Preliminary Results

RNS Number : 8423T

CVS Group plc

05 October 2010

 



For Immediate Release

5 October 2010

CVS GROUP plc

("CVS", the "Company" or the "Group")

Preliminary Results for the year ended 30 June 2010

CVS, one of the UK's leading providers of veterinary services, is pleased to announce its preliminary results for the year ended 30 June 2010.

Financial highlights

	Year ended      30 June  2010	Year ended 30 June 2009	Movement    %
Adjusted results:
Adjusted EBITDA 1	£13.1m	£12.5m	+4.6
Adjusted earnings per share2	11.9p	11.5p	+3.5
Reported results:
Revenue	£85.5m	£76.6m	+11.6
Operating profit	£5.7m	£7.0m	-18.9
Profit before income tax	£3.8m	£4.4m	-13.6
Profit after income tax	£3.1m	£3.0m	+0.7
Cash generated from operations	£12.6m	£12.4m	+2.0
Basic earnings per share	5.7p	5.9p	-3.4

¹See page 10 of the financial information for a reconciliation of profit before income tax for the period to adjusted earnings before income tax, net finance expense, depreciation, amortisation, transaction costs and share option expense ("adjusted EBITDA").

² See note 6 of the financial information for a reconciliation of basic and diluted earnings per share to "adjusted earnings per share".

-    Significant increase in Group revenue

-    Underlying like-for-like sales growth of 0.2% (excluding the weather affected months of December 2009 and January 2010); like-for-like sales decrease of 1.2% (before adjusting for the above)

-    Cash generated from operations increased by 2.0%

-    Successfully acquired and integrated 41 surgeries and a laboratory. Of these acquired sites, 40 were completed in the last third of the year bringing the total number of sites at the year end to 211 surgeries and 6 laboratories

-    Profit before income tax reduced by £0.6m reflecting transaction costs being expensed which would previously have been capitalised due to changes in accounting standards, additional acquisition related amortisation charges and increased non-cash share option charges, partly offset by lower finance expenses

Commenting on the results Chief Executive, Simon Innes, said:

"I am pleased to report that CVS has delivered sustained growth in revenue and operating cash flow in the year.   Like-for-like sales showed slight growth after excluding the weather affected months of December 2009 and January 2010.  These results demonstrate the veterinary profession's ability to be largely resilient to tougher trading conditions.  However, in light of the more challenging and competitive landscape, the Group has responded with a number of measures aimed at augmenting the organic business and developing new revenue streams."

Contacts:

CVS Group plc Simon Innes, Chief Executive Paul Coxon, Financial Director	01379 644 288
Buchanan Communications Richard Oldworth/Suzanne Brocks/Ben Romney	020 7466 5000

Chairman's statement

Introduction and review of operations for the year

I am pleased to announce the results of CVS Group plc ("CVS", "the Group", or "the Company") for the year ended 30 June 2010.  The Group has continued to deliver improvements in many key financial metrics despite the challenges presented by a tougher operating climate.

The Group has grown revenue by 11.6% to £85.5m (2009: £76.6m) and adjusted EBITDA by 4.6% (see page 11 for reconciliation to profit before income tax) to £13.1m (2009: £12.5m). Adjusted EBITDA as a percentage of sales has declined from 16.3% to 15.3%, primarily reflecting changes to the Group's cost base in conjunction with softer second half like-for-like sales brought about by a more challenging operating environment. In addition, there was strong cash delivery with cash generated from operations of £12.6m (2009: £12.4m).  However, operating profit fell to £5.7m (2009: £7.0m), reflecting transaction costs being expensed which would previously have been capitalised due to changes in accounting standards, additional acquisition related amortisation charges and increased non cash share option charges. 

Continued uncertainty in the general economy has affected the business as increasingly hard pressed consumers look to make savings in areas of discretionary spending.  Veterinary products and services have not been immune to this and as a result the Group is engaged in a number of activities to counter these trends including the development of an on-line dispensary and pet shop (Animed Direct).

The business was also affected in the year by a prolonged period of severe winter weather.  This made it almost impossible in some areas for both customers and staff to reach our surgeries and as a consequence revenue was lost, with a disproportionately large impact on adjusted EBITDA due to the Group's relatively high operating margins.

During the last four months of the year the Group acquired the strategically important Veterinary Enterprises & Trading Limited ("VET" or "Pet Doctors") group of 27 surgeries and one laboratory.  This addition to CVS is considered to be significant not only because of its size but also as it has removed a competitor for future acquisitions, enhanced the Group's ability to generate economies of scale and it fits well geographically with the existing business, particularly in the South East of England where it has a strong presence.  I am pleased to report that Pet Doctors has performed in line with expectations post acquisition.

Cash flow and funding position

Cash flow generated from operations increased by 2.0% to £12.6m.  The ability of the Group to convert profit into cash is clearly demonstrated with adjusted EBITDA (see page 11 for reconciliation to profit before income tax) at £13.1m.

Overall net debt increased slightly during the year to £42m, as £6.5m of internally generated cash was used to assist in the funding of acquisitions.  Any future acquisition activity is expected to be funded from cash generated from operations.

The Group has complied with all bank covenants throughout the period, and is projected to continue to do so.

In the year under review, £1.9m of debt has been repaid.  Since the year end, £2.1m has been repaid, with a further £3.1m scheduled to be repaid during the remainder of this financial year (ending 30 June 2011) and this has been reflected in our cash flow forecasts.

Chairman's statement (continued)

Dividends

The Board, at this point in time, believes that cash generated from operations should be reinvested in the business, and as such the Directors propose that no dividend should be declared for the year ended 30 June 2011.  The Board will continue to review its dividend policy on an ongoing basis.

Our people

The Group continues to be the largest employer in the UK veterinary profession with approximately 2,200 staff today. Of those, around 500 are vets out of an estimated total of approximately 12,000 practising vets in the UK, giving further indication of the significant scope left for expansion in the UK market. Our people are our best asset in enabling the Group to deliver its strategy. I would like to thank all of our people, including those new to CVS in the year, for their expertise and professionalism in providing the best possible care and service.

