TIDMCVSG
RNS Number : 9179Q
CVS Group plc
24 February 2023
CVS Group plc
Interim report for the six months ended 31 December 2022
For Immediate Release 24 February 2023
CVS Group plc
("CVS", the "Company" or the "Group")
Interim results for the six months ended 31 December 2022
Robust results and current trading in line with full year
expectations
CVS, one of the UK's leading providers of integrated veterinary
services, is pleased to announce its unaudited interim results for
the six months ended 31 December 2022 ("H1 2023") and provide an
update on year-to-date trading. Comparative data is provided for
the six months ended 31 December 2021 ("H1 2022"), unless otherwise
stated.
Financial Highlights
H1 2023 H1 2022 FY 2022
GBPm except where stated (unaudited) (unaudited) Change %(6) (audited)
-------------------------------- ------------- ------------- ----------- ----------
Revenue 296.3 273.7 8.2% 554.2
Like-for-like sales(1) growth
(%) 7.5% 9.6% -2.1ppts 8.0%
Adjusted EBITDA(2)
Adjusted EBITDA(2) margin
(%) 57.8 52.0 11.2% 107.4
Adjusted EBITDA(2) margin
(%) 19.5% 19.0% 0.5ppts 19.4%
Adjusted profit before tax(3) 41.1 36.2 13.5% 75.5
Adjusted earnings per share(4)
(p) 45.6 41.5 9.9% 85.8
Operating profit 31.5 26.3 19.7% 42.8
Profit before tax 28.0 22.9 22.1% 36.0
Basic earnings per share
(p) 29.6 24.7 19.8% 36.2
Net bank borrowings(5) 57.6 63.2 -9.0% 36.0
-------------------------------- ------------- ------------- ----------- ----------
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. Alternative
performance measures are described in note 2.
3 Adjusted profit before tax is calculated as profit before
amortisation, taxation, costs relating to business combinations,
and exceptional items. Alternative performance measures are
described in note 2.
4 Adjusted earnings per share is calculated as adjusted profit
before tax, less applicable taxation, divided by the weighted
average number of Ordinary shares in issue in the period.
Alternative performance measures are described in note 2.
5 Net bank borrowings is drawn bank debt less cash and cash equivalents.
6 Percentage increases and decreases are calculated based on the
underlying values throughout this document.
Financial Highlights
-- Organic growth has continued with 7.5% like-for-like sales(1)
growth, within the Group's organic revenue growth ambition of
between 4% and 8%
-- Increase in Adjusted EBITDA(2) margin to 19.5%, a
like-for-like improvement of 0.5 percentage points, within our
stated ambition of margins between 19% and 23%
-- Membership of our preventative healthcare scheme, Healthy Pet
Club (HPC), has increased to 481,000, up 4.3% vs. 31 December 2021
(+2.3% vs. 30 June 2022)
-- Leverage of 0.60x as at 31 December 2022 (31 December 2021:
0.76x; 30 June 2022: 0.40x) reflecting strong EBITDA growth and
operating cash conversion, offset by an increase in net debt due to
continued execution of our M&A and capital investment
strategy
Operational & Strategic Highlights
-- Renewed focus on capital investment to drive further growth
o Increased investment in our facilities and equipment to
support growth, with total capital expenditure of GBP19.9m (H1
2022: GBP10.6m, FY 2022: GBP24.5m)
o State-of-the art companion animal greenfield site opened in
Southport in December 2022, and work has progressed on our flagship
referral hospital, Bristol Vet Specialists, which is due to open in
Spring 2023
-- Continued execution of M&A strategy
o Completed five practice acquisitions (eight practice sites) in
the UK in H1 2023 for GBP24.4m (eight acquisitions (eleven practice
sites) year to date for GBP35.3m)
-- Long-term strategic vision of being the veterinary company people most want to work for
o 5.0% more vets employed on average in calendar year 2022 vs
2021 as we strive to be an employer of choice
o Employee net promotor score significantly increased to 18.6 (
31 December 2021 : 3.7, 30 June 2022 : 4.8), reflecting our
investment in our highly skilled and dedicated team including the
introduction of a range of new benefits and our expanding EDI and
wellbeing programmes. Whilst this is a significant improvement we
expect it to stabilise over the next six months
Current trading and outlook: confident of continued growth and
delivery of our strategic goals
-- Whilst we are mindful of the wider macroeconomic backdrop and
inflationary pressures, demand for our high-quality veterinary
services remains robust and the positive performance of H1 2023 has
continued in to the first month of the second half
-- The Board remains confident that full year results will be in line with market expectations
-- In February 2023, CVS re-financed its debt facility, at the
same margin and on improved commercial terms, increasing the total
facility from GBP170.0m to GBP350.0m, to support the Group's five
year growth ambition as set out at the Capital Markets Day
-- We continue to focus on investment in our people, technology
and clinical facilities in order to support further organic
growth
-- We remain confident that we can continue to execute on our
exciting pipeline of selective acquisitions and development of
Greenfield sites
Richard Fairman, Chief Executive Officer, commented:
"These results reflect the continued professionalism and
dedication of our colleagues in providing high-quality care to our
clients and their animals and I would like to take this opportunity
to thank them for their contribution.
At our Capital Markets Day in November 2022, we announced six
key elements underpinning our ambition to double Adjusted EBITDA
over the next five years. Demand for our services remains strong,
notwithstanding a challenging macroeconomic environment and I am
pleased to report H1 2023 results are in line with expectations and
we are on track to deliver continued growth. In February 2023 we
re-financed our debt facility, increasing the total facility to
GBP350.0m, with funding now in place to support our five year
growth ambition.
Our purpose is to give the best possible care to animals and we
are increasing our investment in our practice facilities, clinical
equipment and technology to ensure we can provide a comfortable
environment with great facilities for our colleagues, patients and
clients.
I am also pleased to report that we have welcomed eight
practices (comprising eleven sites) into the Group in the financial
year to date, with a strong pipeline of further opportunities.
The robust performance in H1 2023 has continued into the second
half of the year and we look forward to reporting further growth in
the future."
Results webcast
Management will host a live webcast and Q&A for analysts and
investors at 9am GMT this morning. Those wishing to join should
register at
https://stream.brrmedia.co.uk/broadcast/63bd291ddd6e715032016056 .
For those unable to join, there will be a playback facility
available on the CVS website later.
Contacts:
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 Clarke / 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) and the Group's online retail business ("Animed
Direct").
The Group employs c.8,500 personnel, including c.2,200
veterinary surgeons and c.3,100 nurses.
Introduction
The Board is pleased to report that the Group has delivered
continued growth in both revenue and adjusted EBITDA, as demand for
its fully integrated veterinary services remains strong.
We are pleased that our H1 2023 results take a positive step
towards our stated five year ambition to double Adjusted EBITDA by
focusing on:
-- Organic revenue growth of 4% - 8% per annum;
-- Adjusted EBITDA margin ambition between 19% to 23%;
-- Investment in practice facilities and technology to deliver additional organic growth;
-- Investment in selective acquisitions subject to disciplined
criteria for returns and earnings accretion;
-- Operating cash conversion greater than 70%; and
-- Maintaining leverage (net debt to EBITDA ratio) below 2.0x.
Our highly skilled colleagues have continued to deliver
exceptional clinical care, which has driven our first-half
performance. This focus on delivering evidence-based clinical care
in well-equipped facilities has contributed to like-for-like sales
(1) growth in H1 2023 of 7.5%, and Adjusted EBITDA margin
improvement of 0.5 percentage points, to 19.5%.
Market trends: CVS benefits from a growing market with
consistent consumer demand
The veterinary market remains robust, and both consumer insights
and consumer patterns over the past six months indicate that pet
owners remain willing to spend on high-quality veterinary care and
products for their animals, particularly as a result of the
increased humanisation of pets during the COVID-19 pandemic. The
number of active patients in our Veterinary Practices division
remains consistent with the prior period.
We have seen a further increase in membership of our popular
preventative healthcare scheme Healthy Pet Club to 481,000 members,
which enables pet owners to spread the cost of their pets'
vaccinations and flea and worming treatments and save money on a
range of services and products.
With the pet population increasing during 2020 and 2021, we saw
an increase in busyness in our practices as our clinicians provided
puppies and kittens with their first vaccinations, check-ups and
other early-in-life procedures. We expect to see the full benefit
of this increased population over the next five to ten years as
these animals reach maturity and may require more frequent and
complex veterinary interventions. The Group is well-placed to
provide this care through our fully-integrated veterinary services
model, starting with our first-opinion practices which are
supported by our specialist-led multi-disciplinary hospitals, our
out-of-hours centres and our diagnostic laboratories. Our
crematoria provide clinical waste disposal and, at the end of a
pet's life, compassionate cremation services.
