Reviewing AIM Listed CVS Group Plc And LSE Main Market Listed Pennon Group Plc

CVS Group Plc

CVS Group Plc (CVSG) is a veterinary service providing company based in the United Kingdom. The company claims to be the largest integrated veterinary service provider in the UK, operating in excess of 450 veterinary surgeries throughout England, Northern Ireland, Scotland and Wales, and provides treatment to small animals, large animals as well as equine animals.

The company has a veterinary diagnostic practice with four laboratories, seven pet crematoria, Animal Direct- the company’s e-commerce portal, Pet Medic Recruitment – the company’s veterinary recruitment agency, the healthy pet club- company promoted largest preventive pet Healthcare scheme in the United Kingdom, VETisco- is the company’s veterinary instruments business and MiVetClub & VetShare- two pet buying groups supported by the company. Other than the above the company also has its own brand MiPet brand of  Pet food, therapeutics and associated products.

The company’s shares are listed on the AIM segment of the London Stock Exchange where they trade with the ticker name CVSG.

Financial Update

The company on 27 September 2019 came out with the financial results for the year ended 30 June 2019.

  • The revenue of the company for the year was up by 24.2 per cent to stand at £406.5 million.
  • The number of members for Healthy Pet Club during the year was up 10.8 per cent to stand at 401,000.
  • The Adjusted EBITDA of the company for the year was up 14.5 per cent to stand at £54.5 million.
  • The Profit before income tax of the company for the year came down 17.0 per cent to £11.7 million due to amortization costs in relation to acquisitions made by the company.
  • The Leverage of the company reduced during the year to 2.08X as on 30 June 2019.
  • The Adjusted earnings per share of the company increased during the year by 10.1 per cent to stand at 46.7 pence per share.
  • The board of the company for the year has proposed a dividend of 5.5 pence per share, up 10 per cent compared to dividend of 5.0 pence per share in 2018.

Source – Company’s yearly results statement published on 27 September 2019

Stock performance at the London Stock Exchange

Price Chart as on 27 September 2019, before the market close (Source: Thomson Reuters)

On 27 September 2019, at the time of writing the report (before the market close, GMT 11.48 AM), CVSG shares were trading on the London Stock Exchange at GBX 976.00.

The stock has a 52-week High of GBX 1062.30 and a 52-week low of GBX 362.26. The total market capitalization of the company was £642.95 million.

Outlook

The company this year was able record a significantly better financial performance thanks to the encouraging results given by it in the second half of the financial year following a lacklustre first half-year performance.  This improvement in results is a reflection of the measures the company took in addressing the key problems that had impacted the performance of the company during the first half. The measures taken continue to show their positive effects, with highly encouraging performance trends in the early part of the new financial year.

The company operates in a sector with favorable market conditions. The consumer spending behavior trends in this sector have shown that it is resilient to economic downturns and people are getting more and more serious about the wellbeing of their pets. The company has already made contingency plans which  are in place to manage any short-term Brexit-related impacts and the board has assures all shareholders that the business is well grounded and is well placed to withstand any significant adverse impact which the UK’s decision to exit the EU may bring with it.

Multiple initiatives are being undertaken by the company to bring in further organic growth and the company continues to generate positive operating cashflows.  The board believes that the company is now well placed for further investment in its people and infrastructure to drive growth while continually keeping its focus on maintaining the highest standards of veterinary clinical care.  The company intends to explore selective acquisitions where the Board feels confident that those will be able to generate appropriate returns for the company.

Overall the board is happy with the improvements that have been brought about in the company during the year and is confident that it is very well poised for future growth and enhancement of shareholder value. 

Pennon Group Plc

Pennon Group Plc is United Kingdom based environmental infrastructure and management company which was formed at the time of privatization of the water industry in 1989. The Company provides water treatment and waste management services in Cornwall Devon and in parts of Dorset and Somerset. The company has three subsidiaries namely; the South West Water Limited, the Bournemouth Water Limited and the Viridor Limited. The company’s water business vertical comprises the regulated water and wastewater treatment services being provided by South West Water Limited and the regulated water services being provided by Bournemouth Water Limited. The company’s waste management division comprises of waste recycling and recovery services being undertaken by Viridor Limited. The South West Water Limited subsidiary is into providing water and wastewater treatment services for Devon, Cornwall and parts of Dorset and Somerset. The Bournemouth Water Limited subsidiary is into the business of giving its water services in areas of Dorset, in Hampshire and in Wiltshire. Viridor Limited is into recycling of waste, recovery of energy and provision of other waste management services. The company provides its services to over 150 civil amenity authorities and corporate customers, which in turn provide their services to 32,000 customers across the United Kingdom.

The shares of the company are listed on the London Stock Exchange where they trade with the ticker name PNN.

Trading Statement Highlights

The company on 27 September 2019 came out with its trading statement in advance of its half-yearly results for the period ended 30 September 2019, which will be announced on 26 November 2019.

  • The company is on track to meet management expectations set out for the financial period 2019/20.
  • Viridor, the company’s waste recycling division, has ten Energy Recovery Facilities (ERFs) which are performing well; another one called Avonmouth will be the eleventh and the final ERF in series planned for the current portfolio of the company and is on track for commissioning during the second half of 2019/20 and the operational ramp-up is planned for 2020/21.
  • During the six-month period the company entered into a Joint venture with Grundon Waste Management Limited for the building and commissioning of a new Energy Recovery Facility (ERF) in West Sussex in the United Kingdom.
  • The construction at company’s subsidiary Viridor’s £65 million plastics reprocessing facility is in full swing. The plant is set to contribute to the earnings of the company from 2020/21 with 85 per cent of inputs and 75 per cent of the offtake now contracted.
  • South West Water subsidiary of the company is very well in line to continue to give a good performance with heightened Return on Regulated Equity (RORE) of around 11.8 per cent for K6 (2015-2020) whilst it remains focused on the early implementation of the fast-track K7 (2020-25) Business Plan.

Stock performance at the London Stock Exchange

Price Chart as on 27 September 2019, before the market close (Source: Thomson Reuters)

On 27 September 2019, at the time of writing the report (before the market close, GMT 11.55 AM), PNN shares were trading on the London Stock Exchange at GBX 797.80.

The stock has a 52-week High of GBX 810.20 and a 52-week low of GBX 679.48. The total market capitalization of the company was £3.33 billion.

Outlook

On the back of strong financial performance and operational progress achieved by Viridor Limited and South West Water Limited, the two subsidiaries of the company during the six-month period, and also taking into consideration the imminent start of the new K7 regulatory delivery period to which the company’s other subsidiary  South West Water Limited is subject to and the short and medium-term growth opportunities for Viridor, the board of the company has come to the conclusion that now is the appropriate time to conduct a full review of the company’s strategic objectives to choose between the different growth options available to it and construct an appropriate capital allocation policy to implement the chosen strategy.

The company is placed at a strategic and transformational standpoint from where the implementation of its strategy will bring in enhanced growth and value creation opportunities for its shareholders.