Can CVS Group continue crawling out of the dog house?


CVS Group PLC (LON:CVSG) has been one of the outstanding share price performers in recent months as the veterinary services provider has emerged as a good boy after being in the dog-house after a profit warning in January.

An upgrade to earnings guidance in June was backed up by a solid update in July that confirmed CVS’s actions to improve performance had proved efffective.

Full year results for the 12 months ended 30 June will show sales scampering up 24.2% to GBP406.5mln, with like-for-like sales improving 5.2%.

Profit margins were squeezed however due to an increase in the proportion of revenues from the farm division and a further reduction in farm margin following the acquisition of the Slate Hall poultry business last year.

“After a period of introspection when there were questions around strategy and performance, the actual result is some way better than feared and the business is in good shape,” said broker Peel Hunt.

The broker expects underlying earnings (EBITDA) to rise 12% to GBP55mln and profit before tax by 11% to GBP41.4mln.

“Some of the concerns on trading had been around the performance of recent acquisitions in the Netherlands, Farm & Equine,” Peel Hunt said, noting Netherlands has been EBITDA-positive since February and that Farm & Equine saw improving revenues and margins in the second half.

“This is an industry that continues to consolidate rapidly and CVS is an attractive business.”

UK confidence data

In macro data, there will be an update on UK consumer confidence from GfK, which has relevance for several sectors, including retail and leisure.

In August, the headline reading for UK consumer confidence dropped by three points to -14, around a six-year low.

“It is possible that the political deadlock over Brexit had an influence here but it will be interesting to see if rising wage growth starts to give consumers a bit of a lift,” says Russ Mould at AJ Bell.

Recent official wage growth was shown to be 4% in July, a 10-year high and ahead of recent inflation figures.

“Historic data suggest that consumer confidence starts to rise a few months after real, post-inflation wage growth starts to accelerate but this has yet to happen this time around,” Mould adds, but it may or may not filter through to retailers and then their share prices.

Friday September 27:

Finals: Byotrol PLC (LON:BYOT), CVS Group PLC (LON:CVSG)

Interims: Ades International Holdings PLC (LON:ADES), Gan PLC (LON:GAN)

Trading statement: Pennon Group plc (LON:PNN)

Economic data: Nationwide house prices, speech from BoE’s Michael Saunders

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