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Stick with the veterinary services business as it successfully consolidates the small animal vet sector

CVS (CVSG:AIM) 948.5p

Gain to date: 2.4%

Original entry point: Buy at 926.5p, 23 August 2018

Our ‘buy’ call on veterinary services provider CVS (CVSG:AIM) is modestly in the money and we’re staying positive on the stock. 

Resilient full year results (27 Sep) and management’s positive overall outlook for the business are reassuring, although challenges with retaining and recruiting vets may continue to weigh on investor sentiment.

Solid results for the year ended 30 June revealed 20.4% top line growth to a record £327.3m and 7.1% growth in adjusted pre-tax profit to £36m, with the cash generative veterinary industry consolidator also declaring an 11.1% hike in the dividend to 5p. 

Robust like-for-like growth of 4.9% was boosted by an exceptional performance from online drugs arm Animed Direct, while the jump in group sales reflected last year’s acquisition of 52 surgeries.

Vet staffing is proving a significant challenge for CVS, yet industry-wide salary pressures should necessitate price increases to pass on increased costs. We believe concerned pet owners should readily accept these price increases, potentially boosting CVS’ organic revenue growth through the year.

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