TIDMCVSG
RNS Number : 6886M
CVS Group plc
23 September 2021
For Immediate Release 23 September 2021
CVS GROUP plc
("CVS", the "Company" or the "Group")
Final results for the year ended 30 June 2021
CVS, one of the UK's leading providers of integrated veterinary
services, is pleased to announce its final results for the year
ended 30 June 2021.
Financial Highlights
GBPm except where stated 2021 2020 Change
%(5)
----------------------------------- ------ ------ -----------
Revenue 510.1 427.8 19.2%
Group like-for-like ("LFL") sales
growth (%)(1) 17.4% 0.7% +16.7 ppts
Adjusted EBITDA (2) 97.5 71.0 37.3%
Adjusted EBITDA(2) margin (%) 19.1% 16.6% +2.5 ppts
Adjusted profit before income tax
(3) 66.2 38.2 73.3%
Adjusted earnings per share (4)
(p) 75.1 42.0 78.8%
Operating profit 40.1 18.5 116.8%
Profit before income tax 33.1 9.9 234.3%
Basic earnings per share (p) 27.3 8.1 237.0%
----------------------------------- ------ ------ -----------
Notes
1. Like-for-like sales are defined as revenue generated from
like-for-like operations compared to the prior year, adjusted for
the number of working days. For example, for a practice acquired in
September 2019, revenue is included in the like-for-like
calculations from September 2020.
2. Adjusted Earnings Before Interest, Tax, Amortisation and
Depreciation ("adjusted EBITDA") is profit before income tax
adjusted for interest (net finance expense), depreciation,
amortisation, costs relating to business combinations and
exceptional items. Adjusted EBITDA is used as a financial metric
that removes the cost of debt, costs relating to depreciation and
amortisation and one-off costs to get a normalised earnings figure
that is not distorted by irregular items or structural
investment.
3. Adjusted profit before income tax is calculated as profit
before amortisation, taxation, costs relating to business
combinations and exceptional items.
4. Adjusted earnings per share is calculated as adjusted profit
before income tax less applicable taxation divided by the weighted
average number of Ordinary shares in issue in the year.
5. Leverage on a bank test basis is drawn bank debt less cash at
bank; divided by adjusted EBITDA annualised for the effect of
acquisitions, including costs relating to business combinations and
excluding share option costs and exceptional items, prior to the
adoption of IFRS 16.
Financial Highlights
-- Revenue increased by 19.2%, to GBP510.1m from GBP427.8m, with
strong group like-for-like(1) growth of 17.4% benefitting from
favourable market dynamics and a continued focus on providing high
quality care to our clients and their animals
-- The Group delivered adjusted EBITDA(2) growth of 37.3%, to
GBP97.5m from GBP71.0m, through an increase in revenue across all
divisions and effective management of costs
-- Profit before income tax increased by 234.3% to GBP33.1m from GBP9.9m
-- Leverage(5) fell to 0.68x from 1.14x as a result of strong
EBITDA growth and reduction in net debt
-- Cash generated from operations decreased to GBP80.3m from
GBP94.8m despite the increase in adjusted EBITDA, due to VAT and
taxes deferred in the prior year due to COVID-19, paid in the
current year
Operational Highlights
-- The last year has provided many challenges across our
industry, but our people have demonstrated resilience and continued
excellence throughout
-- As well as offering first class care to sick or injured
animals we are continually improving the levels of preventative
health care through our Healthy Pet Club
-- Our annual Quality Improvement report reflects our commitment
to patient safety and consistent clinical improvement, and has
gained us significant recognition in the profession, not least by
our regulator the Royal College of Veterinary Surgeons ("RCVS")
-- We are committed to enhancing the clinical services we offer,
particularly in the quality of our facilities and as such we have
completed 13 refurbishments and relocations in FY21
-- We have continued to organically grow our revenues,
supplementing this with nine synergistic acquisitions during the
year
Current trading & Outlook
-- Total sales growth of 17.5% (31 August 2020: 3.5%) in the
first two months of the new financial year (vs same period in
previous year) with like-for-like sales(1) of 14.4% (prior year:
3.9%) benefitting from a further price increase put through in July
2021 in addition to the delayed price increase implemented in
January 2021
-- Strong adjusted EBITDA(2) margin of 19.5% for the two month
period (Prior year equivalent period: 18.7%)
-- Stable vet vacancy rate, averaging 8.8% for the last twelve
months (LTM) to the end of August 2021 (Prior year LTM: 6.8%) with
continued initiatives to attract and retain our talent
including:
o Acceleration of annual pay increase with effect from 1 July
2021 to align with the start of our financial year;
o Remuneration changed in line with feedback focusing more on
fixed income for clinicians and introducing bonus schemes that
reward collaboration across the Group; and
o Additional day's holiday for every year worked at CVS, up to a
maximum of 5 years
-- Continued growth in Healthy Pet Club scheme to 455,000
members at 31 August 2021 (+7.9% compared to 31 August 2020)
-- One new acquisition made since the year end
-- Leverage(5) flat at 0.7x (31 August 2020: 0.8x)
Richard Fairman, Chief Executive Officer commented:
"We have delivered a very strong performance for the year with
credit to every single one of our colleagues for their
extraordinary efforts to provide the best possible service to our
customers and their animals, against a difficult backdrop of
restrictions and evolving regulatory guidance. These results
demonstrate the resilience of our fully integrated veterinary model
and our commitment to providing the very highest standards of
clinical care.
We continue to expand and develop our business, and, alongside
our ongoing investments in high quality facilities and practices,
we have welcomed a number of new vets and nurses to the Group, as
demand for veterinary services continues to increase in light of
rising pet ownership.
We see a number of opportunities to grow the business, through
favourable consumer trends, further improving our specialist
offering and by continuing to make investment in support. Although
management expectations for the full year are not based on
attaining annual growth at the high levels of the first two months,
the very positive start to the new financial year is encouraging.
We remain focused on providing first class veterinary care and look
forward with confidence."
Results webcast
Management will host a live webcast and Q&A for analysts and
investors at 9am GMT this morning. Those wishing to join should
email CVSGroup@mhpc.com for the registration details. For those
unable to join, there will be a playback facility available on the
CVS website later today at
www.cvsukltd.co.uk/investor-centre/investor-presentation .
This announcement is released by CVS Group plc and contains
inside information for the purposes of the retained UK version of
the EU Market Abuse Regulation (EU) 596/2014 ("UK MAR"),
encompassing information relating to trading for the Company's
current financial year, and is disclosed in accordance with the
Company's obligations under UK MAR. This announcement is being made
on behalf of the Company by the directors named below.
An electronic copy of the Annual Report for the year ended 30
June 2021 is being made available on the Company's website at
www.cvsukltd.co.uk/investor-centre/annual-reports
Contacts
CVS Group plc via MHP Communications
Richard Fairman, CEO
Ben Jacklin, COO
Robin Alfonso, CFO
Singer Capital Markets (Nominated Adviser & Broker) +44 20
7496 3000
Aubrey Powell / Rachel Hayes / Jen Boorer
MHP Communications (Financial PR) +44 20 3128 8549
Andrew Jaques / Simon Hockridge / Rachel Mann / Charles
Hirst
About CVS Group plc
CVS Group is a fully integrated provider of veterinary services
in the UK, with practices in the Netherlands and the Republic of
Ireland. CVS is focused on providing high quality clinical services
to its customers and their animals, with outstanding and dedicated
clinical teams and support colleagues at the core of its
strategy.
The Group has 506 veterinary practices across its three markets,
including eight specialist referral hospitals and 34 dedicated
out-of-hours sites. Alongside the core Practices division, CVS
operates Laboratories (providing diagnostic services to CVS and
third parties), Crematoria (providing pet cremation and clinical
waste disposal for CVS and third party practices), Buying Groups
and the Group's online retail business (Animed Direct).
The Group employs c. 7,200 personnel, including c. 2,000
veterinary surgeons and c. 2,500 nurses.
Further information is available via the Company's website, at
www.cvsukltd.co.uk
Chairman's statement
"Well positioned to deliver further growth in shareholder
value"
Introduction
When I wrote to you last year, CVS was emerging from the first
phase of an unprecedented period of disruption caused by the
COVID-19 pandemic. Over the past year, we have continued to face
challenges but have taken a number of appropriate and decisive
actions as a Board. Through this effective leadership, combined
with the ongoing dedication of our colleagues, I am delighted that
CVS has demonstrated the resilience of its business model and has
emerged as a stronger business with excellent growth opportunities
ahead.
The fundamental strength of CVS is our people and this has been
a key factor in our strong performance over the past year. CVS
colleagues have continued to work tirelessly to provide high
quality care to our clients and their patients and, on behalf of
the Board, I would like to take this opportunity to thank them all
for their hard work and commitment.
Strong financial performance
CVS has delivered improved financial performance in the past
financial year as a result of positive momentum in trading across
the group.
We generated revenue growth of 19.2% which reflects strong
organic growth, with like-for-like sales increasing by 17.4% for
the Group. This reflects an increased client base and our continued
focus on delivering high quality clinical care. We completed nine
acquisitions during the financial year and revenue of GBP6.1m was
generated from these (2020: four acquisitions with revenue of
GBP4.3m).
Our adjusted EBITDA increased by 37.3% to GBP97.5m (2020:
GBP71.0m) reflecting good performance across all areas of our
business and close control of expenses. Adjusted EPS increased by
78.8% to 75.1p (2020: 42.0p).
Profit before income tax increased by 234.3% to GBP33.1m (2020:
GBP9.9m). This dual benefit of the increase in revenue and the
careful management of costs has resulted in significant improvement
in returns. Basic EPS increased by 237.0% to 27.3p (2020:
8.1p).
We continued to generate strong cash flow from operations of
GBP80.3m (2020: GBP94.8m), with the year-on-year decrease of 15.3%
due to the repayment of VAT of GBP15.0m to HMRC, which was deferred
from 2020 under the COVID-19 VAT Deferral scheme.
Strategic progress
We have a very clear purpose to provide the best possible care
to animals and this is underpinned by our vision to be the
veterinary company people most want to work for.
In recognition of the essential part our colleagues play in the
success of CVS, we have continued to review reward and benefits
across CVS to ensure we remain well positioned to retain and
attract the very best talent in the profession. We also support
employee shareholding in CVS and, with this in mind, we increased
the discount to 20.0% for our latest employee Save As You Earn
scheme which launched in November 2020.
We continue to expand our colleague base in response to the
increased demand for our integrated veterinary services,
particularly in light of a growing pet population. In the year
ended 30 June 2021, CVS employed an average of 7,241 colleagues
(2020: 6,761) including 1,962 veterinary surgeons (30 June 2020:
1,781) and 2,548 nurses (30 June 2020: 2,359) who we support
through our comprehensive training and development programmes.
We have delivered strong underlying financial performance over
the past year from a focus on organic growth through the delivery
of first class clinical care. We continue to invest in improving
our practice facilities and clinical equipment, completing 13
practice refurbishment and relocation projects in the past
financial year. We have also announced plans to create a
specialist, multi-disciplinary referral hospital in Bristol and
look forward to welcoming our first clients to this new facility in
2022.
Alongside our focus on organic growth and our continued
investment in practice and clinical facilities, we are well placed
to make further acquisitions of first opinion veterinary practices.
Acquisitions can widen our offer of high quality and integrated
veterinary services, whilst augmenting our organic growth,
positioning CVS well to deliver further growth in shareholder value
over the medium term.
Governance and the Board
We remain committed to the highest levels of corporate
governance and, as an AIM-quoted company, we voluntarily adopt the
FRC UK Corporate Governance Code (2018).
We are committed to ensuring we have the right balance of skills
and experience within the Board. In July 2020, we appointed an
additional Non-Executive Director, Richard Gray. Richard is the
Chair of the Nominations Committee.
Our Senior Independent Non-Executive Director, Mike McCollum has
announced his intention to stand down, after serving for eight and
a half years, and will leave CVS at the end of his current service
agreement, which expires on 23 September 2021. On behalf of the
Board, I would like to take this opportunity to thank Mike for his
tremendous service and to wish him every success in the future.
The Nominations Committee is proposing that we appoint David
Wilton as a new Non-Executive Director on 24 September 2021 to
replace Mike McCollum as Audit Committee Chair. David is a
Chartered Accountant and has a wealth of experience in senior
financial roles, most recently as Chief Financial Officer of Sumo
Group plc. In light of Mike McCollum's departure, Deborah Kemp will
become the Senior Independent Director.
On 16 August 2021, we appointed Jenny Farrer as our new Company
Secretary. Jenny is a Chartered Governance Professional and has a
wealth of experience in company secretarial roles.
I am delighted to welcome David and Jenny to CVS.
In the year, we consulted with major shareholders on governance
and other matters and, in light of their feedback and independence
considerations, I stood down from all Board committees with effect
from 30 April 2021.
Dividends
The robust performance delivered over the past year demonstrates
both the resilience of our business and the strength of our
integrated veterinary services model. The Group continues to be
highly cash generative, and despite continuing strong levels of
investment in facilities, equipment and acquisitions in the year,
we reduced our net debt by GBP11.9m over the course of the
year.
In light of the improvements in financial performance and the
continued strong cash generation, the Board is recommending a
return to our progressive dividend policy, with the payment of a
final dividend of 6.5p per share (2020: GBPnil).
Shareholder engagement
During the year, the Directors regularly held one-to-one
meetings and calls with existing and potential new shareholders,
hosted a number of roadshows and attended several virtual broker
conferences.