We are highly aware of the ongoing challenges in the
macroeconomic environment, however the Group's ability to provide
joined-up care throughout a pet's life provides consistent revenue
streams. Our focus on high-quality clinical care positions us well
to remain resilient to the economic challenges, as tested and
proven during the COVID-19 pandemic.
Capital allocation: our plan to deliver sustainable future
growth
CVS has placed particular emphasis in recent years on developing
strong foundations upon which to generate positive and sustainable
organic growth. Having announced our ambition to double Adjusted
EBITDA over the next five years, we have begun implementing our
selective capital allocation programme. This involves increasing
investment in our existing facilities and equipment. In H1 2023, we
invested GBP19.9m in capital projects, completing 13 refurbishments
and relocations.
Alongside investment in improving and developing our existing
practices, we are excited to be investing in Greenfield sites,
which provide opportunities and support for clinicians to establish
new veterinary practices and hospitals in state-of-the-art
facilities. In December 2022, we opened our Greenfield companion
animal veterinary practice in Southport, a superior quality
facility housing a spacious operating theatre, dental suite,
in-house laboratory and x-ray facilities. We hope to open two
further Greenfield sites during FY23. Our flagship
multidisciplinary referral centre, Bristol Vet Specialists, is set
to open in April 2023 in Avonmouth. The new hospital, which covers
over 30,000 square feet, is being custom built with uniquely
designed facilities, the latest cutting-edge equipment and
specialists in a range of disciplines.
M&A strategy - continued opportunities for selective
acquisitions
We have continued our efforts to identify selective acquisitions
which complement our existing network of veterinary practices and
enhance the breadth of skills and expertise in the Group. In H1
2023, we completed five acquisitions (eight practice sites) for an
aggregate initial consideration of GBP24.4m. A further three
acquisitions (three practice sites) have been completed in the
second half to date, and we have an exciting pipeline of future
acquisitions. We are delighted to welcome these colleagues, clients
and patients into the Group.
We are carefully considering targeted entry into new
geographical markets both in Europe and in English-speaking
geographies further afield, where there are similar cultures to the
UK and with currently less corporate consolidation.
Our leverage (net debt / adjusted annualised EBITDA) remains
comfortably below 1.0x. In February 2023, CVS re-financed its debt
facility, on the same commercial terms, increasing the total
facility from GBP170.0m to GBP350.0m, to support the Group's five
year growth ambition as set out at the Capital Markets Day .
People: Our vision is to be the veterinary company people most
want to work for
Our people remain at the core of our business, and we continue
to seek ways to support them. This includes creating great places
to work as well as providing our colleagues with the support
required to not only give exceptional care to patients but also to
achieve their career goals. As a result of our strategic focus on
our people, our employee NPS score, a standardised measure of
employee satisfaction where 100 is the maximum and -100 is the
minimum, has increased to 18.6 from 4.8 at June 2022.
During the period, we conducted a full review of our employment
policies and benefits and launched a range of new benefits. These
new benefits are in addition to our existing range which includes,
among others, enhanced maternity pay, additional annual leave for
up to five years of service alongside the option to buy/sell
further annual leave, and annual Save-As-You-Earn schemes, of which
the latest scheme saw a 38.9% increase in uptake in the current
year.
Our new benefits includes a health cash plan enabling colleagues
to opt in to reclaim the cost of a range of medical services,
including mental health services. We have also added policies
to:
-- support our colleagues through fertility investigations and
treatments, including supporting their partner in these
treatments;
-- provide additional compassionate leave in the event of pregnancy loss; and
-- offer additional paid leave for significant health-related
life events including major surgery, hospitalisation, and
procedures related to gender transition.
During 2022, we implemented two salary reviews: a 3.0%
out-of-cycle "cost of living" increase in May 2022 to support our
colleagues with increasing inflationary pressures, alongside our
annual salary review in July 2022.
CVS promoting Equity, Diversity and Inclusion
The Group has a clearly-stated equity, diversity and inclusion
(EDI) strategy which was introduced in our 2022 Sustainability
Report. We have been primarily focusing on ensuring foundational
understanding of EDI, which includes understanding the diversity of
our current workforce by collecting workforce diversity data. The
proportion of our colleagues having submitted this data increased
to over 60% by the end of the period, which will support us to
promote and maintain equal opportunities, and understand how we can
best support our colleagues to feel a sense of inclusion and
belonging at work.
As well as crucial revised policies covering EDI and bullying,
harassment and incivility, we introduced an original EDI training
course for all CVS colleagues. We have also introduced a regular
survey-question measure of whether our colleagues feel equally
included at work, and in December 2022 85% of colleagues responded
positively.
Providing skills enhancement and training
In addition to supporting our existing colleagues, we are
looking towards the next generation of skilled veterinary workers
and have a range of programmes including our New Graduate
Programme, Graduate summer school, and our esteemed ChesterGates
Veterinary Nurse Training Centre. We have developed a leading
induction programme for practices to on-board and support new
graduates joining the practice and ensure they have the resources
they need to start a successful and fulfilling veterinary
career.
Clinical developments: Our purpose is to provide the best
possible care to animals
We are striving to have a positive impact on the veterinary care
sector as a whole, through investing in research projects designed
to better understand and improve veterinary care. Through our
Clinical Research Awards we have committed GBP0.5m across 16
projects, 11 of which are led by CVS colleagues. These projects are
studying topics relating to animal health, clinical practices and
the environment.
In September 2022, Paul Higgs was appointed to the role of Chief
Veterinary Officer. In this role, Paul will oversee all clinical
quality improvement work in our first-opinion and referrals
divisions to help us enhance the care we provide to animals. Prior
to his current role, Paul was Clinical Director at CVS' Highcroft
Referrals Hospital in Bristol, where he still practices as a
European Veterinary Specialist in internal medicine.
In August 2022, we published our fourth annual Quality
Improvement report. Angela Rayner, Director of Quality Improvement,
commented, "In quality improvement the work is never done, but
celebrating what we achieve keeps us going. This report is a
celebration of CVS teams, whose care and passion for what they do
never ceases to be inspiring. I am grateful to all the wonderful
colleagues at CVS for making this report possible."
Care at our Heart: embedding our Environmental, Social and
Governance (ESG) strategy
We are delighted to have published our first standalone
Sustainability Report in August 2022. We are committed to our ESG
strategy, placing care at the heart of our operations to ensure we
do the right thing, in the right way. Our seven working groups
across the business have focused on analysing and understanding our
impact on Energy and carbon, Waste, One Health, Wellbeing, People
development, EDI and Community.
For the 2023 financial year we have linked Executive Committee
remuneration to the delivery of five non-financial targets, with
20% of bonus potential linked to reducing clinical waste, improving
patient care index (our measure of quality in practices), improving
employee and client net promoter scores, and reducing colleague
attrition.
We have been engaging with suppliers to reduce the environmental
impact of our supply chain, including minimising emissions by
combining orders into fewer deliveries and utilising low-emissions
delivery vehicles, and promoting the use of recycled and recyclable
packaging.
As we have been investing in capital projects across our estate
we have implemented energy and carbon saving methods, such as
passive-infrared switches on lighting, use of sustainable
materials, and "green" clauses in lease agreements. We are
partnering with our new facilities management provider to promote
energy saving measures in our facilities.
Our colleague charity of the year in 2022 was the Pet Blood Bank
and we raised GBP20,000 through a variety of local initiatives,
which was matched by CVS with a GBP20,000 donation to Vetlife, the
charity that provides emotional, financial and mental health
support to the veterinary community.
Financial review: robust foundations from which to deliver
continued growth
CVS delivered a resilient performance for H1 2023, delivering
continued organic growth and investing in our existing veterinary
practice portfolio in support of our purpose to give the best
possible care to animals.
Group revenue was GBP296.3m in the period, an increase of 8.2%
over the prior year (H1 2022: GBP273.7m). Like-for-like sales(1) ,
grew 7.5% (H1 2022: 9.6%).
Gross margin before clinical staff costs increased slightly to
77.5% (H1 2022: 77.1%). Employment costs as a percentage of revenue
increased to 51.9% (H1 2022: 50.4%) as a result of additional
investment in our people and increased headcount in
revenue-generating and support roles. We continue to increase our
headcount, with a 7.2% increase in the average number of clinical
colleagues employed during H1 2023 versus H1 2022.
Adjusted EBITDA for the half-year was GBP57.8m, an increase of
11.2% (H1 2022: GBP52.0m). This is primarily due to the increase in
top line revenue.