Further business development

We estimate that CVS has 9-10% of the UK small animal veterinary market measured by wholesaler spend, which demonstrates the opportunity for further consolidation.

In late July 2010, following the financial year end, Animed Direct, our on-line dispensary and pet shop division, was launched further broadening our offering of veterinary related services.

Outlook

Following on from the tough second half to the last financial year, the first quarter of the new financial year has been encouraging with the adverse trend in like-for-like sales improving to a decrease of 1.4% compared to a decrease of 2.8% in the fourth quarter of last year.

Owing to the timing of acquisitions in the year ended 30 June 2010, the majority taking place in the last third of the year, the Board expects that there will be a material uplift in revenues in the year to 30 June 2011.

We continue to focus on developing the organic business by furthering ways to extract operational efficiency, improve business performance and create new revenue streams together with the subsequent generation of cash and profit.

The Board remains cautiously optimistic about the Group's future with further growth opportunities supported by strong cash generation and a slow return to more favourable economic conditions.

Richard Connell

Chairman

4 October 2010

Business and financial review

CVS has continued to deliver growth over the prior year in terms of revenues, cash generation and adjusted EBITDA.  Group revenue increased to £85.5m (2009: £76.6m), cash generated from operations increased to £12.6m (2009: £12.4m) and adjusted EBITDA increased to £13.1m (2009: £12.5m). Operating profit and profit before tax were, however, down on the prior year at £5.7m (2009: £7.0m) and £3.8m (2009: £4.4m) respectively.

Management uses adjusted EBITDA and adjusted earnings per share ("EPS") financial measures (both as described in the financial highlights on page 1) as the basis for assessing the underlying performance of the group.  These terms are not defined by International Financial Reporting Standards and therefore may not be directly comparable with other companies' adjusted profit measures.  A reconciliation of profit before tax to adjusted EBITDA can be found on page 11 of the financial information, and a reconciliation of adjusted EPS can be found in note 6 to the financial information.

Factors that have influenced the improvement in the adjusted EBITDA figure compared with the prior year include the full year effect of previous year acquisitions augmented by acquisitions made during the year.  This positive movement in absolute terms was partly offset by a fall in the adjusted EBITDA margin.  This principally arose from more difficult trading conditions in the second half of the financial year as first the weather and then the more general economic environment impacted like-for-like sales particularly in the last quarter, together with changes in the Group's cost structure.  In addition, £0.1m of costs were incurred relating to the restructuring of Pet Doctors and the set up of the on-line dispensary which are expected to generate benefits in the future.

Operating profit was additionally impacted by three principal factors.  Firstly, an amendment to 'IFRS3 - Business Combinations' resulted in £0.5m of transaction costs relating to acquisitions, which would previously have been capitalised, being expensed.  Secondly, in order to continue to incentivise employees, share options were granted in addition to existing awards which contributed to a non-cash charge in the year of £0.6m (2009: £0.1m).  Thirdly, amortisation charges have increased year on year by £0.5m due to acquisition activity.

Adjusted earnings per share (as defined in note 6 to the financial information) were 11.9p, 3.5% up on 11.5p in the prior year.  Basic earnings per share was slightly below prior year at 5.7p (2009: 5.9p).

Divisional performance

Practice

The Group is the leading national veterinary surgery consolidator, operating 211 veterinary surgeries across the UK, primarily focused on the small animal market. Revenue amounted to £79.1m, an increase of 13.7% over the prior year although like-for-like revenues were down by 0.9% to £74.8m as a result of the weather and economic factors previously mentioned.

The Practice division's activities are carried on under a number of well established local brands as it is the Group's policy to retain these following acquisition.

In the year CVS acquired 41 surgeries, the majority of which were acquired in the last third of the year.  The annualised turnover from these newly acquired surgeries amounts to c.£21m.  These surgeries contributed £6.4m of revenue in the year.

In the latter part of the financial year a new Director of Practice Operations was appointed with the principal objective of improving the operational effectiveness of the Practice division.  This remit will be supported by a divisional management structure underpinned by a combination of local practice management and regional area management with a combination of clinical and retail management experience.

A number of initiatives have already been implemented, including:

Business and financial review (continued)

-    Regional practice performance benchmarking

-    Identifying and agreeing priority measures to support poorer performing sites

-    Focusing the divisional management team on sales growth supported by the development of the appropriate local fee structure

-    Further developing the marketing of the Healthy Pet Club loyalty scheme

In support of these initiatives the Group has instigated a number of tactical localised marketing campaigns aimed at higher volume procedures such as neutering and vaccinations.

The Healthy Pet Club loyalty scheme has continued to grow in the year with over 8,000 pets being added to the scheme and benefits the division by retaining customer loyalty, encouraging clinical compliance and bringing more customers into the surgery.  At the year end total pet members stood at more than 17,000 in total.

Significant benefits from increasing economies of scale continue to be enjoyed by the division in terms of drug buying, overheads and equipment.  However these improvements were offset by the impact of more difficult trading conditions on the Division's predominantly fixed employment cost structure which led to a slight fall in overall gross profit margin.

The adjusted EBITDA for the division grew significantly by £1.5m to £15.9m and the profit before tax by £0.4m to £10.2m, primarily due to acquisition activity in the current and prior year partially offset by the factors outlined above.

As a result of the weaker general economy, the Group believes that the outlook for veterinary and related services is subject to a degree of uncertainty.  However, as a counterbalance, stable pet populations, increases in animal longevity, advances in veterinary medical science, changes in the demographic profile of the human population and growth in the pet insurance industry and the initiatives instigated by our operations team all provide positive support.

As the Practice division grows it will continue to support growth in the other, complementary, Laboratory and Crematorium divisions.

Laboratory

The Group operates 6 laboratories in the UK which provide diagnostic services to third party veterinary surgeries (75% of revenues) as well as CVS owned veterinary surgeries (25% of revenues). Services are generally provided via postal and courier services allowing complete coverage of the UK.

The laboratory division had a difficult year due to the weather and economic factors already mentioned together with a significantly more competitive operating landscape.  This had an adverse impact on both revenue, adjusted EBITDA and profit before tax which fell by 5.2%, 15.0% and 18.7% respectively to £7.9m, £1.1m and £0.7m, the reduction in profitability reflecting also the largely fixed nature of the cost base.