We appointed MHP Communications as our financial public
relations ("PR") agency in the year and we will continue to develop
our shareholder engagement and reporting in line with best
practice. The Executive Directors held the Group's first ever live
webcast of the Group's interim results presentation in March 2021
and we will continue to present future results in this way, with a
replay facility available.
Outlook
The veterinary sector is undergoing structural growth, through a
number of continuing trends including the humanisation of pets, an
increase in the demand for companion animals accelerated by
COVID-19 restrictions, consumers who are keen to provide the best
possible care to their pets, and clinical enhancements which are
increasing the range of services we can offer to achieve the best
potential outcomes.
Our fully integrated veterinary services model, with
first-opinion veterinary practices supported by specialist referral
hospitals, laboratories, crematoria and our online retail business
all position CVS well to benefit from these favourable sector and
consumer trends. Through our improved financial performance and
strengthened balance sheet, we are well placed to invest further in
our people, our facilities and clinical equipment, and in selective
acquisitions to drive growth and enhanced returns.
As we continue to expand and develop our business, our focus
will rightly remain on attracting and retaining the very best
talent and working as a team to provide the highest quality care to
our clients and their animals.
I look forward with confidence to a successful future.
Richard Connell
Chairman
23 September 2021
Chief Executive Officer's statement
"Care at our Heart"
Introduction
I am pleased to share our 2021 Annual Report and Financial
Statements.
We have delivered a strong performance in the past financial
year. Our business model has proven to be resilient, despite the
difficult backdrop of COVID-19, and we have as rich a proposition
as ever, focused on providing the very highest standards of
clinical care. This is all due to the efforts and collaboration of
our outstanding team of colleagues.
Throughout the past year, we have had to respond to evolving
regulatory guidance and new ways of working in order to provide
ongoing care to animals, whilst keeping our colleagues and clients
safe.
I would like to take this opportunity to thank all CVS
colleagues for their professionalism, sheer hard work and continued
commitment to providing the highest levels of service.
Favourable market and consumer trends
We have seen a continued increase in pet ownership in the past
year and, whilst there is no definitive pet population data
available, results of a recent survey published by the Pet Food
Manufacturers Association indicate that c.3.2 million UK households
have acquired a puppy or kitten since the start of lockdown
restrictions and that there are now over 24 million cats and dogs
in the UK. This is clearly a positive trend for CVS, and whilst
there are short-term benefits from first consultations,
vaccinations and in some cases neutering procedures, we anticipate
the benefits to be recognised over the medium term as these puppies
and kittens reach their mature stages of life and require more
veterinary intervention.
We continue to see a favourable trend of humanisation of pets,
with consumers willing to spend more on looking after their
animals. In many households, pets are seen as a core member of the
family and as with human health, improvements in clinical diets and
advances in clinical treatments available are likely to lead to
increased life expectancy of pets.
Our fully integrated veterinary services model positions CVS
well to benefit from these favourable market and consumer trends.
Our first-opinion practices provide access to advice and clinical
care and our preventative pet health scheme, the Healthy Pet Club,
provides regular vaccinations, check-ups and flea and worming
treatments. Our specialist-led, multi-disciplinary referral
hospitals provide access to advanced procedures where required and
our in-house laboratories provide an increasing range of diagnostic
tests in support of our first-opinion and specialist clinical
teams. Our online retail business provides a large range of pet
food, drugs and other products and our crematoria provide a
compassionate and valued end-of-life service to our clients.
Strong financial performance
We have delivered a strong financial performance in the past
year, with revenue of GBP510.1m representing an increase of 19.2%
over that achieved in the prior year. This reflects a 17.4%
increase in like-for-like sales. Adjusted EBITDA increased to
GBP97.5m, with all divisions contributing to this 37.3% increase
over the prior year.
This improved financial performance coupled with continued good
operational cash conversion led to a reduction in leverage to 0.68x
at 30 June 2021 (30 June 2020: 1.14x).
Strategy
Our purpose is to provide the best possible care to animals and
our integrated veterinary services are key to enabling this. Our
integrated model and our breadth of skills, services and facilities
position us well to provide outstanding care to our clients and
their animals.
Our highly skilled and dedicated team of clinicians and support
colleagues are at the centre of our strategy and our vision is to
be the veterinary company people most want to work for. We are
committed to making CVS a great place to work and have a career and
we continue to develop our reward and benefits to ensure we remain
well positioned in a competitive marketplace. Our leading Learning,
Education and Development team have delivered significant online
training over the past year in support of our colleague
development.
We pride ourselves on our high clinical standards and remain
focused on recommending and providing the best clinical care.
Retaining and attracting the very best veterinary talent is clearly
key to this, but we also recognise the need for continued
investment in our practice facilities and clinical equipment. I am
delighted that we have completed 13 practice
refurbishments/relocations in the past year and we have invested
GBP3.8m in new clinical equipment.
Our focus on delivering organic growth through our existing
operations will continue to be augmented by the selective
acquisition of veterinary practices and the investment in existing
and new facilities. We made nine acquisitions in the past year and
I am delighted to welcome our new colleagues to CVS. We also
announced plans to open a brand new, state of the art
multi-disciplinary referral hospital in Bristol and I look forward
to the opening of this new facility in 2022. This new facility will
allow us to continue to provide specialist support to our clients
and their animals for more complex cases, complementing the
first-opinion services we provide in CVS. This will also increase
the services we supply to third-party practices.
Recruitment of more clinicians
We have expanded CVS over the past year and in the year ended 30
June 2021 we employed an average of 181 (10.2%) more vets and 189
(8.0%) more nurses than in the year ended 30 June 2020.
Notwithstanding this increase, we are keen to recruit more
clinicians to support our growth and are advertising for a number
of new positions. This has the effect of inflating our veterinary
surgeon vacancy rate which is calculated as the number of vet
vacancies divided by the total number of roles (being both employed
vets and new vacancies).
RCVS consultation on legislative review
We have been proactively engaging with the RCVS as a business
for some time, for changes in legislation that would allow our
highly skilled nurses to perform a greater range of procedures
without the need for vet supervision.
We are delighted that the RCVS undertook consultation on a
number of proposed reforms to the Veterinary Surgeons Act, 1966
('the Act'), including proposals to enable nurses to undertake a
broader range of procedures such as feline castrations. We actively
participated in this consultation process and we broadly support
the RCVS reform recommendations which were formally approved by the
RCVS Council on 10 June 2021. We now encourage the government to
support these reforms so that revised legislation can be
enacted.
Sustainability and ESG
Our focus on providing the very best possible care to our
clients and their animals and our focus on making CVS a great place
to work and have a career are central components of our
strategy.
The Board of CVS is acutely aware that today companies must also
be managed so that wider society benefits from their business
operations and services. Whilst CVS has always taken its broader
societal obligations seriously, we have recently begun the process
of understanding our impact on, and the wider contribution we make
to society, in order to ensure that CVS becomes a truly sustainable
business focussed on delivering value to all of our stakeholders.
This initiative which commenced in the second half of this
financial year, builds on our mission and purpose and will, over
time, evolve into a fully costed and measurable ESG strategy.
We describe this approach as "Care at our Heart", having worked
to identify and articulate the core priorities for all arms of our
business, using internal interviews and analysis. The concept of
"care" resonated strongly across these discussions - we are, of
course, a business that provides best-in-class clinical care. But
care, in its broader sense, goes to the very heart of what we
do.
As a Company, we strive to reflect this in the work we do. Care
is in our DNA, and it is the foundation of our ESG strategy.
-- We care deeply about protecting the wellbeing of our
colleagues, and equipping them with the support, resources,
training and access to personal development opportunities that they
need.
-- We care about driving standards of clinical excellence in the
profession and providing the best possible health care for
animals.
-- We care about making a positive impact in the communities in which we work.
-- We care about doing our job in a way that is sustainable and
that doesn't compromise the natural environment.
-- We care about delivering value for our investors by doing good.
As a business we have made a number of changes to progress our
sustainability agenda, and we are extremely committed to further
development in the future. I am delighted that our stakeholders are
equally committed to making demonstrable changes and through
working together, I am confident that we will deliver meaningful
improvements across all aspects of ESG within CVS.
We have outlined some of our progress in the FY21 Annual Report
and I look forward to sharing further developments in due
course.
Wellbeing and mental health
As a caring employer, we are committed to supporting our
colleagues in their wellbeing and mental health. Given the
challenges over the past 18 months to our working and personal
lives from the COVID-19 pandemic, wellbeing and mental health
support is more important than ever.
We continue to develop ways to support all colleagues and we now
have over 300 'First Aiders for Mental Health' across CVS who are
actively championing wellbeing and positive mental health across
our business.
We launched a range of new initiatives over the past year
supported by our wellbeing ambassador, Sally Gunnell OBE.
Outlook
With our improved financial performance in the past year,
continued strong cash flow and strengthened balance sheet, CVS is
well positioned for further growth and to benefit from the
favourable market and consumer trends.
We will continue to focus on organic growth through providing
great care to our clients and animals and through further
investment in our people, our clinical facilities and our
practices. This organic growth can be augmented by further
acquisitions and we have acquired a further eight practice sites
since the financial year end.
Our highly skilled and dedicated team of colleagues are key to
our business and with their continued support and dedication, I
look forward to sharing further success in the future.
Richard Fairman
Chief Executive Officer
23 September 2021
Operational review
"Delivering outstanding clinical care despite challenging
circumstances"
During the last twelve months we have faced many challenges, but
the way in which our colleagues have stepped up to protect animal
welfare and continued to deliver the best possible care has been
nothing short of remarkable. We owe our colleagues an enormous debt
of gratitude and therefore I would like to thank every one of them
for their continued hard work.
Our purpose is to give the best possible care to animals, which
we are delivering through our clear vision to be the veterinary
company people most want to work for. This financial year has seen
us make significant strides forward despite the challenging
environment. Our focus on the critical KPIs of our colleague
satisfaction and our vet vacancy rate are a reflection of this
vision. Beneath our purpose and vision, as we introduced in our
FY20 Annual Report, are our four strategic pillars:
-- we recommend and provide the best clinical care every time;
-- we are great place to work and have a career;
-- we provide great facilities and equipment; and
-- we take our responsibilities seriously.
Alongside the strong growth we have seen during the year I am
delighted to have seen a significant number of new clinical
positions created over the year, and on average in the year ended
30 June 2021 we employed 10.2% (181) more vets than we did in the
year ended 30 June 2020. We have also seen more roles filled by
internal candidates, promoting great careers within CVS, as well as
through our highly successful refer a friend scheme during the
year. As a result of the continued expansion of our practices, we
have advertised for more clinical roles than ever, which has had
the effect of increasing our vet vacancy rate across the year to
8.3%. Critically, and in stark contrast to the higher vet vacancy
rate experienced several years ago, these vacancies are the result
of our expansion ambitions, as we seek to add new clinical roles
across the company to capitalise on an expanding market. Our annual
clinical attrition rates and employee Net Promotor Scores both
remain improved on prior years as we continue to strive to be the
veterinary company people most want to work for.
We have also made some changes to remuneration since the end of
the financial year in response to survey data and feedback,
focusing more on fixed income for clinicians and introducing bonus
schemes that reward collaboration across the Group and the delivery
of the best possible clinical care. We also recognise the intense
demands of clinical roles in the veterinary profession, not least
during the last 18 months, and have introduced an enhanced holiday
scheme to give colleagues an extra day of annual leave for each
year of CVS service, up to a maximum of five years. This is
additional to our buy and sell holiday scheme, both of which are
aimed at ensuring our colleagues get the right balance of time away
from work.
We remain committed to being a great place to work and have a
career. This year, we have partnered with the University of
Nottingham to deliver a unique four-year accredited graduate
program which launched in autumn 2020. Supporting and mentoring a
pipeline of talented graduates is a central tenet to our ongoing
commitment to supporting long and successful careers for our
clinicians within CVS. We have also introduced our first graduate
summer camp to the graduate intake programme. This helps our newly
qualified vets to develop their core practical skills, increase
their knowledge and understanding of surgery and consulting, and be
'practice ready' as they begin their careers with us. Additionally,
we have partnered with the University of Bristol to deliver final
year clinical rotations for their veterinary students in our equine
clinics and hospitals. This now means all students at Bristol
Veterinary School will experience at least one rotation within CVS
before they graduate, exposing bright and ambitious young talent to
all that CVS has to offer, and enabling us to contribute to the
education of the next generation of veterinary surgeons.
Our efforts to build the best learning education and development
platform in the profession have continued, with the Knowledge Hub -
our online training portal - having an average of 4,200 users per
week during FY21. This platform offers almost 200 live courses and
programs and we had over 10,000 clinical webinar views in the year,
reflecting the critical role that offering continued professional
development has in the retention and recruitment of our talented
colleagues. A limited number of courses are now also available to
third parties, as we begin a rollout of learning opportunities to
the wider profession.
Having great facilities and equipment is critical to us
delivering on our strategy, and as such we have completed 13
refurbishments and relocations in FY21. The quality of practice
facilities is directly related to our ability to recruit vets and
the ability of our clinical teams to deliver the best possible
care; therefore refurbishments and relocations are a fantastic
investment opportunity for us. We are also deploying new
industry-leading techniques across our practices, including dental
radiography and keyhole surgery for neutering, which now is in
operation in 40 practices across the Group.