Operating profit increased to GBP31.5m (H1 2022: GBP26.3m) after
depreciation of property, plant and equipment of GBP6.1m (H1 2022:
GBP5.7m), depreciation of right-of-use assets of GBP7.1m (H1 2022:
GBP6.7m), amortisation of GBP11.3m (H1 2022: GBP11.3m) and costs
relating to business combinations of GBP1.8m (H1 2022:
GBP2.0m).
Adjusted profit before tax, which excludes amortisation, costs
relating to business combinations and exceptional items, increased
to GBP41.1m (H1 2022: GBP36.2m).
Adjusted earnings per share increased to 45.6p (H1 2022: 41.5p).
Basic earnings per share for the period increased to 29.6p (H1
2022: 24.7p).
Cash generated from operations was GBP45.5m (H1 2022: GBP37.9m)
with the increase driven mainly from increased EBITDA. Operating
cash conversion of 58.9% (H1 2022: 54.0%) is in line with
management expectations and the full year is expected to be in
excess of 70%, with the first half impacted by prior year bonus
payments.
Net bank borrowings increased to GBP57.6m (30 June 2022:
GBP36.0m) after funding GBP24.4m of acquisitions (net of cash
acquired), along with GBP19.9m of capital expenditure, up from
GBP10.6m in the comparative period. This increase reflects the
implementation of our capital allocation programme for future
growth.
Operating segment performance
Veterinary Practices division
Our Veterinary Practices division comprises c.500 veterinary
practices across three markets, including eight specialist referral
hospitals and 37 dedicated out-of-hours sites, as well as our
buying groups, Vet Direct and MiPet insurance. The Veterinary
Practice division generated revenues of GBP263.4m in H1 2023, an
increase of 8.2% on the GBP243.3m achieved in the prior period.
Like-for-like sales growth, adjusted for the number of working days
in the period, was 7.3% (H1 2022: 9.4%), demonstrating our
continued ability to generate organic growth within our veterinary
practices. Our companion animal and referrals practices generated
the greatest growth in the division, demonstrating the benefits of
our focus on providing high-quality clinical care and the
resilience of our core business units.
Gross margin before clinical staff costs in the Veterinary
Practices Division improved to 80.3% (H1 2022: 79.8%).
Adjusted EBITDA for the Veterinary Practices division increased
to GBP55.4m (H1 2022: GBP52.1m). Adjusted EBITDA margin was down
slightly at 21.0% (H1 2022: 21.4%), reflecting increased investment
in our people and inflationary costs increases.
Laboratories division
Our Laboratories division provides diagnostic services and
in-practice laboratory analysers to CVS practices and third-party
owned veterinary surgeries. Diagnostic services are offered via
post and courier allowing complete coverage of the UK. Revenue of
GBP14.2m was generated in the period, reflecting strong growth of
7.2% from the GBP13.3m generated in H1 2022.
Adjusted EBITDA increased to GBP4.4m (H1 2022: GBP4.0m), with
adjusted EBITDA margin increasing by 1.2 percentage points, to
31.2%.
Crematoria division
Our Crematoria division provides pet cremation and clinical
waste disposal for CVS and third-party practices. Revenue was
GBP5.3m in the period (H1 2022: GBP4.8m) reflecting the success of
the Direct Pet Cremation project which is now in operation in all
our Crematoria, offering a more compassionate aftercare service and
increased options for pet owners. Adjusted EBITDA was GBP1.6m (H1
2022: GBP1.7m) reflecting increased costs of fuel used to run our
cremators.
Online retail business
We have continued to improve our Online retail business, Animed
Direct, with revenue increasing to GBP24.5m (H1 2022: GBP22.7m),
benefitting from increased transaction values. Adjusted EBITDA was
flat at GBP1.7m (H1 2022: GBP1.7m) as we continue to invest in
marketing and improved systems and processes to offer enhanced
customer experience.
Central administration
Central administration costs were GBP5.3m (H1 2022: GBP7.5m)
Expressed as a percentage of Group revenue, excluding RDEC and
associated costs, these costs remained consistent at 3.5% (H1 2022:
3.5%).
Cash flow and funding position
CVS had borrowings of GBP85.0m at 31 December 2022 with cash and
cash equivalents of GBP27.4m, equating to net bank borrowings of
GBP57.6m (H1 2022: GBP63.2m). The Group had leverage (net debt /
adjusted annualised EBITDA) of 0.60x as of 31 December 2022 (30
June 2022: 0.40x).
Following the completion of a re-financing of the Group's debt
facility on 22 February 2023, the Group has total facilities of
GBP350.0m to 21 February 2027, with an optional 1 year extension,
provided by a syndicate of eight banks: AIB, Barclays, Danske,
HSBC, JP Morgan, Lloyds, NatWest and Virgin Money. The facility
comprises the following elements:
-- a fixed term loan of GBP87.5m, repayable on 21 February 2027 via a single bullet repayment;
-- a four-year Revolving Credit Facility of GBP262.5m, available to 21 February 2027.
We retain our GBP5.0m overdraft facility, renewable
annually.
The Group is subject to two financial covenants associated with
these facilities which are based on the ratios of net debt to
EBITDA and EBITDA to interest. EBITDA for this purpose is based on
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.
The covenant levels are unchanged following the re-financing and
allow a maximum Group net debt to EBITDA leverage ratio of 3.25x,
although it is not the Group's intention to operate at this level.
Leverage has increased during H1 2023, to 0.60x (30 June 2022:
0.40x). This increase is primarily due to an increase in net debt
following increased investment for future growth. The EBITDA to
interest ratio must not be less than 4.5x (unchanged as part of the
re-financing). As of 31 December 2022, the ratio was 42.16x (30
June 2022: 41.00x).
Bank covenants are tested quarterly and the Group has
considerable headroom in both financial covenants and in its
undrawn but committed facilities as at 31 December 2022.
Dividends
A dividend of 7.0p (December 2021: 6.5p) per share was paid in
December 2022 in respect of the financial year ended 30 June 2022.
The Board will continue to review its dividend policy and
anticipates the payment of a final dividend in respect of the
current financial year in December 2023. In line with our customary
practice, the amount of this dividend will be dependent on the
outcome of the full year results and the growth capital needs of
the business.
Current trading & Outlook: we remain confident of continued
growth and delivery of our strategic goals
The veterinary market remains resilient, with strong demand for
excellent clinical care. Our preventative healthcare scheme, The
Healthy Pet Club, provides the opportunity for clients to spread
the cost of veterinary care. We will continue to provide a wide
range of evidence-based clinical services to meet our clients'
needs and support their animals to live healthy and full lives.
We will continue our investment in our people, technology and
our clinical facilities in order to support further organic growth.
This will be augmented by investment in our exciting pipeline of
selective acquisitions and development of exceptional Greenfield
sites.
Following strong H1 2023 results, the Board remains confident
that the full year results will be in line with expectations.
The Board would like to acknowledge and thank all members of the
CVS team for their efforts to provide the very best care for
animals, and with their support, we look forward to sharing
continued success in the future.
Richard Connell
Chair
24 February 2023
Condensed consolidated income statement for the six-month period
ended 31 December 2022 (unaudited)
Note Six months Six months
ended 31 ended 31 Year ended
December December 30 June
2022 (Unaudited) 2021 (Unaudited) 2022 (Audited)
GBPm GBPm GBPm
---------------------------- ------- ------------------- ------------------- -----------------
Revenue 296.3 273.7 554.2
Cost of sales (169.6) (159.3) (315.1)
---------------------------- ------- ------------------- ------------------- -----------------
Gross profit 126.7 114.4 239.1
Administrative expenses (95.2) (88.1) (196.3)
---------------------------- ------- ------------------- ------------------- -----------------
Operating profit 31.5 26.3 42.8
Finance expense 5 (3.5) (3.4) (6.8)
Profit before tax 28.0 22.9 36.0
Tax expense 8 (6.9) (5.4) (10.3)
---------------------------- ------- ------------------- ------------------- -----------------
Profit for the period 21.1 17.5 25.7
---------------------------- ------- ------------------- ------------------- -----------------
Earnings per Ordinary share (EPS)
Basic 6 29.6p 24.7p 36.2p
Diluted 6 29.4p 24.5p 35.9p
---------------------------- ------- ------------------- ------------------- -----------------
All activities derive from continuing operations.
Reconciliation of alternative performance measures
The Directors believe that adjusted measures, being adjusted
EBITDA, adjusted PBT and adjusted EPS provide additional useful
information for shareholders. These measures are used by the Board
and management for planning, internal reporting and setting
Director and management remuneration. In addition, they are used by
the investor analyst community and are aligned to our strategy and
KPIs. These measures are not defined by IFRS and therefore may not
be directly comparable with other companies' adjusted measures.