During the year, the division added a further laboratory which increased the geographical presence of the division and introduced new opportunities to capture more laboratory referral business within the group.

In the latter half of the financial year, Martyn Carpenter was appointed to the new role of Director of Laboratory Operations.  The focus of this role is to retain existing customers and broaden the client base.  This will be supported by further development of the sales team.

Crematorium

The Rossendale crematorium completed its first full financial year of operation under CVS ownership.

It delivered revenue of £0.7m (2009: £0.4m) and an adjusted EBITDA of £0.3m (2009: £0.2m) (42.0% of sales), which exceeded the Board's expectations.

Business and financial review (continued)

In addition to services provided to non group practices and the general public, the division also serves CVS practices in the North and Midlands which account for 26% of its revenues.

Central administration

The Group's approach to centralising the administrative and management function continues to be an integral part of the strategy of the business and therefore enables the other divisions to focus on operational matters.

On an adjusted basis, the total costs for the central administration segment increased from £3.5m to £4.3m, being 5.0% of revenue (2009: 4.5%).  The increase being driven by costs rising due to the enhanced size of the Group against a backdrop of more difficult trading conditions.

The loss before tax for the central administration segment increased from £6.4m to £7.3m, being 8.6% of revenue (2009: 8.4%) due to the factors referred to above in addition to those impacting on operating profit as discussed on page 4.

Other financial highlights

Net finance expenses of £1.9m represent a decrease of £0.7m (28%) compared to the previous year, reflecting a benefit from interest rate reductions on its floating rate debt, the commencement of debt repayments in the year and the non-cash movement in the fair value of the Group's derivative financial instrument.

The Group recorded an increase in profit after income tax for the year of £0.1m to £3.1m representing an increase of 0.7%.  A reduction in finance costs as described above coupled with a reduction in the effective tax rate (due to a one-off credit of £0.5m in respect of costs previously deemed to be disallowable) over last year contributed to this increase.

Cash generated from operations also improved on last year showing a 2.0% increase. The extent of cash generated has allowed the Group to self-fund all acquisitions made during the year with the exception of Pet Doctors which was largely funded by a placing of new shares.  The Group continues to convert profit into cash with cash generated from operations of £12.6m compared to adjusted EBITDA of £13.1m.

Business and financial review (continued)

Key performance indicators ('KPIs')

The Directors monitor progress against the Group strategy by reference to the following financial KPIs.  Performance during the year is set out in the table below:

	2010	2009	Definition, method of calculation and analysis
Revenue	£85.5m	£76.6m	Total Revenue of the Group. Positives - Acquisitions and Healthy Pet Club growth. Negatives - Adverse trading conditions impact on like-for-like sales.
Adjusted EBITDA	£13.1m	£12.5m	Adjusted EBITDA represents earnings before income tax, net finance expense, depreciation, amortisation, transaction costs and share option expense. Positives - Acquisitions and improved buying terms. Negatives - Adverse trading conditions, on-line dispensary start up and Pet Doctor's restructuring costs.
Adjusted EPS	11.9p	11.5p	Earnings, adjusted for amortisation, share option expense, transaction costs relating to acquisitions, non-recurring tax credits and fair value adjustments, net of the notional tax impact of the above, divided by the number of issued shares.  The increase reflects the above effects to adjusted EBITDA augmented by reductions in finance costs and the effective tax rate.
Cash generated from operations	£12.6m	£12.4m	Cash generated from operations has slightly increased with the improvement in adjusted EBITDA supported by favourable working capital movements partly offset by transaction costs being expensed which would previously have been capitalised brought about by changes in accounting standards which now form part of operating cashflows.

In addition to the above, the Group monitors like-for-like sales performance. Like-for-like sales comprise the revenue generated from all operations compared to the prior year (on a pro-forma basis, i.e. including pre-acquisition revenues in respect of acquisitions in the current and comparative periods), after adjusting for sites under refurbishment and discontinued operating activities. Like-for-like sales for the year ended 30 June 2010 decreased by 1.2% reflecting both the adverse weather in December 2009 and January 2010 and the difficult trading conditions brought about by general economic conditions (particularly in the last quarter). Like-for-like sales after excluding the weather affected months of December 2009 and January 2010 increased by 0.2%.

Business and financial review (continued)

Funding and treasury management

As at 30 June 2010, the Group had net debt of £41.9m (2009: £40.8m) comprising debt of £41.7m (net of issue costs) and an overdraft of £0.2m.   During the year £1.9m of the Group's term debt facility was repaid.

In March 2010 the acquisition of the Pet Doctors group was partly funded by a £8.6m (net of issue costs) placing of ordinary shares plus £3.6m of internally generated cash.

The Board considers that maintaining a reasonably leveraged balance sheet is appropriate for the Group, given the stable nature of its cash flows.

The Group has a centralised treasury function to manage interest rate risk. Derivative instruments are used solely to mitigate these risks. Interest rate collar arrangements are used to manage exposure to interest rate fluctuations, whilst allowing some benefit of reductions in interest rates. At the year end, the Group had interest hedging arrangements in place covering £30.1m of debt. The Group sweeps funds daily from its various bank accounts into deposit accounts to optimise interest generation.

The Board anticipate that borrowings will reduce further in the coming months as bank loan repayments are made.

Business environment

The Group has seen a greater impact in the year under review from the unfavourable economic climate with like-for-like sales increase being only 0.2% in the current year (excluding the weather affected months of December 2009 and January 2010). Before adjusting for the weather affected months, like-for-like sales decreased by 1.2%. The achievement of marginal growth after adjusting for the weather affected months of December and January, albeit reduced on the prior year, is regarded by the Board as being an indicator of the resilience of the business and the veterinary market.  However, it should be noted that the financial performance deteriorated in the second half of the year, primarily due to the weather conditions in December and January and the prevailing economic climate impacting like-for-like sales particularly in the final quarter.

The Board is focused on a number of initiatives as outlined previously to combat tougher operating conditions.

Principal risks and uncertainties

The Group's operations are subject to a number of risks that include the impact of competition, continued employment and recruitment of key personnel and the maintenance of clinical standards.