Veterinary Practices division
Our Veterinary Practices division comprises our companion
animal, referrals, farm animal and equine veterinary practices, as
well as our buying groups, Vet Direct and MiPet Insurance. The
division has performed extremely well during the financial year,
with like-for-like revenue growth of 15.9% and total revenue growth
of 18.0%. We have also generated growth through acquisitions,
having made nine acquisitions comprising 15 practice sites in FY21
and eight practice sites since the financial year-end, mainly
providing companion animal services, as well as complementary farm
and equine animal services. We are pleased to report that this
cohort of new acquisitions have been well integrated into the
Group, and are performing well.
Companion Animal
Our Companion Animal division forms the majority of our
Veterinary Practices division, and has proven resilient in
recovering from the COVID-19 disruption. We have continued to focus
on supporting our clinical teams to deliver the best possible care,
and despite the challenges of the pandemic we have made excellent
progress across a range of areas of clinical development.
Despite reception areas and consultation rooms remaining mainly
closed throughout much of FY21, the division has continued to
deliver high quality clinical service whilst changing the ways of
working within practice. The temporary relaxation of restrictions
by the RCVS allowed for remote prescribing and supported
telemedicine consultations in the very early months of the
pandemic, but throughout the financial year we saw a strong demand
from clients to attend our clinics in person, and the demand for
virtual interactions fell away, reiterating the close ties of our
practices with their communities.
Referrals
Our Referrals division continues to grow strongly, with revenue
increasing 29.3% over the prior year. We have expanded the range of
clinical disciplines we offer in our hospitals, and we have seen
growth of our vet-to-vet telemedicine imaging service, VetOracle.
These services are offered to both our own and third-party
practices across the globe, and we have invested further in systems
to support further growth. We also continue to expand our network
of advanced peripatetic practitioners, who provide advanced
clinical services to our primary care practices entering new
disciplines and geographical locations.
Our Referrals division has worked hard to build relationships
with both internal and external first opinion practices. This has
led to a 31.4% increase in cases being referred during the
financial year compared to FY2020.
Equine
Our Equine division has 20 equine practices across the UK, the
Republic of Ireland and the Netherlands, including five RCVS
accredited referral hospitals in the UK and large referral
hospitals in both the Republic of Ireland and the Netherlands.
The division has performed well in the financial year,
generating internal referrals through supporting collaboration
between practices, providing operational leverage and resulting in
EBITDA growth of 163.1%. We have also implemented further training
for first-opinion equine vets and provided additional equipment,
such as scanning equipment, for use on first visits, contributing
to a 26.2% increase in revenue.
We have continued to expand our out-of-hours service, Equicall,
offering emergency cover to both CVS and third-party practices.
This world-first equine dedicated out-of-hours service has not only
improved access to clinical care for our clients, but has improved
flexibility for our vets by reducing the burden on existing vet
teams.
Farm Animal
Our Farm Animal division consists of 23 farm animal practices
and a large specialist poultry business, Slate Hall. During the
year we have increased both fee and drug revenue via buying groups
and increased incentives for our vets, such as our productivity
bonus scheme.
After launching our first greenfield farm animal practice in
2020, we have continued to advance this model throughout 2021, and
at the end of this financial year we have three greenfield
practices providing opportunities for young and ambitious vets.
International
Our International division comprises 25 practices in the
Netherlands and six practices in the Republic of Ireland.
Internationally we have expanded and improved our out-of-hours
services, to reach more clients and support the best possible
working environment for our clinicians.
We continue to focus on rolling out our people-focused model,
providing the best possible care to animals in all our territories.
Improved collaboration between practices, including referral of
more advanced cases between experienced clinicians remains a good
opportunity for organic growth.
Healthy Pet Club
As well as offering first class care to sick or injured animals
we continue to offer preventative health care through our Healthy
Pet Club scheme, which offers routine flea and worming treatments
and vaccinations, as well as twice yearly health checks. These
clients can spread the cost of accessing the best preventative
health care, as well as allowing our clinicians to identify
diseases and recommend the best diagnostics and treatments. The
scheme membership has grown by 8.4% over the last year to around
450,000 members, representing roughly 40% of our companion animal
active client base. The Healthy Horse Programme has also grown,
with 10,000 members at the end of June 2021.
MiPet products/purchasing
During the year, we have continued our efforts to increase
purchases of our own-brand products rather than third-party branded
pharmaceuticals. As well as providing increased choice for our
clients, this has also resulted in our own-brand spend increasing
to 34.0% of the UK practices' pharmaceutical spend, up from 28.0%
in 2020.
We have continued to improve our warehouse management system,
improving efficiency and increasing our permanent staffing, which
has enabled us to cope with the increase in Online Retail order
volumes as well as successfully complying with social distancing
requirements through effective use of space and adjusted shift
patterns within our warehouse.
Outlook for Veterinary Practice Division
We are optimistic for continued growth within our Veterinary
Practices division, with revenue growth expected to come from an
increased number of clients and our focus on exceptional clinical
care and our desire to be the veterinary company people most want
to work for. Initiatives for the forthcoming year include a focus
on radiography in first-opinion practices, in collaboration with
our specialist VetOracle imaging teams. This will enable
improvements in image acquisition, interpretation, and most
importantly in the quality of diagnoses in pursuit of the best
possible clinical care.
We are also focused on enhancing the role of our veterinary
nurses in our clinics, and have launched a new programme to grow
the number of consultations undertaken by our talented nursing
colleagues. In areas such as these we continue to see significant
opportunity to drive organic growth, by focusing on increasing our
capability in all areas of diagnostics, and then recommending and
delivering the best possible treatments.
We continue to seek high quality independent practices to join
our network and, having put significant effort into our integration
processes over the last two years, we are confident we can drive
value from all acquisitions we make. We are well placed to continue
to improve margins via streamlined referrals, use of our own-brand
products and an increased range of clinical services.
Laboratories
Our Laboratories division provides diagnostic services and
in-practice desktop analysers to both CVS and third-party
practices, and employs a national courier network to facilitate the
collection and timely processing of samples from practices across
the UK. We continue to develop our capability to ensure we can
support the wider Group's focus on growing diagnostic care.
Diagnostic services
Our diagnostic laboratories have grown during the year,
including 20.1% growth in the number of tests provided to external
customers. During the pandemic we also introduced COVID-19 PCR
testing for our colleagues and for third parties, which was
discontinued in March 2021 due to changes in government
regulations.
Analysers
Analyser revenue is driven by a combination of sales of
analysers, leasing agreements and ongoing sales of consumables
throughout the life of the equipment. Revenues from the analyser
business grew by 28.7% over the course of the financial year,
including strong growth within CVS practices aligned to the wider
clinical focus on diagnostics.
Outlook for Laboratories
The Laboratories division has remained resilient despite
increasing consolidation in the veterinary sector resulting in the
loss of some external clients. By increasing the speed and range of
testing we offer in our laboratories, continuing to ensure
field-leading client service, and employing a highly skilled
network of sales teams and engineers, we are optimistic for further
growth in the years to come.
Crematoria
Our Crematoria division provides both individual and communal
cremation services for companion animal and equine clients, as well
as clinical waste disposal services for both CVS and third-party
veterinary practices.
Having successfully trialled our Direct Pet Cremation project in
the first half of the year, this was rolled out across more of our
companion animal practices in the final quarter of the financial
year. This initiative has contributed to the increase in the number
of individual cremations of 20.2% over the prior year.
Direct Pet Cremation Project
Our integrated veterinary platform is demonstrated in action
with our Direct Pet Cremation Project, which sees clients allowed
more time to consider difficult decisions about their beloved pet's
end-of-life and cremation, such as whether to choose individual
cremation, and choices between a range of caskets and other
mementos. Crematoria and practices collaborate to give our clients
time and space, which reduces the emotional pressures of our
clients' decisions and allows our subject matter experts in our
crematoria to discuss the full range of options open to clients
during the most difficult time of all.
Outlook for Crematoria
Our Direct Pet Cremation project has seen great engagement from
our practices and clients, and as we complete the rollout in the
new financial year we expect this to continue, along with our
Crematoria division revenues.
Online Retail Business
Our online pet food and pharmacy retailer, "Animed Direct",
focuses on pet food and prescription and non-prescription
medication, directly to customers. This is supported by the buying
power of the Group as a whole, which ensures the business is able
to provide the best value for customers.
During the financial year, our Online Retail division delivered
revenue growth of 29.9% and adjusted EBITDA growth of 16.0%. The
COVID-19 lockdowns have changed consumer habits towards sourcing
pet food online. Our high levels of customer service have enabled
us to retain a large portion of the new customers that first used
the platform during the COVID-19 lockdowns, despite retail
restrictions having subsequently eased.
We have expanded our range of product lines and continued to
improve our website, prescription management system and customer
service management system, which contributes to our consistent
five-star Trustpilot rating.
Outlook for Online Retail Business
The continual improvements and expansion to our product range as
well as the increasing changes in customers' shopping habits
towards online shopping for convenience is expected to continue to
deliver revenue growth in our Online Retail business in the coming
years. We continue to develop our website to improve user
experience, further increasing revenue growth opportunities.
Head office
Central administration costs include those of the central
finance, IT, human resource, purchasing, legal and property
functions. Total costs were GBP15.7m (2020: GBP12.1m) representing
3.1% of revenue (2020: 2.8%). The increased spend reflects business
growth during the period as well as investment in people and
processes in support of further scalability, whilst maintaining a
high standard of internal and external service.
As a percentage of revenue, the spend on support functions has
increased, particularly in the areas of IT and Human Resources.
This represents our continued investment in support areas, ensuring
that we continue to have suitable systems to appropriately support
the trading divisions. This overall increase in central costs also
reflects health and safety expenditure in relation to COVID-19, for
example, additional personal protective equipment for our
colleagues, amounting to cGBP0.5m. The Group continues to base
support colleagues in regions where possible, so they can easily
provide the close support that the operations teams require.
Ben Jacklin
Chief Operating Officer
23 September 2021
Financial review
"Strong growth in financial performance and well placed for
future investment"
Financial highlights
The Group has recovered well from the COVID-19 pandemic, to
deliver significant growth in revenues and adjusted EBITDA.
Key financial highlights are shown below:
Change
2021 2020 %
------------------------------- ------ ------ -------
Revenue (GBPm) 510.1 427.8 19.2%
Adjusted EBITDA (GBPm)* 97.5 71.0 37.3%
Adjusted profit before income
tax (GBPm)* 66.2 38.2 73.3%
Adjusted earnings per share
(p)* 75.1 42.0 78.8%
Operating profit (GBPm) 40.1 18.5 116.8%
Profit before income tax
(GBPm) 33.1 9.9 234.3%
Basic earnings per share
(p) 27.3 8.1 237.0%
------------------------------- ------ ------ -------
A reconciliation of the difference between the reported
operating profit figure and adjusted EBITDA is shown below:
2021 2020
GBPm GBPm
---------------------------- ----- -----
Operating profit 40.1 18.5
Adjustments for:
Amortisation, depreciation
and impairment(1) 48.1 46.4
Costs relating to business
combinations 9.3 0.7
Exceptional items - 5.4
---------------------------- ----- -----
Adjusted EBITDA 97.5 71.0
---------------------------- ----- -----
1. Impairments in the year ended 30 June 2020 are shown in
exceptional items
* Adjusted financial measures (adjusted EBITDA, adjusted profit
before income tax and adjusted earnings per share) are defined
below, and reconciled to the financial measures defined by
International Financial Reporting Standards ("IFRS") on pages 90
and 118 of the FY21 Annual Report and shown below after the
consolidated statement of income and in note 2 to the financial
statements on segmental reporting. Management uses adjusted EBITDA
and adjusted earnings per share ("adjusted EPS") as the basis for
assessing the financial performance of the Group. These figures
exclude costs relating to business combinations and exceptional
items and hence assist in understanding the performance of the
Group. These terms are not defined by IFRS and therefore may not be
directly comparable with other companies' adjusted profit
measures.
Financial performance
Revenue increased by 19.2% to GBP510.1m from GBP427.8m with
strong Group like-for-like growth of 17.4%. The Group continues to
benefit from favourable market dynamics with the trend in
humanisation of pets, increasing pet ownership and the shift in
consumer spending online. Like-for-like growth was underpinned by
the continued focus on our strategy of providing the best clinical
care, and was delivered despite a planned companion animal price
increase being delayed during the year, which was eventually
implemented on 1 January 2021. Revenue also included COVID-19 PCR
testing, which discontinued in March 2021 following a change in
Government guidance.
Adjusted EBITDA increased by 37.3% to GBP97.5m from GBP71.0m. As
a percentage of revenue, adjusted EBITDA increased to 19.1% from
16.6%, benefiting from operating leverage and strong revenue
growth. Adjusted EBITDA also benefitted from GBP2.0m of Research
and Development Expenditure Tax Credits, following the Group's
first claim under this scheme. The Group made nine acquisitions in
the financial year, which in aggregate generated revenue of GBP6.1m
and adjusted EBITDA of GBP1.3m during the period.
Adjusted profit before income tax increased 73.3% to GBP66.2m
from GBP38.2m, benefitting from the increase in adjusted EBITDA and
reduction in finance expense. Adjusted EPS (as defined in note 2 of
the FY21 financial statements) increased 78.8% to 75.1p from 42.0p.
Adjusted profit before income tax and adjusted EPS exclude the
impact of amortisation of intangible assets, costs relating to
business combinations and exceptional items.
Profit before income tax increased by 234.3%, to GBP33.1m from
GBP9.9m, underpinned by the increase in adjusted EBITDA and
reduction in exceptional costs, partially offset by the increase in
costs relating to business combinations, which includes business
combinations costs in respect of prior periods. Basic EPS increased
237.0%, to 27.3p from 8.1p.