Adjusted EBITDA is calculated by reference to profit before tax,
adjusted for interest (net finance expense), depreciation,
amortisation, costs relating to business combinations and
exceptional items. The following table provides the calculation of
adjusted EBITDA.
Six months Six months
ended 31 ended 31 Year ended
December December 30 June
Alternative performance measure: 2022 (Unaudited) 2021 (Unaudited) 2022 (Audited)
adjusted EBITDA Note GBPm GBPm GBPm
------------------------------------------------ ----- ------------------ ------------------ ----------------
Profit before tax 28.0 22.9 36.0
Adjustments for:
Finance expense 5 3.5 3.4 6.8
Amortisation of intangible assets 9 11.3 11.3 22.2
Depreciation of property, plant
and equipment 9 6.1 5.7 11.3
Profit on disposal of property,
plant and equipment and right-of-use
assets - - (0.3)
Depreciation and impairment of
right-of-use assets 10 7.1 6.7 14.1
Costs relating to business combinations(1) 1.8 2.0 4.9
Exceptional items(2) - - 12.4
------------------------------------------------ ----- ------------------ ------------------ ----------------
Adjusted EBITDA 57.8 52.0 107.4
------------------------------------------------ ----- ------------------ ------------------ ----------------
Adjusted earnings per share (EPS):
Adjusted EPS 6 45.6p 41.5p 85.8p
Diluted adjusted EPS 6 45.2p 41.1p 85.0p
------------------------------------------------ ----- ------------------ ------------------ ----------------
(1) Includes amounts paid in respect of acquisitions in prior
years expensed to the income statement.
(2) Exceptional items in the prior year relate to impairment in
relation to Quality Pet Care Ltd.
Condensed consolidated statement of comprehensive income for the
six-month period ended 31 December 2022 (unaudited)
Six months
ended 31 Six months Year ended
December ended 31 30 June
2022 (Unaudited) December 2022 (Audited)
GBPm 2021 (Unaudited)GBPm GBPm
Profit for the period 21.1 17.5 25.7
Other comprehensive income - items that
will or may be reclassified to profit
or loss in future periods
Cash flow hedges:
Net movement on cash flow hedge 0.5 1.0 2.8
Cost of hedging reserve - (0.1) (0.1)
Deferred tax on cash flow hedge and
available-for-sale financial assets (0.1) (0.2) (0.7)
Exchange differences on translation
of foreign operations - (0.5) (0.1)
Other comprehensive income for the period,
net of tax 0.4 0.2 1.9
-------------------------------------------- ------------------- ----------------------- ----------------
Total comprehensive income for the period
attributable to owners of the parent 21.5 17.7 27.6
-------------------------------------------- ------------------- ----------------------- ----------------
Condensed consolidated statement of financial position as at 31
December 2022 (unaudited)
31 December 31 December
30 June
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
Note GBPm GBPm GBPm
--------------------------------- ----- ---------------- ------------ -----------
Non-current assets
Intangible assets 9 234.4 217.2 216.5
Property, plant and equipment 9 82.7 61.9 69.7
Right-of-use assets 10 99.4 98.9 101.7
Investments 11 0.1 17.1 0.1
Derivative financial instruments 2.8 0.5 2.3
419.4 395.6 390.3
--------------------------------- ----- ---------------- ------------ -----------
Current assets
Inventories 28.7 22.6 26.2
Trade and other receivables 49.4 49.5 52.7
Current tax receivable 8 2.8 2.4 -
Cash and cash equivalents 27.4 21.8 49.0
--------------------------------- ----- ---------------- ------------ -----------
108.3 96.3 127.9
--------------------------------- ----- ---------------- ------------ -----------
Total assets 527.7 491.9 518.2
Current liabilities
Trade and other payables 13 (83.3) (77.4) (86.6)
Provisions 14 (0.9) (3.0) (2.1)
Lease liabilities 15 (9.5) (8.6) (9.4)
Current tax liabilities 8 - - (3.3)
(93.7) (89.0) (101.4)
Non-current liabilities
Borrowings 17 (84.5) (84.1) (84.3)
Lease liabilities 15 (93.4) (92.4) (95.1)
Deferred tax liabilities (22.2) (21.1) (20.0)
--------------------------------- ----- ---------------- ------------ -----------
(200.1) (197.6) (199.4)
--------------------------------- ----- ---------------- ------------ -----------
Total liabilities (293.8) (286.6) (300.8)
--------------------------------- ----- ---------------- ------------ -----------
Net assets 233.9 205.3 217.4
--------------------------------- ----- ---------------- ------------ -----------
Condensed consolidated statement of financial position as at 31
December 2022 (unaudited)
31 December 31 December
2022 2021
(Unaudited) (Unaudited) 30 June
2022
GBPm GBPm (Audited)
GBPm
---------------- --------------- --------------- ------------
Shareholders' equity
Share capital 0.1 0.1 0.1
Share premium 105.7 103.3 105.4
Capital redemption reserve 0.6 0.6 0.6
Treasury reserve (1.2) - -
Cash flow hedge reserve 2.0 0.5 1.6
Merger reserve (61.4) (61.4) (61.4)
Retained earnings 188.1 162.2 171.1
---------------------------- ------ ------ ------
Total equity 233.9 205.3 217.4
---------------------------- ------ ------ ------
The interim financial information above is reproduced from that
on pages 9 to 29 of the Group's Interim Report which was approved
by the Board of Directors on 24 February 2023.
Condensed consolidated statement of changes in equity for the
six-month period ended 31 December 2022 (unaudited)
Cash Cost
Capital flow of
Share Share redemption Treasury hedge hedging Merger Retained Total
capital premium reserve reserve reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- --------- -------- ----------- --------- -------- -------- --------- --------- ---------
At 1 July 2022 0.1 105.4 0.6 - 1.6 - (61.4) 171.1 217.4
-------------------- --------- -------- ----------- --------- -------- -------- --------- --------- ---------
Profit for the
period - - - - - - - 21.1 21.1
-------------------- --------- -------- ----------- --------- -------- -------- --------- --------- ---------
Other comprehensive
income and
losses
Cash flow hedges:
Fair value income - - - - 0.5 - - - 0.5
Exchange
differences on
translation
of foreign
operations - - - - - - - - -
Deferred tax on
cash flow hedge
and
available-for-sale
financial
assets - - - - (0.1) - - - (0.1)
Total other
comprehensive
income - - - - 0.4 - - - 0.4
Total comprehensive
income - - - - 0.4 - - 21.1 21.5
Transactions with
owners:
Issue of Ordinary
shares - 0.3 - - - - - - 0.3
Credit to reserves
for share-based
payments - - - - - - - 1.2 1.2
Deferred tax
relating to
share-based
payments - - - - - - - (0.3) (0.3)
Purchase of
Treasury shares - - - (1.2) - - - - (1.2)
Dividends to equity
holders of
the Company - - - - - - - (5.0) (5.0)
Transactions with
owners - 0.3 - (1.2) - - - (4.1) (5.0)
-------------------- --------- -------- ----------- --------- -------- -------- --------- --------- ---------
At 31 December 2022 0.1 105.7 0.6 (1.2) 2.0 - (61.4) 188.1 233.9
-------------------- --------- -------- ----------- --------- -------- -------- --------- --------- ---------
Condensed
consolidated
statement
of changes in
equity for the
six-month
period ended 31
December 2022
(unaudited)
Condensed
consolidated
statement of
changes in equity
for the six-month
period ended
31 December 2022
(unaudited)
-------------------- --------- -------- ----------- --------- -------- -------- --------- --------- ---------
Condensed consolidated statement of changes in equity for the
six-month period ended 31 December 2021 (unaudited)
Cash Cost
Capital flow of
Share Share redemption Treasury hedge hedging Merger Retained Total
capital premium reserve reserve reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- -------- ----------- --------- -------- -------- -------- --------- ---------
At 1 July 2021 0.1 103.1 0.6 - (0.5) 0.1 (61.4) 149.1 191.1
--------------------------------- --------- -------- ----------- --------- -------- -------- -------- --------- ---------
Profit for the period - - - - - - - 17.5 17.5
--------------------------------- --------- -------- ----------- --------- -------- -------- -------- --------- ---------
Other comprehensive income and
losses
Cash flow hedges: Fair value
income/(loss) - - - - 1.0 (0.1) - - 0.9
Exchange differences on
translation
of foreign operations - - - - - - - (0.5) (0.5)
Deferred tax on cash flow hedge
and available-for-sale
financial
assets - - - - - - - (0.2) (0.2)
Total other comprehensive
income/(loss) - - - - 1.0 (0.1) - (0.7) 0.2
Total comprehensive
income/(loss) - - - - 1.0 (0.1) - 16.8 17.7
Transactions with owners:
Issue of Ordinary shares - 0.2 - - - - - - 0.2
Credit to reserves for
share-based
payments - - - - - - - 1.3 1.3
Deferred tax relating to
share-based
payments - - - - - - - (0.4) (0.4)
Purchase of Treasury shares - - - - - - - - -
Dividends to equity holders of
the Company - - - - - - - (4.6) (4.6)
Transactions with owners - 0.2 - - - - - (3.7) (3.5)
--------------------------------- --------- -------- ----------- --------- -------- -------- -------- --------- ---------
At 31 December 2021 0.1 103.3 0.6 - 0.5 - (61.4) 162.2 205.3