Competition

The Group is exposed to a degree of risk through the actions of competitors. However, the geographic spread of the Group's businesses and the fragmented nature of the market mean that the Directors do not consider this to be a significant risk.   In addition, the acquisition of the Pet Doctors group of practices in the year, who were following a similar business model to that of CVS, has further mitigated this risk. Furthermore, the expansion of the Group's healthy pet club loyalty scheme and the post year end introduction of Animed Direct, our on-line dispensary and pet shop, provide further mitigation against the risk of competition.

Key personnel

The Group has limited risk in relation to the ability to attract and retain appropriately qualified veterinary surgeons. The Group is committed to the development of its employees and will continue to recruit specialist and qualified professionals to promote its services. The involvement of senior personnel is encouraged through the operation of the Group's LTIP scheme which has been offered more widely to senior management in the year.  A further SAYE scheme, available to all staff, was set up in the year.

Business and financial review (continued)

Clinical standards

It is of the utmost importance to the Group that the clinical care delivered to our patients is at the standard expected by customers, industry forums and regulatory authorities.  The Group has established a formal organisation structure that allows clinical policies and procedures to be developed and ensure day-to-day compliance monitoring.  The Group has further mitigated any risk by ensuring that suitable insurance policies are taken out at both an individual and corporate level.

Economic environment

The current economic environment potentially poses a risk to the Group through reduced consumer spending on veterinary, laboratory and crematorium services. In the year under review, the Group has shown some resilience to the challenging economic conditions but has nevertheless been impacted.

The Practice division has continued to grow its payment plan based Healthy Pet Club loyalty scheme during the year as a way of mitigating this risk.  The plan has significant benefits in terms of stimulating customer loyalty, ensuring clinical compliance for the pet and bringing customers into the surgery. 

Adverse weather

In common with many businesses the Group's revenue is adversely affected during sustained periods of severe winter weather.

As the Group continues to widen its geographical presence the exposure to this risk will be mitigated to some extent.

Key contractual arrangements

The directors consider that the Group has only one significant third party supplier contract which is for the supply of veterinary drugs. In the event that this supplier ceased trading the Group would be able to continue in business without any disruption in trading by purchasing from alternative suppliers.

Future developments

The Group will focus its activities on developing its organic business in all three operating divisions.  The established business will be further supported by the recent launch of Animed Direct in late July 2010.  In addition, where internally generated cash allows, selective acquisitions may continue.

Simon Innes

Chief Executive

4 October 2010

Forward looking statements

Certain statements in these preliminary results are forward-looking.  Although the Board believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

Consolidated income statement for the year ended 30 June 2010

	Note	2010 £'000	2009 £'000
Revenue	2	85,527	76,605
Cost of sales		(51,176)	(45,657)
Gross profit		34,351	30,948
Administrative expenses		(28,662)	(23,937)
Operating profit		5,689	7,011
Fair value adjustments in respect of financial assets and liabilities	4	149	(48)
Other finance expense	4	(2,028)	(2,580)
Other finance income	4	29	61
Net finance expense		(1,850)	(2,567)
Profit before income tax	2	3,839	4,444
Income tax expense	5	(781)	(1,406)
Profit for the year attributable to owners of the company		3,058	3,038
Earnings per ordinary share for profit attributable to the owners of the Company (expressed in pence per share) ("EPS")
Basic	6	5.7p	5.9p
Diluted	6	5.7p	5.8p

All amounts relate to continuing operations, including the impact of business combinations arising during the year.

The following table is provided to show the comparative earnings before interest, tax, depreciation and amortisation ("EBITDA") after adjusting for transaction costs and share option expense.

Non-GAAP measure: Adjusted EBITDA	Note	£'000	£'000
Profit before income tax	2	3,839	4,444
Adjustments for:
Net finance expense	4	1,850	2,567
Depreciation		1,905	1,526
Amortisation		4,385	3,842
Transaction costs	3	530	-
Share option expense		556	117
Adjusted EBITDA	2	13,065	12,496

 

 

Statement of consolidated comprehensive income for the year ended 30 June 2010

	Note	2010 £'000	2009 £'000
Profit for the year		3,058	3,038
Other comprehensive income
Fair value adjustments in respect of financial assets and liabilities		(970)	(2,028)
Revaluation of available for sale investments		7	(16)
Deferred tax on other comprehensive income		272	568
Other comprehensive income for the year, net of tax		(691)	(1,476)
Total comprehensive income for the year attributable to owners of the company		2,367	1,562

Consolidated balance sheet as at 30 June 2010

	Note	2010 £'000	2009 £'000
Non-current assets
Intangible assets		56,695	41,886
Property, plant and equipment		8,835	7,467
Investments		74	67
Deferred income tax assets		1,321	455
		66,925	49,875
Current assets
Inventories		2,453	1,972
Trade and other receivables		6,602	5,431
Cash and cash equivalents		109	2,792
		9,164	10,195
Total assets	2	76,089	60,070
Current liabilities
Trade and other payables		(12,101)	(8,452)
Current income tax liabilities		(574)	(1,169)
Borrowings	8	(5,350)	(1,924)
		(18,025)	(11,545)
Non-current liabilities
Borrowings	8	(36,655)	(41,644)
Deferred income tax liabilities		(7,076)	(4,942)
Derivative financial instruments		(2,284)	(1,463)
		(46,015)	(48,049)
Total liabilities	2	(64,040)	(59,594)
Net assets		12,049	476

Consolidated balance sheet as at 30 June 2010 (continued)

	Note	2010 £'000	2009 £'000
Shareholders' equity
Share capital		113	103
Share premium		8,640	-
Capital redemption reserve		592	592
Revaluation reserve		125	125
Merger reserve		(61,420)	(61,420)
Retained earnings		63,999	61,076
Total shareholders' equity		12,049	476

The financial information comprising the consolidated income statement, the statement of consolidated comprehensive income, the consolidated balance sheet, the consolidated statement of changes in shareholders equity, the consolidated cash flow statement and the related notes, were authorised for issue by the Board of Directors on 4 October 2010 and were signed on its behalf by:

