet clinics to cremation services and an online pharmacy, Animed. With a diverse portfolio, CVS addresses pet needs at various stages of their lives. The veterinary business, being recession-resistant and witnessing a surge in pet ownership during the pandemic, contributes significantly to CVS’s success.
Since its listing in 2008, CVS Group has strategically grown through the acquisition of small independent vet practices. The focus on small acquisitions minimizes individual deal risks. The company sees acquisitions as a crucial element, particularly in the fragmented Irish and Dutch markets, and remains open to entering new geographic regions. CVS recently ventured into Australia, reflecting the company’s commitment to exploring new opportunities.
Regulatory Scrutiny and Future Outlook
While CVS Group operates in a resilient industry, there are challenges – such as the shortage of skilled professionals in the vet industry and associated recruitment costs – which pose ongoing concerns. The company’s operating model, which limits acquisition risks and keeps costs down, contributes to maintaining free cash flow and supports dividend payments.
The Competition and Markets Authority (CMA) investigation into the vet sector remains a key factor impacting CVS Group’s short-term outlook. The investigation focuses on the cross-selling of services and pricing practices within the industry. The findings, expected in early 2024, will significantly influence market sentiment. Despite the regulatory scrutiny, experts consider CVS Group as a high-quality business with growth potential, and some analysts consider recent valuation adjustments to be excessive. The outcome of the CMA investigation will play a crucial role in shaping CVS Group’s near-term trajectory.
In summary, CVS Group’s financial performance and strategic moves, coupled with regulatory considerations, highlight the complexities and opportunities within the veterinary services sector. The company’s ability to navigate industry challenges while maintaining growth will be closely observed, with the CMA investigation outcomes being a key determinant of short-term sentiment.