Vet practices owner CVS Group (LON: CVSG) grew its like-for-like interim revenues by 7.5%, which is near to the top of the target range, and the pace of acquisitions has increased. Margins also increased.
The vet practices remain the main generator of revenues, with the rest coming from laboratories, crematoria and online retail. Healthy Pet Club membership increased by 4% to 481,000. Five practices were acquired in the first half and a further three since then. So far, this year £35.3m has been spent with up to £50m planned for each year.
In the six months to December 2022, revenues increased from £273.7m to £296.3m, while underlying pre-tax profit improved from £36.2m to £41.1m. All four divisions grew their revenues, although the crematoria profit was lower due to higher energy costs.
As well as acquisitions, CVS Group is upping the spending on capital investment. Some of that is going into a new greenfield vet practice and a new hospital in Bristol, but it is mainly on equipment for existing practices.
Net debt was £57.6m at the end of 2022. The new £350m bank facility leaves plenty of cash to fund other acquisitions, which may not all be in the UK.
Forecast
Peel Hunt forecasts that full year pre-tax profit will improve from £75.2m to £82.6m. Next year, it could reach £86.7m. This would generate enough cash for capital investment and still reduce net debt. However, acquisitions are likely to increase borrowings.
At 1898p, the shares are trading on 21 times prospective earnings. The dividend could be increased from 7p a share to 7.5p a share.