--------------------------------- --------- -------- ----------- --------- -------- -------- -------- --------- ---------
Condensed consolidated statement of cash flows for the six-month
period ended 31 December 2022 (unaudited)
Six months Six months
ended 31 December ended 31 December Year ended
2022 2021 30 June 2022
(Unaudited) (Unaudited) (Audited)
Note GBPm GBPm GBPm
Cash flows from operating activities
Cash generated from operations 16 45.5 37.9 93.1
Taxation paid (7.2) (5.5) (11.2)
Interest paid (3.3) (3.2) (6.4)
Net cash generated from operating
activities 35.0 29.2 75.5
---------------------------------------- ----- ------------------ ------------------ -------------
Cash flows from investing activities
Business combinations (net of
cash acquired) (24.4) (0.4) (8.4)
Purchase of property, plant and
equipment 9 (18.0) (10.3) (23.0)
Proceeds from sale of property,
plant and equipment 0.1 0.1 0.2
Purchase of intangible assets 9 (1.9) (0.3) (1.5)
Purchase of other investments - (19.7) (21.4)
Proceeds from sale of other investments - - 9.0
Net cash used in investing activities (44.2) (30.6) (45.1)
---------------------------------------- ----- ------------------ ------------------ -------------
Cash flows from financing activities
Dividends paid (5.0) (4.6) (4.6)
Proceeds from issue of Ordinary
shares 0.3 0.2 2.3
Purchase of Treasury shares (1.2) - -
Repayment of obligation under
right-of-use asset (6.5) (6.1) (12.7)
- -
Repayment of borrowings 17 ) ) (0.1)
Net cash used in financing activities (12.4) (10.5) (15.1)
---------------------------------------- ----- ------------------ ------------------ -------------
Net (decrease)/increase in cash
and cash equivalents (21.6) (11.9) 15.3
Cash and cash equivalents at
the beginning of period 49.0 33.7 33.7
---------------------------------------- ----- ------------------ ------------------ -------------
Cash and cash equivalents at
end of the period 27.4 21.8 49.0
---------------------------------------- ----- ------------------ ------------------ -------------
Notes to the interim consolidated financial information
1. General information
The principal activity of CVS Group plc, together with its
subsidiaries ("the Group") is to operate veterinary practices,
complementary veterinary diagnostic businesses, pet crematoria and
an online pharmacy and retail business.
CVS Group plc is a public limited company incorporated under the
Companies Act 2006 and domiciled in England and Wales and its
shares are quoted on the AIM Market of the London Stock Exchange
("CVSG"). Its company registration number is 06312831 and
registered office is CVS House, Owen Road, Diss, IP22 4ER.
This interim consolidated financial information does not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. The statutory accounts of CVS Group plc in
respect of the year ended 30 June 2022 have been delivered to the
Registrar of Companies, upon which the Company's auditors have
given a report which was unqualified and did not contain any
statement under Section 498 of the Companies Act 2006.
Forward looking statements
Certain statements in this interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, we can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. Save as required by regulation or
law, we undertake no obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
2. Basis of preparation
The interim consolidated financial information of CVS Group plc
is for the six months ended 31 December 2022. It is unaudited and
has been prepared in accordance with the AIM Rules for Companies
and with IAS 34, 'Interim Financial Reporting'. The interim
consolidated financial information should be read in conjunction
with the annual financial statements for the year ended 30 June
2022, which have been prepared in accordance with international
accounting standards and in conformity with the requirements of the
Companies Act 2006.
The interim consolidated financial information has been prepared
on a going concern basis.
Use of alternative performance measures
Adjusted EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation), adjusted profit before tax (adjusted PBT) and
adjusted earnings per share (adjusted EPS)
The Directors believe that adjusted measures, being adjusted
EBITDA, adjusted PBT and adjusted EPS, provide additional useful
information for shareholders. These measures are used by the Board
and management for planning, internal reporting and setting
Director and management remuneration. In addition, they are used by
the investor analyst community and are aligned to our strategy and
KPIs. These measures are not defined by International Financial
Reporting Standards (IFRS) and therefore may not be directly
comparable with other companies' adjusted measures. They are not
intended to be a substitute for, or superior to, IFRS measurements
of profit or earnings per share.
Adjusted EBITDA is calculated by reference to profit before tax,
adjusted for interest (net finance expense), depreciation,
amortisation, costs relating to business combinations and
exceptional items.
Adjusted PBT is calculated as profit before tax, amortisation,
costs relating to business combinations and exceptional items.
Adjusted EPS is calculated as adjusted profit before tax, less
applicable tax, divided by the weighted average number of Ordinary
shares in issue during the period.
The following table provides the calculation of adjusted EBITDA
as defined above:
Six months Six months
ended 31 ended 31 Year ended
December December 30 June
Alternative performance measure: 2022 (Unaudited) 2021 (Unaudited) 2022 (Audited)
adjusted EBITDA Note GBPm GBPm GBPm
------------------------------------------------ ----- ------------------ ------------------ ----------------
Profit before tax 28.0 22.9 36.0
Adjustments for:
Finance expense 5 3.5 3.4 6.8
Amortisation of intangible assets 9 11.3 11.3 22.2
Depreciation of property, plant
and equipment 9 6.1 5.7 11.3
Profit on disposal of property,
plant and equipment and right-of-use
assets - - (0.3)
Depreciation and impairment of
right-of-use assets 10 7.1 6.7 14.1
Costs relating to business combinations(1) 1.8 2.0 4.9
Exceptional items(2) - - 12.4
------------------------------------------------ ----- ------------------ ------------------ ----------------
Adjusted EBITDA 57.8 52.0 107.4
------------------------------------------------ ----- ------------------ ------------------ ----------------
Adjusted earnings per share (EPS):
Adjusted EPS 6 45.6p 41.5p 85.8p
Diluted adjusted EPS 6 45.2p 41.1p 85.0p
------------------------------------------------ ----- ------------------ ------------------ ----------------
(1) Includes amounts paid in respect of acquisitions in prior
years expensed to the income statement.
(2) Exceptional items in the prior year relate to impairment in
relation to Quality Pet Care Ltd.
Net debt
Net debt is calculated as bank borrowings less gross cash and
cash equivalents and unamortised borrowing costs.
Six months Six months
ended 31 ended 31 Year ended
December December 30 June
2022 (Unaudited) 2021 (Unaudited) 2022 (Audited)
GBPm GBPm GBPm
-------------------------------- --- --------------------- ------------------ ----------------
Borrowings repayable after more
than one year
Loan facility 85.0 85.0 85.0
Unamortised borrowing costs (0.5) (0.9) (0.7)
------------------------------------ ---- ---------------- ------------------ ----------------
Total borrowings 84.5 84.1 84.3
Cash and cash equivalents (27.4) (21.8) (49.0)
------------------------------------ ---- ---------------- ------------------ ----------------
Net debt 57.1 62.3 35.3
------------------------------------ ---- ---------------- ------------------ ----------------
Net bank borrowings
Net bank borrowings is drawn bank debt less cash and cash
equivalents.
Like-for-like sales
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
sales calculation.
3. Summary of significant accounting policies
The accounting policies adopted are consistent with those set
out on pages 115 to 124 of the consolidated financial statements of
CVS Group plc for the year ended 30 June 2022 (which are available
upon request from the Company's registered office or on the
Company's website).
The policy for recognising and measuring taxation in the interim
period is described in note 8.
Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The significant
judgements made by management in applying the Group's accounting
policies, and the key sources of estimation uncertainty, were the
same as those described in the last annual financial
statements.
4. Segment reporting
Segment information is presented in respect of the Group's
business and geographical segments. The primary format, operating
segments, is based on the Group's management and internal reporting
structure and monitored by the Group's Chief Operating Decision
Maker (CODM).
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, tax-related
assets and liabilities, costs relating to business combinations,
and Head Office salary and premises costs.
Revenue comprises GBP214.4m of fees and GBP81.9m of goods (31
December 2021: GBP195.5m and GBP78.2m respectively).
