CVS heading in the right direction on “favourable market dynamics”

CVS share price jumps on results announcement

CVS released its full-year results on Thursday and appears to be on a good trajectory.

The group saw its revenue increase by 19.2% to £510.1m, as like-for-like sales increased by 17.4%.

The numbers are a result of “favourable market dynamics”, the company said, which includes pet ownership in the UK rising during the pandemic.

Increased revenue led to a 37.3% jump in EBITDA (underlying cash profits) to £97.5m.

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The company announced a final dividend of 6.5p, after dividends were suspended the year before.

The CVS share price increased by 6.8% after the announcement.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, provided further context.

“The vet-clinic giant is barking up the right, very fruitful, tree. A huge boom in pet ownership over lockdown – there are now over 24 million cats and dogs in the UK – means more trips to the vets and more online pet food orders, and that means a ballooning revenue stream for CVS. What’s particularly impressive is that even when you strip out the effects of lockdowns, growth has been very impressive. Having an organic engine driver is much preferred to relying on favourable market dynamics.”

“The group offers a myriad of other services too, which helps pad out revenue and profits. These include a laboratories business which does diagnostics, as well as a cremation service. These alternative sources of income aren’t the main story by any stretch, but they are certainly nice to have,” Lund-Yates added.

“Things to watch out for include a very tough labour market in the veterinary sector because of skills shortages. CVS’ good reputation and improved remuneration packages should help it with staff retention and attraction, but it’s an ongoing battle and one CVS has lost in the past. Failure to secure enough high-quality veterinary surgeons and nurses is a risk for the group.”

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