Vet service must make profits its pet subject
PETS were a must-have in lockdown. More than half the nation’s households now include a four-legged friend and 3.2 million bought their pet during the pandemic.
Furry companions offered a welcome distraction from the past year’s chaos, but also required several trips to the vet.
New puppies need a variety of jabs and may also get neutered. That’s been a welcome tailwind for CVS Group, one of the nation’s top vet networks.
Evidence of growing pet ownership was clear in CVS’s results for the sixmonth period ending in December.
Net client registrations rose 17 per cent and the group’s pet healthcare plan, Healthy Pet Club, saw the number of members it serves rise 3.6 per cent. All divisions, from Veterinary (its bread and butter) to Crematoria, reported growth. That fed into a 38.8 per cent increase in underlying profit before tax.
Increasingly, CVS does more than offer veterinary services though. Online veterinary pharmacy business Animed allows owners to order everything they need for their pet from home.
The division saw revenues rise 34 per cent during the first half of the financial year, proving demand for pet-related e-commerce is strong. But Animed’s profits didn’t grow at the same clip, giving CVS work to improve profitability.
One difficulty facing the group is its reliance on highly skilled workers – and a shortage of vet staff has proved a challenge before. While the group has worked to reduce that risk, a spike in staff costs could threaten margins.
For now CVS’s strong position in a booming industry has driven its price-to-earnings (P/E) ratio up to 30.9, nearly double the long-term average.
That reflects investor belief growth will be strong, but high expectations can open the door to disappointment. Pet ownership is unlikely to keep ballooning, so CVS will have to squeeze more from existing customers. That means growing Animed business and possibly looking to ripe new European markets.
Failure could mean disappointing investors, leading to unpleasant consequences for the share price.
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