Pets have become big business. So much so that last week private equity giant CVC agreed to buy a majority stake in the vet chain Medivet from rival Inflexion in a deal worth more than £1 billion.
A pandemic-induced boom in pet ownership, along with the availability of more complex procedures and posh pet food, has driven rapid growth among insurers, pet shops and veterinary practices. CVS Group, an Aim-listed owner of vet surgeries, is a way for public market investors to bite into a piece of the action.
Analysts at Peel Hunt suggest that Medivet’s business is less attractive than CVS’s, given that many of its practices operate with a joint venture structure making it harder to create a “collegiate culture”. CVS is also likely to continue its focus on acquisitions after adding nine practices last year.
A trading statement in July revealed a lot of what to expect this week when CVS announces full-year results. It has already said that like-for-like sales for the 12 months to June rose 17.4 per cent, ahead of City expectations. Full-year revenues are expected to be £502.3 million, according to analyst consensus estimates.
The company has done well since the Royal College of Veterinary Surgeons permitted practices to offer a full range of procedures, rather than essential services. Trading was interrupted in the first lockdown when sales at small animal practices fell by about 50 per cent.
Part of the attraction is that pet owners are spending ever larger sums on their animals, from treatments to high-quality food and treats, while taking out insurance to pay for complex procedures when their pets are ill.
A test in the coming months will be whether this trend begins to slow now that restrictions have eased.
CVS is among a number of “super groups” snapping up independent vet practices. It has about 500 across the UK, the Netherlands and Ireland. It also owns laboratories, crematoriums and Animed Direct, an online pharmacy. Recently its labs have been busy with Covid testing.
In 2019, the Royal College of Veterinary Surgeons said more than four in ten UK vets worked either for a corporate or in a joint venture with a corporate. CVS is the UK’s second-biggest group, with a 9 per cent market share. But unlike its private equity-owned competitors, CVS has relatively little debt — at an estimated 1.7 times adjusted earnings, according to broker Singer Capital Markets.
CVS is expected to report sales of £502.3 million for the 12 months to the end of June. Shares in CVS closed on Friday at £24.90. If it continues to perform, this is one to buy.
