I am delighted to report a further outstanding performance by CVS with another record year for revenue and operating profits across the Group. Strong like-for-like growth of 6.3% was enhanced by further acquisitions in our Veterinary Practice Division. We increased our investment in equipment, premises, our services and our staff.
Revenue grew by 24.6% to £271.8m (2016: £218.1m). Adjusted EBITDA increased by 28.2% to £42.1m (2016: £32.8m) and adjusted EPS grew by 32.1% to 42.8p (2016: 32.4p).
Operating profit rose by 46.2% to £17.2m (2016: £11.8m), cash generated from operations increased 10.8% to £37.2m (2016: £33.6m) and profit before tax increased by 58.4% to £14.5m (2016: £9.1m). Basic EPS increased by 59.5% to 18.5p (2016: 11.6p).
In 2017 we acquired 62 surgeries, following on from the 67 acquired in 2016. In total these businesses are expected to generate revenue of approximately £38.0m per annum. Subsequent to the year end a further 10 surgeries have been acquired.
Of particular note were our first acquisitions in the Netherlands, which give us a foothold to develop a business similar to that which we have in the UK. In the UK, our equine business expanded strongly with the acquisitions of Bell Equine during the year and B&W Equine subsequent to the year end. Severn Edge Veterinary Group gives CVS a strong presence in Shropshire in small animal and farm animal and further expands our equine capability.
We have continued to progress our strategy in our referrals business. After some challenges, our state-of-the-art multi-disciplinary referral centre at Lumbry Park improved its performance significantly and is now close to breaking even. Manchester Veterinary Specialists opened in February 2017 and is already profitable. The substantial refurbishment at Chestergates Veterinary Specialists was completed in September 2017 and now has the capacity to significantly grow its business.
Like-for-like sales grew by 6.3% (2016: 4.8%) with growth in all areas, in particular Animed Direct which performed exceptionally.
It is pleasing to note that the new Veterinary Practice Division management team introduced at the end of 2016 has settled in well and has driven performance of the business forward.
Our Healthy Pet Club scheme continued its strong growth with an additional 53,000 (20.9%) members over the year.
The Laboratory Division again grew very strongly with revenue increasing by 10.2% to £16.3m (2016: £14.8m).
Following the acquisition of three crematoria in 2016, the Crematoria Division has increased revenue by 27.1% to £6.3m.
In August 2017, we launched our own brand pet insurance under the name of MiPet Cover. This is the only pet insurance in the UK that is designed by vets. It provides top of the range cover at a competitive price. Whilst it is too early to fully assess the response from customers, their initial reaction and that from our own staff, who were involved in its design, has been very positive.
The Group remains the largest employer in the UK’s veterinary profession with approximately 5,150 staff as at today (2016: 4,300), including around 1,270 vets (2016: 1,040). Yet again, our staff have risen to the challenge of delivering and integrating the high volume of acquisitions whilst continuing to develop the business. I would like to thank them all, including those new to CVS, for their efforts and for their expertise and professionalism in providing the best possible care and service to all our customers and their animals.
The development of our staff and of our clinical and non-clinical training continues to be a priority. No other veterinary group has the knowledge, expertise and ability to provide so much training internally and this is an area where CVS distinguishes itself from our competition.
It is proposed to pay a dividend of 4.5p per share in December 2017, a 28.6% increase on the 3.5p per share paid in 2016. The increased scale and growth of our business can support a meaningful increase in the level of dividend whilst retaining sufficient funds to continue to grow the business.
If approved at the Annual General Meeting, the dividend will be paid on 8 December 2017 to shareholders on the register on 24 November 2017. The ex-dividend date will be 23 November 2017.
The Group’s exposure to the potential impacts of Brexit appears to be limited. The greatest impact could be in the employment of European vets. We have not seen any significant impact on employment so far but, together with other major employers in the industry and the Royal College of Veterinary Surgeons, we are lobbying the UK Government to ensure that there are no adverse impacts. Clearly, Brexit issues create some uncertainty for the pace of growth in the
UK economy over the next couple of years, but the Board believes that the characteristics of our business make it relatively resilient.
Like-for-like sales growth has remained robust since the year end. The acquisition pipeline remains strong and the recent acquisition of B&W Equine will allow for further developments in our equine business. Further acquisitions in the Netherlands will continue the development of our business in Europe.
The recent launch of our MiPet Cover insurance is an exciting development which has significant long-term potential, although it is not expected to generate a profit in the current financial year.
Initiatives such as the introduction of own brand products, the expansion of out-of-hours sites and the development of our referrals business are expected to continue to deliver benefits in 2018.
The Board therefore believes that the outlook for CVS remains very promising.
Richard Connell
Non-Executive Chairman
29 September 2017
