A review of the veterinary sector by the Competition and Markets Authority (CMA) has caused shares in pet care companies to crash.
CVS Group (CVSG), which owns over 500 surgeries in the UK, Netherlands and Republic of Ireland, saw shares plunge by 27 per cent on Thursday morning. Meanwhile, shares in Pets at Home (PETS) - which generates about a third of its operating profits from veterinary services - fell by 10 per cent.
The CMA said that vet bills appeared to have risen faster than the rate of inflation and that pet owners “may not find it easy to access the information they need about prices and treatment options”.
It plans to review the pricing of services, how prescriptions and medication for pets are arranged and sold, out-of-hours support, and whether customers know their vet may be part of a bigger chain.
In 2013, independent practices accounted for 89 per cent of the UK veterinary industry, but this figure has fallen to less than half.
Analysts at Jefferies said the CMA was challenging reasonable price rises driven by demand and supply: “Much of the inflation in the cost of vet services is being driven directly by the shortage of vet practitioners and the (justified, in our view) inflation in vet salaries”.
They added that CMA concerns about the visibility of vets being owned by larger groups will impact the corporate roll-up operators, rather than companies like Pets at Home.
In the year to 30 March 2023, Pets at Home increased veterinary revenue by 13.3 per cent and managed to widen its profit margin, meaning underlying profit before tax rose by 18.3 per cent to £50.9mn. Meanwhile, CVS grew its profit before tax by 22 per cent to £28mn in the six months to December 2022.
CVS said it had “always sought to ensure its prices are appropriate and reflect fair value to our clients”, and that its bills reflect high employment costs caused by the “significant shortage of vets in the UK”.