P Coxon Director

S Innes Director

Consolidated statement of changes in equity for the year ended 30 June 2010

 

	Share  capital	Capital redemption reserve	Revaluation reserve	Merger reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 July 2008	103	592	125	(61,420)	59,405	(1,195)
Profit for the year	-	-	-	-	3,038	3,038
Other comprehensive income
Fair value adjustments in respect of financial assets and liabilities	-	-	-	-	(2,028)	(2,028)
Revaluation of available for sale investments	-	-	-	-	(16)	(16)
Deferred tax on other comprehensive income	-	-	-	-	568	568
Total other comprehensive income	-	-			(1,476)	(1,476)
Total comprehensive income	-	-	-	-	1,562	1,562
Transactions with owners
Credit to reserves for share-based payments	-	-	-	-	117	117
Deferred tax relating to share-based payments	-	-	-	-	(8)	(8)
Transactions with owners	-	-	-	-	109	109
At 30 June 2009	103	592	125	(61,420)	61,076	476

 

	Share  capital	Share premium	Capital redemption reserve	Revaluation reserve	Merger reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 July 2009	103	-	592	125	(61,420)	61,076	476
Profit for the year	-	-	-	-	-	3,058	3,058
Other comprehensive income
Fair value adjustments in respect of financial assets and liabilities	-	-	-	-	-	(970)	(970)
Revaluation of available for sale investments	-	-	-	-	-	7	7
Deferred tax on other comprehensive income	-	-	-	-	-	272	272
Total other comprehensive income	-	-	-	-	-	(691)	(691)
Total comprehensive income	-	-	-	-	-	2,367	2,367
Transactions with owners
Issue of ordinary shares	10	8,640	-	-	-	-	8,650
Credit to reserves for share-based payments	-	-	-	-	-	556	556
Transactions with owners	10	8,640	-	-	-	556	9,206
At 30 June 2010	113	8,640	592	125	(61,420)	63,999	12,049

Consolidated cash flow statement for the year ended 30 June 2010

	Note	2010 £'000	2009 £'000
Cash flows from operating activities
Cash generated from operations	9	12,624	12,380
Taxation paid		(1,907)	(828)
Interest received		29	61
Interest paid		(1,950)	(2,658)
Net cash generated from operating activities		8,796	8,955
Cash flows from investing activities
Acquisition of businesses	7	(2,146)	(5,793)
Acquisition of subsidiaries (net of cash acquired)	7	(11,855)	(2,510)
Purchase of property, plant and equipment		(1,965)	(1,538)
Purchase of intangible assets		(97)	(45)
Proceeds from sale of property, plant and equipment		20	2
Proceeds from sale of available for sale investments		-	316
Net cash used in investing activities		(16,043)	(9,568)
Cash flows from financing activities
Finance lease principal payments		(9)	(38)
Repayment of bank loan		(4,342)	(18)
Proceeds from issue of ordinary share capital (net of issue costs)		8,650	-
Proceeds from long-term borrowings		-	3,069
Net cash from financing activities		4,299	3,013
Net (decrease)/increase in cash and cash equivalents		(2,948)	2,400
Cash and cash equivalents at beginning of year		2,792	392
Cash and cash equivalents at end of year		(156)	2,792

Notes to the consolidated financial information for the year ended 30 June 2010

1.  Summary of significant accounting policies

Statement under s498 - publication of non-statutory accounts

The financial information set out in this preliminary announcement does not constitute statutory financial statements for the years ended 30 June 2010 or 2009, for the purpose of the Companies Act 2006, but is derived from those financial statements. Statutory financial statements for 2010, on which the Group's auditors have given an unqualified report which does not contain statements under Section 498(2) or (3) of the Companies Act 2006, will be filed with the Registrar of Companies subsequent to the Group's next annual general meeting. Statutory financial statements for 2009 have been filed with the Registrar of Companies. The Group's auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

Basis of preparation

The consolidated financial statements, from which this preliminary announcement is derived, have been prepared on a going concern basis and under the historical cost convention, except for certain financial instruments and share-based payments that have been measured at fair value. The Group has operated within the levels of its current debt facility and complied with both the financial and non-financial covenants contained in the facility agreement therein throughout the year under review and to the date of the approval of the financial statements. The Group is forecasting that it will continue to operate within the levels of its current facility and comply with the financial and non-financial covenants contained in the facility agreement. On this basis the Directors consider it appropriate to prepare the consolidated financial statements on the going concern basis.

Whilst the financial information included in this preliminary announcement has been prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRS. Other than as stated below, the accounting policies applied in preparing this financial information are consistent with the Group's financial statements for the year ended 30 June 2009.

Changes in accounting policy and disclosure

The Group has adopted the following new and amended standards as of 1 July 2009:

IAS 1 (revised) "Presentation of financial statements"

IAS 1 requires entities to choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The Group has elected to present two statements in the financial statements.

IAS 39 (amendment) "Financial Instruments: Recognition and measurement"

The amended IAS 39 requires the fair value movement on the hedged item to be split between the time value movement and the intrinsic value movement. The movement on the time value is recognised in the income statement immediately and the movement in the intrinsic value is recognised directly in equity.  The total time value that had been recognised in equity at 1 July 2009 is required to be prospectively recycled through the income statement over the remaining life of the underlying hedged item. The impact on the financial information for the year ended 30 June 2010 of adopting IAS 39 is that an amount of £245,000 has been credited to the income statement, offset by an amount of £96,000, being the amortisation of the total time value of the instrument previously recognised in equity. If the amendment had not been applicable, a charge of £76,000 would have been recognised in the income statement.

1.   Summary of significant accounting policies (continued)

IFRS 3 (revised) "Business combinations"

IFRS 3 (revised) amends the treatment of acquisition costs as part of business combinations. These were previously treated as an element of consideration paid. From 1 July 2009 the Group is required to expense all transaction costs relating to acquisitions directly in the income statement. The charge for the year ended 30 June 2010 was £530,000.

IFRS 7 (amendment) "Financial instruments - Disclosures"

The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. The presentation requirement of IFRS 7 has been applied in the financial statements.