Taxation
Income tax expense has increased by GBP9.6m, to GBP13.8m from
GBP4.2m, primarily due to the increase in profit before income tax
and GBP4.3m relating to the re-measurement of deferred tax balances
in respect of UK jurisdictions following the UK Government's
announcement to increase the rate of corporation tax to 25%, from
19%, in April 2023.
The Group's effective tax rate was 41.7% (2020: 42.3%). A
reconciliation of the expected tax charge, at the standard rate, to
the actual charge is shown below:
GBPm %*
Profit before income tax 33.1
----------------------------------------------- ------- --------
Expected tax at UK standard rate of tax 6.3 19.0%
Expenses not deductible for tax purposes 2.4 7.3%
Adjustments to previous year tax charge 1.6 4.8%
Utilisation of brought forward losses (0.1) (0.3%)
Effect of difference between closing deferred
tax rate and current rate (0.7) (2.1%)
Effect of tax rate change on opening deferred
tax balances 4.3 13.0%
----------------------------------------------- ------- --------
Actual charge/effective rate of tax 13.8 41.7%
----------------------------------------------- ------- --------
* percentage of profit before income tax
All of the Group's revenues and the majority of its expenses are
subject to corporation tax. The main expenses that are not
deductible for tax purposes are costs relating to acquisitions and
depreciation on fixed assets that do not qualify for tax relief.
Tax relief for some expenditure, mainly fixed assets, is received
over a longer period than that for which the costs are charged in
the FY21 financial statements.
Financial position
2021 2020
GBPm GBPm
------------------------------- -------- --------
Intangible assets 228.4 229.8
Property, plant and equipment 57.4 51.6
Right-of-use assets 97.2 98.1
Other non-current assets 0.1 1.2
Current assets 101.4 83.6
Current liabilities (98.5) (102.0)
Non-current liabilities (194.9) (195.7)
Equity 191.1 166.6
------------------------------- -------- --------
As at 30 June 2021, intangible assets amount to GBP228.4m (2020:
GBP229.8m), primarily consisting of goodwill, patient data records
and computer software. The net reduction of GBP1.4m relates to
amortisation and impairment in the year of GBP23.8m (2020:
GBP23.2m), net foreign exchange movements on opening balances of
GBP1.0m (2020: GBP0.5m), offset by additions through business
combinations of GBP22.9m (2020: GBP7.2m) and computer software
additions of GBP0.5m (2020: GBP1.3m).
Property, plant and equipment of GBP57.4m (2020: GBP51.6m)
includes freehold land and buildings, leasehold improvements,
fixtures, fittings and equipment and motor vehicles. The net
increase of GBP5.8m primarily relates to additions (including those
arising via business combinations) of GBP16.7m (2020: GBP11.3m),
reflecting our continuing commitment to investing in our
facilities, offset by net disposals of GBP0.5m (2020: GBPnil), net
foreign exchange movements on opening balances of GBP0.1m (2020:
GBPnil) and depreciation in the year of GBP10.3m (2020:
GBP10.7m).
Right-of-use-assets of GBP97.2m (2020: GBP98.1m) consists of
property leases for our veterinary practices, specialist referral
centres and support office of GBP95.1m (2020: GBP96.3m) and leases
for vehicles and equipment of GBP2.1m (2020: GBP1.8m). The net
reduction in the year of GBP0.9m relates to the depreciation and
impairment charge in the year of GBP14.0m (2020: GBP14.6m), net
disposals of GBP1.7m (2020: GBPnil), foreign exchange on opening
balances of GBP0.6m (2020: GBP0.1m increase), offset by additions
(including those via business combinations) and re-measurement of
lease terms of GBP15.4m (2020: GBP4.8m).
Other non-current assets of GBP0.1m (2020: GBP1.2m) relates to a
managed investment fund measured at fair value of GBP0.1m (2020:
GBP0.1m) and deferred tax assets of GBPnil (2020: GBP1.1m). In the
current year the deferred tax asset has been offset against
deferred tax liabilities (see note 24 to the FY21 financial
statements for further details).
Current assets of GBP101.4m (2020: 83.6m) comprises inventories
of GBP19.5m (2020: GBP18.7m), trade and other receivables of
GBP48.1m (2020: GBP43.4m), current income tax receivable of GBP0.1m
(2020: GBP0.4m current liability), and cash and cash equivalents of
GBP33.7m (2020: GBP21.5m). The net increase of GBP17.8m mainly
relates to increased cash and cash equivalents and increased trade
receivables in line with the growth in overall revenues.
Current liabilities of GBP98.5m (2020: GBP102.0m) comprise trade
and other payables of GBP86.0m (2020: GBP87.7m), provisions of
GBP3.9m (2020: GBP5.0m), lease liabilities of GBP8.6m (2020:
GBP8.8m), income tax liabilities of GBPnil (2020: GBP0.4m) and
borrowings of GBPnil (2020: GBP0.1m). The net reduction of GBP3.5m
mainly relates to the net movement following the repayment of
GBP15.0m deferred VAT under the COVID-19 VAT Deferral scheme
partially offset by an increase in bonus accruals due to the strong
performance of the Group (included within other payables) and
additional legal fees accrued.
Non-current liabilities of GBP194.9m (2020: GBP195.7m) includes
borrowings of GBP83.9m (2020: GBP83.5m), lease liabilities of
GBP90.2m (2020: GBP89.8m), derivative financial instruments of
GBP0.4m (2020: GBP0.9m) and deferred tax liabilities of GBP20.4m
(2020: GBP21.5m). See below for further details regarding the
Group's borrowings.
Equity of GBP191.1m (2020: GBP166.6m) increased by GBP24.5m as a
result of total comprehensive income of GBP19.0m (2020: GBP5.5m),
new shares issued and shares disposed from the Employee Benefit
Trust ("EBT") of GBP1.5m (2020: GBP1.0m) to settle obligations
under the Group's Save As You Earn ("SAYE") scheme, and
transactions in relation to share-based payments and associated
deferred income tax of GBP4.0m (2020: GBP1.0m). There was no
dividend payment in 2021 (2020: GBP3.9m).
Cash flow and movement in net debt
Net debt decreased by GBP11.9m to GBP50.2m from GBP62.1m. The
movement in net debt is explained as follows:
2021 2020
GBPm GBPm
---------------------------------------------- ------- -------
Cash generated from operations 80.3 94.8
Capital expenditure - maintenance (8.2) (8.7)
Repayment of right-of-use liability (13.0) (14.2)
Taxation paid (13.0) (9.5)
Interest paid (7.1) (7.0)
---------------------------------------------- ------- -------
Free cash flow 39.0 55.4
Capital expenditure - development (8.4) (3.7)
Business combinations (net of cash acquired) (19.4) (7.2)
Loans and borrowings acquired through
business combinations (1.0) -
Dividends paid - (3.9)
Sale of property, plant and equipment 0.6 -
Exceptional items - (0.7)
Proceeds from Ordinary shares 1.2 0.1
Proceeds from sale of Treasury shares 0.3 0.9
Amortisation of debt issuance costs (0.4) (1.0)
---------------------------------------------- ------- -------
Decrease in net debt 11.9 39.9
---------------------------------------------- ------- -------
Cash generated from operating activities decreased by 15.3% to
GBP80.3m from GBP94.8m, despite the increase in adjusted EBITDA.
The decrease primarily relates to GBP15.0m of VAT payments which
were deferred under the COVID-19 VAT Deferral scheme and GBP2.0m of
taxes in the Netherlands deferred from the prior year, paid in the
current year. Cash generated from operations also includes an
additional GBP7.7m of payments for costs relating to business
combinations, which mostly relate to acquisitions in prior
periods.
The analysis of capital expenditure between maintenance and
development in the table above reflects a broad split between
expenditure which we believe will primarily maintain profit, and
that which we expect to increase profit. This split can only ever
be approximate. Development capital expenditure includes new sites,
relocations, significant extensions and significant new equipment.
All other capital expenditure is included as maintenance.
Repayment of right-of-use liabilities of GBP13.0m (2020:
GBP14.2m) consists of liabilities in respect of property leases for
our veterinary practices, specialist referral centres and support
offices and leases for vehicles and equipment.
No corporation tax relief is received on the majority of the
amortisation and transaction costs which are deducted in arriving
at the unadjusted profit before income tax figure. Therefore,
taxation paid moves broadly in line with the adjusted profit before
income tax of the Group. The increase in tax paid in the year is
primarily as a result of the increase in profit generated by the
Group.
The interest payment of GBP7.1m was consistent with the prior
year of GBP7.0m, reflecting the Group's maintenance of low levels
of net debt during the financial year.
Cash available for discretionary expenditure ("free cash flow")
decreased to GBP39.0m from GBP55.4m, primarily as a result of the
deferred VAT payments noted above.
Development capital expenditure of GBP8.4m (2020: GBP3.7m) was
incurred in the year. This investment included relocation of our
practices at the Grove in Fakenham, Barry in Wales, Buttercross in
Nottinghamshire and Rosemullion in Cornwall and refurbishment of
some of our existing sites with significant investment in our sites
at Buchanan in Manchester, Springfield in Rotherham and Newquay in
Cornwall, which is due to complete in October 2021. The level of
investment in the prior year was adversely impacted by action taken
to preserve cash during the first COVID-19 lockdown in March
2020.
Consideration for business combinations, net of cash acquired,
of GBP19.4m was paid for nine practices (15 practice sites) (2020:
GBP7.2m) acquired during the financial year to June 2021. In
addition a further GBP1.0m (2020: GBPnil) was paid to settle loans
transferred as part of the business combinations.
Dividend of GBPnil (2020: GBP3.9m) following the decision not to
declare a dividend in the prior year due to COVID-19 support
received.
Sale of property plant and equipment of GBP0.6m (2020: GBPnil)
relates to sites held not deemed to be in the right location for
future investment.
Exceptional items of GBPnil (2020: GBP0.7m). The prior year
related to amounts paid in relation to Board restructuring
costs.
Proceeds from the sale of Ordinary and Treasury shares of
GBP1.5m (2020: GBP1.0m) arose on the exercise of options under the
Group's approved SAYE scheme, which allows colleagues to save
regular amounts each month over a three-year period and benefit
from increases in the Group's share price over that time.
Amortisation of debt issuance costs of GBP0.4m (2020: GBP1.0m)
in line with our policy.
Net debt and borrowing costs
The Group's net debt comprises the following:
2021 2020
GBPm GBPm
--------------------------- ------- -------
Borrowings repayable:
Within one year - 0.1
After more than one year:
Loan facility 85.0 85.0
Unamortised borrowing
costs (1.1) (1.5)
Total borrowings 83.9 83.6
Cash and cash equivalents (33.7) (21.5)
--------------------------- ------- -------
Net debt 50.2 62.1
--------------------------- ------- -------
The Group has total facilities of GBP175.0m to 31 January 2024,
provided by a syndicate of four banks: NatWest, HSBC, BOI and AIB,
and comprise the following elements:
-- a fixed term loan of GBP85.0m, repayable on 31 January 2024
via a single bullet repayment;
-- a four-year Revolving Credit Facility ("RCF") of GBP85.0m,
that runs to 31 January 2024;
-- an envisaged, but not committed, accordion facility of up to
GBP100.0m, that runs to 31 January 2024; and
-- in addition, the Group has a GBP5.0m overdraft facility,
renewable annually.
The two financial covenants associated with these facilities,
described below, remain unchanged and will continue to be
calculated based on the Group's accounting policies applicable at
30 June 2019 for the duration of the facilities i.e. pre-IFRS
16.
At the year-end, the total borrowings principally consist
of:
-- the GBP85.0m term loan (gross of unamortised issue costs) (2020: GBP85.0m); and
-- GBPnil drawn down under the RCF (gross of unamortised issue costs) (2020: GBPnil)
The two financial covenants associated with the Group's bank
facilities are based on the ratios of net debt to EBITDA and EBITDA
to interest. EBITDA is based on adjusted EBITDA, annualised for the
effect of acquisitions, including costs relating to business
combinations and excluding share option costs, prior to the
adoption of IFRS 16. The EBITDA to interest ratio must not be less
than 4.5x. At 30 June 2021 it was 24.97x.
The covenant levels allow a maximum net debt to EBITDA ratio
("gearing") of 3.25x, although it is not the Group's intention to
operate at this level. The gearing ratio decreased during the year,
to 0.68x at 30 June 2021 from 1.14x at 30 June 2020. This decrease
in ratio reflects both the decrease in net debt and increase in
EBITDA.
The Group manages its banking arrangements centrally. Funds are
swept daily from its various bank accounts into central bank
accounts to optimise the Group's net interest payable position.
Interest rate risk is also managed centrally and derivative
instruments are used to mitigate this risk. On 28 February 2020,
the Group entered into two four-year fixed interest rate swap
arrangements to hedge fluctuations in interest rates on GBP70.0m of
its term loan facility.
Going concern
At the statement of financial position date the Group had cash
balances of GBP33.7m and an unutilised overdraft facility of
GBP5.0m. Total facilities of GBP170.0m are available to support the
Group's organic and acquisitive growth initiatives over the coming
years, comprising a term loan of GBP85.0m and an RCF of GBP85.0m.
The Directors consider that the GBP5.0m overdraft and the GBP170.0m
facility enable the Group to meet its liabilities as they fall due.
Since the year end, the Group has continued to trade profitably and
to generate cash.
