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CVS temporarily halves small animal practices

The veterinary group experienced growth across its operating segments
March 27, 2020

A strong first half for CVS (CVS) will be followed by a significant blow to second-half income after the veterinary group announced the closure of half of its small animal practices during the government’s coronavirus lockdown period.

IC TIP: Hold at 754p

CVS experienced revenue growth across all of its operating segments, with online pharmacy and retail business Animed Direct witnessing a sales lift of 37 per cent to £14.7m. Cash generated from operations grew to £39.3m from £19.6m owing to operating profit growth and the impact of new lease accounting standards, helping CVS to bring down its net debt to £96.8m from £102m as of 30 June 2019. The balance sheet is in good shape to see it through the commercial impact of the pandemic. Net debt stood at 1.75 times cash profits, well below its covenant of 3.25 times, while CVS also had undrawn borrowings of £79m under recently revised facilities as of 29 February.

Coronavirus has, however, forced CVS to reduce its small animal capacity by around a third, which Peel Hunt analysts estimate will reduce its fourth-quarter sales by £60m, or around 40 per cent, assuming this disruption continues to the end of June.

Peel Hunt forecasts full-year 2020 adjusted pre-tax profits of £23.8m and EPS of 27.6p for the June year-end, rising to £50.9m and 58.2p in FY2021.

CVS GROUP (CVSG)   
ORD PRICE:754pMARKET VALUE:£533m
TOUCH:745-754p12-MONTH HIGH:1,290pLOW: 502p
DIVIDEND YIELD:nilPE RATIO:43
NET ASSET VALUE:234p*NET DEBT:59%**
Half-year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20181951.61.2nil
20192256.77.0nil
% change+15+319+483-
Ex-div:na   
Payment:na   
*Includes intangible assets of £240m, or 340p a share **Includes lease liabilities of £113.6m