Right then, let’s dissect CVS Group’s latest trading update. The veterinary juggernaut has been busy reshaping its portfolio while navigating some choppy UK waters and planting deeper roots Down Under. The headline? A solid, if unspectacular, performance largely in line with expectations, but with some significant strategic moves beneath the surface.
Financials: Holding Steady Amidst the Headwinds
For the year ended 30 June 2025 (FY25), CVS delivered a performance that met market forecasts, albeit reflecting the tougher trading environment we’ve seen in the UK.
- Revenue (Continuing Operations): £673.2 million (unaudited), up 5.4% year-on-year. Crucially, this excludes the now-divested Crematoria business.
- Like-for-Like (LFL) Sales: A modest 0.2% increase across continuing operations. This was notably softer than FY24’s 2.9% LFL growth, primarily driven by the core UK Veterinary Practice division achieving only 1.0% LFL growth for the year. Positively, they flagged improved momentum in the final quarter.
- Adjusted EBITDA (Continuing Operations): Approximately £134 million, hitting market consensus (£133.3m) and up from £123.0m in FY24.
- Adjusted EBITDA Margin: Improved to around 20% (FY24: 19.3%), sitting comfortably within their 19-23% target range.
- Capital Discipline: Capex came in at £33.2m, towards the lower end of guidance.
So, a picture of resilience. Revenue grew, profits grew, margins improved – but that sluggish LFL figure in the UK is the clearest signpost of the consumer pressures we all know are out there.
The Big Strategic Shift: Exiting Crematoria, Supercharging the Balance Sheet
This wasn’t just another trading update; it marked a significant strategic pivot. As flagged in April, CVS completed the sale of its Crematoria operations on 15th May 2025.
- Sale Price: £42.4 million initial cash consideration.
- Valuation: Represented a punchy 10x multiple on the division’s adjusted EBITDA.
- Financial Impact: Expected profit on disposal ~£32.0m (boosting the FY25 statutory results). More importantly, it dramatically strengthened the balance sheet:
- Net bank borrowings slashed to £131.4m (down from £168.0m at June 2024).
- Leverage (net debt/EBITDA) plummeted to a very comfortable c.1.2x (down from 1.54x).
- Significant headroom remains, with over £200m in committed undrawn facilities.
The message is clear: this sale wasn’t just about exiting a non-core asset; it was about generating serious financial firepower. That cash is earmarked for their core growth engines.
Growth Engine #1: Australia – Full Speed Ahead
While the UK acquisition tap remains firmly off (thanks to the ongoing CMA investigation – more on that below), CVS has been going gangbusters in Australia.
- FY25 Acquisitions: Seven practice acquisitions (encompassing 15 individual sites) for an initial net cash outlay of A$57.9m / £29.2m.
- Post-Year End: Added another two-site practice (Toorak Road & Caulfield).
- Current Footprint: Now boasts 30 practices across 45 sites in Australia.
The Board is clearly chuffed, reporting that these Aussie acquisitions are performing ahead of business plans, partly thanks to buying synergies. Crucially, they signal a “strong pipeline” and confidence in completing “a number of further” acquisitions in Australia during FY26. This is now a substantial and rapidly growing part of the CVS story.
Growth Engine #2: The UK – Paused, But Poised?
The shadow of the Competition and Markets Authority (CMA) investigation continues to loom large over CVS’s UK M&A ambitions.
- UK Acquisitions: Firmly “on hold”. Zero acquisitions completed in the UK during FY25.
- CMA Timeline: The CMA has delayed its Provisional Decision until September 2025. Consequently, CVS has pushed back its own full-year results announcement to 7th October 2025 to incorporate the CMA’s findings.
- CVS Stance: While “disappointed” with the delay, they express optimism that it will lead to a “more proportionate remedy package”. They continue to “engage proactively”.
The key takeaway? The UK acquisition machine is in the garage, but CVS clearly believes it will be back on the road eventually, spotting “accretive UK acquisition opportunities in due course“. The timing and potential conditions (remedies) imposed by the CMA remain the billion-pound question for UK investors.
Outlook: Fundamentals Strong, Firepower Ready
Despite the UK economic uncertainty and the CMA overhang, CVS strikes a bullish tone on the long-term:
- Sector Fundamentals: They reiterate the strong tailwinds – post-COVID pet population growth, increasing pet life expectancy, pet humanisation, and advancing clinical care.
- CVS Position: Points to its “strengthened balance sheet” (courtesy of the crematoria sale) and the “successful establishment of a meaningful Australia operation” as key enablers for future inorganic growth.
- Ambition: Confident in delivering “attractive growth in shareholder value over the medium and long term”.
The Analyst’s View
This update paints a picture of a company proactively managing challenges and opportunities. Hitting EBITDA consensus in a softer UK market is commendable. The crematoria disposal was executed at an attractive multiple, providing a vital financial springboard. Australia is emerging as a genuine second engine of growth, performing well and with clear expansion runway.
The elephant in the room remains the CMA. The delay is frustrating, but CVS’s optimism about a proportionate outcome is noteworthy. October’s results, now incorporating the CMA’s provisional findings, will be pivotal. Until then, the UK M&A pause persists.
Overall, CVS appears financially robust, strategically focused on its core veterinary services, and well-positioned geographically. The successful navigation of the CMA process is the critical next step to fully unlocking its UK potential alongside its burgeoning Australian business. One to watch closely come autumn.