After consideration of market conditions, the Group's financial
position (including the level of headroom available within the bank
facilities), financial forecasts for the three years to 30 June
2024, its profile of cash generation and the timing and amount of
bank borrowings repayable, and principal risks, the Directors have
a reasonable expectation that both the Company and the Group will
be able to continue in operation and meet its liabilities as they
fall due over the period, being at least 12 months from the date of
approval of the financial statements. For this reason, the going
concern basis continues to be adopted in preparing the FY21
financial statements.
More information on the Group's viability statement can be found
on page 79 of the FY21 Annual Report.
Share price performance
At the year-end the Company's market capitalisation was
GBP1,708.7m (2,415p per share), compared to GBP727.8m (1,030p per
share) at the previous year-end.
Key contractual arrangements
The Directors consider that the Group has only two significant
third-party supplier contracts which are for the supply of
veterinary drugs. In the event that these suppliers ceased trading,
the Group would be able to continue in business without significant
disruption in trading by purchasing from alternative suppliers.
Forward-looking statements
Certain statements and arrangements described in the FY21 Annual
Report and results release are forward looking. Although the Board
is comfortable that the expectations reflected in these
forward-looking statements are reasonable, it can give no assurance
that these expectations will prove to be correct. Because these
statements involve risks and uncertainties, actual results may
differ materially from those expressed or implied by these
forward-looking statements.
Robin Alfonso
Chief Financial Officer
23 September 2021
Key performance indicators
Financial KPIs
The Directors monitor progress against the Group strategy by
reference to the following financial KPIs. Performance during the
year is set out in the table below.
KPI 2021/ Why it's a KPI 2021 performance
2020
(A) Revenue GBP510.1m Revenue is a key
measure of * Overall revenue has increased by GBP82.3m.
GBP427.8m performance
across all
divisions * Like-for-like revenue, adjusted for intercompany
of the Group and sales eliminations, increased GBP72.3m, with
demonstrates our acquisitions in the year and the full year impact of
ability to prior year acquisitions generating additional revenue
attract of GBP10.0m.
and retain
customers.
* The Group has seen significant growth following
recovery from the COVID-19 pandemic, during which
revenue growth had slowed.
----------- ------------------ -----------------------------------------------------------------
(B) Like-for-like 17.4% Like-for-like
sales sales * Like-for-like performance reflects the Group's
0.7% shows revenue recovery from COVID-19, as temporary practice
generated closures during 2020 limited growth in the prior
from year.
like-for-like
operations
compared * Increased pet ownership has also contributed to
to the prior increased like-for-like sales.
year,
adjusted for the
number of working
days. For
example,
for a practice
acquired in
September
2019, revenue is
included from
September
2020 in the
like-for-like
calculations.
This
shows the
underlying
growth in revenue
across all
divisions,
excluding the
impact
of acquisitions.
----------- ------------------ -----------------------------------------------------------------
(C) Adjusted GBP97.5m Adjusted Earnings
EBITDA Before Interest, * The improvement in adjusted EBITDA reflects the
GBP71.0m Taxation, improvement in like-for-like adjusted EBITDA of
Depreciation GBP28.7m, with acquisitions in the year and the full
and Amortisation year impact of prior year acquisitions generating
("EBITDA") additional EBITDA of GBP1.4m.
excludes
costs relating
to business * This is partly offset by an increase in central costs
combinations of GBP3.6m incurred to protect our colleagues and
and exceptional clients and to continually build a foundation for
items and assists further development and expansion of the group.
in understanding
the underlying
performance of
the Group.
----------- ------------------ -----------------------------------------------------------------
(D) Adjusted 75.1p This is profit
EPS before income tax * The increase reflects the increase of GBP28.0m in the
42.0p adjusted for: year in adjusted profit before income tax.
amortisation;
costs relating
to business
combinations;
and exceptional
items, net of the
notional tax
impact
of these, divided
by the weighted
average number
of shares.
Adjusted
EPS is a KPI
because
it assists in
understanding
the underlying
returns generated
for our
shareholders.
----------- ------------------ -----------------------------------------------------------------
(E) Total GBP16.6m This is the total
capex amount spent by * Total capital expenditure has increased GBP4.2m,
GBP12.4m the Group on capital consisting of a GBP0.5m reduction in maintenance
expenditure. Capital capital expenditure, and a GBP4.7m increase in
expenditure is development capital expenditure, with the focus on
incurred on improving client experience and on growing our
refurbishment business. Refer to the financial review on pages 36
and relocation to 40 of the FY21 Annual Report for further detail.
of practice
facilities
and investment
in new equipment
and clinical
facilities.
Investing in our
practices and
clinical
equipment is key
to achievement
of our strategic
goal of providing
great facilities
and equipment.
(F) Gross 76.1% Gross margin
margin before represents * The increase in gross margin is principally due to
clinical 75.5% revenue after our focus on providing great clinical care.
staff costs deducting
the cost of drugs,
laboratory fees
and cremation fees,
and other goods
sold or used by
the business,
expressed
as a percentage
of total revenue.
Gross margin is
a KPI because it
helps us to monitor
and measure our
ability to purchase
drugs at the best
possible price
whilst ensuring
the highest quality.
---------- ---------------------- ---------------------------------------------------------------
(G) Cash GBP80.3m Cash generated
generated from operations * Cash generated from operations has decreased due to
from operations GBP94.8m shows the cash payment in the year of the tax deferred under the
inflows before: COVID-19 tax deferral schemes which were accessed
payments of income across the UK and the Netherlands in the prior year
taxation and .
interest;
business
combinations; * The Board is confident that the cash generated from
purchases of operations is performing in line with its
property, expectations and in a manner which continues to
plant and equipment enable investment.
and intangible
assets; repayment
of right-of-use
assets; payments
of dividends; debt
issue costs;
increase/repayment
of bank loans;
and proceeds from
issue of shares.
Delivery of increased
cash generated
from operations
allows us to invest
in further growth
opportunities across
our business.
---------- ---------------------- ---------------------------------------------------------------
Non-financial KPIs
Tracking our non-financial measures allows us to monitor our
performance against our core strategic goals.
KPI 2021/ Why it's a KPI 2021 performance
2020
(H) Vet Vacancy 8.3% The vet vacancy
rate rate is calculated * The vet vacancy rate has increased in 2021, as we are
6.9% as the average advertising for a number of new positions to support
number of live our growth due to increasing demand for our services.
vet vacancies divided
by the total number
of vets by headcount
plus vacancies.
This shows the
average level of
vet vacancies for
the Group during
the period. This
links to our vision
of being the
veterinary
company people
most want to work
for.
--------- ---------------------- -----------------------------------------------------------------
(I) Healthy 450,000 Healthy Pet Club
Pet Club is our preventative * The rate of growth in Healthy Pet Club members has
members 415,000 care scheme. It increased to 8.4% in 2021 from 3.5% growth in 2020.
provides CVS with
a robust and regular
revenue stream, * This demonstrates the increased humanisation of pets
as well as improving and desire for our clients to invest in their pets'
customer loyalty. futures through preventative care.
--------- ---------------------- -----------------------------------------------------------------
(J) Number 159 This shows the
of RCVS awards number of RCVS * Due to the COVID-19 pandemic, the RCVS did not issue
159 Practice Standards further Practice Standards Scheme awards during the
Scheme awards across year. All of our practices who already hold these
the Group. These awards continue to be recognised as award-holders.
awards promote
and maintain the
highest standards
of veterinary care
across a range
of different criteria
including client
experience and
clinical governance.
Monitoring the
number of RCVS
awards helps us
achieve our strategic
goal of taking
our responsibilities
seriously.
--------- ---------------------- -----------------------------------------------------------------
(K) Employee 2.9 Employee Net Promoter
NPS Score ("eNPS") * We have seen significant improvements in colleague
0.7 is a measure of engagement due to our ability to effectively support
how likely our our colleagues through the COVID-19 pandemic, among
colleagues are other factors.
to recommend the
Group as a place
to work as reported
on anonymous surveys.
Monitoring eNPS
shows the level
of colleague
satisfaction
across the Group
and helps us to
ensure we are a
great place to
work and have a
career.
--------- ---------------------- -----------------------------------------------------------------
(L) Client 72.2 Client Net Promoter
NPS Score ("NPS") is * We have seen a small reduction in client engagement,
78.5 a measure of the likely due to the impact of RCVS guidance which
level of our clients' restricted our customers from accompanying their pets
satisfaction with in our practices. This figure remains strongly
their experiences positive, and we expect it to return to its previous
with the Group levels in due course
via anonymous
reporting
of the likelihood
that clients would
recommend the Group
for our services.
Monitoring NPS
helps us to ensure
we recommend and
provide the best
clinical care every
time.
--------- ---------------------- -----------------------------------------------------------------
Principal risks and uncertainties
Risk management structure
The Board has overall responsibility for ensuring risk is
appropriately managed across the Group. The day-to-day
identification, management and mitigation of risk is delegated to
the Group's senior management.
Risk registers are prepared which evaluate the risks most likely
to impact the Group. Colleagues across the business are involved in
the preparation and regular review of these risk registers in order
to ensure that all potential areas of risk are adequately
identified, recorded and managed. Controls that are in place are
assessed in order to determine the extent to which they mitigate
risk and in circumstances where it is considered appropriate to
reduce risk further, appropriate actions are determined.
The Group's business operations are subject to a wide range of
risks. Some of the most significant risks are explained below
together with details of actions that have been taken to mitigate
these risks.
The Key roles and delegated responsibilities
Executive Management Audit Committee Internal audit
team
Collectively responsible Assists the Board Holds meetings with
for managing risks. to fulfil its corporate risk owners across
governance duties the business, assesses
and oversees responsibilities the risk ratings and
in relation to financial documents the controls
reporting, internal in place to mitigate
control and the risk each risk, and recommends
management structure. improvements and correction
actions.
Risk appetite
The effectiveness of the Group's risk management approach relies
upon a culture of transparency and openness that is encouraged by
both the Board and senior management. The Group's appetite for risk
is considered low; whilst some risk is accepted in order to develop
the business and invest in future growth, the Group has no appetite
for major risks which cannot be effectively mitigated through
appropriate controls.
Assessment of principal risks
During the year, the Board undertook a robust, in-depth and
comprehensive assessment of the emerging and principal risks facing
the Group and specifically those that might threaten the delivery
of its strategic business model, its future performance, solvency
or liquidity. A summary of the principal risks and uncertainties
that could impact the Group's performance is shown on pages 52 to
57 of the FY21 Annual Report.
COVID-19 and Brexit
The Group faced unprecedented disruption to its operations in
the previous financial year to 30 June 2020 due to the COVID-19
pandemic, and the Group has had to continue to evolve its
operations to reflect ongoing COVID-19 government and regulatory
guidance in the financial year to 30 June 2021. The Group has also
had to adapt to the changes arising from the UK's exit from the
European Union.
The Board continues to monitor and assess the risks and
opportunities which may arise from further disruption through
COVID-19 or similar pandemic and through Brexit. The medium and
longer term impacts of COVID-19 and Brexit remain unclear but the
Board and senior management continue to monitor developments and
plan accordingly.
Our key focus in monitoring and managing risks from COVID-19 and
Brexit is to ensure the safety and wellbeing of our colleagues and
to ensure we have appropriate resources in place to continue to
provide appropriate services to our customers and their
animals.
COVID-19 and Brexit both have the ability to affect the
following principle risks:
Ø Key employees
Ø Economic environment and consumer trends
Ø Competition
Ø Changes in industry regulations
Ø Sourcing pharmaceutical supplies
Ø Health and Safety legislation
Ø Corporate legislation or regulatory requirements
Ø Bank facilities
Ø Future pandemic or lockdown
Principal risk occurrence
Risk Description Potential Mitigating Changes in
impact factors year
Key employees Failure to Failure to Close relationship We have increased
retain and be able to with UK veterinary the number
attract key meet the increased schools and of vets and
colleagues, demand from market-leading nurses employed
particularly clients and graduate induction by 10.2% and
veterinary their animals. programme. 8.0% respectively.
surgeons due
to structural Increased Focused training In order to
shortages of employment programmes deliver growth
qualified vets costs leading to cover clinical, and service
in the industry. to adverse customer service the increased
impact on and management demand we
financial training. are seeking
performance to recruit
of the Group. Appropriate more vets
reward and and nurses.
Increased benefits.
pressure on Attrition
our colleagues Regular feedback rates remain
to cover vacancy from colleagues unchanged.
gaps. to address
common issues
or concerns
including
our whistleblowing
policy, as
detailed on
page 64 of
the FY21 Annual
Report.
Highly qualified
recruitment
team.
Home Office
reinstatement
of Veterinary
Surgeons on
UK Shortage
Occupation
List.
------------------ -------------------- ------------------------------- --------------------
Economic Risk that Reduction Diverse range We continue
environment Brexit and in consumer and provision to respond
and consumer the continuing confidence of services to evolving
trends COVID-19 pandemic and spending across the guidance and
has a detrimental on veterinary Group to a are able to
impact on services. wide range adapt our
the economy. of animals services accordingly
Short term in the UK, (e.g. the
restrictions the Netherlands use of tele-consultations
in resource and the Republic where required).
due to requirement of Ireland.
for self-isolation. Brexit import
Strong year and export
Further lockdown on year growth rules and
restrictions. in the Healthy regulations
Pet Club ("HPC"), are clear.
Supply disruptions. which had
450,000 members
Changing consumer at the year
trends may end and the
lead to a Healthy Horse
reduction Programme
in pet ownership. ("HHP"), which
had 10,000
members. This
promotes loyalty
to the Group.
Online retail
business protects
the Group
against changes
in consumer
spending habits.
