CVS has expansion plan optimism despite dip in profits

A fall in profits will not stop one of the UK’s largest veterinary companies investing in new staff and practices, both at home and abroad, a senior official has insisted.

CVS Group deputy chief executive Ben Jacklin conceded inflationary pressures were likely to continue for the foreseeable future after the company’s latest half-year results were published.

But despite that, and the ongoing interest of competition regulators in the sector, he remains confident of further expansion. He said: “We have a good pipeline and we expect to do more deals.”

‘Like-for-like growth’

Mr Jacklin was speaking after the company published its results for the six months to the end of December 2023 on 29 February.

He said there had been “good like-for-like growth”, following a 6% increase in sales, while revenues rose by 11.4% to £329.9 million.

But although the company’s preferred measurement of earnings before interest, taxes, depreciation and amortisation rose by 8.9% to £63 million, its operating profits were down by 9.2% to £28.6 million, while pre-tax profits dropped by 16.4% to £23.4 million.

Although overall inflation has been on a broader downward trajectory in recent months, standing at 4% in January, concerns persist that faster price increases are continuing to affect both veterinary businesses and their clients.

Wage inflation

Mr Jacklin acknowledged that cost rises were a factor, with wage inflation a greater issue for veterinary businesses than in other sectors, and conceded that was likely to remain the case for some time yet.

He said: “We’re still seeing inflationary increases and our expectation is we’re not past that.”

But another key influence is the enduring commitment to investment in new staff and practices, which has led to the company more than doubling its net bank borrowings to in excess of £129 million.

Alongside investment in new practice sites, such as the recently opened Bristol Vet Specialists, the latest results confirmed increases of more than 8% in the number of both vets and nurses employed during 2023, plus the spending of more than £63 million on 17 practice acquisitions, mostly in Australia.

Australia

The company expects to complete deals for at least 10 more Australian practices in the coming months, and Mr Jacklin said: “We see a great opportunity to build a really fantastic group of practices in Australia that share the values we’ve got. There’s a long, long way ahead of us over there.”

But the group is also confident of completing new deals in the UK, too, based on what it described as a more “prudent” approach following recent inquiries by the Competition and Markets Authority (CMA).

The company now briefs the CMA on potential acquisitions before they proceed because of competition concerns, while Mr Jacklin also sounded an upbeat tone on the authority’s wider review of the veterinary sector, the initial findings of which have yet to be published.

‘Really proud’

Asked whether the company was frustrated by the lack of updates so far, Mr Jacklin said: “Clearly, we’re looking forward to what the CMA have to say, but equally, we would far rather the CMA took a really thorough and detailed look at our profession and our business.

“We’re really proud of the things that we do for our clients, and our clients tell us that they’re really pleased with it.

“The more the CMA can do to learn about our profession, the more informed their view will be and I think the better the outcome is for the profession.”