29 Sept 2023
The claim was made as one of the profession’s largest care providers, the CVS Group, announced significant revenue and profit increases in its latest annual results.
Allister Webb
Job Title
Image © 92ashrafsoomro / Adobe Stock
Business analysts have played down the potential impact from regulators’ review of the UK veterinary sector, with some suggesting financial markets had “overreacted” to the move.
The claim was made as one of the profession’s largest care providers, the CVS Group, announced significant revenue and profit increases in its latest annual results.
Company bosses said they are supportive of the Competition and Markets Authority’s (CMA) work, as they continue to seek further expansion opportunities at home and abroad.
But although its share price plummeted by around a third in the wake of the review announcement, a reaction estimated to have wiped hundreds of millions of pounds from the company’s value, there appears to be little expectation of a broader downturn in fortunes.
In its analysis, the investment bank Berenberg said it felt investors should not expect the review to bring forward measures that would “materially impact” the company’s prospects. Meanwhile, a separate paper by Liberum Capital added: “In our view, the shares have overreacted.”
The seemingly optimistic outlook coincided with the release of the group’s results for the year to the end of June 2023 on 21 September.
They showed a 9.8% increase in revenues to £608.3 million and a near 50% jump in pre-tax profits to £53.9 million, although the company stressed that its 2022 results had been impacted by its decision to divest itself of Quality Pet Care Ltd following a CMA inquiry.
That was one of several acquisition investigations carried out by the authority over the past two years and which are understood to have, at least in part, influenced the decision to launch a broader review of the sector.
The current process is seeking both professional and public testimonies in four main areas – pricing, prescription arrangements, awareness of corporate ownership structures and the provision of emergency and out of hours cover, with findings expected to be published in the new year.
Although the latest reports acknowledged the potential for uncertainty arising from the process, Liberum argued greater costs arising from the shortage of veterinary professionals, and not profit, was the primary driver of price increases across the sector.
The Berenberg paper added: “We expect a focus from the regulator (if any) on so-called ‘sunlight remedies’, focused on greater quality consumer information and price transparency.”
CVS deputy chief executive Ben Jacklin said the company is engaging with the new process and is encouraging both its staff, the rest of the sector and pet owners alike to do the same. He added: “I don’t think this is about CVS or the corporates. It’s a profession-wide issue.”
The company’s results also gave a strong indication that the increased regulatory interest in corporate veterinary takeovers had not diminished its desire for further expansion.
They showed it had invested nearly £55 million in 11 separate transactions during 2022-23, while two new deals have been announced in recent weeks.
The latest practices to be acquired are Bridge Vets in Wroxham, Norfolk, and Masefield Veterinary Services, based in Malvern, Worcestershire, and Mr Jacklin insisted he was confident there was still capacity for expansion within the UK.
He said: “We think around 45% of UK practices are still independent and we see a number of those are still interested in joining the group. We are ourselves less than 10% of the market, so there’s 90% of the country we’re not in, in simple terms.
“We do see an opportunity for high quality vet practices who wish to do so to join the group.”
Mr Jacklin also revealed the company had briefed the CMA about its latest deals before going ahead with them, in line with a revised policy instigated following the earlier inquiry. He said: “We think it’s really helpful. We support the CMA in what they’re doing. They’re looking after the consumer as they should be doing.”
Another area where CVS is looking to expand further is in Australia, where the acquisition of its first five practices was also confirmed in the annual results.
Further acquisitions there are expected in a move that analysts have also welcomed as a means of mitigating any potential fallout from the CMA review.
Mr Jacklin, who spent part of his career practising in Australia, argued its market offered similar growth potential to what the UK did a decade ago and the possibility of deeper working relationships between the countries.
He said: “We do see a real synergy with the UK as well in terms of employment. We want vets in Australia to come and work here if they want to, and vice versa, and we’re certainly going to be making the most of that.