Ability to
source supplies
from a number
of manufacturers.
Competition Increased Loss of third-party The Group Ongoing market
consolidation practice clients has a wide consolidation.
and acquisition to Laboratories, range of services
of independent Crematoria to offer its Growth in
veterinary and Referrals. clients by revenues across
practices. way of its all divisions.
Increased integrated
acquisition veterinary Continued
value multiples platform. increase in
being paid. our HPC and
Continuous HHP schemes
Increased investment to retain
price competition to maintain our clients.
may limit high-class
the ability facilities
to pass on and equipment
increased in order to
in employment, provide excellent
pharmaceutical clinical service.
and other
costs. Detailed assessment
of acquisition
opportunities
measured against
clear target
criteria.
Regular reviews
of pricing
of products
and services
to ensure
we remain
competitive.
------------------- --------------------- --------------------- ---------------------------
Adverse publicity Any adverse Reduction Policies and Financial
publicity in customer procedures PR agency
on the Group, numbers leading in place to appointed
other corporate to adverse monitor service to support
veterinary revenue. delivery and with media
groups or ensure continued communication.
on the veterinary Adverse impact levels of
sector as on our ability high class Continued
a whole. to attract veterinary monitoring
and retain care. of our clinical
key colleagues. standards
Participation against our
in the RCVS quality improvement
Practice Standards frameworks
Scheme and for clinicians
RCVS Knowledge and practices.
QI Champion
accreditation.
Established
Clinical Advisory
Committees
to advise
on clinical
standards
and drug lists
across the
Group.
Individual
practice branding
to reduce
the risk of
any adverse
publicity
being associated
with other
practices.
Group Marketing
and Communications
teams to respond
swiftly to
any issues.
Prominent
representation
on national
bodies and
at industry
events to
build the
Group's reputation
and credibility.
Information The Group is A cyber-attack Policies and Appointment
technology dependent on could result procedures of a Chief
various aspects in loss of are in place Technology
of Information systems and to ensure Officer.
Technology potential stability
("IT") and loss of client and security Strengthened
support for data. of our networks senior IT
its operations. and systems. team including
Loss of connectivity appointment
and availability Restricted of Head of
of systems access to Security and
across our systems, networks Head of IT
network. and applications Projects.
wherever possible.
Scheduled
program of
network security
enhancement
with external
reviews performed
periodically.
Full system
testing of
any developments
prior to live
deployment.
Regular backups
and testing
of the recovery
of those system
backups.
Established
Practice Management
System in
place which
is able to
work without
access to
the internet
for short
periods of
time.
Changes in The industry Failure to Policies and Monitoring
industry regulations is subject adhere to procedures and adherence
to a number these could in place to to temporary
of laws and have a material monitor compliance regulation
regulations. impact on and any developments changes put
the Group or proposed in place by
through damage changes. the RCVS as
to reputation a result of
and/or financial Regular engagement the COVID-19
penalties. with regulatory pandemic.
and legislative
Changes in bodies to
regulations promote best
could adversely practice and
impact the lobbying for
Group's competitive change where
advantage. considered
appropriate.
Clinical Directors
in place to
ensure high
standards
are maintained.
----------------- ---------------------- ---------------------- ----------------
Sourcing Failure to Inability Supply agreements Monitoring
pharmaceutical source pharmaceutical to treat in place with the availability
supplies products at patients multiple major of any drugs
the required with the wholesalers sourced from
price and required to cover stocking outside the
quantity. prescription issues. UK due to
and non-prescription Brexit and
medicines. Supply of own-brand the ongoing
products in COVID-19 pandemic.
Adverse revenue Group warehouses
impact. for onwards Increased
supply. stock levels
Adverse impact in Group warehousing
on margins Regular pricing to reduce
through having reviews with the potential
to source all major suppliers impact of
alternative across all any supply
supplies divisions for disruption.
on less favourable best possible
terms. pricing. New warehousing
system.
New direct
supply agreement
with major
manufacturer.
Sourcing and Failure to Pressure Dedicated team Strengthened
integrating attract and that higher committed to acquisitions
acquisitions acquire acquisitions multiples sourcing team.
at the appropriate reduces growth acquisitions.
price. opportunities
through acquisitions. Clear list
of criteria
Failure to used to assess
integrate any potential
efficiently acquisition
impacting targets.
actual performance
versus business Multi-disciplined
case. team communications
in advance
of acquisition
to plan the
integration.
Use of professional
advisers to
ensure appropriate
due diligence
and legal advice
is undertaken.
Close monitoring
of post-acquisition
performance
versus business
plan.
---------------------- ---------------------- ---------------------- ----------------------
Health and Failure to Colleagues, Robust health Ongoing provision
safety legislation comply with clients or and safety of COVID-19
health and the general procedures guidance in
safety legislation public are are in place light of evolving
across our injured. ensuring full guidelines.
practices, compliance
laboratories, Required temporary with health COVID-19 test
crematoria, closure of and safety kits provided
warehouse sites whilst legislation. to colleagues.
and other any issues
sites. are addressed. Mandatory COVID-19 secure
employee training risk assessments
Loss of revenue to ensure at all sites.
and potential they can perform
claims against their duties Enhanced PPE
the Group. safely. supplied to
protect colleagues
Appropriate and clients
protective against COVID-19
equipment and other
supplied to risks.
all employees
in order for New guidance
them to perform and training
their duties supplied to
safely. colleagues.
Specialist
Health and
Safety team
which regularly
reviews any
risks and
identifies
areas for
improvement.
Participation
in the RCVS
Practice Standards
Scheme to
ensure the
Group promotes
the highest
levels of
clinical standards.
Specialist
and appropriately
qualified
third-party
advisers undertake
maintenance,
inspections
and property
development.
Corporate Failure to The Group Appropriate Regular reviews
legislation comply with could face training supplied of legal and
and regulatory laws and regulations. fines and to colleagues regulatory
requirements penalties in the relevant developments
leading to areas required. across all
financial countries
loss. Suitable experts in which the
employed to Group operates.
The Group ensure compliance
could face and to regularly
suspension update policies
of certain and procedures.
operations.
Appropriate
insurance
cover and
third-party
professional
advice used
as required.
----------------------- -------------------- --------------------- --------------------
Bank facilities Failure to Lack of availability The Group The Group
comply with of funding. maintains is cash generative
bank covenants suitable facilities and has continued
and ability Increased from a syndicate to reduce
to secure future borrowing of leading net debt and
funding. costs. banks with leverage,
an appropriate thereby increasing
term. the headroom
under the
Existing facilities financial
comprise term covenants.
debt, revolving
credit facility
and an overdraft.
Regular reporting
of headroom
and compliance
to the Board
and Executive
Committee.
Regular meetings
with bank
syndicate
members to
appraise performance.
Daily cash
flow forecasts
prepared and
reviewed for
a rolling
three-month
period to
enable working
capital requirements
to be understood
and to optimise
bank drawings
and interest
costs.
Future pandemic Future uncertainty Future lockdowns Working closely Continued
or lockdown over COVID-19 affect our with the RCVS adherence
and associated ability to and BVA to to government
lockdowns. service our review evolving and regulatory
clients if guidance. advice across
non-emergency all operating
services are Multiple, territories.
unable to geographically-spread
be undertaken. locations
across the
UK, Netherlands
and Republic
of Ireland
protect the
Group from
any localised
lockdowns.
The Group
operates across
a diverse
number of
operations
with an online
retail business
and provides
veterinary
care across
companion,
equine and
farm animal
species.
The farm animal
division is
protected
due to it
being critical
to the human
food chain.
Sustainability The Group's Disruptions Sustainability Increased
and climate continued to our supply and ESG is focus on ESG
change success depends chain leading discussed and additional
on the social to stock shortage as a standing detail included
and environmental and financial agenda item in the FY21
sustainability loss. in Board meetings. Annual Report.
of its operations.
Adverse weather ESG working
leading to group formed
a decline which is chaired
in our client by the CEO.
demand.
Appointment
Changes in of ESG advisers
regulations to help assess
increasing our risks
the cost of and to develop
our operations. our Sustainability
and ESG focus.
-------------------- ------------------- ----------------------- -----------------
Consolidated income statement
for the year ended 30 June 2021
2021 2020
Note GBPm GBPm
------------------------------------------- ---- ------- -------
Revenue 2 510.1 427.8
Cost of sales (288.2) (257.7)
------------------------------------------- ---- ------- -------
Gross profit 221.9 170.1
Administrative expenses (181.8) (151.6)
------------------------------------------- ---- ------- -------
Operating profit 40.1 18.5
Finance expense (7.0) (8.6)
------------------------------------------- ---- ------- -------
Profit before income tax 2 33.1 9.9
Income tax expense 3 (13.8) (4.2)
------------------------------------------- ---- ------- -------
Profit for the year attributable to owners
of the parent 19.3 5.7
------------------------------------------- ---- ------- -------
Earnings per Ordinary share (expressed in
pence per share) ("EPS")
Basic 4 27.3p 8.1p
Diluted 4 27.1p 8.1p
------------------------------------------- ---- ------- -------
All activities derive from continuing operations.
Reconciliation of adjusted financial measures
The Directors believe that an adjusted profit measure, being
adjusted Earnings Before Interest, Tax, Depreciation and
Amortisation ("EBITDA"), provides additional useful information for
shareholders on performance. This is used for internal performance
analysis. This measure is not defined by IFRS and is not intended
to be a substitute for, or superior to, IFRS measurements of
profit. The following table is provided to show the comparative
EBITDA after adjusting for costs relating to business combinations,
impairment and exceptional items.
2021 2020
Non-GAAP measure: adjusted EBITDA Note GBPm GBPm
------------------------------------------- ---- ----- -----
Profit before income tax 33.1 9.9
Adjustments for:
Finance expense 7.0 8.6
Depreciation and impairment of tangible
and right-of-use assets(1) 24.3 24.2
Amortisation of intangible assets 23.8 22.2
Costs relating to business combinations(2) 2 9.3 0.7
Exceptional items(1) - 5.4
------------------------------------------- ---- ----- -----
Adjusted EBITDA 2 97.5 71.0
------------------------------------------- ---- ----- -----
1. Impairments in the year ended 30 June 2020 are shown in exceptional items
2. Includes amounts paid in respect of acquisitions in prior
years expensed to the income statement.