IFRS 8 "Operating segments"

IFRS 8 requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. Management have confirmed that the Group operates in three distinct trading segments, together with a centralised support function. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board of Directors. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. The Board has determined the operating segments based on these reports.

Use of non-GAAP profit measures

Adjusted EBITDA

The Directors believe that adjusted EBITDA provides additional useful information for shareholders on underlying trends and performance. These measures are used for internal performance analysis. Adjusted EBITDA is not defined by IFRS and therefore may not be directly comparable with other companies' adjusted profit measures. It is not intended to be a substitute for, or superior to, IFRS measurements of profit.  Adjusted EBITDA is calculated by reference to profit/(loss) before income tax, adjusted for interest (net finance expense), depreciation, amortisation, share option expense and transaction costs relating to acquisitions.

2.   Segmental reporting

Segment information is presented in respect of the Group's business and geographical segments. The primary format, operating segments, is based on the Group's management and internal reporting structure. Inter-segment pricing is determined on an arm's length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly interest-bearing borrowings and associated costs, taxation related assets/liabilities, transaction costs and head office salary and premises costs. 

Geographical segments

The business operates predominantly in the UK. It performs a small amount of laboratory work for European based clients. In accordance with IFRS 8 "Operating segments" no segmental results are presented for trade with European clients as these are not reported separately for management reporting purposes.

Operating segments

The Group is split into three operating segments; veterinary practices, laboratories, crematorium and a centralised support function for business segment analysis:

Year ended 30 June 2010	Veterinary practices £'000	Laboratories £'000	Crematorium        £'000	Head     office £'000	Group £'000
Revenue	79,148	7,859	698	(2,178) 1	85,527
Profit/(loss) before income tax	10,241	710	228	(7,340)	3,839
Adjusted EBITDA	15,898	1,137	293	(4,263)	13,065
Total assets	70,217	4,146	872	854	76,089
Total liabilities	(11,309)	(1,258)	(108)	(51,365)	(64,040)
Reconciliation of adjusted EBITDA
Profit/(loss) before income tax	10,241	710	228	(7,340)	3,839
Net finance expense	-	-	-	1,850	1,850
Amortisation	4,037	259	36	53	4,385
Depreciation	1,620	168	29	88	1,905
Share option expense	-	-	-	556	556
Transaction costs relating to business combinations	-	-	-	530	530
Adjusted EBITDA	15,898	1,137	293	(4,263)	13,065

¹Inter-segment revenues representing laboratory sales and crematorium fees to veterinary practices eliminated on consolidation.

2.    Segmental reporting (continued)

Year ended 30 June 2009	Veterinary practices £'000	Laboratories £'000	Crematorium £'000	Head     office £'000	Group £'000
Revenue1	69,586	8,286	440	(1,707) 1	76,605
Profit/(loss) before income tax	9,801	873	174	(6,404)	4,444
Adjusted EBITDA	14,403	1,337	217	(3,461)	12,496
Total assets	49,553	8,935	1,060	522	60,070
Total liabilities	(8,530)	(981)	(110)	(49,973)	(59,594)
Reconciliation of adjusted EBITDA
Profit/(loss) before income tax	9,801	873	174	(6,404)	4,444
Net finance expense	-	-	-	2,567	2,567
Amortisation	3,443	255	27	117	3,842
Depreciation	1,159	209	16	142	1,526
Share option expense	-	-	-	117	117
Adjusted EBITDA	14,403	1,337	217	(3,461)	12,496

¹Inter-segment revenues representing laboratory sales and crematorium fees to veterinary practices eliminated on consolidation.

 

3.   Transaction costs relating to business combinations

IFRS 3 (revised) amends the treatment of acquisition costs as part of business combinations. These were previously treated as an element of consideration. From 1 July 2009 the Group is required to expense all transaction costs relating to acquisitions directly in the income statement. The charge for the year ended 30 June 2010 was £530,000 (2009: £nil).

4.   Finance (income) and expense

		2010 £'000	2009 £'000
Interest expense, bank loans and overdraft		1,932	2,481
Amortisation of debt arrangement fees		96	95
Finance charges payable under finance leases		-	4
		2,028	2,580
Fair value adjustments in respect of financial assets and liabilities		(149)	48
Bank interest receivable		(29)	(61)
Net finance expense		1,850	2,567

Fair value adjustments in respect of financial assets and liabilities reflect the ineffective portion of derivative financial instruments that qualify for hedge accounting (amounting to £245,000 (2009: £48,000)) less the recycling of fair value adjustments in respect of the time value of the option accumulated in equity prior to the adoption of the amendment to IAS 39 (amounting to £96,000 (2009: £nil)).

5.   Income tax expense

Analysis of income tax expense recognised in the income statement

	2010 £'000	2009 £'000
Current tax expense
UK corporation tax	1,811	1,751
Adjustments in respect of previous periods	(531)	-
Total current tax charge	1,280	1,751
Deferred tax expense
Origination and reversal of temporary differences	(647)	(458)
Adjustments in respect of previous periods	148	113
Total deferred tax credit	(499)	(345)
Total income tax expense	781	1,406

Factors affecting the current tax charge

The adjustments to current tax charge in respect of previous periods includes a one-off adjustment in respect of expenses that were previously deemed not to be deductible for tax purposes amounting to £525,000.

b)         Reconciliation of effective income tax charge

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the

5.    Income tax expense (continued)

Weighted average tax rate applicable to profits of the consolidated entities as follows:

	2010 £'000	2009 £'000
Profit before tax	3,839	4,444
Effective tax charge at 28% (2009: 28%)	1,075	1,244
Effects of:
Expenses not deductible for tax purposes	89	49
Adjustments to deferred tax charge in respect of previous periods	148	113
Adjustments to current tax charge in respect of previous periods	(531)	-
Total income tax expense	781	1,406

(c)    Factors affecting the future tax charge

A number of changes to the UK Corporation tax system were announced in the June 2010 Budget Statement. The Finance (No 2) Act 2010, which was substantively enacted on 20 July 2010, includes legislation to reduce the main rate of corporation tax from 28% to 27% from 1 April 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 24% by 1 April 2014. The changes had not been substantively enacted at the balance sheet date and, therefore, is not reflected in this financial information. The changes are not anticipated to have a material impact on the Group's financial statements in future periods.

