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1. Company Snapshot

1.a. Company Description

CVS Group plc engages in veterinary, pet crematoria, online pharmacy, and retail businesses.The company operates through four segments: Veterinary Practices, Laboratories, Crematoria, and Online Retail.It operates animal veterinary practices and complementary veterinary diagnostic businesses.


The company also provides pet cremation and clinical waste services for veterinary practices.In addition, it operates Animed Direct, an online pharmacy and retail business that sells prescription and non-prescription medicines, premium pet foods, and other pet care products; and an online dispensary.Further, the company provides burial grounds; and veterinary instrumentation supply and referral services.


It owns 506 veterinary practices, 3 laboratories, 7 crematoria, and an online pharmacy.CVS Group plc was founded in 1999 and is based in Diss, the United Kingdom.

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1.b. Last Insights on CVSG

CVS Group's recent momentum may be attributed to its solid fundamentals and strategic insider buying, suggesting confidence in the company's future prospects. The European market's resilience, with the STOXX Europe 600 Index climbing 2.11%, has also contributed to the positive sentiment. Additionally, the company's strong corporate earnings and optimistic resolutions in geopolitical tensions have likely boosted its outlook. With no recent earnings release indicating otherwise, CVS Group's growth potential and adaptability to changing economic conditions make it an intriguing opportunity for investors.

1.c. Company Highlights

2. CVS Group Delivers Robust Full-Year Results

CVS Group reported a 5.4% increase in revenue to £673.2 million, with like-for-like growth of 0.2% across the group and 1% in the core practice division. Adjusted EBITDA rose by 9.4% to £134.6 million, resulting in an adjusted EBITDA margin of 20%. The company's actual EPS came in at 0.401, slightly below estimates of 0.405. The financial performance was driven by the UK operations and continued expansion in Australia, where the company completed 7 practice acquisitions, bringing its total footprint to 51 sites.

Publication Date: Oct -28

📋 Highlights
  • Revenue Growth:: Full-year revenue rose by 5.4% to £673.2 million, with like-for-like growth of 0.2% across the group.
  • Adjusted EBITDA Increase:: Adjusted EBITDA climbed 9.4% to £134.6 million, achieving a 20% margin.
  • Australia Expansion:: Completed 7 practice acquisitions in Australia, expanding to 51 sites with margins above the group average.
  • UK Market Resilience:: Overcame first-half challenges, ending the year with 1% like-for-like growth in the core practice division.

Expansion in Australia

The company's Australian operations have been a key driver of growth, with a focus on high-quality, larger practices in areas of high population. Richard Fairman stated that the demand has been good, with margins above the group margin, and the cost of acquisition is around 8x EBITDA. The pipeline is strong, with a further 15% to 20% of the market up for grabs, providing opportunities for continued expansion.

UK Operations and Market Conditions

The UK operations faced challenges in the first half due to softer market conditions, but saw significant improvement in the final quarter. The company is confident in its medium-term ambition of 4% to 8% like-for-like growth, driven by improved consumer confidence, certainty from the CMA process, and a cohort of aging pets requiring clinical care. The company's guidance for the current year includes the acquisitions made in the first couple of months, and a tailwind from softer comps in the second half is expected to continue.

Valuation and Growth Prospects

With a P/E Ratio of 54.99 and an EV/EBITDA of 10.98, the company's valuation suggests that investors are pricing in a certain level of growth. Analysts estimate next year's revenue growth at 5.7%, which is slightly above the company's reported revenue growth of 5.4%. The company's ROE of 6.63% and ROIC of 8.17% indicate a reasonable return on equity and invested capital. The dividend yield of 0.6% is relatively low, but the free cash flow yield of 3.08% provides some comfort.

Operational Improvements

The company has invested in improving the Animed Direct website and customer journey, leading to improved revenue growth in the second half. The company is also using AI to support consulting room processes, such as a scribing AI function that records consultations and structures clinical notes. Paul Higgs mentioned that the Royal College forecasts that the shortage of vets will become less relevant in the next few years, and the company is seeing an improvement in the number of vets working in the UK.

3. NewsRoom

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.53%)

6. Segments

Veterinary Practices

Expected Growth: 6.5%

CVS Group plc's Veterinary Practices segment growth of 6.5% is driven by increasing pet ownership, rising pet humanization, and growing demand for premium veterinary services. Additionally, strategic acquisitions, expansion of services, and investments in digital platforms have contributed to the segment's growth.