Consolidated statement of comprehensive income
for the year ended 30 June 2021
2021 2020
GBPm GBPm
------------------------------------------------------- ----- -----
Profit for the year 19.3 5.7
-------------------------------------------------------- ----- -----
Other comprehensive income - items that
will or may be reclassified to profit or
loss in future periods
Cash flow hedges:
Net movement on cash flow hedge 0.9 (1.5)
Cost of hedging reserve (0.4) 0.5
Deferred tax on cash flow hedge and available-for-sale
financial assets (0.1) 0.2
Exchange differences on translation of foreign
operations (0.7) 0.6
-------------------------------------------------------- ----- -----
Other comprehensive loss for the year, net
of tax (0.3) (0.2)
-------------------------------------------------------- ----- -----
Total comprehensive income for the year
attributable to owners of the parent 19.0 5.5
-------------------------------------------------------- ----- -----
Consolidated statement of financial position
as at 30 June 2021
Company registration number: 06312831
Group Group
2021 2020
Note GBPm GBPm
--------------------------------- ------ ------ ------ ----- ------- ---------
Non-current assets
Intangible assets 228.4 229.8
Property, plant and equipment 57.4 51.6
Right-of-use assets 97.2 98.1
Investments 0.1 0.1
Deferred income tax assets - 1.1
383.1 380.7
------------------------------------------------------ ----- ------- ---------
Current assets
Inventories 19.5 18.7
Trade and other receivables 48.1 43.4
Current income tax receivable 0.1 -
Cash and cash equivalents 33.7 21.5
--------------------------------------------------------- ----- ------- ---------
101.4 83.6
------------------------------------------------------ ----- ------- ---------
Total assets 2 484.5 464.3
--------------------------------------------------------- ----- ------- ---------
Current liabilities
Trade and other payables (86.0) (87.7)
Provisions (3.9) (5.0)
Lease liabilities (8.6) (8.8)
Current income tax liabilities - (0.4)
Borrowings 7 - (0.1)
--------------------------------------------------------- ----- ------- ---------
(98.5) (102.0)
------------------------------------------------------ ----- ------- ---------
Non-current liabilities
Borrowings 7 (83.9) (83.5)
Lease liabilities (90.2) (89.8)
Derivative financial instruments (0.4) (0.9)
Deferred income tax liabilities (20.4) (21.5)
--------------------------------------------------------- ----- ------- ---------
(194.9) (195.7)
------------------------------------------------------ ----- ------- ---------
Total liabilities 2 (293.4) (297.7)
--------------------------------------------------------- ----- ------- ---------
Net assets 191.1 166.6
--------------------------------------------------------- ----- ------- ---------
Shareholders' equity
Share capital 0.1 0.1
Share premium 103.1 101.9
Capital redemption reserve 0.6 0.6
Treasury reserves - (0.3)
Cash flow hedge reserve (0.5) (1.4)
Cost of hedging reserve 0.1 0.5
Merger reserve (61.4) (61.4)
Retained earnings 149.1 126.6
--------------------------------------------------------- ----- ------- ---------
Total equity 191.1 166.6
--------------------------------------------------------- ----- ------- ---------
The financial information comprising the consolidated income
statement, the statement of consolidated comprehensive income, the
consolidated balance sheet, the consolidated statement of changes
in shareholders' equity, the consolidated cash flow statement and
related notes, were authorised for issue by the Board of Directors
on 23 September 2021 and were signed on its behalf by:
Richard Fairman Robin Alfonso
Director Director
Consolidated statement of changes in equity
for the year ended 30 June 2021
Cash Cost
Capital flow of
Share Share redemption Treasury hedge hedging Revaluation Merger Retained Total
capital premium reserve reserve reserve reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
At 1 July 2020 0.1 101.9 0.6 (0.3) (1.4) 0.5 - (61.4) 126.6 166.6
-------------------- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Profit for the
year - - - - - - - - 19.3 19.3
-------------------- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Other comprehensive
income and losses
Cash flow hedges:
Fair value
income/(loss) - - - - 0.9 (0.4) - - - 0.5
Deferred tax on
cash flow hedge
and
available-for-sale
financial assets - - - - - - - - (0.1) (0.1)
Exchange differences
on translation
of foreign
operations - - - - - - - - (0.7) (0.7)
-------------------- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Total other
comprehensive
(loss)/income - - - - 0.9 (0.4) - - (0.8) (0.3)
-------------------- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Total comprehensive
income/(loss) - - - - 0.9 (0.4) - - 18.5 19.0
-------------------- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Transactions with
owners
Issue of Ordinary
shares - 1.2 - - - - - - - 1.2
Disposal of treasury
reserve - - - 0.3 - - - - - 0.3
Credit to reserves
for share -- based
payments - - - - - - - - 2.2 2.2
Deferred tax
relating
to share -- based
payments - - - - - - - - 1.8 1.8
-------------------- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Total transactions
with owners - 1.2 - 0.3 - - - - 4.0 5.5
-------------------- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
At 30 June 2021 0.1 103.1 0.6 - (0.5) 0.1 - (61.4) 149.1 191.1
-------------------- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Cash Cost
Capital flow of
Share Share redemption Treasury hedge hedging Revaluation Merger Retained Total
capital premium reserve reserve reserve reserve reserve reserve earnings equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ---- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
At 1 July 2019 0.1 99.7 0.6 - - - 0.1 (61.4) 124.0 163.1
------------------- ---- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Profit for the
year - - - - - - - - 5.7 5.7
------------------- ---- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Other comprehensive
income and losses
Cash flow hedges:
Fair value
(loss)/income - - - - (1.4) 0.5 - - (0.1) (1.0)
Deferred tax on
cash flow hedge
and
available-for-sale
financial assets - - - - - - - - 0.2 0.2
Exchange
differences
on translation
of foreign
operations - - - - - - - - 0.6 0.6
------------------- ---- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Total other
comprehensive
(loss)/income - - - - (1.4) 0.5 - - 0.7 (0.2)
------------------- ---- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Total comprehensive
income/(loss) - - - - (1.4) 0.5 - - 6.4 5.5
------------------- ---- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Transactions with
owners
Issue of Ordinary
shares - 0.1 - - - - - - - 0.1
Reclassification
between reserves - 2.1 - (2.1) - - - - - -
Disposal of
revaluation
reserve - - - - - - (0.1) - - (0.1)
Disposal of
treasury
reserve - - - 1.8 - - - - (0.9) 0.9
Credit to reserves
for share -- based
payments - - - - - - - - 0.9 0.9
Deferred tax
relating
to share -- based
payments - - - - - - - - 0.1 0.1
Dividends to equity
holders of the
Company 6 - - - - - - - - (3.9) (3.9)
------------------- ---- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Total transactions
with owners - 2.2 - (0.3) - - (0.1) - (3.8) (2.0)
------------------- ---- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
At 30 June 2020 0.1 101.9 0.6 (0.3) (1.4) 0.5 - (61.4) 126.6 166.6
------------------- ---- ------- ------- ---------- -------- ------- ------- ----------- ------- -------- ------
Consolidated statement of cash flow
for the year ended 30 June 2021
Group Group
2021 2020
Note GBPm GBPm
-------------------------------------- ---- ------ ------
Cash flows from operating activities
Cash generated from operations 8 80.3 94.8
Taxation paid (13.0) (9.5)
Interest paid (7.1) (7.0)
Exceptional items paid - (0.7)
---------------------------------------- ---- ------ ------
Net cash generated from operating
activities 60.2 77.6
---------------------------------------- ---- ------ ------
Cash flows from investing activities
Business combinations (net of
cash acquired) 5 (19.4) (7.2)
Purchase of property, plant and
equipment (16.1) (11.1)
Proceeds from sale of property,
plant and equipment 0.6 -
Purchase of intangible assets (0.5) (1.3)
---------------------------------------- ---- ------ ------
Net cash used in investing activities (35.4) (19.6)
---------------------------------------- ---- ------ ------
Cash flows from financing activities
Dividends paid - (3.9)
Proceeds from issue of Ordinary
shares 1.2 0.1
Proceeds from sale of Treasury
shares 0.3 0.9
Repayment of obligations under
right-of-use assets (13.0) (14.2)
Debt issuance costs - (1.7)
Repayment of borrowings (1.1) (65.2)
Increase of borrowings - 35.0
---------------------------------------- ---- ------ ------
Net cash used in financing activities (12.6) (49.0)
---------------------------------------- ---- ------ ------
Net increase in cash and cash
equivalents 12.2 9.0
Cash and cash equivalents at
the beginning of the year 21.5 12.5
---------------------------------------- ---- ------ ------
Cash and cash equivalents at
the end of the year 33.7 21.5
---------------------------------------- ---- ------ ------
Notes to the consolidated financial statements for the year
ended 30 June 2021
1. Summary of significant accounting policies
Statement under s498 - publication of non-statutory accounts
The financial information set out in this preliminary
announcement does not constitute statutory financial statements for
the years ended 30 June 2021 or 2020, for the purpose of the
Companies Act 2006, but is derived from those financial statements.
Statutory financial statements for 2021, on which the Group's
auditors have given an unqualified report which does not contain
statements under Section 498(2) or (3) of the Companies Act 2006,
will be filed with the Registrar of Companies subsequent to the
Group's next annual general meeting. Statutory financial statements
for 2020 have been filed with the Registrar of Companies. The
Group's auditors have reported on those accounts; their reports
were unqualified and did not contain statements under Section
498(2) or (3) of the Companies Act 2006.
Basis of preparation
The consolidated and Company financial statements of CVS Group
plc have been prepared in accordance international accounting
standards and in conformity with the requirements of the Companies
Act 2006. The consolidated financial statements have been prepared
on a going concern basis and under the historical cost convention,
except for certain financial instruments and share-based payments
that have been measured at fair value.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
FY21 financial statements. Further details are provided in the
Directors' Report on pages 78 to 81 of the Group's FY21 Annual
Report
The accounting policies set out in the FY21 Annual Report have,
unless otherwise stated, been applied consistently to all years
presented in the financial statements. The accounting policies
relate to the Group and are applied by the Company as
appropriate.
Use of non-GAAP measures
Adjusted EBITDA, adjusted Profit Before Tax ("adjusted PBT") and
adjusted Earnings Per Share ("adjusted EPS")
The Directors believe that adjusted EBITDA, adjusted PBT and
adjusted EPS provide additional useful information for shareholders
on the Group's underlying performance. These measures are used by
the Board and management for planning and internal reporting and
are aligned to our strategy and KPIs. A subset is also used by
management in setting Director and management remuneration. The
measures are also used in discussions with the investment analyst
community. These measures are not defined by IFRS and therefore may
not be directly comparable with other companies' adjusted measures.
They are not intended to be a substitute for, or superior to, IFRS
measurements of profit or earnings per share.
Adjusted EBITDA is calculated by reference to profit before
income tax, adjusted for interest (net finance expense),
depreciation, amortisation, costs relating to business combinations
and exceptional items.
Adjusted profit before income tax is calculated as profit before
amortisation, taxation, costs relating to business combinations and
exceptional items.
Adjusted earnings per share is calculated as adjusted profit
before income tax less applicable taxation divided by the weighted
average number of Ordinary shares in issue in the period.
Like-for-like sales
Like-for-like sales comprise the revenue generated from all
operations compared to the prior year. Revenue is included in the
like-for-like calculation with effect from the month in which it
was acquired in the previous year adjusted for the number of
working days; for example, for a practice acquired in September
2019, revenue is included from September 2020 in the like-for-like
revenue calculation.
Net debt
Net debt is calculated as borrowings less gross cash and
unamortised borrowing costs.
2. Segment reporting
Segment information is presented in respect of the Group's
business and geographical segments. The primary format, operating
segments, is based on the Group's management and internal reporting
structure and monitored by the Group's Chief Operating Decision
Maker ("CODM"). Inter-segment pricing is determined on an arm's
length basis.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on
a reasonable basis. Unallocated items comprise mainly
interest-bearing borrowings and associated costs, taxation related
assets and liabilities, costs relating to business combinations,
and Head Office salary and premises costs.
Geographical segments
The business operates predominantly in the UK. As at 30 June
2021, it has 25 veterinary practices in the Netherlands and 6 in
the Republic of Ireland. It performs a small amount of laboratory
work for Europe-based clients and until December 2020 the Online
Retail Business distributed a small quantity of goods to European
countries. In accordance with IFRS 8, 'Operating Segments', no
segment results are presented for trade with European clients as
these are not reported separately for management reporting purposes
and are not considered material for separate disclosure.
Revenue comprises GBP359.3m of fees and GBP150.8m of goods
(2020: GBP293.6m and GBP134.2m respectively). Revenue from
contracts totalled GBP60.4m in the year (2020: GBP46.8m).
Operating segments
The Group is split into four operating segments (Veterinary
Practices, Laboratories, Crematoria and Online Retail Business) and
a centralised support function (Head Office) for business segment
analysis. In identifying these operating segments, management
generally follows the Group's service lines representing its main
products and services.
Each of these operating segments is managed separately as each
segment requires different specialisms, marketing approaches and
resources. Intra-group sales eliminations are included within the
Head Office segment. Head Office includes costs relating to the
employees, property and other overhead costs associated with the
centralised support function together with finance costs arising on
the Group's borrowings.
Online
Veterinary Retail
Practices Laboratories Crematoria Business Head Office Group
Year ended 30 June 2021 GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ---------- ------------ ---------- --------- ----------- -------
Revenue 453.4 28.0 8.0 41.7 (21.0) 510.1
Profit/(loss) before income
tax 49.5 8.4 2.4 2.7 (29.9) 33.1
Adjusted EBITDA 98.4 9.1 2.8 2.9 (15.7) 97.5
Total assets 422.4 32.7 16.9 10.9 1.6 484.5
Total liabilities (179.8) (4.0) (1.4) (3.4) (104.8) (293.4)
------------------------------ ---------- ------------ ---------- --------- ----------- -------
Reconciliation of adjusted
EBITDA
Profit/(loss) before income
tax 49.5 8.4 2.4 2.7 (29.9) 33.1
Finance expense 4.1 - - - 2.9 7.0
Depreciation and impairment
of tangible and right-of-use
assets(1) 22.7 0.7 0.4 - 0.5 24.3
Amortisation 14.0 - - 0.2 9.6 23.8
Costs relating to business
combinations 8.1 - - - 1.2 9.3
------------------------------ ---------- ------------ ---------- --------- ----------- -------
Adjusted EBITDA 98.4 9.1 2.8 2.9 (15.7) 97.5
------------------------------ ---------- ------------ ---------- --------- ----------- -------
Online
Veterinary Retail
Practices Laboratories Crematoria Business Head Office Group
Year ended 30 June 2020 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ---------- ------------ ---------- --------- ----------- -------
Revenue 384.1 21.1 7.2 32.1 (16.7) 427.8
Profit/(loss) before income
tax 26.9 5.0 2.1 2.4 (26.5) 9.9
Adjusted EBITDA 72.3 5.8 2.5 2.5 (12.1) 71.0
Total assets 401.5 22.6 14.0 22.6 3.6 464.3
Total liabilities (176.8) (2.8) (1.4) (17.7) (99.0) (297.7)
---------------------------- ---------- ------------ ---------- --------- ----------- -------
Reconciliation of adjusted
EBITDA
Profit/(loss) before income
tax 26.9 5.0 2.1 2.4 (26.5) 9.9
Finance expense 4.1 - - - 4.5 8.6
Depreciation(1) 21.7 0.8 0.4 0.1 1.2 24.2
Amortisation 14.7 - - - 7.5 22.2
Costs relating to business
combinations 0.2 - - - 0.5 0.7
Exceptional items(1) 4.7 - - - 0.7 5.4
---------------------------- ---------- ------------ ---------- --------- ----------- -------
Adjusted EBITDA 72.3 5.8 2.5 2.5 (12.1) 71.0
---------------------------- ---------- ------------ ---------- --------- ----------- -------
1. Impairments in the year ended 30 June 2020 are shown in exceptional items.
3. Income tax expense
a) Analysis of income tax expense recognised in the income
statement
2021 2020
GBPm GBPm
-------------------------------------------------- ----- -----
Current tax
Current tax on profits for the year 12.9 6.8
Adjustments in respect of previous years 1.3 (1.8)
--------------------------------------------------- ----- -----
Total current tax charge 14.2 5.0
--------------------------------------------------- ----- -----
Deferred tax
Origination and reversal of temporary differences (5.0) (3.9)
Adjustments in respect of previous years 0.3 0.7
Effect of tax rate change on opening deferred
tax balance 4.3 2.4
--------------------------------------------------- ----- -----
Total deferred tax credit (0.4) (0.8)
--------------------------------------------------- ----- -----
Total income tax expense 13.8 4.2
--------------------------------------------------- ----- -----
b) Reconciliation of effective income tax charge
The total income tax expense for the year differs from the
theoretical amount that would arise using the standard rate of UK
corporation tax of 19.0% (2020: 19.0%) as follows:
2021 2020
GBPm GBPm
--------------------------------------------------- ----- -----
Profit before tax 33.1 9.9
--------------------------------------------------- ----- -----
Effective tax charge at 19.0% (2020: 19.0%) 6.3 1.9
Effects of:
Expenses not deductible for tax purposes 2.4 1.0
Tax rate change on opening deferred tax balances 4.3 2.4
Adjustments to deferred tax charge in respect
of previous years 0.3 0.7
Adjustments to current tax charge in respect
of previous years 1.3 (1.8)
Utilisation of brought forward losses previously
unrecognised (0.1) -
Effect of difference between closing deferred
tax rate and current tax rate (0.7) -
--------------------------------------------------- ----- -----
Total income tax expense 13.8 4.2
--------------------------------------------------- ----- -----
Factors affecting the current tax charge
UK corporation tax is calculated at 19.0% (2020: 19.0%) of the
estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The effective tax rate on reported profits is 41.7% (2020:
42.3%). The Group's effective tax rate for 2021 was influenced by
the remeasurement of deferred tax balances in respect of UK
jurisdictions from 19.0% to an average rate of 22.6% as a result of
the substantively enacted increase in the UK corporation tax rate
to 25.0% from 1 April 2023. It was further affected by an increase
in expenses not deductible for tax purposes predominantly in
respect of business acquisitions.