Operating segments
The Group is split into four operating segments (Veterinary
Practices, Laboratories, Crematoria and Online Retail Business) and
a centralised support function (Head Office) for business segment
analysis. In identifying these operating segments, management
generally follows the Group's service lines representing its main
products and services.
Each of these operating segments is managed separately as each
segment requires different specialisms, marketing approaches and
resources. Intra-group sales eliminations are included within the
Head Office segment. Head Office includes costs relating to the
employees, property and other overhead costs associated with the
centralised support function, together with finance costs arising
on the Group's borrowings.
Online
Veterinary Retail Head
Six-months ended Practices Laboratories Crematoria Business Office Group
31 December 2022 GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------- --------------- ----------- ---------- ---------- --------
Revenue 263.4 14.2 5.3 24.5 (11.1) 296.3
Adjusted EBITDA 55.4 4.4 1.6 1.7 (5.3) 57.8
Profit/(loss) before
tax 32.5 4.0 1.4 1.6 (11.5) 28.0
Total assets 436.2 39.4 21.6 27.6 2.9 527.7
Total liabilities (166.8) (1.7) (1.6) (17.0) (106.7) (293.8)
Reconciliation of
adjusted EBITDA
Profit/(loss) before
tax 32.5 4.0 1.4 1.6 (11.5) 28.0
Finance expense 2.0 - - - 1.5 3.5
Depreciation of property,
plant and equipment 5.4 0.4 0.2 - 0.1 6.1
Depreciation and impairment
of right-of-use assets 6.8 - - - 0.3 7.1
Amortisation of intangible
assets 7.8 - - 0.1 3.4 11.3
Costs relating to
business combinations 0.9 - - - 0.9 1.8
----------------------------- ------------------- --------- ----------- ---------- ---------- --------
Adjusted EBITDA 55.4 4.4 1.6 1.7 (5.3) 57.8
----------------------------- ------------------- --------- ----------- ---------- ---------- --------
Online
Six-month period Veterinary Retail Head
ended Practices Laboratories Crematoria Business Office Group
31 December 2021 GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------- --------------- ----------- ---------- ---------- --------
Revenue 243.3 13.3 4.8 22.7 (10.4) 273.7
Adjusted EBITDA 52.1 4.0 1.7 1.7 (7.5) 52.0
Profit/(loss) before
tax 30.2 3.6 1.5 1.6 (14.0) 22.9
Total assets 428.2 32.3 17.7 10.9 2.8 491.9
Total liabilities (163.0) (2.2) (1.1) (14.8) (105.5) (286.6)
Reconciliation of adjusted
EBITDA
Profit/(loss) before
tax 30.2 3.6 1.5 1.6 (14.0) 22.9
Finance expense 2.1 - - - 1.3 3.4
Depreciation of property,
plant and equipment 5.0 0.3 0.2 - 0.2 5.7
Depreciation and impairment
of right-of-use assets 6.6 0.1 - - - 6.7
Amortisation of intangible
assets 7.2 - - 0.1 4.0 11.3
Costs relating to
business combinations 1.0 - - - 1.0 2.0
Adjusted EBITDA 52.1 4.0 1.7 1.7 (7.5) 52.0
----------------------------- ------------------- --------- ----------- ---------- ---------- --------
Online
Veterinary Retail Head
Year ended 30 June Practices Laboratories Crematoria Business Office Group
2022 GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------- --------------- ----------- ---------- ---------- --------
Revenue 492.1 27.2 9.5 46.6 (21.2) 554.2
Adjusted EBITDA 108.8 8.3 3.4 3.5 (16.6) 107.4
Profit/(loss) before
tax 64.8 7.6 2.9 3.4 (42.7) 36.0
Total assets 426.0 38.6 20.1 27.9 5.6 518.2
Total liabilities (170.6) (5.1) (2.2) (18.6) (104.3) (300.8)
Reconciliation of adjusted
EBITDA
Profit/(loss) before
tax 64.8 7.6 2.9 3.4 (42.7) 36.0
Finance expense 4.1 - - - 2.7 6.8
Depreciation of property,
plant and equipment 9.9 0.6 0.5 - 0.3 11.3
Depreciation and impairment
of right-of-use assets 13.7 0.1 - - 0.3 14.1
Profit on disposal
of property, plant
and equipment and
right-of-use assets (0.3) - - - - (0.3)
Amortisation of intangible
assets 14.6 - - 0.1 7.5 22.2
Costs relating to
business combinations 2.0 - - - 2.9 4.9
Exceptional items - - - - 12.4 12.4
Adjusted EBITDA 108.8 8.3 3.4 3.5 (16.6) 107.4
----------------------------- ------------------- --------- ----------- ---------- ---------- --------
Geographical segments
The business operates predominantly in the UK. As at 31 December
2022, it has 27 veterinary practices in the Netherlands and four in
the Republic of Ireland. It performs a small amount of laboratory
work and teleradiology work for Europe-based clients, and a small
amount of teleradiology work for clients based in the rest of the
world. In accordance with IFRS 8, 'Operating segments', no segment
results are presented for trade with clients in Europe or the rest
of the world as these are not reported separately for management
reporting purposes, and are not considered material for separate
disclosure.
5. Finance expense
Year ended
30 June
Six months Six months
ended 31 ended 31
December December
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Interest expense on bank loans
and overdraft 1.2 1.1 2.2
Interest expense on lease
liabilities 2.1 2.1 4.2
Amortisation of debt arrangement
fees 0.2 0.2 0.4
Net finance expense 3.5 3.4 6.8
--------------------------------------- ------------- ------------- ------------
6. Earnings per Ordinary share
(a) Basic
Basic earnings per share is calculated by dividing the profit
after taxation by the weighted average number of shares in issue
during the period.
Year ended
30 June
Six months Six months
ended 31 December ended 31 December
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
------------------------------------ ------------------ ------------------ -----------
Profit for the year (GBPm) 21.1 17.5 25.7
Weighted average number of Ordinary
shares in issue 71,215,385 70,839,356 70,926,977
------------------------------------ ------------------ ------------------ -----------
Basic earnings per share (pence) 29.6 24.7 36.2
------------------------------------ ------------------ ------------------ -----------
(b) Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of Ordinary shares outstanding to assume
conversion of all dilutive potential Ordinary shares. The Company
has potentially dilutive Ordinary shares, being the contingently
issuable shares under the Group's Long-Term Incentive Plan (LTIP)
schemes and Save-As-You-Earn (SAYE) schemes. For share options, a
calculation is undertaken to determine the number of shares that
could have been acquired at fair value (determined as the average
annual market share price of the Company's shares) based on the
monetary value of the subscription rights attached to outstanding
share options. The number of shares calculated as above is compared
with the number of shares that would have been issued assuming the
exercise of the share options.
Year ended
30 June
Six months Six months
ended 31 December ended 31 December
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
--------------------------------------- ------------------ ------------------ -----------
Profit for the year (GBPm) 21.1 17.5 25.7
Weighted average number of Ordinary
shares in issue 71,215,385 70,839,356 70,926,977
Adjustment for contingently issuable
shares - LTIPs 277,538 249,944 248,506
Adjustment for contingently issuable
shares - SAYE schemes 232,314 494,778 377,056
--------------------------------------- ------------------ ------------------ -----------
Weighted average number of Ordinary
shares for diluted earnings per share 71,725,237 71,584,078 71,552,539
--------------------------------------- ------------------ ------------------ -----------
Diluted earnings per share (pence) 29.4 24.5 35.9
--------------------------------------- ------------------ ------------------ -----------
Alternative performance measure: adjusted earnings per share
Year ended
30 June
Six months Six months
ended 31 December ended 31 December
2022 2021 2022
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
Profit before tax 28.0 22.9 36.0
Adjustments for:
Amortisation of intangible assets 11.3 11.3 22.2
Costs relating to business combinations 1.8 2.0 4.9
Exceptional items - - 12.4
Adjusted profit before tax 41.1 36.2 75.5
Tax expense amended for the above
adjustments (8.6) (6.8) (14.6)
------------------------------------------- ------------------ ------------------ -----------
Adjusted profit after tax 32.5 29.4 60.9
------------------------------------------- ------------------ ------------------ -----------
Weighted average number of Ordinary
shares in issue 71,215,385 70,839,356 70,926,977
Weighted average number of Ordinary
shares for diluted earnings per
share 71,725,237 71,584,078 71,552,539
Adjusted earnings per share (pence) 45.6p 41.5p 85.8p
------------------------------------------- ------------------ ------------------ -----------
Diluted adjusted earnings per share
(pence) 45.2p 41.1p 85.0p
------------------------------------------- ------------------ ------------------ -----------
7. Share-based payments
Long-Term Incentive Plans
The Group operates incentive schemes for certain senior
executives and others, the CVS Group Long-Term Incentive Plan
(LTIP).
