Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CVS Group PLC (CVSGF, Financial) reported a 6.6% increase in revenue to GBP341.8 million for the first half of the fiscal year.
- Adjusted EBITDA increased by 4.5% to GBP67.4 million, with a margin of 19.7%, benefiting from acquisitions in Australia.
- The company has successfully expanded its footprint in the Australian veterinary market, completing five acquisitions and exchanging contracts for six more.
- CVS Group PLC (CVSGF) maintains a strong operating cash conversion rate of 72%, exceeding their target of 70%.
- The Healthy Pet Club membership has grown to 507,000 members, indicating strong engagement with preventative health schemes.
Negative Points
- Like-for-like sales declined by 1.1%, impacted by softer market conditions in the UK, particularly in online retail and laboratory businesses.
- Adjusted EPS decreased by 8.3p, affected by increased depreciation, finance expenses, and higher effective tax rates.
- The UK operations face uncertainty due to the ongoing CMA market investigation, leading to a reprioritization of investments.
- The online retail business experienced a 6% revenue decline, attributed to economic challenges affecting demand for premium products.
- Employment costs as a percentage of revenue increased due to wage inflation and investment in staff, impacting overall margins.
Q & A Highlights
Q: Can you elaborate on the impact of the CMA market investigation on your UK operations?
A: Richard Fairman, CEO: The ongoing CMA market investigation has led us to reprioritize our investment activities, focusing more on the Australian market where the regulatory environment is more stable. In the UK, we are undertaking investments in facilities, equipment, and technology on a very disciplined basis, with no new acquisitions planned during this period of uncertainty.
Q: What are the key drivers behind the revenue growth in the first half of the year?
A: Robin Alfonso, CFO: Revenue grew by 6.6% to GBP341.8 million, primarily driven by acquisitions in Australia. However, like-for-like sales declined by 1.1% due to softer market conditions in the UK, particularly affecting our online retail and laboratory businesses.
Q: How is the Australian market performing, and what are your future plans there?
A: Richard Fairman, CEO: We have invested over GBP100 million in the Australian market since July 2023, acquiring 27 practices. The market is performing well, and we expect annualized revenue of approximately GBP55 million from these acquisitions. We continue to focus on acquiring high-quality practices and have a strong pipeline of opportunities.
Q: What measures are being taken to address the challenges in the UK online retail business?
A: Robin Alfonso, CFO: The online retail business faced a 6% revenue decline due to economic conditions impacting demand for premium products. We launched a new website in February 2025 to improve speed and usability, which we believe will drive future growth.
Q: Can you discuss the strategic focus on clinical care and employee satisfaction?
A: Paul Higgs, Chief Veterinary Officer: We emphasize clinical care through our governance framework and initiatives like the "Let's Learn from Mistakes" campaign. Employee satisfaction is crucial, and our net promoter score has improved significantly after addressing challenges from the previous year.
Q: What is the outlook for the second half of the year?
A: Richard Fairman, CEO: We expect to see year-on-year growth in our core veterinary practices division and across the group in the second half. Our strategy remains focused on organic growth and acquisitions, particularly in Australia, and we are confident in meeting market expectations for the full year.
Q: How is the company managing inflationary pressures, particularly in wages?
A: Robin Alfonso, CFO: Inflation has impacted our adjusted EBITDA margin, primarily through wage increases. We aim to protect margins through cost efficiencies, benefits from previous investments, and synergies from our Australian operations.
Q: What are the company's plans for capital investment in the near term?
A: Robin Alfonso, CFO: We plan to invest between GBP30 million to GBP50 million annually in capital expenditures, focusing on technology, clinical equipment, and practice refurbishments. Our acquisition focus will remain in Australia, with over GBP50 million planned for acquisitions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