Online Retail

Expected Growth: 8.5%

CVS Group plc's online retail segment growth of 8.5% is driven by increasing pet owners seeking convenient and cost-effective ways to purchase pet medication and supplies online. Additionally, the company's investments in digital marketing, user-friendly website, and fast delivery options have improved customer experience, leading to increased online sales and market share.

Laboratories

Expected Growth: 5.5%

CVS Group plc's Laboratories segment growth of 5.5% is driven by increasing demand for healthcare services, expansion of Medicare and Medicaid programs, and strategic acquisitions. Additionally, the company's focus on providing low-cost, high-quality healthcare services and its strong brand reputation contribute to its growth. Furthermore, the rising need for diagnostic testing and personalized medicine also supports the segment's growth.

Central Administration

Expected Growth: 4.5%

Central Administration's 4.5% growth at CVS Group plc is driven by efficient cost management, strategic investments in digital transformation, and effective allocation of resources. Additionally, the segment benefits from economies of scale, process standardization, and a focus on operational excellence, enabling the company to maintain a competitive edge and drive growth.

Crematoria

Expected Growth: 6.0%

CVS Group plc's Crematoria segment growth of 6.0% is driven by increasing demand for funeral services, aging population, and rising funeral costs. Additionally, the company's strategic acquisitions and investments in crematoria facilities, as well as its focus on providing high-quality services, have contributed to the growth.

7. Detailed Products

Veterinary Services

CVS Group plc provides veterinary services through its network of veterinary practices, offering a range of services including consultations, vaccinations, and surgical procedures.

Laboratory Diagnostics

CVS Group plc offers laboratory diagnostic services, providing testing and analysis for veterinary practices and farmers.

Farm Sales and Supply

CVS Group plc supplies farming products and equipment, including animal feed, pharmaceuticals, and veterinary instruments.

Pet Retail

CVS Group plc operates pet retail stores, offering a range of pet food, accessories, and health products.

Online Retail

CVS Group plc operates an online retail platform, offering a range of pet products and veterinary supplies.

8. CVS Group plc's Porter Forces

Forces Ranking

Threat Of Substitutes

CVS Group plc operates in a highly competitive market, and there are many substitutes available to customers. However, the company's strong brand reputation and customer loyalty programs help to mitigate the threat of substitutes.

Bargaining Power Of Customers

CVS Group plc's customers have a high bargaining power due to the availability of many alternative pharmacies and retailers. The company's large customer base and loyalty programs help to reduce the bargaining power of individual customers.

Bargaining Power Of Suppliers

CVS Group plc has a diverse supplier base, and no single supplier has a significant impact on the company's operations. The company's large scale of operations also gives it bargaining power over its suppliers.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the pharmacy retail market. CVS Group plc's strong brand reputation, large scale of operations, and regulatory requirements make it difficult for new entrants to compete effectively.

Intensity Of Rivalry

The pharmacy retail market is highly competitive, with many established players competing for market share. CVS Group plc competes with other large retailers, as well as smaller independent pharmacies, which increases the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 43.65%
Debt Cost 4.78%
Equity Weight 56.35%
Equity Cost 8.68%
WACC 6.98%
Leverage 77.47%

11. Quality Control: CVS Group plc passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Mears

A-Score: 6.6/10

Value: 9.0

Growth: 7.2

Quality: 4.7

Yield: 7.5

Momentum: 2.0

Volatility: 9.0

1-Year Total Return ->

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XPS Pensions

A-Score: 6.5/10

Value: 3.2

Growth: 8.0

Quality: 7.7

Yield: 6.9

Momentum: 7.5

Volatility: 6.0

1-Year Total Return ->

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CEWE

A-Score: 6.5/10

Value: 6.9

Growth: 5.7

Quality: 7.5

Yield: 5.0

Momentum: 4.0

Volatility: 9.7

1-Year Total Return ->

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CVS

A-Score: 3.9/10

Value: 2.5

Growth: 5.0

Quality: 3.8

Yield: 0.6

Momentum: 7.5

Volatility: 4.0

1-Year Total Return ->

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Playtech

A-Score: 3.8/10

Value: 8.0

Growth: 2.8

Quality: 6.2

Yield: 5.0

Momentum: 0.0

Volatility: 1.0

1-Year Total Return ->

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Musti

A-Score: 2.8/10

Value: 3.0

Growth: 3.4

Quality: 2.1

Yield: 0.0

Momentum: 1.5

Volatility: 7.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

12.14$

Current Price

12.14$

Potential

-0.00%

Expected Cash-Flows