Furthermore, the Group has tax losses carried forward, the utilisation of which will reduce the current tax charge in future periods.

6.   Earnings per ordinary share

(a)  Basic

Basic earnings per ordinary share are calculated by dividing the profit after taxation by the weighted average number of shares in issue during the period.

	2010	2009*
Earnings attributable to ordinary shareholders (£'000)	3,058	3,038
Weighted average number of ordinary shares in issue	53,361,521	51,696,623
Basic earnings per share (pence per share)	5.7	5.9

(b)  Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary shares outstanding to assume conversion of all dilutive potential Ordinary shares. The Company has potentially dilutive Ordinary shares being the contingently issueable shares under the Group's long term incentive plan schemes.  For share options, a calculation is undertaken to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

6.    Earnings per ordinary share (continued)

	2010	2009*
Earnings attributable to Ordinary shareholders (£'000)	3,058	3,038
Weighted average number of Ordinary shares in issue	53,361,521	51,696,623
Adjusted for contingently issueable shares	635,177	427,176
Weighted average number of Ordinary shares for diluted earnings per share	53,996,698	52,123,799
Diluted earnings per share (pence per share)	5.7	5.8

^*In accordance with the provision of IAS 33 - "Earnings per Share," the comparatives have been adjusted to reflect the impact of the placing in the year (being the impact of the discount applied to the market price, on the weighted average number of shares).

Non-GAAP measure: Adjusted earnings per share

Adjusted earnings per Ordinary share is calculated by dividing the profit after taxation excluding amortisation, share option expense, transaction costs relating to acquisitions, non-recurring tax credits and fair value adjustments, and having adjusted for the tax effects of such adjustments, by the weighted average number of shares in issue during the period.

	2010	2009*
	£'000	£'000
Earnings attributable to Ordinary shareholders	3,058	3,038
Adjustments for:
Amortisation	4,385 110	3,842 110
Share option expense	556	117
Fair value adjustments in respect of financial assets and liabilities (note 4)	(149)	48
Transaction costs relating to acquisitions	530	-
Tax effect of the above adjustments	(1,490)	(1,122)
Non-recurring tax credit in respect of expenses previously deemed to be disallowable for tax purposes	(525)	-
Adjusted profit after income tax and earnings attributable to ordinary shareholders	6,365	5,923
Weighted average number of Ordinary shares in issue	53,361,521	51,696,623
Weighted average number of Ordinary shares for diluted earnings per share	53,996,698	52,123,799
	Pence	Pence
Adjusted earnings per share	11.9p	11.5p
Diluted adjusted earnings per share	11.8p	11.4p

^*In accordance with the provision of IAS 33 - "Earnings per Share," the comparatives have been adjusted to reflect the impact of the placing in the year (being the impact of the discount applied to the market price, on the weighted average number of shares).

7.   Business combinations

Details of business combinations (both acquisitions of trade and assets and acquisitions of the entire issued share capital of a limited company) in the year ending 30 June 2010 are set out below, in addition to an analysis of post acquisition performance of the respective business combinations, where practicable. All business combinations have been accounted for under the acquisition method.  All intangible assets are recognised at their respective fair values. 

The residual excess over the net assets acquired is recognised as goodwill.  This primarily represents two main items, firstly cost synergies arising from the application of the Group's buying power and secondly, in respect of Veterinary Enterprises & Trading Limited, a premium to remove a platform that could have allowed a new consolidator to enter the market. None of the goodwill recognised in respect of share acquisitions is expected to be deductible for income tax purposes.

Given the nature of the veterinary surgeries acquired (mainly partnerships or sole traders) and the records maintained by such practices it is not practicable to disclose the revenue or profit/loss of the combined entity for the period as though the acquisition date for all business combinations effected during the period had been the beginning of that period. It is not practicable to disclose the impact of the business combinations on the consolidated cash flow statement as full ledgers were not maintained for each business combination in relation to all related assets and liabilities post acquisition.

Trade and assets acquisitions

The table below summarises the trade and assets acquisitions in the year ended 30 June 2010:

Assets and trade	Date of acquisition	Fair value of property plant and equipment acquired £'000	Fair value of intangible assets acquired1   £'000	Consideration2                                    £'000
A practice in:
Berkshire	16/07/2009	295	5	300
Cheshire	30/11/2009	20	336	356
Kent	15/03/2010	20	330	350
Nottingham	14/06/2010	5	420	425
West Sussex	21/06/2010	107	1,000	1,107
East/West Sussex	22/06/2010	6	334	340
		453	2,425	2,878

¹Intangible assets acquired represents patient data records (£2,157,000) and goodwill (£268,000).

²Consideration includes deferred consideration amounting to £732,000.

7.             Business combinations (continued)

Trade and assets acquisitions (continued)

Analysis of post acquisition performance:

			Post-acquisition revenue1   £'000	Post-acquisition contribution2 £'000
A practice in:
Berkshire			1,136	146
Cheshire			367	27
Kent			137	1
Nottingham			20	8
West Sussex			45	2
East/West Sussex			20	4
			1,725	188

¹Post-acquisition revenue represents revenue from the date of acquisition to 30 June 2010.

²Post-acquisition contribution represents the direct operating result of practices prior to the allocation of central overheads, on the basis that it is not practicable to allocate these, from the date of acquisition to 30 June 2010.

Share acquisitions

Acquisition of Veterinary Enterprises & Trading Limited, Cedar Veterinary Services Limited and Ark Alliance Limited

On 11 March 2010, the Group acquired the whole of the issued share capital of Veterinary Enterprises & Trading Limited ("VETL") for a total consideration of £9.9m. The main operating companies in the VETL group are Pet Doctors Limited and Greendale Veterinary Diagnostics Limited.

On 22 March 2010 the Group acquired the whole of the issued share capital of Cedar Veterinary Services Limited ("CVSL") for a total consideration of £0.8m. On 15 May 2010 the Group acquired the whole of the issued share capital of Ark Alliance Limited ("AAL") for a total consideration of £1.2m. Immediately following the acquisitions of CVSL and AAL the trades and related assets were transferred to CVS (UK) Limited.