Changes in tax rates
The UK corporation tax rate for the year was 19.0% (2020:
19.0%). In March 2021, the UK Government announced an increase in
the UK corporation tax rate to 25.0% from 1 April 2023. The
increase in UK corporation tax rate was substantively enacted on 24
May 2021. As a result, the relevant deferred taxation balances have
been re-measured using the rates expected to apply when the
deferred tax balances reverse.
The impact of change in tax rate in the prior year arose due to
the previous enacted reduction in the UK corporation tax rate from
19.0% to 17.0% from 1 April 2020 being repealed, and the 19.0% tax
rate being substantively enacted on 17 March 2020.
The impact of the change in tax rate has been recognised in
total income tax expense in the Income Statement, except to the
extent that it relates to items previously recognised outside of
the Income Statement in which case it has been recognised in Other
Comprehensive Income and Equity accordingly.
4. Earnings per Ordinary share
a) Basic
Basic earnings per Ordinary share is calculated by dividing the
profit after taxation by the weighted average number of shares in
issue during the year.
2021 2020
----------------------------------------------- ---------- ----------
Earnings attributable to Ordinary shareholders
(GBPm) 19.3 5.7
----------------------------------------------- ---------- ----------
Weighted average number of Ordinary shares in
issue 70,685,939 70,654,009
----------------------------------------------- ---------- ----------
Basic earnings per share (pence per share) 27.3 8.1
----------------------------------------------- ---------- ----------
b) Diluted
Diluted earnings per share is calculated by adjusting the
weighted average number of Ordinary shares outstanding to assume
conversion of all dilutive potential Ordinary shares. The Company
has potentially dilutive Ordinary shares, being the contingently
issuable shares under the Group's LTIP schemes and SAYE schemes.
For share options, a calculation is undertaken to determine the
number of shares that could have been acquired at fair value
(determined as the average annual market share price of the
Company's shares) based on the monetary value of the subscription
rights attached to outstanding share options. The number of shares
calculated as above is compared with the number of shares that
would have been issued assuming the exercise of the share
options.
2021 2020
----------------------------------------------- ---------- ----------
Earnings attributable to Ordinary shareholders
(GBPm) 19.3 5.7
----------------------------------------------- ---------- ----------
Weighted average number of Ordinary shares in
issue 70,685,939 70,654,009
Adjustment for contingently issuable shares -
LTIPs 237,307 109,143
Adjustment for contingently issuable shares -
SAYE schemes 246,533 3,017
----------------------------------------------- ---------- ----------
Weighted average number of Ordinary shares for
diluted earnings per share 71,169,779 70,766,169
----------------------------------------------- ---------- ----------
Diluted earnings per share (pence per share) 27.1 8.1
----------------------------------------------- ---------- ----------
Non-GAAP measure: adjusted earnings per share
Adjusted earnings per Ordinary share is calculated as adjusted
profit before income tax less applicable taxation divided by the
weighted average number of Ordinary shares in issue in the
period.
Note 2021 2020
----------------------------------------------- ---- ---------- ----------
Earnings attributable to Ordinary shareholders 19.3 5.7
Add back taxation 13.8 4.2
----------------------------------------------- ---- ---------- ----------
Profit before income tax 33.1 9.9
Adjustments for:
Amortisation of intangible assets 23.8 22.2
Costs relating to business combinations 2 9.3 0.7
Exceptional items 2 - 5.4
----------------------------------------------- ---- ---------- ----------
Adjusted profit before income tax 66.2 38.2
Tax charge amended for the above adjustments (13.1) (8.5)
----------------------------------------------- ---- ---------- ----------
Adjusted profit after income tax and earnings
attributable to owners of the parent 53.1 29.7
----------------------------------------------- ---- ---------- ----------
Weighted average number of Ordinary shares
in issue 70,685,939 70,654,009
Weighted average number of Ordinary shares
for diluted earnings per share 71,169,779 70,766,169
----------------------------------------------- ---- ---------- ----------
Pence Pence
------------------------------------------- ----- -----
Adjusted earnings per share (pence per
share) 75.1p 42.0p
-------------------------------------------- ----- -----
Diluted adjusted earnings per share (pence
per share) 74.6p 41.9p
-------------------------------------------- ----- -----
5. Business combinations
Details of business combinations in the year ended 30 June 2021
are set out below, in addition to an analysis of post-acquisition
performance of the respective business combinations, where
practicable. The reason for each acquisition was to expand the CVS
Group business through acquisitions in meeting our strategic
goals.
Name of business combination Date of acquisition
----------------------------------------- -------------------
04 November
Darboe & Baily Limited 2020
17 November
Astonlee Limited 2020
19 November
White Lodge Veterinary Centre Limited 2020
03 December
Charter Veterinary Hospital Group Limited 2020
20 February
Market Hall Vets (trade and assets) 2021
23 February
Animal Health Centre Limited 2021
Polmont Veterinary Clinic Limited 01 March 2021
Enterprise Veterinary Services Limited 02 March 2021
Greensands Veterinary Clinic Limited 29 April 2021
----------------------------------------- -------------------
All businesses were acquired via 100% share purchase agreement
unless indicated otherwise in the table above.
Given the nature of the veterinary practices acquired and the
records maintained by such practices, it is not practicable to
disclose the revenue or profit or loss of the combined entity for
the year as though the acquisition date for all business
combinations during the year had been at the beginning of that
year.
The table below summarises the total assets acquired through
business combinations in the year ended 30 June 2021:
Book
value
of Fair
acquired value Fair
assets adjustments value
GBPm GBPm GBPm
------------------------------------------ --------- ------------ ------
Property, plant and equipment 0.6 - 0.6
Patient data records - 8.8 8.8
Right-of-use assets 4.9 - 4.9
Inventories 0.4 - 0.4
Deferred tax liability (0.1) (2.0) (2.1)
Trade and other receivables 1.4 (0.1) 1.3
Provision for impairment of trade
receivables (0.1) - (0.1)
Trade and other payables (1.9) - (1.9)
Loans (1.0) - (1.0)
Right-of-use liabilities (4.9) - (4.9)
------------------------------------------- --------- ------------ ------
Total identifiable assets (0.7) 6.7 6.0
------------------------------------------- --------- ------------ ------
Goodwill 14.1 14.1
------------------------------------------- --------- ------------ ------
Total initial consideration paid (net
of cash acquired of GBP1.3m) 20.1
------------------------------------------- --------- ------------ ------
Initial consideration paid (net of
cash acquired of GBP1.3m) 19.4
------------------------------------------- --------- ------------ ------
Deferred consideration payable 0.5
------------------------------------------- --------- ------------ ------
Contingent consideration payable 0.2
------------------------------------------- --------- ------------ ------
Total consideration (net of cash acquired
of GBP1.3m) 20.1
------------------------------------------- --------- ------------ ------
Goodwill recognised represents the excess of purchase
consideration over the fair value of the identifiable net assets.
Goodwill reflects the synergies arising from the combination of the
businesses; this includes cost synergies arising from shared
support functions and buying power synergies. Goodwill includes the
recognition of an amount equal to the deferred tax that arises on
the acquired non-tax deductible patient data records.
Post-acquisition revenue and post-acquisition adjusted EBITDA
were GBP6.1m and GBP1.3m, respectively. The post-acquisition period
is from the date of acquisition to 30 June 2021. Post-acquisition
EBITDA represents the direct operating result of practices from the
date of acquisition to 30 June 2021 prior to the allocation of
central overheads, on the basis that it is not practicable to
allocate these.
Goodwill and intangible assets recognised in the year relating
to business combinations are not expected to be deductible for tax
purposes.
The acquisition costs incurred in relation to the above and
prior year business combinations amounted to GBP9.3m for the year
and are included within other expenses.
The Directors do not consider that any individual in-year
acquisition to be material to the Group and therefore have not
separately disclosed these.
Business combinations in previous years
Details of business combinations in the comparative year are
presented in the consolidated financial statements for the year
ended 30 June 2020.
Business combinations subsequent to the year-end
Subsequent to the year end, the Group has made one acquisition
on 19 August 2021.The Group purchased 100% of the share capital of
Quality Pet Care Limited, a company registered in England and
Wales, for consideration of GBP20.4m. This is a business comprising
eight companion animal veterinary practice sites across the UK.
The acquisition was purchased for total cash consideration of
GBP20.4m. Assets acquired comprised principally goodwill and
intangible patient data records with a provisional fair value of
GBP20.4m.
6. Dividends
The Directors have proposed a final dividend of 6.5p (2020:
GBPnil) per share, giving a total of GBP4.6m (2020: GBPnil). During
the year no dividend was paid (2020: GBP3.9m).
7. Borrowings
Borrowings comprise bank loans and are denominated in Sterling.
The repayment profile is as follows:
2021 2020
Group GBPm GBPm
----------------------------- ----- -----
Within one year or on demand - 0.1
Between one and two years - -
After more than two years 83.9 83.5
----------------------------- ----- -----
83.9 83.6
----------------------------- ----- -----
The balances above are shown net of issue costs of GBP1.1m
(2020: GBP1.5m), which are being amortised over the term of the
bank loan. The carrying amount of borrowings is deemed to be a
reasonable approximation to fair value.
The Group has total facilities of GBP170.0m. These facilities
are provided by a syndicate of four banks: NatWest, HSBC, BOI and
AIB, and comprise the following elements:
-- a fixed term loan of GBP85.0m, repayable on 31 January 2024
via a single bullet repayment; and
-- a four-year revolving credit facility ("RCF") of GBP85.0m that runs to 31 January 2024.
In addition, the Group has a GBP5.0m overdraft facility
renewable annually.
The two financial covenants associated with these facilities
have remained unchanged, and are based on the ratios of Group
borrowings to EBITDA and Group EBITDA to interest. The Group
borrowings to EBITDA ratio must not exceed 3.25x. The Group EBITDA
to interest ratio must not be less than 4.5x. The facilities
require cross-guarantees from the most significant of CVS Group's
trading subsidiaries but are not secured on the assets of the
Group. EBITDA is based on the last twelve months' adjusted EBITDA
performance adjusted for a twelve-month adjustment for businesses
acquired, transaction costs and deferred consideration on business
combinations and share option expenses, prior to the impact of IFRS
16.
Bank covenants are tested quarterly and the Group has
considerable headroom in both financial covenants and in its
undrawn but committed facilities as at 30 June 2021.
Interest rate risk is also managed centrally and derivative
instruments are used to mitigate this risk. On 28 February 2020,
the Group entered into a four-year interest rate fixed swap
arrangement to hedge fluctuations in interest rates on GBP70.0m of
its term loan.
At the consolidated and Company statement of financial position
date GBP70.0m of the term loan was hedged using an interest rate
swap. The remainder of the debt is not hedged.
Undrawn committed borrowing facilities
At 30 June 2021, the Group has a committed overdraft facility of
GBP5.0m (2020: GBP5.0m) and an RCF of GBP85.0m (2020: GBP85.0m).
Both the overdraft facility and the RCF were undrawn at 30 June
2021 and 30 June 2020.
8. Cash flow generated from operations
Group
------------
2021 2020
GBPm GBPm
----------------------------------------- ----- -----
Profit for the year 19.3 5.7
Taxation 13.8 4.2
Total finance costs 7.0 8.6
Amortisation of intangible assets 23.8 22.2
Depreciation and impairment of property,
plant and equipment and right-of-use
assets(1) 24.3 24.2
Increase in inventories (0.4) (1.4)
(Increase)/decrease in trade and other
receivables (3.4) 8.5
(Decrease)/increase in trade and other
payables (5.2) 11.5
(Decrease)/increase in provisions (1.1) 5.0
Share option expense 2.2 0.9
Exceptional items(1) - 5.4
------------------------------------------- ----- -----
Total net cash flow generated from
operations 80.3 94.8
------------------------------------------- ----- -----
1. Impairments in the year ended 30 June 2020 are shown in exceptional items.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR PPUCPBUPGPPP
(END) Dow Jones Newswires
September 23, 2021 02:00 ET (06:00 GMT)
Cvs (LSE:CVSG)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Cvs (LSE:CVSG)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024