Under the LTIP schemes, awards are made at an effective nil
cost. Executive schemes vest over a three-year performance period
conditional upon the Group's adjusted earnings per share growth and
Total Shareholder Return (TSR). Schemes for others vest over a
three-year period but are not conditional on performance. The LTIP
scheme arrangements are a mixture of equity-settled and
cash-settled. Cash-settled LTIP schemes are linked to a number of
shares, the value of which is settled in cash upon exercise.
The following LTIP schemes were issued in H1 2023:
LTIP 16 LTIP 16(b) LTIP 16(c)
--------------------------- --------------- --------------- -------------
Issue date 30 September 30 September 12 October
2022 2022 2022
Option life 3 years 3 years 3 years
Number of shares 119,639 5,915 5,915
Share price at grant date GBP16.90 GBP16.90 GBP17.60
Exercise price 0.2p 0.2p 0.2p
Settlement Equity-settled Equity-settled Cash-settled
--------------------------- --------------- --------------- -------------
During the six months to 31 December 2022, Directors and
employees exercised 115,280 share options (31 December 2021:
97,491) with a weighted average share price at the date of exercise
of GBP20.01 (31 December 2021: GBP24.22) in respect of the LTIP13
(31 December 2021: LTIP12) scheme.
Options were valued using the Monte-Carlo option pricing model
and the share-based payment charge for the period in respect of the
options issued under the LTIP schemes amounted to GBP0.6m (31
December 2021: GBP0.8m), which has been charged to administrative
expenses. National Insurance contributions amounting to GBP0.1m (31
December 2021: GBP0.2m) have been accrued in respect of the LTIP
scheme transactions and are treated as cash-settled
transactions.
Save As You Earn (SAYE)
The Group operates an incentive scheme for all employees, the
CVS Group SAYE plan, an HM Revenue & Customs-approved scheme.
Under the new SAYE15 scheme, awards were made at a 20.0% discount
(SAYE14 and SAYE13 were made at a 20.0% discount and SAYE11 and
SAYE12 scheme awards were made at a 10.0% discount) of the closing
mid-market price on date of invitation, vesting over a three-year
period. There are no performance conditions attached to the SAYE
schemes.
SAYE15 was opened for subscription in November 2022 with 381,689
options granted and a contract start date of 1 January 2023. The
exercise price was GBP15.15, a 20.0% discount to the closing
mid-market price on the date of invitation.
Options were valued using the Black-Scholes option pricing model
and the share-based payment charge for the period in respect of the
options issued under the SAYE schemes amounted to GBP0.6m (31
December 2021: GBP0.5m), which has been charged to administrative
expenses.
8. Tax expense
The tax charge for the six months ended 31 December 2022 is
recognised based on management's estimate of the weighted average
annual effective tax rate expected for the full financial year,
adjusted for the tax impact of any discrete items arising in the
period. The estimated average annual tax rate used for the six
months ended 31 December 2022 is 22.8% (31 December 2021:
21.8%).
The reported effective tax rate for the six months ended 31
December 2022 is 24.6% (31 December 2021: 23.8%). The reported
effective tax rate has increased from the previous period by 0.8%.
This is predominantly due to an increase in the standard rate of UK
corporation tax rate to 25.0% from April 2023, resulting in UK
corporation tax being calculated at a blended rate of 20.5% (31
December 2021: 19.0%), offset in part by a decrease in expenses not
deductible for tax purposes, mainly in respect of business
acquisitions.
9. Intangible assets and property, plant and equipment
Property,
Intangible plant and
assets equipment
GBPm GBPm
Six months ended 31 December 2022
Opening net book value at 1 July 2022 216.5 69.7
Foreign currency translation 0.5 -
Additions 1.9 18.0
Other additions 0.2 -
Additions arising through business combinations 26.6 1.1
Disposals - -
Amortisation and depreciation (11.3) (6.1)
------------------------------------------------- ----------- -----------
Closing net book value at 31 December 2022 234.4 82.7
------------------------------------------------- ----------- -----------
Six months ended 31 December 2021
Opening net book value at 1 July 2021 228.4 57.4
Foreign currency translation (0.2) -
Additions 0.3 10.3
Disposals - (0.1)
Amortisation and depreciation (11.3) (5.7)
------------------------------------------------- ----------- -----------
Closing net book value at 31 December 2021 217.2 61.9
------------------------------------------------- ----------- -----------
10. Right-of-use assets
Right-of-use
assets
GBPm
-------------------------------------------- -------------
Six months ended 31 December 2022
At 1 July 2022 101.7
Foreign currency translation 0.2
Remeasurement of lease term 0.7
Additions 2.2
Acquired through business combinations 2.5
Disposals (0.8)
Depreciation (7.1)
--------------------------------------------- -------------
Closing net book value at 31 December 2022 99.4
--------------------------------------------- -------------
Six months ended 31 December 2021
At 1 July 2021 97.2
Foreign currency translation (0.3)
Remeasurement of lease term 4.0
Additions 4.9
Disposals (0.2)
Depreciation (6.7)
--------------------------------------------- -------------
Closing net book value at 31 December 2021 98.9
--------------------------------------------- -------------
11. Investments
30 June
2022
31 December 31 December
2022 2021 (Audited)
(Unaudited) (Unaudited)
GBPm GBPm GBPm
Investments in equity instruments - 17.0 -
designated as fair value through
other comprehensive income
Other investments 0.1 0.1 0.1
----------------------------------- ------------- ------------- ------------
Total 0.1 17.1 0.1
----------------------------------- ------------- ------------- ------------
12. Business Combinations
Details of business combinations in the six months ended 31
December 2022 are set out below. The reason for each acquisition
was to expand the CVS Group business through acquisitions aligned
to our strategic goals.
Name of business combination Date of acquisition
-------------------------------------- -------------------
Werrington Vets Limited 27 July 2022
Woodlands Veterinary Clinic Limited 16 September 2022
Market Cross Veterinary Clinic Limited 18 October 2022
Seadown Veterinary Services Ltd 9 November 2022
The Harrogate Vet Limited 24 November 2022
-------------------------------------- -------------------
All businesses were acquired via 100.0% share purchase
agreement.
Given the nature of the veterinary practices acquired and the
records maintained by such practices, it is not practicable to
disclose the revenue or profit or loss of the combined entity for
the period as though the acquisition date for all business
combinations during the year had been at the beginning of that
period.
The table below summarises the total assets acquired through
business combinations in the six months ended 31 December 2022:
Book value
of
acquired Fair value
assets adjustments Fair value
Note GBPm GBPm GBPm
------------------------------------------ ---- ---------- ------------- ------------
Property, plant and equipment 9 1.1 - 1.1
Patient data records 9 - 7.2 7.2
Right-of-use assets 10 2.5 - 2.5
Inventories 0.2 - 0.2
Deferred tax liability (0.2) (1.8) (2.0)
Trade and other receivables 2.0 - 2.0
Trade and other payables (1.3) - (1.3)
Right-of-use liabilities (2.5) - (2.5)
------------------------------------------ ---- ---------- ------------- ------------
Total identifiable assets 1.8 5.4 7.2
------------------------------------------ ---- ---------- ------------- ------------
Goodwill 9 19.4
------------------------------------------ ---- ---------- ------------- ------------
Total consideration (net of cash acquired
of GBP2.3m) 26.6
------------------------------------------ ---- ---------- ------------- ------------
Initial consideration paid (net of cash
acquired of GBP2.3m) 24.4
Deferred consideration payable 0.7
Contingent consideration payable 1.5
------------------------------------------ ---- ---------- ------------- ------------
Total consideration (net of cash acquired
of GBP2.3m) 26.6
------------------------------------------ ---- ---------- ------------- ------------
Goodwill recognised represents the excess of purchase
consideration over the fair value of the identifiable net assets.
Goodwill reflects the synergies arising from the combination of the
businesses; this includes cost synergies arising from shared
support functions and buying power synergies. Goodwill includes the
recognition of an amount equal to the deferred tax that arises on
non-qualifying fixed assets acquired under a business
combination.
Post-acquisition revenue and post-acquisition adjusted EBITDA
were GBP2.2m and GBP0.6m respectively. The post-acquisition period
is from the date of acquisition to 31 December 2022.
Post-acquisition EBITDA represents the direct operating result of
practices from the date of acquisition to 31 December 2022 prior to
the allocation of central overheads, on the basis that it is not
practicable to allocate these.
Goodwill and intangible assets recognised in the year relating
to business combinations are not expected to be deductible for tax
purposes.
Acquisition costs of GBP1.8m (31 December 2021: GBP2.0m) are
included within other expenses in note 4 of the financial
statements.