The book values of the assets (excluding intangibles) and liabilities of VETL, CVSL, and AAL, and the fair value of the intangible assets, at the date of acquisition are set out below. Unless otherwise stated, the Directors consider that the book values of the assets (excluding intangibles) and liabilities are equivalent to the fair values. The purchase price allocation exercise has not been completed as at 30 June 2010. As such, provisional values have been used in this financial information. The final purchase price allocation will be presented in the 2011 financial statements.

7.    Business combinations (continued)

	VETL	CVSL	AAL	Total
	£'000	£'000	£'000	£'000
Intangible assets - patient data records	5,685	754	1,115	7,554
Intangible assets - goodwill	6,995	211	462	7,668
Intangible assets - trade name	1,450	-	-	1,450
Property, plant and equipment	686	10	179	875
Inventories1	277	49	38	364
Trade and other receivables	313	115	101	529
Cash and cash equivalents	(58)	(42)	36	(64)
Current income tax liabilities	15	7	(54)	(32)
Deferred income tax assets	490	2	-	492
Deferred income tax liabilities	(1,998)	(211)	(322)	(2,531)
Loans and borrowings	(2,215)	-	(212)	(2,427)
Trade and other payables	(1,729)	(90)	(116)	(1,935)
Net assets acquired	9,911	805	1,227	11,943
Consideration satisfied by:
Cash	9,911	762	1,118	11,791
Deferred consideration	-	43	109	152
Total consideration	9,911	805	1,227	11,943

¹Inventory with a book value of £451,000 acquired as part of business combinations were fair valued on acquisition resulting in a fair value of £364,000 being recognised as per the above table.

Analysis of post acquisition performance:

The post-acquisition turnover of VETL amounted to £4,032,000 and the post-acquisition profit after tax amounted to £560,000.

The post-acquisition turnover of CVSL amounted to £416,000 and the post-acquisition contribution amounted to £51,000 (contribution represents the direct operating result prior to the allocation of central overheads on the basis that it is not practicable to allocate these given the transfer of assets and trade to CVS (UK) Limited).

The post-acquisition turnover of AAL amounted to £199,000 and the post-acquisition contribution amounted to £15,000 (contribution represents the direct operating result prior to the allocation of central overheads on the basis that it is not practicable to allocate these given the transfer of assets and trade to CVS (UK) Limited).

7.      Business combinations (continued)

Pro-forma full year information

The following unaudited pro-forma summary presents the Group as if the above share acquisitions had occurred on 1 July 2009. As per above, it is not practicable to disclose the same information in respect of the trade and assets acquisitions. The pro forma amounts include the results of VETL, CVSL and AAL and amortisation of the acquired intangible assets recognised on acquisition. The pro forma amounts do not include any possible synergies from the acquisition of the respective companies. The pro forma information is provided for comparative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations of the combined companies.

			£'000
Revenue			101,798
Profit for the financial year			2,037

Business combinations in previous periods

Details of business combinations in the comparative period are presented in the consolidated financial statements for the year ended 30 June 2009.

8.   Borrowings

	2010 £'000	2009 £'000
Current
Bank overdraft	265	-
Bank loans	5,085	1,915
Finance leases	-	9
	5,350	1,924
	2010 £'000	2009 £'000
Non-current
Bank loans	36,655	41,644

 

8.    Borrowings (continued)

 Bank loans

The repayment profile of the bank loans is as follows:

	2010 £'000	2009 £'000
Within one year or on demand	5,350	1,915
Between one and two years	3,956	5,081
Between two and three years	2,831	3,956
Between three and four years	29,868	2,831
Between four and five years	-	29,776
	42,005	43,559

The balances above are shown net of issue costs of £347,000 (2009: £443,000), which are being amortised over the term of the bank loans.

The borrowings are denominated in sterling.

On 4 October 2007 the Group entered into a banking facility agreement with The Royal Bank of Scotland plc and Barclays Bank plc comprising a £32,000,000 term loan to refinance existing bank and other indebtedness, an acquisition facility of £12,000,000 and a working capital facility of £2,000,000.

The bank loans and overdraft are secured by a first debenture incorporating fixed and floating charges over the assets and undertakings of each Group company. The bank loans and overdraft are also secured on first legal mortgage charges over freehold property included in property, plant and equipment. The term bank loan facility was subject to an initial 26 month capital repayment holiday. The loan is repayable in equal quarterly instalments of £637,500 from 31 December 2009 through to 30 September 2013, with a bullet repayment for the balance due on that date.

The acquisition facility was subject to an initial 36 month capital repayment holiday. As at 30 June 2010, the acquisition facility has been fully drawn down. An amount equating to 12.5% of the drawdown at 30 June 2010 is repayable on 30 September 2010. The remaining balance is repayable in equal quarterly instalments equating to 3.125% of the drawn-down amount from 31 December 2010 through to 30 September 2012, with a bullet repayment for the balance due on the 30 September 2013.

Undrawn committed borrowing facilities

The Group has a committed working capital facility of £2,000,000 (2009: £2,000,000) of which, £1,700,000 was undrawn at 30 June 2010 (2009: £2,000,000) and which is repayable on demand. 

8.    Borrowings (continued)

Finance leases

Future minimum lease payments under finance leases, together with the future finance charges and present value of the net minimum lease payments are as follows:

	2010 £'000	2009 £'000
Minimum lease payments
Within one year	-	10
Future finance charges
Within one year	-	1
Net minimum lease payments
Within one year	-	9

The finance leases were secured over certain items of fixtures, fittings and equipment.

9.   Cash flow generated from operations

	2010 £'000	2009 £'000
Profit for the year	3,058	3,038
Taxation	781	1,406
Total finance costs	1,879	2,628
Investment income	(29)	(61)
Amortisation of intangible assets	4,385	3,842
Depreciation of tangible fixed assets	1,905	1,526
Loss on disposal of property, plant and equipment	-	11
Increase in inventories	(22)	(102)
Increase in trade and other receivables	(642)	(255)
Increase in trade and other payables	753	230
Share option expense	556	117
Total net cash flow generated from operations	12,624	12,380

 

END

 

 

FR KKQDDCBDDFKK