AGM 2010 Documents
Chairman’s statement
Introduction and review of operations
I am pleased to announce the results of CVS Group plc (“CVS”, “the Group”, or “the Company”) for the year ended 30 June 2009. This is a very strong set of results despite the recent turbulent economic climate. The Group has continued to grow and deliver significant improvements in all financial metrics.
CVS is one of the leading providers of veterinary and related services in the UK with 168 veterinary surgeries, 6 laboratories and a pet crematorium. The Group is comprised of three operating divisions and a central support function. We have seen growth across all three operating divisions during the year.
Veterinary services
This is the primary division generating 88.6% (£67.88m) of Group revenues. The division has delivered 20% revenue growth (£11.21m) over the prior year, and includes the impact of the acquisition of 17 new surgeries.
Laboratory services
The laboratory division generated 10.8% (£8.29m) of Group revenues. The laboratory division delivered 51% revenue growth (£2.81m), a key factor of which was the full year impact of the significant expansion of this division through the acquisition of Axiom Laboratories in the prior year.
Crematorium services
In the current period, the Group expanded into the crematorium market with the acquisition of its first site near Bolton. The crematorium contributed £0.44m of revenue in the current year, of which 15% was derived from the Group’s veterinary surgeries.
Central administrative function
The central administrative function of the Group provides support to the operating divisions, relieving them of the majority of their administrative burden and enabling local staff to focus on clinical care and other value added services.
Cash flow and funding position
Operating profit for the year amounted to £7.01m. Adjusted EBITDA (as defined on page 1) of £12.50m demonstrates the underlying financial performance of the Group and the ability to turn this into cash is reflected in cash generated from operations of £12.38m. In the first half of the year cash generated was used in conjunction with bank financing to fund acquisitions. In the second half of the year the Group has funded all of its acquisitions from cash whilst also reducing net debt by £1.55m. The Group will continue to use cash from operations to fund acquisitions and will commence making repayments of debt in December 2009 (see note 24).
The Group has complied with all bank covenants throughout the period.
Dividends
The Board, at this point in time, believes that cash generated from operations should continue to be reinvested in the business, and as such the Directors propose that no dividend should be declared for the year ended 30 June 2009. The Board will continue to review its dividend policy on an ongoing basis.
Profit after tax and earnings per share
Profit after tax was £3.04m, a substantial increase from a loss of £0.34m (as restated) in the prior year. The increase is due to organic growth, growth from acquisitions and exceptional IPO related costs incurred in the prior year. Earnings per share have increased significantly compared to the prior year. Basic and diluted earnings per share were 5.9p and 5.8p respectively, compared to a loss per share of 0.7p (as restated) in the prior year. Adjusted EPS (as defined on page 1) was 11.5p compared to 8.0p (as restated) in the prior year.
Our people
The Group continues to be the largest employer in the UK veterinary profession with 1,750 staff. The Group currently employs around 393 vets out of an estimated total of 12,312 practising vets in the UK, giving further indication of the significant scope left for expansion in the UK market. Our people continue to be key to the Group in delivering its strategy. I would like to thank each of them for their skill and professionalism in providing the best possible care and service.
Strategy
We will continue our strategy of growth through acquisition in the fragmented UK veterinary market combined with organic growth of existing surgeries. We aim to continue to deliver improved returns from the acquisition of veterinary related businesses by growing and managing them more efficiently, centralising administration and utilising the buying power of the Group. In addition, the ability to provide laboratory and crematorium services facilitates vertical integration and drives further efficiencies.
The Directors believe that CVS has 7-8% of the UK small animal veterinary market measured by wholesaler spend, which demonstrates the significant opportunity for further consolidation.
Outlook
The new financial year has started well with all three operating divisions continuing to trade profitably. In addition there has been a further acquisition of Falkland Veterinary Clinic, Newbury.
The focus on the delivery of growth, both organically and through acquisition, across all divisions as well as the focus on the generation of cash and profit, will continue. The Group has succeeded in establishing a resilient business base from which it can build and will continue to seek ways to extract operational efficiency. Having delivered strong results in a period of general economic uncertainty, we are confident that the Group is well positioned to continue driving the business forward.
Richard Connell
Chairman
21 September 2009