The Directors do not consider any individual in-year acquisition
to be material to the Group and therefore have not separately
disclosed these.
The acquisition of The Harrogate Vet Limited is a related party
transaction and further details can be found in note 20.
Subsequent to the period end, the Group has made three
acquisitions:
- 100% of the share capital of AT Animal Care Limited, a single
site companion animal veterinary practice in the UK on 24 January
2023
- 100% of the share capital of Matt Smith Pet Care Limited, a
single site companion animal veterinary practice in the UK on 26
January 2023
- The trade and assets of Macqueen Vets, a single site companion
animal veterinary practice in the UK on 26 January 2023
13. Trade and other payables
30 June
31 December
2021 2022
31 December
2022 (Unaudited) (Audited)
(Unaudited)
GBPm GBPm GBPm
Trade payables 35.7 35.2 40.4
Social security and other taxes 19.9 16.7 18.4
Other payables 5.4 5.5 6.0
Deferred income(1) 2.2 2.3 2.2
Accruals 20.1 17.7 19.6
--------------------------------- ------------- ------------- ------------
Total 83.3 77.4 86.6
--------------------------------- ------------- ------------- ------------
(1) Deferred income relates to the contract liability relating
to the Healthy Pet Club (HPC) contract.
14. Provisions
31 December
2021
31 December 30 June
2022 (Unaudited) 2022
(Unaudited) (Audited)
GBPm GBPm GBPm
At the beginning of the period 2.1 3.9 3.9
Charged to the income statement
within administration expenses - - 1.2
Utilised in the period (1.2) (0.9) (3.0)
At the end of the period 0.9 3.0 2.1
--------------------------------- ------------- ------------- ------------
Provisions relate to costs set aside for properties including
site closures and other property maintenance obligations. It is
anticipated these will be utilised in the next twelve months.
15. Lease liabilities
30 June
31 December
2021 2022
31 December
2022 (Unaudited) (Audited)
(Unaudited)
GBPm GBPm GBPm
Current 9.5 8.6 9.4
Non-current 93.4 92.4 95.1
------------------------------------ ------------- ------------- ------------
Total discounted lease liabilities 102.9 101.0 104.5
------------------------------------ ------------- ------------- ------------
Maturity analysis - contractual
undiscounted cash flows
Less than one year 13.4 12.4 13.2
Between one and five years 56.1 52.7 56.2
More than five years 53.3 57.7 56.6
Total 122.8 122.8 126.0
------------------------------------ ------------- ------------- ------------
16. Cash flow generated from operations
Year ended
30 June
2022
Six months
ended 31
December
2022 (Audited)
Six months
ended 31
December
(Unaudited) 2021 (Unaudited)
GBPm GBPm GBPm
Profit for the period 21.1 17.5 25.7
Tax expense 6.9 5.4 10.3
Finance expense 3.5 3.4 6.8
Amortisation of intangible assets 11.3 11.3 22.2
Depreciation of property, plant
and equipment 6.1 5.7 11.3
Depreciation and impairment of right-of-use
assets 7.1 6.7 14.1
Profit on sale of property, plant
and equipment and right-of-use assets - - (0.3)
Increase in inventories (2.3) (3.1) (6.6)
(Increase)/decrease in trade and
other receivables (1.2) 2.0 (3.2)
Decrease in trade and other payables (7.0) (11.4) (0.1)
Decrease in provisions (1.2) (0.9) (1.8)
Share option expense 1.2 1.3 2.3
Exceptional items - - 12.4
Total net cash flow generated from
operations 45.5 37.9 93.1
--------------------------------------------- ------------- ------------------ ------------
17. Analysis of movement in liabilities from financing activities
At 1 Liabilities At 31
July Cash on disposed Non-cash December
2022 flow New leases leases movement 2022
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- --------- ----------- ------------- ---------- ----------
Lease liabilities (104.5) 8.6 (5.4) 0.8 (2.4) (102.9)
Bank loans (84.3) - - - (0.2) (84.5)
Total liabilities
from financing activities (188.8) 8.6 (5.4) 0.8 (2.6) (187.4)
---------------------------- -------- --------- ----------- ------------- ---------- ----------
At 1 Liabilities At 31
July Cash on disposed Non-cash December
2021 flow New leases leases movement 2021
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- --------- ----------- ------------- ---------- ----------
Lease liabilities (98.8) 8.2 (8.9) 0.2 (1.7) (101.0)
Bank loans (83.9) - - - (0.2) (84.1)
Total liabilities
from financing activities (182.7) 8.2 (8.9) 0.2 (1.9) (185.1)
---------------------------- -------- --------- ----------- ------------- ---------- ----------
Non-cash movements on right-of-use lease liabilities mainly
comprise interest. Non-cash movements on borrowings and bank loans
mainly include amortisation of issue costs on bank loans and bank
debt acquired.
18. Dividends
The dividends paid in December 2022, representing the final
dividend payable for the year ended 30 June 2022, amounted to
GBP5.0m (7.0 pence per share) (31 December 2021: GBP4.6m (6.5 pence
per share)).
19. Events after the reporting period
On 24 January 2023, the Group completed the purchase of 100.0%
of the share capital of AT Animal Care Limited, a company
registered in England and Wales. On 26 January 2023, the Group
completed the purchase of 100.0% of the share capital of Matt Smith
Pet Care Limited, a company registered in England and Wales. On 26
January 2023, the Group completed the purchase of the trade and
assets of Macqueen Vets. These businesses each comprise one
companion animal veterinary practice site in the UK, aligned with
the Group's strategic goals. Initial cash consideration for these
acquisitions was GBP10.9m.
On 22 February 2023, the Group completed a re-finance of the
debt facility, increasing the total facility from GBP170.0m to
GBP350.0m, which comprises the following elements:
-- a fixed term loan of GBP87.5m, repayable on 21 February 2027 via a single bullet repayment;
-- a four-year Revolving Credit Facility of GBP262.5m, that runs to 21 February 2027.
In addition the Group has a GBP5.0m overdraft facility,
renewable annually.
20. Related party transactions
During the period, on 23 November 2022, the Group completed the
purchase of 100.0% of the share capital of The Harrogate Vet
Limited, a company registered in England and Wales, for initial
consideration of GBP2.6m, plus deferred consideration of GBP1.5m.
This is a business comprising one animal veterinary practice site
in the UK.
Prior to acquisition, the company was partially owned by the
spouse of one of the Executive Directors of the Group, and as such
the acquisition is considered a related party transaction. The
terms of the acquisition, including consideration paid, were on an
arm's length basis and consistent with acquisitions of other
unrelated entities.
Consideration of GBP1.5m remains payable to the related party,
contingent on fixed EBITDA targets within the practice
acquired.
The related party remained in employment within the Group, and
will receive an annual salary in FY23.
Directors and advisers
Directors R Connell (Chair)
D Kemp (Non-Executive Director)
R Gray (Non-Executive Director)
D Wilton (Non-Executive Director)
R Fairman (Chief Executive Officer)
B Jacklin (Chief Operating Officer)
R Alfonso (Chief Financial Officer)
Company Secretary J Farrer
Company number 06312831
Registered office CVS House
Owen Road
Diss
Norfolk
IP22 4ER
Independent auditor Deloitte LLP
1 Station Square
Cambridge
CB1 2GA
Bankers NatWest Bank Plc Gentleman's Walk Norwich
NR2 1NA
HSBC Bank plc
8 Canada Square
London
E14 5HQ
AIB Group (UK) plc
St Helen's
1 Undershaft
London
EC3A 8AB
Barclays Bank plc
1 Churchhill Place
London
E14 5HP
Virgin Money
15(th) Floor
The Leadenhall Building
122 Leadenhall Street
London
EC3V 4AB
JPMorgan Chase Bank
25 Bank Street
Canary Wharf
London
E14 5JP
Lloyds Bank plc
25 Gresham Street
London
EC2V 7HN
Danske Bank UK
75 King William Street
London
EC4N 7DT
Rabobank
Willemskade 1
8011 AC Zwolle
Netherlands
Ulster Bank Limited
33 Eyre Square
Galway
H91 HY96
Republic of Ireland
Legal advisors Leathes Prior 74 The Close Norwich NR1
4DR DLA Piper UK LLP
Victoria Square House
Victoria Square
Birmingham
B2 4DL
Eversheds Sutherland
115 Colmore Row
Birmingham
B3 3AL
Nominated advisor Peel Hunt LLP
and broker 7(th) Floor
100 Liverpool Street
London
EC2M 2AT
Joint broker Berenberg
60 Threadneedle Street
London
EC2R 8HP
Financial Public Relations Camarco
3rd Floor
Cannongate House
62-64 Cannon Street
London
EC4N 6AE
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END
IR PPUMWPUPWPUW
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