Disposal of non-core operations
For immediate release 21 May 2024
CVS Group plc
("CVS" or the "Company" and, together with its subsidiaries, the "Group")
Disposal of non-core operations
CVS, the UK listed veterinary group and a leading provider of veterinary services announces the disposal of its non-core operations in the Netherlands and the Republic of Ireland.
Rationale for and terms of the disposals
In light of the Group's significant investment opportunities in Australia and through capital expenditure in its existing UK operations, CVS has reviewed its Netherlands and Republic of Ireland ("ROI") operations given their sub-scale nature and the particular challenges within these veterinary markets. As a result, the Group has taken the decision to divest its operations in these markets. The Group has exchanged contracts for the disposal of the Netherlands and ROI subsidiaries to Global Veterinary Excellence Limited with completion expected within the next two weeks. The cash consideration for the disposals is €2 and CVS is providing a £600,000 unsecured loan at a market rate to Global Veterinary Excellence Limited.
Global Veterinary Excellence Limited is a company owned by former director of these subsidiary entities, James Cahill. James, a veterinary surgeon, was with CVS for six years and has over 30 years' experience in the industry.
By virtue of James being a former director of CVS subsidiary companies, he is a related party under the AIM Rules for Companies and, when aggregated, the two disposals constitute a related party transaction under AIM Rule 13. The directors of CVS Group plc consider, having consulted with the Company's nominated adviser, Peel Hunt, that the terms of the transactions are fair and reasonable insofar as the Company's shareholders are concerned.
Financial effects of the disposals
Both the Netherlands and Republic of Ireland operations are loss-making and for the financial year ended 30 June 2023 had combined revenue of £19.4m; adjusted EBITDA1 loss of £0.2m; loss before tax of £6.8m, which included a £2.3m exceptional write off; and net assets with a carrying value of £16.4m in the Group consolidated accounts. The forecast for the year to 30 June 2024 is a combined adjusted EBITDA loss of approximately £2.0m and loss before tax of approximately £6.0m. It is expected that CVS will make a non-cash write-down in its FY2024 accounts in relation to the disposals.
These operations have had a negative contribution to the Group's operating cash flows and significant management focus would be required to address operational performance. Therefore, following their disposal, it is expected that more capital will be able to be allocated to the Group's growth strategy and management will be free to focus on the delivery of the Group's growth strategy.
Richard Fairman, CEO, commented "Our Netherlands and Ireland practices no longer fit with our strategy of focusing on growth in the UK and Australian markets. We have exciting plans to expand in Australia and this disposal will free up working capital and management capacity to support our continued expansion.
We are delighted to have found a solution that enables our former colleagues to continue to deliver high quality veterinary care in the Netherlands and Republic of Ireland and wish James and Global Veterinary Excellence Limited well as an independent business."
Notes:
1. Adjusted EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) is profit before tax adjusted for interest (net finance expense), depreciation, amortisation, costs relating to business combinations, and exceptional items.
2. Financial numbers provided consistent with IFRS and may differ to locally reporting general accounting standards
CVS Group plc via Camarco
Richard Fairman, CEO
Ben Jacklin, Deputy CEO
Robin Alfonso, CFO
Peel Hunt LLP (Nominated Adviser & Joint Broker) +44 (0)20 7418 8900
Christopher Golden / James Steel / Andrew Clark / Lalit Bose
Berenberg (Joint Broker) +44 (0)20 3207 7800
Toby Flaux / Ben Wright / James Thompson / Milo Bonser
Camarco (Financial PR)
Ginny Pulbrook +44 (0)7961 315 138
Geoffrey Pelham-Lane +44 (0)7733 124 226
About CVS Group plc (www.cvsukltd.co.uk)
CVS Group is an AIM-listed provider of veterinary services with operations in the UK, and Australia. CVS is focused on providing high-quality clinical services to its clients and their animals, with outstanding and dedicated clinical teams and support colleagues at the core of its strategy.
The Group now operates c.460 veterinary practices across its two territories, including specialist referral hospitals and dedicated out-of-hours sites. Alongside the core Veterinary Practices division, CVS operates Laboratories (providing diagnostic services to CVS and third-parties), Crematoria (providing pet cremation and clinical waste disposal for CVS and third-party practices) and an online retail business ("Animed Direct").
The Group employs c.9,000 personnel, including c.2,400 veterinary surgeons and c.3,400 nurses.
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