Introduction
I am pleased to announce the results of CVS Group plc (“CVS”, “the Group”, or “the Company”) for the year ended 30 June 2008, being our first year of trading since becoming a public company.
This has been both a very important and a very successful year for the Group, encompassing a change from private equity ownership following the admission of the shares to trading on AIM on 10 October 2007.
Business overview
The Group was formed in August 1999 to acquire and operate veterinary practices which were well established within their local community, with a reputation for high quality clinical care and service.
The Group has built a reputation in the veterinary profession as a leading national consolidator, with the Group, at the year end, operating 150 surgeries across the UK. This has provided us with significant operational leverage, with greater efficiencies as the majority of administrative services are consolidated within the head office.
Scale also brings significant benefits in buying of drugs and equipment. This coupled with pricing management and the growth in the underlying market for veterinary care, has allowed the Group to demonstrate the ability to extract organic profit growth from the practices it acquires.
Results and dividends
The results show strong growth both through acquisitions and organically. The results are discussed in detail in the Business and Financial review on pages 4-8.
In the year under review the Group acquired 30 surgeries, which represents an increase of 25% on the start of the year. In addition, a strategically important laboratory business (Axiom Veterinary Laboratories Limited (“Axiom”)) was acquired during the year.
The diagnostic services offered by Axiom complement the existing capability of the Group and the acquisition more than doubled (to 7) the number of sites operated, enabling us to offer a broader range of diagnostic services to clients. The acquisition of Axiom shows potential to increase laboratory turnover by c. 140% (annualised) and has already contributed £2.3m to turnover in this financial year, since its acquisition in January 2008.
The directors propose that no final dividend should be declared for the year ended 30 June 2008. No interim dividend for 2008 was paid (2007: £nil). The Board, at this point in time, believes that cash generated from operations should continue to be reinvested into the purchase of further businesses. The Board will continue to review its dividend policy on an ongoing basis.
Staff
Our excellent team of people continue to be key to the Group in delivering its strategy. I would like to thank each of them for their professionalism in giving our clients the best possible clinical care and service.
As part of the recognition for their hard work the Group has established a Save As You Earn share purchase scheme, which was open for subscription to all staff after the year end. The aim is to further reward the commitment of our staff and allow them to benefit from the success of CVS.
The Group continues to be the largest employer in the UK veterinary profession with 1,600 staff. The Group currently employs around 360 vets out of an estimated total of 12,000 practising vets in the UK, giving some indication of the significant scope left for expansion in the UK market.
Future outlook
The Board will continue to focus on delivering revenue growth and cash and profit generation both organically and through acquisition.
The directors intend to continue the strategy of growth through acquisition in the fragmented UK veterinary market. We continue to be approached by veterinary practices and laboratory service providers seeking to sell to the Group and we are currently evaluating a number of potential practice acquisitions which would add in excess of 30 surgeries to our business.
The new financial year has started well with current trading in line with expectations. Since the year end the Group has also made a further acquisition, comprising of a large veterinary surgery in the North East of England.
Richard Connell
Chairman
15 September 2008